Capstone Financial Advisors, Inc. v. Plywaczynski

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Appellate Court Date: 2016.02.09 13:55:48 -06'00'
Capstone Financial Advisors, Inc. v. Plywaczynski, 2015 IL App (2d) 150957Appellate Court CAPSTONE FINANCIAL ADVISORS, INC., Plaintiff-Appellant, v.
Caption KEITH PLYWACZYNSKI, MARINER WEALTH ADVISORS
LLC, and MARINER WEALTH ADVISORS LLC–CHICAGO,
Defendants-Appellees.
District & No. Second District
Docket No. 2-15-0957
Filed December 23, 2015
Decision Under Appeal from the Circuit Court of Du Page County, No. 15-CH-1589;
Review the Hon. Bonnie M. Wheaton, Judge, presiding.
Judgment Affirmed.
Counsel on Ross I. Molho, of Clingen, Callow & McLean, LLC, of Wheaton, and
Appeal Kenneth J. Vanko, of Clingen, Callow & McLean, LLC, of Lisle, for
appellant.
Peter E. Cooper and John S. Monical, both of Lawrence, Kamin,
Saunders & Uhlenhop, LLC, of Chicago, and Sharron Ash, of
Hamburger Law Firm, of Englewood, New Jersey, for appellees.
Panel 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, Inc. (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 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 nondisclosure, provision, (2) a two-year
nonsolicitation provision, and (3) a two-year noncompete 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
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
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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 noncompete 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 noncompete 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 nonsolicitation
provision and the nondisclosure provision; the noncompete 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
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. (Internal quotation marks omitted.) 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 nonsolicitation and
nondisclosure provisions, the trial court failed to consider the noncompete provision entirely or
how the “critical operative language” in the noncompete 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 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 noncompete
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.
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¶ 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,
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 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.
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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
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 noncompete provision. As defendants point out, Capstone mentions the
noncompete provision repeatedly in its Rule 307(d) petition to this court, yet it mentioned the
noncompete provision only twice, and indirectly at that, in its TRO motion in the trial court.
Defendants overlook that Capstone’s attorney also mentioned the noncompete 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 noncompete 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.
¶ 17 For the foregoing reasons, the judgment of the circuit court of Du Page County is affirmed.
¶ 18 Affirmed.
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