On November 13, 2001, in New York City, the Institute for International Research staged its fourth annual "Raiding on Wall Street" conference, the only major event of its kind addressing the raiding issues confronting today's financial services industry. The Institute invited SRZ attorneys Michael Roche and James Komie to participate as panelists in roundtable discussions with other national experts on restrictive covenant and trade secret litigation.

Other speakers at the conference included George Friedman, Director of Dispute Resolution for the NASD, Justices Herman Cahn and Edward Ramos of the Supreme Court Commercial Division for New York County and representatives from the in-house legal departments of several of the nation's largest financial services companies. The conference's theme this year was retaining valuable employees and protecting proprietary secrets, but many panel discussions departed from their own stated themes to speculate on the impact of recent rules changes by states' securities regulators, changes calculated to benefit customers and bound to affect legal tactics.

Specifically, beginning in Utah and spreading to other states, securities regulators have pressured major brokerage firms to stop the practice of seeking injunctions against the transfer of customer accounts. Brokers routinely violate the terms of their restrictive covenant agreements when switching firms, but customers—regulators have argued—should not be penalized in the process. While the litigation that regularly ensues when a broker switches firms is usually resolved within a matter of months, customers have complained about being separated from their broker by an injunction for even a short period, particularly in light of the recent volatile market. The new rules changes, happily, can safeguard customers from protracted litigation.

Many panels at the conference addressed this countrywide development, including the one on which James sat. "Examining Recent Claims in Arbitration and the Ramifications of the Outcomes" was its title, but the moderator quickly included in the topic speculation on the impact of the rules changes in progress. Panelists explored what might happen when attorneys cannot bar accounts from transferring and whether it is worthwhile for firms simply to seek damages instead of injunctive relief.

Michael's panel, "Litigating Raiding Cases," addressed a hypothetical situation involving a client seeking to hire a working unit from a competitor. Exploring the dynamics and ethics inherent in that situation, panelists discussed the process involved, including settlement techniques and procedures to follow when litigation is unavoidable. One member of the audience—in-house counsel for a firm SRZ frequently encounters on the opposite side of the negotiating table—singled out Michael's comments for their perceptiveness.

"I learned a great deal, both as a panelist and an audience member," says James. "It was fascinating to learn how other attorneys who regularly litigate these issues plan to deal with the rule changes and to hear their predictions as to how the rule changes will affect the resolution of these cases. I look forward to returning next year to compare notes on whether the rule changes have actually had the major impact everyone is predicting."

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