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Fidelity Brokerage Services, LLC v. Callinan

Superior Court of Massachusetts, Suffolk, Business Litigation Session

February 11, 2019

Devin CALLINAN et al.


          Brian A. Davis, Associate Justice of the Superior Court

          This is an action in which plaintiff Fidelity Brokerage Services, LLC ("Fidelity") seeks a court order preliminarily enjoining its former employee, defendant Devin Callinan ("Mr. Callinan"), from violating the terms of his employment agreements with Fidelity and further enjoining Mr. Callinan and his new employer, defendant UBS Financial Services, Inc. ("UBS" or, collectively with Mr. Callinan, "Defendants"), from utilizing any of Fidelity’s confidential information to solicit Fidelity customers whom Mr. Callinan serviced or learned of during his tenure at Fidelity. The parties agree that the merits of Fidelity’s underlying claims will be resolved through mandatory, binding arbitration conducted in accordance with the rules and regulations of the Financial Industry Regulatory Authority ("FINRA"). Thus, the only issue to be resolved by this Court is whether Mr. Callinan and UBS’s business activities will be restricted in any way while that arbitration proceeding is pending.

          After Fidelity filed its Verified Complaint and motion for preliminary injunction on July 6, 2018, the parties agreed to a period of expedited discovery. They thereafter exchanged documents and conducted the depositions of Mr. Callinan and Dominic Collamati ("Mr. Collamati"), the Branch Office Manager of Fidelity’s Framingham, Massachusetts investment center (the "Framingham Center"), on an accelerated basis.

         On October 3, 2018, the Court conducted a hearing on Fidelity’s motion for a preliminary injunction. Both sides appeared. Upon consideration of the Verified Complaint, the affidavits, memoranda, and other materials submitted by the parties, as well as the oral arguments of counsel, the Court issued a written Preliminary Injunction Order on October 10, 2018 (Docket Entry No. 21.0), which the Court subsequently revised on October 16, 2018, in response to a request for clarification submitted by Mr. Callinan (see Revised Preliminary Injunction Order (Docket Entry No. 22.0) (the "Injunction Order")). In its Injunction Order, the Court found that Fidelity had established all of the elements necessary to obtain preliminary injunctive relief, namely, a likelihood of success on the merits, a substantial risk of irreparable harm if an injunction did not issue, a balance of possible harms weighing in its favor, and a demonstration that the public interest would be best served by granting the relief sought. See Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-17 (1980); Brookline v. Goldstein, 388 Mass. 443, 447 (1983). At the time the Court issued its Injunction Order, it promised the parties a more comprehensive written decision setting forth, in greater detail, its findings and reasons for granting Fidelity’s request for injunctive relief. This decision is provided in fulfillment of that promise.

          Factual Findings

          The relevant facts, most of which are undisputed, are as follows.

          Mr. Callinan joined Fidelity in 2007 shortly after graduating from college. Following a series of promotions, Mr. Callinan became a Vice President, Financial Consultant with Fidelity in 2016. In that capacity, he served approximately 500 "high net worth" clients working primarily out of Fidelity’s Framingham Center. The parties agree that, as a general matter, Mr. Callinan did not develop his client base through his own contacts or leads. Rather, Mr. Callinan’s clients came to him almost exclusively through reassignments from other Fidelity representatives, referrals from existing Fidelity customers, or leads supplied by Fidelity. Fidelity asserts that it is unique in the retail brokerage field in that it does not have its account representatives make "cold calls" to persons who have no relationship with Fidelity or who have not been referred to Fidelity. Fidelity’s Financial Consultants instead serve and maintain a customer base that Fidelity itself has developed at substantial expense.

          As usually is the case, Mr. Callinan was required by Fidelity to sign an employment agreement that spelled out his rights and obligations as a Fidelity employee. The most recent employment agreement that Mr. Callinan signed prior to his departure is dated December 21, 2016 (the "Employment Agreement").[1] Paragraph 6 of that Employment Agreement, titled "Non-solicitation," states in relevant part that,

during [his] employment and for a period of one year following [his] separation from employment by the Fidelity Companies, [Mr. Callinan] will not use any Confidential Information belonging to the Fidelity Companies to directly or indirectly, on [his] own behalf or on behalf of anyone else or any company, solicit in any manner or induce or attempt to induce any customer or prospective customer of the Fidelity Companies to divert or take away all or any portion of his/her/its business from the Fidelity Companies or otherwise cease the relationship with Fidelity Companies. During this same period, [Mr. Callinan] also will not, directly or indirectly, on [his] own behalf or on behalf of anyone or any company, solicit in any manner or induce or attempt to induce any customer or prospective customer with whom [he] had personal contact or about whom [he] otherwise learned during the course of [his] employment with Fidelity Companies.

          Employment Agreement, ¶ 6.

          Early in the morning of June 13, 2018, Mr. Callinan abruptly resigned from his position at Fidelity. Later the same morning, he began his new employment with UBS at UBS’s office in Wellesley, Massachusetts. Immediately upon arriving at UBS, Mr. Callinan created a written list of Fidelity clients that he claims to have prepared entirely from memory.[2] Mr. Callinan then gave the list to his new managers at UBS, who proceeded to track down and add contact information for each client on the list using publicly available sources, such as Google. Over the next approximately four months, Mr. Callinan utilized the contact information to personally contact many of his former Fidelity clients by telephone. Mr. Callinan asserts that, in each call, he initially did "nothing more" than notify the client that he had left Fidelity and offer to provide the client with his new contact information at UBS, unless the client requested additional information about his departure. Devin Callinan’s Opposition to Plaintiff’s Motion for a Preliminary Injunction ("Defendant’s Opp.," Docket Entry No. 17.0) at 4. If the client made such a request, Mr. Callinan used the opportunity to expound on the reasons why he moved to UBS and the advantages that he sees in working at UBS, as opposed to Fidelity. Id. Among the things that Mr. Callinan said, if the client made an inquiry, is that he believes UBS has a broader menu of investment options to choose from, and that, at UBS, he will have a smaller group of clients to whom he can offer more personalized services. Id. Mr. Callinan also told at least some Fidelity clients that, because "there’s a small select group of products at Fidelity ... that drive a lot of representatives of Fidelity’s compensation," he believes that he had a "real big conflict of interest" at Fidelity between doing what was in his own financial interest and "doing what’s right for each and every customer that I worked with." Transcript of Deposition of Devin Callinan, taken Sept. 10, 2018, at 81.[3]

          Fidelity has submitted its own independent evidence concerning the content of some of Mr. Callinan’s calls to his former Fidelity clients, which suggests that Mr. Callinan also used the calls as an opportunity to persuade those clients to transfer their investment accounts from Fidelity to UBS.[4] Fidelity seeks to prevent Mr. Callinan and UBS from undertaking any further persuasive efforts directed at Fidelity’s customers while the parties’ FINRA arbitration is being resolved.


         Massachusetts law holds that non-competition and other restrictive covenants contained in an employment contract "will be enforced if it is reasonable, based on all the circumstances." All Stainless, Inc. v. Colby, 364 Mass. 773, 778 (1974). See also Marine Contractors Co. v. Hurley, 365 Mass. 280, 287 (1974) (a non-solicitation provision, like an employee covenant not to compete, "generally [is] enforceable only to the extent that [it is] necessary to protect the legitimate business interests of the employer"). In deciding what is "reasonable," the Court must consider, among other things, the "reasonable needs of the former employer for protection against harmful conduct of the former employee[, ]" the "reasonableness of the restraint imposed on the former employee[, ]" and the geographic scope of the covenant and its duration, as well as the "public interest" as a whole. All Stainless, Inc., 364 Mass. at 778. See also Marine Contractors Co., 365 Mass. at 287 (non-solicitation provision must be reasonable in its time, space, and scope).

         Massachusetts law also permits the enforcement of a restrictive covenant contained in an employment contract, in appropriate circumstances, by means of a preliminary injunction. As in most cases involving preliminary equitable relief, a party seeking a preliminary injunction "must show that (1) success is likely on the merits; (2) irreparable harm will result from denial of the injunction; and (3) the risk of irreparable harm to the moving party outweighs any similar risk of harm to the opposing party." Cote-Whitacre v. Dep’t of Pub. Health, 446 Mass. 350, 357 (2006), citing Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609, 616-17 (1980).

          The positions of the parties with respect to Fidelity’s motion for a preliminary injunction directed to Defendants’ conduct are relatively straightforward. Fidelity asserts that it is likely to succeed on the merits because the facts show that Mr. Callinan, aided and abetted by UBS, violated the terms of his Employment Agreement by utilizing "Confidential Information" concerning the identity of Fidelity’s clients for the purpose of "soliciting" those clients to transfer their Fidelity investment accounts to UBS. Fidelity further asserts that it will be irreparably harmed if Defendants’ conduct is not enjoined and that the balance of harms weighs heavily in its favor.

          Mr. Callinan, in turn, asserts that Fidelity is unlikely to succeed on the merits because the information he retained in his memory regarding his former Fidelity clients does not constitute "Confidential Information" for purposes of his Employment Agreement and because he was legally entitled to "announce" his departure from Fidelity to his former clients irrespective of the terms of his Employment Agreement.[5] Mr. Callinan also alleges that the balance of harms actually weighs in his favor because granting Fidelity’s requested ...

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