Prime Capital Financial is asking a federal court to pause Edelman Financial Engines’ recently filed lawsuit against the firm, arguing that the issues at stake are being addressed in other cases around the country.
In filings responding to Edelman’s original complaint filed in late November, Overland Park, Kan.-based Prime Capital also argued for the case to be transferred to Kansas’s jurisdiction, questioning why Edelman filed the case in Delaware federal court.
Edelman’s suit, filed Nov. 19, centered on six former Edelman planners who left to work at Prime Capital. (Edelman noted it filed arbitration claims against the advisors, though Prime Capital wasn’t a party in them.) In the suit, Edelman accused Prime Capital of “a coordinated and concealed scheme to pillage” the firm by stealing Edelman’s client relationships.
“Rather than invest time and money to develop its own pipeline of client leads and clients—as Edelman has done, at great time and expense—Prime Capital opted for theft,” the suit read.
In the suit, Edelman argued that Prime Capital instructs planners to poach from Edelman, encouraging them to remain at the latter firm and use their role in the company to access confidential client information “through memorization or other undetectable means.”
At Prime Capital’s direction, the planners resign with Edelman via mail, typically on a Friday, “and, when feasible, sent before a long holiday weekend and addressed to an office thousands of miles from where the planner worked—to buy time to solicit Edelman’s clients after their resignation letters have been mailed but before Edelman learns of their resignation.”
According to Edelman, Prime Capital had been “deploying this playbook” for years, nabbing hundreds of Edelman clients and nearly $1.5 billion in managed assets. In addition to the advisors who’d already left, Edelman believed Prime Capital was in the midst of recruiting as many as 40 current Edelman employees to leave the firm.
Allison Amadia, Edelman’s chief legal and risk officer, said in a statement that the firm wouldn’t be “deterred by this baseless procedural maneuvering engineered to avoid the merits of Edelman’s claims.”
“We are continuing to pursue all appropriate legal remedies to protect our clients, our advisors and our business,” she said. “We will not tolerate the misappropriation of trade secrets or the exploitation of the trusted client relationships that Edelman Financial Engines has spent years building.”
In Prime Capital’s response, the firm noted that Prime Capital had already been named as a defendant in three ongoing lawsuits filed by Edelman Financial Engines against advisors who had departed for Prime Capital, as well as the ongoing arbitration claims centered on similar actions.
Edelman added Prime Capital as a defendant in cases against advisors Tim Dowden, Jared Copinga and Scott Szymula earlier this year, accusing the firm of helping the former Edelman advisors steal confidential information and solicit clients in violation of restrictive covenants.
“In this case, the gestalt of (Edelman’s) complaint is that (Prime Capital) is allegedly engaged in an ongoing conspiracy to steal its client relationships and to misappropriate its trade secret information, the response read. “(Prime Capital) adamantly denies all of those allegations. But, regardless of who ultimately prevails on the merits of those claims, granting a stay will streamline this case or, at least, simplify the presentation of important issues.”
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