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Edelman Financial Engines

Court Gives Go-Ahead for Edelman’s Suit Against Mariner Wealth

A Kansas federal judge said there was some overlap between the litigation and arbitration against former Edelman advisors who left for Mariner, but it wasn’t “significant enough” to justify a pause in the case.

Edelman Financial Engines’ lawsuit against Mariner Wealth will proceed as scheduled after a federal judge denied the latter firm’s request to halt the suit.

Mariner wanted a stay in the Kansas-based suit, arguing a pause would avoid the chance for “inconsistent results” between the litigation and arbitration Edelman filed against several former advisors who left to join Mariner. 

But Edelman argued it would be irrevocably hurt by what they believed could be an “indefinite” pause waiting for those proceedings to cease. U.S. Magistrate Judge Brooks Severson agreed with Edelman in a ruling last week, acknowledging while there was some overlap between the suit and arbitration proceedings, the overlap wasn’t significant enough to justify the pause.

“Although the arbitrations are planned to unfold over the next several months, the Court has significant doubts that they will actually occur and be concluded as currently scheduled,” Severson wrote in her ruling.

In November, the $250 billion AUM Edelman filed its suit against Mariner, accusing that firm of luring about 10 advisors away from Edelman while urging them to break their restrictive covenants, including non-solicitation agreements (at that point, Edelman put the damage at the loss of around 850 clients representing approximately $621 million in assets). 

Edelman argued Mariner wanted to “free-ride” off Edelman’s work by stealing the firm’s “trade secrets, goodwill and client relationships,” according to the initial complaint. But Mariner fired back the following month, accusing Edelman of waging a campaign through the courts to “unlawfully stifle fair competition” in the industry. Mariner and Edelman did not return requests for comment prior to publication.

The Edelman complaint is one of several court battles Mariner is currently waging, with several plaintiffs accusing the firm of recruiting tactics falling outside the bounds of average competitiveness. Though the details differ, the plaintiffs accused Mariner of helping advisors leave firms, breaking their confidentiality agreements, and even allegedly pilfering trade secrets. 

The spate of litigation had industry experts asking if Mariner’s aggressive recruiting strategy had crossed a legal line or if the plaintiffs in these firms were trying to impede a competitor who seemed to be winning the war for talent in the courts.

One of the other currently broiling cases involves Avantax Planning Partners, who filed a suit against advisor (and former Avantax employee) Michael Carignan and Mariner Wealth. The $43 billion AUM tax-centric planning firm sued Mariner in Iowa state court last fall before it was bumped to federal court last month.

In the complaint, Avantax accused Carignan of breaking the terms of his contract with the firm after he left to join Mariner. According to Avantax, Carignan did so with Mariner’s “support and encouragement,” with Mariner allegedly knowing that Carignan’s conduct was contrary to the “contractual obligations” the advisor owed his former firm.

But Mariner and Carignan both filed responses to Avantax’s accusations last week, with Mariner asking the courts to stop the suit against them. In their motion, Mariner argued that Avantax couldn’t show that Iowa courts had the proper jurisdiction over any of the allegations.

Carignan’s motion opposed Avantax’s previously filed plea for a temporary injunction on his work, calling the Avantax customer non-solicitation agreement “incomprehensible" (a spokesperson for Avantax told the firm does not comment on pending litigation).

According to the motion, Carignan was previously employed by Honkamp Krueger and appreciated his freedom there. 

But when Blucora (which later changed its name to Avantax) bought Honkamp in early 2020, he began to have a change of heart, saying he “did not appreciate” corporate changes Avantax mandated (his dissatisfaction only grew when Cetera purchased Avantax several years later).

“Carignan is only the latest Avantax employee to decide not to continue working for Avantax, a fraction of whom have left for Mariner,” Carignan’s motion read. “In each of those cases, Avantax has run to court claiming that without an immediate injunction, Avantax would be harmed irreparably. Each time, a court has rejected Avantax’s motion.”

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