Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—4th Cir.: Financial advisors who left employer to start their own firm properly subject to preliminary injunction; but not new firm, (Aug 13, 2025)

By Ronald Miller, J.D.

With respect to the former employees, the appeals court concluded that their employment agreements controlled over the protocol and prohibited their conduct.

The conduct of former employees of a financial services firm, who left the firm to start their own business, did not constitute “raiding” as that term was contemplated by a protocol in the financial industry, ruled the Fourth Circuit. Under the protocol, liability attaches when an outside firm preys upon another firm, not when individuals leave a firm. However, a district court did not abuse its discretion in granting the preliminary injunction as to the former employees. Under the terms of the employees’ employment agreements, the non-solicitation and confidentiality provisions of the agreements likely prohibited the employees’ conduct in contacting the employer’s clients. It did, however, abuse its discretion in granting the preliminary injunction as to the new firm, Founders Grove (Salomon & Ludwin, LLC, v. Winters, No. 24-1728 (4th Cir. Aug. 12, 2025)).

The employer is a wealth management firm based in Richmond, Virginia. Several employees of the firm, including financial advisors and operational professionals, left to start a competing firm and then began contacting their former clients.

Employment agreements. All of the employer’s employees generally have access to proprietary client information. To protect this proprietary information, the employer takes several steps. Most significantly, it requires financial advisors to sign a Financial Services Professional Employment Agreement. And it requires operational professionals to sign an Administrative Professional Employment Agreement.

The agreements contain a number of provisions that protect the employer. The agreements state that client information is a trade secret. And they prohibit an employee from soliciting the employer’s clients for two years after the end of their employment. Moreover, attached to each agreement is a confidentiality agreement, which prohibits an employee from disclosing the employer’s trade secrets and client information.

Protocol. Complicating these provisions, the employer signed on to an industry-wide document called the Protocol for Broker Recruiting. The protocol is a separate voluntary agreement among firms in the financial services industry that allows a departing financial advisor, with written notice, to take certain client information with them when leaving one member-firm to join another member-firm. So long as a financial advisor complies, the protocol shields both the departing financial advisor and the new member-firm from liability.

Complicating things a bit more, the agreements address the protocol, stating that the parties to the agreement acknowledge that the employer is not part of or subject to the protocol. But the employer joined the protocol in March 2018—long before the defendant financial advisers executed these agreements.

Competing firm. While still employed by the employer in the spring of 2024, the defendant financial advisors decided to leave and found their own firm, Albero Advisors. A month and a half after setting up their business, they resigned from the employer. The new firm joined the protocol. According to the employees their resignation letters listed the clients they served, in accordance with the protocol. At the same time, the departing employees began contacting the employer’s clients, informing them of their new endeavor and stating that they would be in touch. As a result, the employer lost over 400 accounts representing hundreds of millions of dollars in client assets.

The employer sued the employees and Albero Advisors, alleging trade secret violations under federal and state law; tortious interference with business relations; breach of the duty of loyalty; and breach of contract. At some point, Albero Advisors changed its name to Founders Grove Wealth Partners, so the employer sued that firm also. Additionally, the employer filed an emergency motion for a temporary restraining order, which the district court granted.

Preliminary injunction. Thereafter, the employer moved for and obtained a preliminary injunction. As to the likelihood of success on the merits of the employer’s claims, the district court found no dispute that its client information likely constituted a trade secret and that the employees obtained that information through their relationship with the employer. But because both the employer and Founders Grove were members of the protocol, the district court determined that it had to consider the impact of the protocol. It concluded that the protocol’s raiding exception applied because the employees had likely raided the employer. Additionally, the district court found that the employer established it was likely to suffer irreparable harm, and that the balance of equities and public interest cut in favor of granting injunctive relief. The employees appealed.

Raiding. On appeal, the employees argued that the district court erred in determining that if the protocol controlled, the defendants’ conduct constituted raiding. The Fourth Circuit agreed that the district court incorrectly interpreted raiding. But with respect to the former employees, the appeals court concluded that the agreements controlled over the protocol and prohibited their conduct. As to Founders Grove, the appeals court vacated the injunction because it was not a party to the agreements.

In determining that the employer was likely to succeed in showing the employees’ conduct constituted raiding under the protocol, the district court found that their efforts to start a competing firm while still employed, combined with the resulting loss of 40 percent of the employer’s total employees, 50 percent of its financial advising team, and approximately 30 percent of its business constituted raiding.

The appeals court found that the district court’s interpretation of raiding was inconsistent with the text of the protocol, the ordinary meaning of the term “raid,” and the industry-specific meaning, as they suggested that raiding involves a separate firm targeting employees of another firm.

Text of protocol. First, the appeals court noted that language in the protocol against raiding applies only to actions by a firm, not individuals. Thus, the protocol contemplates liability when an outside firm preys upon another firm, not when individuals leave a firm.

Nevertheless, the employer claimed that the employees’ subsequent solicitation of clients and taking of over $300,000,000 in assets constituted raiding. However, under the protocol, taking clients is generally not actionable against either the departing advisor or the new firm they join. Thus, the appeals court concluded that “raid” refers to intruding conduct by an outside firm to steal away employees.

Ordinary meaning. Second, the ordinary meaning of raiding also refers to a competing firm swooping in to lure employees away from their current employer—not a means of keeping employees from striking out on their own. Using dictionaries from around the time the protocol was drafted, “raid” is defined as “a sudden, hostile attack.” Dictionary definitions suggest that the protocol contemplates a separate firm taking employees away from the employer—not employees of that firm leaving of their own accord.

Another tool, corpus linguistics, largely affirms this general understanding of the term “raid.” Spanning differences in discipline, medium and time, corpus linguistics affirms that a raid requires one party attacking another—not merely a faction of a group leaving.

Industry-specific meaning. Finally, even if the appeals court accepted the district court’s definition of raiding from the financial services industry, raiding necessarily required an outside firm. Thus, the defendants’ conduct could not constitute raiding for two reasons. First, four of the five defendants are individuals. And the protocol’s plain text establishes that the raiding exception applies only to firms. Second, the remaining entity defendant, Founders Grove, did not seek to lure employees away from the employer.

Accordingly, the appeals court declined to affirm the preliminary injunction based on the protocol as to either the former employees or Founders Grove.

The agreements. However, the plain language of the agreements provided an alternative ground for finding likelihood of success on the merits as to the former employees, but not as to Founders Grove. The words used by the parties in the agreements indicate that the protocol does not apply to financial advisors.

If the employer were not a member of the protocol, the agreements would control. And if the employer became a member of the protocol, the agreements would also control. Put simply, the meaning of the words here indicates the agreements control over the protocol regardless of the employer’s protocol-membership status.

Consequently, the non-solicitation and confidentiality provisions of the agreements likely prohibited the former employees’ conduct. Thus, the employer has shown a strong likelihood of success on the merits of its trade secrets claims as to the former employees.

However, because Founders Grove was not a party to the agreements, it cannot be enjoined on that basis. Thus, to the extent that the district court preliminarily enjoined Founders Grove, the appeals court found that was an abuse of discretion.

Accordingly, the appeals court affirmed in part and vacated in part the district court’s order.

The case is No. 24-1728.

Judge: Quattlebaum, A., Jr.

Attorneys: Henry Willett, III (Christian & Barton) for Jeremiah Winters, Catherine Atwood, Jennifer Thompson, Abbey Sorensen, and Albero Advisors, LLC dba Founders Grove Wealth Partners. Paul Anthony Werner, III (Sheppard Mullin Bichter & Hampton) for Salomon & Ludwin, LLC.

Companies: Salomon & Ludwin, LLC; Albero Advisors, LLC; Founders Grove Wealth Partners

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