PaineWebber's action against three brokers who left its La Jolla, Calif., office last spring for Sutro & Co.-Ed Dawson, Trace Davis and Joseph O'Leary--was settled in late July.
Therefore, the case never went before arbitrators who would have ruled on whether PaineWebber's claim that a non-compete clause included in its new "code of conduct" was a contract that barred the reps from soliciting their clients or taking some of their client records, as the firm alleged in a court claim (see OddLots, July '97 RR, Page 28).
PaineWebber initially got a temporary restraining order against the brokers in the U.S. District Court for the Southern District of California. The TRO was later dissolved.
The hotly contested case went through one full week of hearings before NASD arbitrators the week of May 12. The panel was due to reconvene July 29, but just prior to that date, the case went to mediation and was settled and bound by a confidentiality agreement, says Sutro general counsel Mary Jane Delaney.
In the interim, the arbitrators issued a ruling that "certain documents still in PaineWebber's possession be returned to Dawson," Delaney says, declining to say more about the nature of those documents.
Dawson was the head of the three-broker group, and after the group's departure, rumors spread through PaineWebber that the reps had taken company records during a late night raid, complete with a moving van.