Last week, Salomon & Ludwin, a Richmond, Va.-based registered investment advisor, filed suit against four former team members and their newly launched RIA, Founders Grove Wealth Partners, claiming they intentionally misappropriated the firm’s trade secrets to solicit clients and breached their employment agreements.
This week, the defendants filed court documents in response, claiming the team was under the protection of the Protocol for Broker Recruiting, an agreement that allows departing advisors to take certain customer information and solicit them regardless of whether they had notices that expressly prohibited such conduct. Founders Grove joined the Protocol recently, and S&L has been a member since 2018, according to J.S. Held, the company that administers the agreement.
The lawsuit names Founders Grove and four former S&L employees, including Jeremiah Winters, founder, managing partner and CEO of Founders Grove; Kate Atwood, founder, managing partner and president; Chief Operating Officer Jen Thompson; and Director of Client Experience Abbey Sorensen. Founders Grove was created last week with the support of Dynasty Financial Partners.
“Pursuant to the Protocol, Mr. Winters and Ms. Atwood could retain the following list of client information upon their resignations from S&L: client names, client addresses, client phone numbers, client email addresses and client account titles,” the court document stated. “They retained that information, as they were permitted to do, and provided S&L with the more comprehensive list of information required by the Protocol.”
The response also characterized the allegations against Thompson and Sorensen as “disingenuous,” pointing to their letters of resignation, which were not attached to the original complaint.
In her resignation letter, Sorensen cited “poor communication to the team, lack of accountability, lack of direct, and inconsistent decision making,” “misguided communication in an attempt to manipulate us and coerce us into a premeditated plan,” “lack of accountability among leaders,” including “countless instances where Dan [Ludwin] has not been held accountable for his reckless behavior or decisions,” and “body shaming.” She also said she didn’t feel “fully supported and safe to express thoughts and concerns without fear of repercussions,” felt “undervalued” with leadership seeing “no value in expanding ... roles and responsibilities.”
Thompson’s letter stated she raised concerns about the firm’s culture, but there was “little to no meaningful change or improvement.” She also cited a “lack of receptiveness to new ideas and the failure to recognize the importance of staying ahead of market developments,” “a lack of urgency and accountability from leadership” after the “discovery of a million-dollar trade error,” the “mishandling” of an SEC audit in 2021 and “misinformation being provided to regulatory authorities by Dalal Salomon.”
"Salomon & Ludwin is disheartened that its former employees have attempted to damage the firm’s reputation by publicly releasing resignation letters that have nothing to do with the employees’ unlawful conduct and include statements that S&L refutes,” said Denise Giraudo, an attorney with SheppardMullin, representing S&L, in a statement. “The firm has always prided itself on the personalized attention it has provided to clients and team members. Salomon & Ludwin’s founders personally mentored and invested in the four individuals that are the subject of the litigation. Unfortunately, the defendants took advantage of the founders’ goodwill for their own personal gain. The firm is proud of its consistent growth and client service that can only be attributed to the values espoused by Salomon & Ludwin’s founders. Our client will not back down and will continue to fight to protect its clients and decades of hard work."
Founders Grove’s response also claims that S&L’s non-solicitation agreements are not enforceable.
“The provisions fail because they impermissibly exceed the category of work done for S&L by defendants, the customers serviced by defendants during their tenure at S&L, and contain otherwise unreasonable restrictions,” it stated.
S&L filed a reply, stating Founders Grove's team members “do not dispute that they created a competing entity while employed by S&L and two months before resigning en masse from the firm that invested in them and educated them on financial advising and client relations for over a decade.
“They also do not seriously dispute they began advertising and promoting for their new firm, Founders Grove Wealth Partners, LLC (“FGWP”), while still employed by S&L. Nor do they dispute that, in leaving S&L, they misappropriated confidential and proprietary information, including client lists and account names, and have since been using those trade secrets to solicit S&L’s clients. Indeed, defendants do not analyze S&L’s DTSA, VUTSA, tortious interference, or breach of the duty of loyalty claims at all.”
S&L calls Founders Grove’s Protocol arguments “a red herring” because they didn’t sign the Protocol agreement until the day of their resignation, nearly two months after the creation of the new RIA. Further, S&L claims the employment and confidentiality agreements supersede the Protocol, and that the team violated Protocol rules by soliciting clients while still employed at the firm.
“They cannot wield the Protocol as a sword and shield to justify their misconduct,” S&L stated.
S&L was founded in 2009 by Dalal Salomon when she took her practice independent. Her partner, Dan Ludwin, joined the firm in 2018. The suit claims Salomon hired and trained financial advisors and operations professionals to exclusively serve her existing clients and their referrals. The firm now has a team of 12, including four advisors, four operations professionals, a trader and three executives.
S&L is seeking injunctive relief against Founders Grove, enjoining the firm from disclosing and using its trade secrets and proprietary information. The injunction also seeks to prevent them from interfering with S&L’s business relationships and soliciting any of its clients during the restricted period. S&L is seeking damages, disgorgement of ill-gotten gains, attorney’s fees and costs and pre-judgment and post-judgment interest.