Capstone Financial Advisors, Inc. v. Plywaczynski

2015 IL App (2d) 150957
No. 2-15-0957
Opinion filed December 23, 2015
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
CAPSTONE FINANCIAL ADVISORS, ) Appeal from the Circuit Court
INC., ) of Du Page County.
)
Plaintiff-Appellant, )
)
v. ) No. 15-CH-1589
)
KEITH PLYWACZYNSKI, MARINER )
WEALTH ADVISORS LLC, and )
MARINER WEALTH ADVISORS LLC— )
CHICAGO, ) Honorable
) Bonnie M. Wheaton,
Defendants-Appellees. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE HUTCHINSON delivered the judgment of the court, with opinion.
Justices Zenoff and Hudson concurred in the judgment and opinion.
OPINION
¶1 Keith Plywaczynski is a certified financial planner (CFP) who provides investment
advice to businesses and high-net-worth individuals. He was formerly employed by Capstone
Financial Advisors (Capstone), an investment advisory firm. He resigned from Capstone and
went to work for a competitor, Mariner Wealth Advisors LLC and Mariner Wealth Advisors
LLC—Chicago (collectively, Mariner). Afterward, Capstone quickly filed suit alleging that
defendants—Plywaczynski, with Mariner’s “active assistance”—jointly breached a restrictive
covenant agreement Plywaczynski had with Capstone. The suit is currently pending in the trial
2015 IL App (2d) 150957
court and, as an adjunct to the suit, Capstone moved for a temporary restraining order (TRO)
against Plywaczynski and Mariner. The trial court denied the TRO motion, finding that Capstone
was unlikely to succeed on the merits of its breach-of-contract claims. Capstone then appealed to
this court. We have jurisdiction under Illinois Supreme Court Rule 307(d) (eff. Feb. 26, 2010) to
provide a “quick review” of the grant or denial of injunctive relief, nothing more. Harper v.
Missouri Pacific R.R. Co., 264 Ill. App. 3d 238, 244 (1994). After conducting our review, we
affirm.
¶2 The facts pertinent to our resolution of the TRO motion are essentially undisputed.
Plywaczynski began working at Capstone in 2004. In 2008, in consideration of Plywaczynski’s
continued employment and a one-time $1,000 payment, he signed a “Confidentiality and
Restrictive Covenant Agreement” with Capstone. Relevant here, the agreement included (1) a
confidentiality, or non-disclosure, provision, (2) a two-year non-solicitation provision, and (3) a
two-year non-compete provision. At some point, Plywaczynski became Capstone’s lead financial
adviser and, in 2010, became a partner. When he became a partner, Plywaczynski also executed
a shareholder’s agreement, which we briefly address below.
¶3 On September 4, 2015, the Friday before Labor Day weekend, Plywaczynski was the last
person in Capstone’s offices at the end of the day. He called J. Frank Verkamp, Capstone’s
managing partner; he resigned and said that he was leaving for Mariner. Capstone’s TRO motion
notes that it has a “comprehensive client database” and that, by the end of the following week,
Capstone had lost or was “delinked” on 41 client accounts, all formerly serviced by
Plywaczynski.
¶4 Capstone quickly filed suit and sought a TRO based on Plywaczynski’s alleged violation
of each of the three provisions in the restrictive covenant agreement. Defendants filed a joint
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response, which included an affidavit from Plywaczynski. In it, he generally denied taking any of
Capstone’s protected client information. He averred that he “retained, partially in [his] head, and
partially from handwritten notes” the contact information of the clients he reached out to.
Plywaczynski also stated that the restrictive covenant prevented him from soliciting Capstone’s
clients, but not from contacting them. In fact, Plywaczynski asserted, he had an obligation under
the professional standards applicable to CFPs to “timely disclose” to his clients “any material
changes” to both his contact information and his employer’s contact information. See CFP
Board, RULES OF CONDUCT, Rule 2.2, http://www.cfp.net/for-cfp-professionals/professional-
standards-enforcement/standards-of-professional-conduct/rules-of-conduct#2. According to
Plywaczynski, he phoned his clients; he spoke to some and left voicemail messages for others.
When he got through, however, he read from a script and provided them with his updated contact
information at Mariner. If the client asked about going with him to Mariner, he provided
information on how to do so. If the client asked about staying at Capstone, then he gave that
information instead.
¶5 With respect to the non-compete provision, Plywaczynski’s affidavit does not specifically
address whether he is rendering investment advisory services, but defendants’ response to the
TRO motion asserts that the non-compete provision is against public policy and unenforceable.
¶6 The parties proceeded to a hearing on Capstone’s TRO motion before the trial court. The
hearing focused almost entirely on Capstone’s allegations concerning the non-solicitation
provision and the non-disclosure provision; the non-compete provision was hardly mentioned at
all. Following the hearing, the trial court found that Capstone had failed to show a likelihood of
success on the merits of its three breach-of-contract claims. Furthermore, the court observed for
the limited purpose of the TRO motion that, by negative implication, the agreement’s bar on
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solicitation appeared to permit Plywaczynski’s contacting his clients. The court also stated that,
again for the limited purposes of the TRO motion, “it is more likely than not that the public
policy of Illinois requires the fiduciary CFP to give [his clients] that [updated] contact
information, which does not constitute solicitation.” Capstone appeals.
¶7 As the party seeking the injunction, Capstone must demonstrate that there is a “fair
question” as to each of the following: (1) a clearly ascertained right in need of protection, (2)
irreparable injury in the absence of an injunction, (3) no adequate remedy at law, and (4) a
likelihood of success on the merits of the case. Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d
52, 62 (2006). Initially, we note that the parties dispute our standard of review. Capstone argues
that it is de novo while defendants maintain that we should review the trial court’s ruling under
the abuse-of-discretion standard. They are both right. Because this case implicates the terms of
the restrictive covenant, we review the trial court’s ruling on the covenant’s enforceability de
novo and we review its ultimate determination on the request for injunctive relief for an abuse of
discretion. Id. at 62-63. While we can imagine similar scenarios where these two standards might
be in tension, we need not address the issue as the result under either standard would be the same
here. The Venture—Newberg-Perini, Stone & Webster v. Illinois Workers’ Compensation
Comm’n, 2013 IL 115728, ¶ 14.
¶8 We first address Capstone’s arguments concerning what is before us. Capstone claims
that, because the trial court’s oral pronouncement focused only on the non-solicitation and non-
disclosure provisions, the trial court failed to consider the non-compete provision entirely or how
the “critical operative language” in the non-compete provision affected the other two provisions.
We disagree. Naturally, we consider both the oral judgment and the written ruling together, and
we must choose between them if and only if they are in conflict. In re K.L.S.-P., 381 Ill. App. 3d
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2015 IL App (2d) 150957
194, 195 (2008). Here, the court’s written order indicates that it found no likelihood of success
on the merits of all three of Capstone’s breach claims. Although the court’s oral ruling drove
home the point that it had rejected two of the claims at issue, we cannot say that the oral ruling
mentioning only those two claims is in any way in tension with the written order disposing of all
three.
¶9 Next, we address what is not before us—namely, Plywaczynski’s shareholder’s
agreement, upon which Capstone relies. That agreement required Plywaczynski to sign a non-
compete agreement at some future time. The parties have not provided us with any supplemental
agreement in connection with the shareholder’s agreement, however, and we confine our analysis
to that which is of record.
¶ 10 Turning to the merits, we agree with the trial court that, for the limited purpose of the
TRO motion, Capstone failed to show a likelihood of success on its breach claims. We make this
determination on different grounds than the trial court, however. See In re Marriage of Gary,
384 Ill. App. 3d 979, 987 (2008) (the decision to grant or deny injunctive relief may be affirmed
on any basis called for in the record). A TRO is an extraordinary remedy and the party seeking it
must meet the high burden of demonstrating, through well-pled facts, that it is entitled to the
relief sought. McMann v. Pucinski, 218 Ill. App. 3d 101, 108 (1991). Along those lines, to be
considered “well-pleaded,” a party’s factual allegations must be supported by allegations of
specific facts. Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148, ¶ 31.
¶ 11 After examining Capstone’s TRO motion, which incorporated its complaint, we are hard
pressed to say that it contains a single well-pled factual allegation that supports granting
injunctive relief. All of the allegations are conclusory, inexplicably lacking in specifics. For
example, Capstone says that after his resignation, “[i]n the course of just a few days,
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2015 IL App (2d) 150957
Plywaczynski managed to solicit and convert forty one Capstone accounts to Mariner.” Capstone
also says that, “[g]iven the speed with which Plywaczynski moved to solicit his former Capstone
accounts, it would be naïve to think he did so without a Capstone client list ***.” Finally,
Capstone says that nearly $1 million in yearly commissions “walked out the door”; that its
clients generally “remain with the company for many years”; and that Mariner is “inducing”
Plywaczynski to breach his agreement. But how does any of this show, with any specificity, that
either Plywaczynski or Mariner used Capstone’s protected client information, or solicited its
customers, to whom Plywaczynski either rendered or is currently rendering investment advice?
That Capstone never says. And, despite having made this same allegation essentially 41 times,
Capstone fails to identify a single client whose confidential information has been used, a single
client whom Plywaczynski solicited (as opposed to merely contacted), or a single client to whom
Plywaczynski rendered investment advice. We emphasize that the standard for injunctive relief is
far too high for a court to rely solely on the moving party’s innuendo. See In re Marriage of
Slomka, 397 Ill. App. 3d 137, 144 (2009) (“allegations of mere opinion, conclusion, or belief are
not sufficient to show a need for injunctive relief”); cf., e.g., Mid-States Vending Service, Inc. v.
Rosen, 77 Ill. App. 2d 83, 88 (1966) (mere assumption that former employee “ ‘must’ ” be in
possession of a customer list is insufficient to warrant injunction).
¶ 12 The deficiencies we have identified in Capstone’s TRO motion simply are not cured by
the additional evidence it has attached to the motion. The affidavits of Capstone principals
Verkamp and Troy Bute merely reiterate the vague claims made in the motion itself. Capstone
also included as exhibits two emails sent to Plywaczynski’s Capstone account that refer to
Mariner. But both emails, dated after Plywaczynski had resigned from Capstone, involve follow-
ups with clients for paperwork with Mariner; neither contains Plywaczynski’s side of the
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conversation or, without more, resembles anything that could reasonably be thought of as a client
solicitation. See Black’s Law Dictionary 1427 (8th ed. 2004) (“solicitation” defined as “[a]n
attempt or effort to gain business”); cf. Tomei v. Tomei, 235 Ill. App. 3d 166, 170 (1992) (not
every client contact qualifies as a prohibited solicitation).
¶ 13 Thus far, this case appears to stand in sharp contrast to two examples we have found. In
Merrill Lynch, Pierce, Fenner & Smith Inc. v. Ran, 67 F. Supp. 2d 764 (E.D. Mich. 1999), four
stockbrokers left Merrill Lynch on the Friday before Labor Day to join a competitor. According
to Merrill’s TRO motion and exhibits, the brokers then “spent the holiday weekend using
confidential client information, which they absconded with, to carry out an orchestrated and pre-
planned solicitation [(by direct mail and by telephone)] of more than 2,800 former clients they
serviced while at Merrill *** in violation of their employment agreements.” Id. at 767. Of
course, the district court granted Merrill a TRO and, eventually, a preliminary injunction. Id. at
772, 781. Less extreme, but equally clear cut, is Scheffel Financial Services, Inc. v. Heil, 2014 IL
App (5th) 130600. There, Heil was also a financial advisor who resigned from his firm on the
Friday before Labor Day. Id. ¶ 6. According to Scheffel’s injunction motion and exhibits, Heil
“overnight-mailed a solicitation package to [his] former clients *** inviting them to bring their
business to him at [his new employer]. He admittedly did this on Friday in hopes of averting any
attempt by Scheffel to stop him with a temporary restraining order from soliciting Scheffel’s
clients.” Id. The circuit court issued an injunction, which the appellate court affirmed. Id. ¶¶ 1,
22.
¶ 14 Whatever these cases might indicate about the Friday before Labor Day and financial
professionals, we find that they stand for the proposition that Capstone must have alleged
more—not necessarily as much as in Merrill Lynch and Scheffel, but certainly more than has
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been alleged thus far—in order to be entitled to a TRO. Absent a concrete factual assertion that
Plywaczynski used confidential information, engaged in client solicitation, or rendered or is
rendering financial advice to a former Capstone client, Capstone cannot make out a prima facie
case for any of the four elements to warrant injunctive relief. Cf., e.g., Mid-States Vending, 77 Ill.
App. 2d at 89-90 (“A temporary injunction will not issue unless the evidence shows that
defendant is doing or threatens to do something contrary to law and prejudicial to plaintiff. Here
the evidence is wholly lacking as to solicitation of customers by defendant, and, therefore, there
could be no showing of illegal, unjustifiable or injurious solicitation of plaintiff’s customers.”).
¶ 15 One final point. Defendants argue that Capstone forfeited its attempt to obtain a TRO to
enforce the non-compete provision. As defendants point out, Capstone mentions the non-
compete provision repeatedly in its Rule 307(d) petition to this court, yet it mentioned the non-
compete provision only twice, and indirectly at that, in its TRO motion in the trial court.
Defendants overlook that Capstone’s attorney also mentioned the non-compete provision once at
the hearing on the TRO motion, but their point is well taken. That said, the issue was sufficiently
before the trial court for us to affirm the order denying the TRO on the merits in connection with
the non-compete provision; therefore, we need not rely on forfeiture.
¶ 16 We hasten to add that nothing we have said should be construed as an opinion, express or
implied, on the merits of Capstone’s complaint, the legitimacy of its business interests (Reliable
Fire Equipment Co. v. Arredondo, 2011 IL 111871, ¶ 17), or the validity of any future request it
may present for injunctive relief. We determine only that the trial court correctly interpreted the
agreement at this early stage, and did not abuse its discretion when it denied Capstone’s TRO
motion as it stands, nothing more.
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¶ 17 For the foregoing reasons, the judgment of the circuit court of Du Page County is
affirmed.
¶ 18 Affirmed.
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