Beirne Wealth Consulting Services, LLC v. Englebert

Background

Christopher and Jamie Englebert worked for Beirne Wealth Consulting Services, LLC. Christopher signed an asset purchase agreement, an employment agreement, and a confidentiality and non-solicitation agreement. Jamie signed a confidentiality and non-solicitation agreement. The confidentiality and non-solicitation agreements barred both Engleberts, during employment and for 24 months afterward, from soliciting, marketing to, or selling similar services to Beirne clients. The agreements also restricted the use and removal of Beirne’s confidential information.

The Engleberts began discussing a separation from Beirne in 2019 and registered Englebert Financial Advisers as a Pennsylvania limited liability company. During the separation discussions, they downloaded or copied certain client and budget information, according to the evidence described in the opinion. Beirne later investigated and fired both Engleberts on August 12, 2019. The Engleberts then began operating their new firm. Beirne alleged that they solicited former clients and that 45 percent of Beirne’s Pennsylvania clients had moved to the new firm. Christopher agreed with that percentage and estimated that approximately $49 million in assets had transferred.

The Preliminary-Injunction Standard

A preliminary injunction is a temporary court order issued before the final resolution of a case. The court explained that Beirne had to show irreparable harm and either a likelihood of success on the merits or sufficiently serious legal questions combined with a hardship balance strongly favoring Beirne. The court found both irreparable harm and a likelihood that Beirne would succeed on its contract claim.

Irreparable Harm

The court did not treat the agreements’ statements about irreparable harm as conclusive, although it considered them persuasive. It independently found that Beirne could suffer irreparable harm because the loss of client relationships and the effects of using Beirne’s proprietary information would be difficult to value and compensate with money damages.

The court relied in part on the Engleberts’ admissions that they told their parents, who were Beirne clients, that they had left Beirne and were starting a new business, and that they accepted other former Beirne clients who moved their accounts to them. Although the evidence was disputed about whether the Engleberts actively solicited clients by postcards and telephone calls, the court found that they were serving former Beirne clients and having substantive conversations with Beirne clients they encountered. It concluded that continuing this conduct could cause additional client losses that could not be remedied at the end of the case.

Likelihood of Success on the Contract Claim

The court stated that a breach-of-contract claim requires a contract, the plaintiff’s performance, the defendant’s breach, and damages caused by the breach. It found that the confidentiality and non-solicitation agreements were clear and that the evidence showed the Engleberts had sold wealth-management services to former Beirne clients.

The court also found that the Engleberts were likely soliciting services when they told former clients that they had left Beirne and started their own firm. The agreements defined solicitation to include direct or indirect communications informing clients that an employee was no longer employed by Beirne. The court therefore concluded that such statements could violate the agreements, even when made in social situations. Declarations from two Beirne clients also supported Beirne’s position that the Engleberts had solicited clients by telephone and postcard.

The Engleberts argued that Beirne’s alleged failure to pay $47,500 in compensation released them from the restrictions. The court stated that, although Beirne’s conduct might expose it to liability under wage-and-hour claims asserted in the counterclaim, the Engleberts had not identified a contract provision making that conduct a breach that would release them from the confidentiality and non-solicitation agreements. They also argued that their involuntary termination ended the restrictions. The court rejected that argument at this stage, explaining that the cited rule applied to termination without cause, while the court treated their termination as for cause because of alleged breaches of their employment agreements.

The Engleberts further argued that Beirne had acted improperly and therefore should be barred from equitable relief under the “unclean hands” doctrine, which can prevent a party that engaged in sufficiently improper conduct from obtaining an injunction. The court held that the allegations of defamation, unpaid wages, interference with business relationships, and breach of contract, even if true, did not amount to the type of seriously immoral or unconscionable conduct required to bar relief.

Order

The court granted Beirne’s motion for a preliminary injunction. It preliminarily enjoined the Engleberts from breaching the non-competition clauses in Christopher’s employment agreement and the confidentiality and non-solicitation agreements signed by both Engleberts. The operative order specifically enjoined Christopher and Jamie Englebert from soliciting, marketing to, or accepting former, current, or prospective Beirne clients.

The court allowed the Engleberts to continue serving clients who had already chosen to retain them. It also denied the Engleberts’ request to send clients a letter explaining their separation without encouraging transfers, stating that they had not made a formal motion and that the requested order would be advisory and outside the controversy before the court. The opinion directed the parties to appear for a previously scheduled conference concerning Beirne’s motion to dismiss the amended counterclaim and third-party complaint.