Edelman Financial Engines' lawsuit against Mariner Wealth will continue as planned after a federal judge denied the latter firm's request to dismiss the suit.
Mariner wanted to stay in the Kansas-based lawsuit, arguing that a pause would avoid the possibility of “inconsistent results” between litigation and arbitration that Edelman filed against several former advisers who left to join Mariner.
But Edelman argued it would be irreparably harmed by what they believed could be an “indefinite” pause waiting for those proceedings to cease. U.S. Magistrate Judge Brooks Severson agreed with Edelman in a ruling last week, acknowledging that while there was some overlap between the lawsuit and arbitration process, the overlap was not significant enough to warrant a pause.
“Although the arbitrations are scheduled to take place over the next several months, the Court has significant doubt that they will occur and be concluded as currently scheduled,” Severson wrote in her decision.
In November, AUM of $250 billion Edelman filed his lawsuit against Marineraccusing that firm of luring about 10 advisers away from Edelman while asking them to break their restrictive covenants, including non-solicitation agreements (at which point, Edelman put the damage at the loss of about 850 clients who represent approximately $621 million in assets).
According to the original complaint, Edelman argued that Mariner wanted to “reinvent” Edelman's work by stealing the firm's “trade secrets, goodwill and client relationships.” But Mariner fired back the next month, accusing Edelman of waging a campaign through the courts to “unlawfully stifle fair competition” in the industry. Mariner and Edelman did not return requests for comment before publication.
The Edelman complaint is one of several court battles Mariner is currently waging, with several plaintiffs accusing the firm of recruiting tactics that fall outside the bounds of the average competitor. Although the details vary, the plaintiffs accused Mariner of helping advisers leave the firms, breaking their confidentiality agreements and even allegedly stealing trade secrets.
The string of lawsuits led industry experts to question whether Mariner's aggressive recruiting strategy had crossed the legal line or whether the plaintiffs at the firms were trying to thwart a competitor that appeared to be winning the battle for talent in the courts.
One of the other heated cases currently involves Avantax Planning Partners, who filed a lawsuit against advisor (and former Avantax employee) Michael Carignan and Mariner Wealth. The $43 billion AUM planning firm sued Mariner in Iowa state court last fall before moving to federal court last month.
In the complaint, Avantax accused Carignan of breaching the terms of his contract with the firm after he left to join Mariner. According to Avantax, Carignan did so with the “support and encouragement” of Mariner, with Mariner allegedly knowing that Carignan's conduct was contrary to the “contractual obligations” the adviser owed to his former firm.
But Mariner and Carignan both filed responses to Avantax's allegations last week, with Mariner asking the courts to stay the lawsuit against them. In their motion, Mariner argued that Avantax could not show that Iowa courts had proper jurisdiction over any of the claims.
Carignan's motion challenged Avantax's previously filed request for a temporary injunction on his work, calling the Avantax client non-solicitation agreement “incomprehensible” (an Avantax spokesman said WealthManagement.com the firm does not comment on pending litigation).
According to the motion, Carignan was previously employed by Honkamp Krueger and valued his freedom there.
But when Blucora (which later changed its name to Avantax) acquired Honkamp in early 2020, he began to have a change of heart, saying he “didn't appreciate” the corporate changes mandated by Avantax (his displeasure it only increased when Cetera bought Avantax a few years later ).
“Carignan is just the latest Avantax employee to decide not to continue working for Avantax, some of whom have left for Mariner,” Carignan's motion said. “In each of these cases, Avantax has gone to court claiming that without an immediate injunction, Avantax would be irreparably harmed. Each time, a court has rejected Avantax's request.”