Judge approves new order aimed at preventing former Salomon & Ludwin employees from poaching their clients

Local investment adviser Salomon & Ludwin last week won a first, albeit temporary, victory in its legal battle against a group of its former employees who abruptly resigned to start their own businesses.

S&L’s request for a temporary restraining order to prevent Jeremiah Winters, Kate Atwood, Jen Thompson, Abbey Sorensen and their new company Founders Grove Wealth Partners from further poaching S&L clients has been approved by the S&L court judge. U.S. District Henry Hudson on June 20.

The order prohibits defendants from disclosing or using S&L’s trade secrets or proprietary information or further soliciting any of its customers at this time.

Hudson’s decision, however, does not prevent defendants from serving former S&L clients who had already moved their accounts to Founders Grove since the group abruptly resigned from S&L over Memorial Day weekend.

Court records illustrate the blow to S&L since the mass exodus began. By June 5, when the parties first appeared in court, a total of 333 clients had transferred a total of $280 million in assets from S&L to Founders Grove. This number had grown to 427 accounts and $352 million as of June 18.

Based in the West End, S&L managed $1.7 billion in client assets before the defendants left.

In addition to siphoning off customers and their funds, the move also cost the lives of four of S&L’s 12 employees. Winters and Atwood were two of four cabinet advisors. Thompson and Sorenson were two of its four operational employees.

S&L is suing the group for allegedly stealing trade secrets and wrongly soliciting clients when it launched Founders Grove without informing their longtime employer.

The case was filed in federal court in Richmond on May 28, four days after the quartet resigned.

The lawsuit alleges violations of the federal Defend Trade Secrets Act, as well as the Virginia Uniform Trade Secrets Act, and a breach of the defendants’ duty of loyalty by establishing their new company while they were still employed at S&L.

S&L has asked the court for damages, the amount of which will be determined at a jury trial.

The restraining order approved last week extends Judge Hudson’s previous “status quo” order and begins a process by which both sides will continue to argue for and against a longer-term restraining order that could extend the entire affair.

Atwood and Winters previously managed $750 million in client assets at S&L, according to a press release announcing the launch of Founders Grove.

S&L was founded in 2009 by Salomon and Daniel Ludwin after spending years at Wells Fargo Advisors.

The firm claims to have hired the four defendants between 2009 and 2017 and has pointed out in court filings that none of the four had their own clients when they joined the firm and have since relied on existing clients and internal references for their new clients.

The core of Founders Grove Group’s defense is what’s called the Broker Protocol, a set of industry standards that guide financial advisors as they move from one firm to another.

S&L claims the quartet entered into employment contracts that included non-solicitation clauses that supersede the protocol.

The Founders Grove quartet claims that protocol takes precedence over these employment contracts. They also maintain that the protocol was designed to allow this type of event and that they followed the provisions of the protocol at every step they took after leaving S&L.

They claim they only took client information permitted by this protocol and claim they only discussed their departure from S&L with clients after they had officially resigned.

Founders Grove is backed by Dynasty Financial Partners, which would financially back the new investment advisory firms in exchange for a minority stake.

S&L is represented in this matter by a group of attorneys from the Washington, D.C. law firm of Sheppard Mullin, including Denise Giraudo and Paul Werner.

The defendants and Founders Grove are represented by Richmond attorney Henry Willett of Christian & Barton, as well as New York attorney Sharron Ash of the Hamburger Law Firm.