When John Hantz led a mass defection out of American Express Financial Advisors' Detroit office lastOctober, he made both waves and headlines--and discovered the ways in which a former employer can use the temporary restraining order (TRO) process to interfere with an ex-employee setting up a business elsewhere.
Initially, Hantz and four other senior executives were enjoined via a TRO from soliciting their former AMEX clients, but it was an unusual TRO in that it also covered "anyone acting in concert with them, without defining who they were," says Hantz's lawyer, Tom Campbell, a partner in the New York City law firm of Smith Campbell & Paduano.
More than 100 people left the Detroit office of AMEX within a short period of time, "including the entire management of the marketing group," Campbell notes. In the midst of a mass defection, though, it wasn't immediately clear who would be going with Hantz to form his new firm, especially since Hantz left in October and didn't launch his new firm, Hantz Financial Services, until January. Hantz now has 15 offices in Michigan and one in Cleveland, with 150 employees--about 120 of them former AMEX colleagues, Hantz says.
An injunctive arbitrator also enjoined AMEX from proceeding in court, while ordering Hantz and his colleagues to return any confidential data that belonged to AMEX. AMEX also took the unusual step of freezing some of the personal accounts of the employees who had left.
But "the arbitrators ordered them to unfreeze the accounts, and they forbid future freezing, except on five days notice to the panel," Campbell says. "Basically, AMEX was trying to put as many impediments in front of them as possible."
The arbitrators also ruled that any accounts that transfer from AMEX to Hantz's new firm would be subject, for the time being, to an escrow requirement, pending the final outcome in arbitration. If any AMEX clients transfer over, Hantz has to put aside an amount equal to 5% of the value of the account in case there are damages owed to AMEX.
AMEX spokesperson Tom Joyce says the initial TRO has since been extended into a preliminary injunction and will be in effect until the arbitration panel makes its ruling, and that's "a clear victory for us," he says. "The arbitrators have upheld our non-compete, non-solicit agreements."
The dispute is expected to remain in arbitration at least through August.
Campbell accuses AMEX of using a variety of techniques to impede departing reps--"massive discovery disputes, appeals, additional appeals," he says. He says he has two other cases involving ex-AMEX planners, one of which "just had its third birthday," and another that was begun in late 1995 and is still ongoing.
In the Hantz case, Joyce says that the real point is to have its non-competes upheld, as a matter of principle.
While Hantz and his colleagues cannot solicit any of their former AMEX clients directly, he is allowed to generate publicity. AMEX had complained to the panel about Hantz talking to the press and tried to stop it, Campbell says, but the panel endorsed Hantz's right to talk to the press and to advertise his new firm.
Ever since, Hantz has been on a media blitz, giving interviews to all of the Detroit papers and to The Wall Street Journal. He's also hung billboards throughout the state of Michigan.
"Try not to hear about Hantz in Michigan, and you'll have a hard time," Campbell says.