Gwen Campbell and J.P. Morgan will be working out their differences in arbitration without interference from the court system, a U.S. District judge in the Northern District of California ruled Wednesday, sending a message to advisors that the language of the side letters so many rely on to capture the spirit of pre-employment negotiations needs to be extremely precise and devoid of interpretation.
The order, issued by Judge Haywood S. Gilliam, denied Campbell the temporary order of protection and preliminary injunction she had requested on Dec. 2 pending an arbitration hearing in an effort to keep her employer from, as she described, encroaching on clients with whom they both had relationships prior to her joining the firm. That alleged encroachment violated agreements made and documented in her job offer side letter that spelled out how channel conflicts would be handled, she said.
Campbell’s court complaint centered around allegations that the J.P. Morgan Private Bank group (formerly called the Wealth Management group) of her own firm was undercutting her relationships with the top clients she brought with her when, after more than a year of negotiations, she left Merrill Lynch in 2020 to join J.P. Morgan Advisors along with 40 clients and a $1.1 billion book of business. In addition, she accused the Private Bank of trying to poach her three top clients and move their assets out from under her, including those of baseball player Alex Rodriguez, who was one of the clients who had relationships with both entities prior to Campbell’s joining the firm.
In response, J.P. Morgan had countered that Campbell had not lost any clients, all clients had access to all services and could choose among them freely, and her claims had no merit.
When contacted for comment about this week’s ruling, J.P. Morgan declined, and Campbell’s attorney could not be reached by press time.
Side Letter Language Matters
When looking at the side letter from J.P. Morgan to Campbell at the time of her joining the firm—and which held most of the language regarding how the relationship between Campbell, her clients and J.P. Morgan would be handled should channel conflicts occur—the judge focused on the “shared clients” section which, according to his ruling, read as follows:
• "As discussed with David Frame, head of the Private Bank in July 2019, clients that you currently share with J.P. Morgan Private Bank will not result in forced partnering or forced consolidation."
• "The stated approach is for those clients to maintain the current nature of their relationship with the Private Bank and transition assets currently held with you to J.P. Morgan Securities under your care."
• "Both sides agree to be good partners and look for ways to collaborate going forward while maintaining separate coverage for the client(s)."
With that as the language of record to draw from, the judge continued, “Concepts like “maintain[ing] the current nature of their relationship,” being “good partners and look[ing] for ways to collaborate going forward while maintaining separate coverage,” and avoiding “forced partnering or forced consolidation” are not self-explanatory, and are susceptible to varying interpretations, especially in the context of the complex and interrelated company and client relationships described in the application."
The judge went on to rule that claims by Campbell "that JPMorgan promised that the Private Bank would not compete for her clients" are not supported by the contents of the offer letter or side letter that defined the two parties' relationship.
The Industry Watches
The case was watched carefully by both financial advisors and the attorneys who counsel them, as some considered Campbell vs. J.P. Morgan potentially a bellwether, had Campbell won, for how and where future tussles over channel conflicts and client control might get some traction.
“This decision by the judge appears to be very case- and fact-specific, too much so to reach precedence where this one decision would affect other cases,” said Laurence Landsman, an attorney at Chicago’s Latimer LeVay Fyock, where he advises brokers and advisors on career changes, including the wording of side letters. “This doesn’t mean that every broker who seeks an injunction ahead of the arbitration is going to lose. It doesn’t mean that at all. This is one instance where the argument didn’t work. It adds to the body of knowledge.”