In a recent case, the Western District of Virginia found in favor of the employer plaintiff, granting a motion for injunctive relief enjoining the defendant’s prior employee from soliciting clients in violation of a non-solicitation agreement. There, the court found the employer was likely to succeed on the merits of the underlying breach of contract claim and was likely to suffer irreparable harm without injunctive relief.

Edward Jones v. Clyburn

Samuel Clyburn, Jr. worked for Edward D. Jones & Co., L.P. (“Edward Jones”) as a financial advisor from October 2009 until he resigned June 26, 2020. Clyburn is now employed as a financial advisor with Ameriprise Financial Services, LLC (“Ameriprise”). Clyburn signed a “Financial Advisor Employment Agreement,” which contained a non-solicitation agreement that stated that for one year following the termination of employment, Clyburn would not “solicit by mail, phone, electronic communication, personal meeting, or any other means, either directly or indirectly, any clients of Edward Jones with whom you had direct contact during your employment with Edward Jones” and would not “during your employment with Edward Jones, and for a period of one year thereafter, initiate any contact or communication of any kind whatsoever for the purpose of inviting, encouraging or requesting any Edward Jones client to transfer from Edward Jones to you or your new employer, to open a new account with you or with your new employer, or to otherwise discontinue his/her/its patronage and business relationship with Edward Jones.”

Current employees of Edward Jones claimed that following Clyburn’s resignation, based on conversations with clients, twenty clients had received calls from Clyburn and several clients chose to move their accounts from Edward Jones to Clyburn. Multiple clients reported that Clyburn had called them and asked them to move their accounts to Ameriprise. According to Edward Jones, $42 million dollars in assets had been lost in the months following Clyburn’s resignation. Edward Jones filed an action for injunctive relief against Clyburn, asserting breach of contract.

A plaintiff seeking a temporary restraining order or preliminary injunction must establish: (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm without injunctive relief; (3) the balance of the equities tips in its favor, and (4) an injunction is in the public interest.

To succeed on a breach of contract claim, under Missouri law as set by the Agreement, the plaintiff must establish “the existence of a valid contract, the rights of plaintiff and obligations of defendant under the contract, a breach by defendant, and damages resulting from the breach.” Clyburn argued he didn’t breach the contract, since he didn’t solicit any clients in violation of the Agreement. However, Edward Jones provided detailed affidavits indicating Clyburn contacted clients to schedule appointments and ask them to move their accounts to Ameriprise. The court found that the statements “clearly support a finding that Mr. Clyburn has initiated contacts with clients ‘for the purpose of inviting, encouraging, or requesting [them] to transfer from Edward Jones’ to Ameriprise, or to ‘open a new account’ with Ameriprise, in violation of the Agreement.” Based on this, the court concluded that Edward Jones had shown a likelihood of success on the merits of its breach of contract claim.

To establish likelihood of irreparable harm, Edward Jones must make a “clear showing that it will suffer harm that is neither remote nor speculative, but actual and imminent,” and “cannot be fully rectified” by the final judgment. The court determined that since Edward Jones “presented evidence indicating that Mr. Clyburn has solicited and diverted business,” it is suffering present harm from Clyburn’s breach and is likely to continue to suffer harm without injunctive relief. The court pointed to a Fourth Circuit holding that “the threat of a permanent loss of customers and the potential loss of goodwill . . . support a finding of irreparable harm.” The court further noted that in addition to the accounts already transferred to Ameriprise, Edward Jones “‘also risks losing future business opportunities with the clients defendant has diverted,’ as well as future referrals from such clients.”

Finally, the court determined that the balance of the equities and public interest factors favor granting injunctive relief, since Edward Jones “has a significant ‘interest in protecting its customers from diversion’ and ‘the public has an interest in protecting the legitimate expectations of parties to a contract.’” The court also pointed out that granting the injunction, will not prevent customers from transferring their accounts and working with the broker of their choice or prevent Clyburn from continuing to work for Ameriprise. Instead, the injunction would only require him to refrain from soliciting Edward Jones’ clients. After finding the factors weighed in favor of plaintiff, the court granted Edward Jones’ motion for a temporary restraining order enjoining Clyburn from soliciting clients of Edward Jones in violation of the non-solicitation agreement.

What Does Edward Jones v. Clyburn Mean for Employers?

Courts determine the enforceability of restrictive covenants on a case-by-case basis, based on what is reasonable and narrowly tailored in light of specific circumstances. Due to the fact intensive inquiry each case requires, the court’s finding here can’t be interpreted as applicable to all non-solicitation provisions. Each agreement is unique based on the circumstances and a court will balance the factors to determine if each specific agreement is narrow and reasonable enough to be enforceable. Similarly, when deciding whether injunctive relief is appropriate, courts will look to the specific circumstances to make a determination. However, other cases with similar facts and a similar non-solicitation clause may find guidance in the court’s ruling. Here, the court found that the non-solicitation provision specifically defined what conduct constituted solicitation in breach of the Agreement. Other agreements with similarly specific and narrow non-solicitation agreements, may also be upheld. Additionally, since Edward Jones was able to establish that Clyburn had already resulted in loss of business to Edward Jones and there was a chance of continued loss of business without injunctive relief, Edward Jones faced irreparable harm without injunctive relief. 

This case, and Edward Jones’ $42 million in lost assets as a result of Clyburn’s solicitation, showcases the serious consequences that can result for an employer if an employee breaches a non-solicitation agreement, or if a non-solicitation agreement is found to be unenforceable. Employers, particularly those in the financial sector, may wish to consider having their employment agreements reviewed to ensure the enforceability of similar non-solicitation provisions.

Whether you’re an employer or employee dealing with a potentially breached non-solicitation agreement, attorneys at General Counsel PC can provide you with knowledge and assistance to better understand your rights. Our attorneys are experienced in reviewing, drafting, negotiating, and litigating non-solicitation agreements for businesses and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William. Call General Counsel PC at 703-556-0411 today to see how we can help you.