Labor & Employment Law Daily Wrap Up, TORT CLAIMS—D. Kan.: Wealth management industry employees' class action lawsuit survives dismissal motion by parent entity, (Jan 17, 2025)

By Kenneth H. Ryesky, M.B.A., J.D.

Asset and wealth management professionals alleged that "institutional gentleman's agreement," admitted to in settlement with Justice Department, limited their careers and employability in the industry.

The federal district court in Wichita, Kansas, has denied the dismissal motion of the parent entity of a major player in the U.S. wealth and asset management industry in a putative class action antitrust lawsuit alleging that the defendants conspired to engage in an illegal “no poach” agreement in which they agreed not to compete for or hire each others’ employees, specifically asset and wealth management professionals. The lawsuit was brought by industry employees who claim harm from the anti-poaching agreement. The court ruled that the complaint sufficiently alleged more than a simple parent-subsidiary relationship, and adequately connected the parent to its subsidiary's alleged conduct (Tobler v. 1248 Holdings, LLC, No. 2:24-cv-02068-EFM-GEB (D. Kan. Jan. 14, 2025)).

Background. The asset and wealth management industry in the United States is estimated to manage a total of more than $50 trillion in client assets. Amongst the Asset and Wealth Management Professionals employed in the industry are those who hold the coveted Chartered Financial Analyst (CFA®) designation, attainment of which entails rigorous examination and experience requirements, and the expenditure of significant time and money; a CFA® charter credential is a requisite for the higher level positions at many asset and wealth management firms.

American Century Companies, Inc. d/b/a American Century Investments, the parent company of American Century Investment Management, Inc. and American Century Investment Services, Inc. (collectively, American Century), is a major player in the industry.

Mariner Wealth Advisors, LLC, along with its many subsidiary entities (collectively, Mariner), has been ranked as one of the top five investment advisors in America. Mariner Wealth Advisors, LLC, in turn, is wholly owned by 1248 Holdings, LLC. Martin Bicknell is the manager and majority shareholder of 1248, and also President and CEO of Mariner Wealth Advisors, LLC.

In 2008, a senior American Century employee jumped ship to a better position at a Mariner subsidiary, bringing some other American Century people with him. American Century's president and CEO (Thomas) thereafter contacted Bicknell; their discussions culminated in a secret mutual non-poaching agreement between Mariner and American Century.

The Justice Department subsequently investigated Mariner and American Century for violations of the Sherman Act in connection with the non-poaching arrangements. Mariner and American Century each resolved the agency's concerns by entering into respective non-prosecution agreements, in which they each admitted to violating the Sherman Act.

On February 23, 2024, two former employees of a Mariner-controlled entity filed this putative class action against American Century, Mariner, and 1248 Holdings, alleging Sherman Act and Kansas state antitrust claims on behalf of asset and wealth management professionals employed by American Century or Mariner. The allegations included, inter alia, that the arrangements between Mariner and American Century (1) depressed their compensation realized during their employment; (2) continued to harm them following their employment by reducing the amounts that could be placed into their 401(k) retirement plans; and (3) harmed them during and continued to harm them following their employment by depriving them of funding, and of experience opportunities, that would have facilitated or accelerated their attainment of a CFA® charter.

1248 Holdings, while not denying that American Century or Mariner entered into an illegal mutual no-poach agreement, moved for dismissal of the action as against it.

The court found that the former employees had alleged more than a mere parent-subsidiary relationship between 1248 Holdings and Mariner. While agreeing with 1248 Holdings that the parent-subsidiary relationship, standing alone, is insufficient to implicate participation of one in a conspiracy act by the other, the allegations were not based on derivative liability stemming from the parent-subsidiary relationship; the complaint effectively alleged that Bicknell acted on behalf of not only Mariner, but also of 1248. Through Bicknell's actions, 1248 Holdings was "directly a participant" in the admitted conspiracy. Here, the alleged decisions to enter into the conspiracy were made by the same decisionmaker, who legally was an agent for both 1248 Holdings and Mariner by dint of his position as manager of the former and President/CEO of the latter.

In construing the complaint, the court noted that "it would seem odd for Mr. Bicknell to agree not to hire or compete for American Century’s asset and wealth management professionals on behalf of Mariner Subsidiaries but retain the ability to compete and hire those same employees on behalf of 1248."

The complaint, which included the non-prosecution agreements as exhibits, sufficiently described the nature of and the actors in the alleged conspiracy to put 1248 Holdings on notice of the allegations against it.

The Case is No. 2:24-cv-02068-EFM-GEB.

Judge: Melgren, E.

Attorneys: Bradley Wilders (Stueve Siegel Hanson) for Jakob Tobler. Daniel E. Blegen (Spencer Fane) for 1248 Holdings, LLC Bicknell Family Holding Co., LLC.

Companies: 1248 Holdings, LLC Bicknell Family Holding Co., LLC

Cases: TortClaims KansasNews