Brian L. Cain, Nancy Ilderton and Wells Fargo Advisors, LLC v. Old National Bancorp, Inc. (mem. dec.)

MEMORANDUM DECISION
Jan 29 2016, 7:25 am
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE
Danny E. Glass Patrick A. Shoulders
Adam E. Glass Jean M. Blanton
Fine & Hatfield, PC Ziemer, Stayman, Weitzel
Evansville, Indiana & Shoulders
Evansville, Indiana
Gary I. Blackman
Levenfeld Pearlstein, LLC
Chicago, Illinois
IN THE
COURT OF APPEALS OF INDIANA
Brian L. Cain, Nancy Ilderton January 29, 2016
and Wells Fargo Advisors, LLC, Court of Appeals Case No.
Appellants-Respondents, 82A04-1510-PL-1646
Appeal from the Vanderburgh
v. Circuit Court
The Honorable David D. Kiely,
Old National Bancorp, Inc., Judge
Appellee-Petitioner Trial Court Cause No.
82C01-1508-PL-4324
Baker, Judge.
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 1 of 8
[1] Brian Cain and Wells Fargo Advisors, LLC (“Wells Fargo”) (collectively,
“Defendants”) appeal the preliminary injunction order issued by the trial court
in favor of Old National Bancorp, Inc. (“ONB”). Finding that Defendants
consented to the issuance of the order, we affirm.
Facts
[2] Cain became an employee of ONB in January 2003. As part of his
employment, he signed a Confidentiality and Non-Solicitation Agreement (the
2003 Agreement). The Agreement sought to prevent Cain from doing the
following for a one-year period after his employment terminated: soliciting or
accepting the business of any ONB “customer”; soliciting or accepting the
business of any “prospective customer” of ONB; advising any entity doing
business with ONB to change their relationship with ONB; or inducing any
ONB employee to leave ONB. Appellee’s App. 166. “Customer” was defined
as “a person or entity who is a customer of the Employer at the time of
Employee’s termination of employment or with whom the Employee had direct
contact on behalf of the Employer. . . .” Id. at 167. “Prospective customer”
was defined as “a person or entity who was the direct target of sales or
marketing activity by the Employee or whom the Employee knew was a target
of the Employer during the one year period preceding the Employee’s
termination. . . .” Id.
[3] When Cain began employment with ONB, he was involved in banking only.
Beginning in 2010, he transitioned to the role of financial advisor and became
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 2 of 8
registered as a securities salesperson. ONB is not licensed to sell securities, so it
directs this business to a licensed third-party broker, LPL Financial (LPL).
ONB still receives payments based on advice LPL provides to ONB customers,
and ONB pays LPL a percentage fee for regulatory oversight.
[4] While remaining an employee of ONB, Cain became a registered representative
of LPL. He signed a Financial Representative Agreement with LPL on
November 1, 2010 (the LPL Agreement). Upon his transition, Cain
immediately came into possession of a book of investments worth $78 million,
which had been built by the person he replaced.
[5] Cain resigned from his employment with ONB on August 21, 2015, and began
working for Wells Fargo within the week. Immediately upon signing, Wells
Fargo paid Cain a $500,000 bonus. On August 25, 2015, ONB filed a
Complaint1 and a Petition for Preliminary Injunction, alleging that Cain’s
activities with Wells Fargo constituted a violation of the 2003 Agreement.
[6] The trial court held a preliminary injunction hearing on September 15, 2015.
Defendants tendered a motion to dismiss the complaint, arguing, in part, that
Cain was only involved with former LPL customers, not ONB customers. The
trial judge invited counsel for both sides into his chambers. The ensuing
discussion did not occur on the record, but was recreated by ONB’s counsel in a
1
ONB did not file a verified complaint.
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 3 of 8
verified statement of evidence—pursuant to Appellate Rule 31—and was
certified as “accurate and complete” by the trial judge. Appellee’s App. 20.
[7] According to the verified statement of evidence, in chambers, the trial judge
informed the parties that his first inclination was to grant the preliminary
injunction, but that he was willing to hear arguments and evidence from either
side. Id. at 14. The judge asked counsel for Defendants whether he would like
to proceed with an evidentiary hearing. Id. at 15. Defendants’ counsel replied
that he would agree to a preliminary injunction on two conditions: that the trial
court make no finding regarding whether the customers Cain was servicing
were ONB customers or LPL customers; and that the preliminary injunction
not include “prospective customers” as stated in the Employment Agreement.
Id. The parties agreed to these conditions. Id. The trial court instructed ONB’s
counsel to draft a proposed injunction order. This was drafted and shared with
Defendants’ counsel—having seen it, Defendants’ counsel responded positively
and with no objections. Id. at 17. The agreed-upon order made the following
conclusions of law: “ONB has no adequate remedy at law and the granting of a
preliminary injunction will not disserve the public interest. Further, ONB has
established a reasonable likelihood of success at trial and the prospective harm
to ONB outweighs any harm to Cain.” Appellant’s App. 9. The trial court
issued the order granting the preliminary injunction.
[8] On September 18, 2015, ONB filed its response to Defendants’ motion to
dismiss. Along with the response, affidavits were filed, the substance of which
focused on the identity of Cain’s customers. The Vice President of LPL stated,
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 4 of 8
on behalf of LPL, that Cain was servicing “customers of Old National Bank.”
Id. at 77. The affidavit also included Cain’s LPL Agreement, which states,
“LPL hereby appoints the Representative [Brian L. Cain] as a limited agent to
service customers of Old National Bank.” Id. at 81.
[9] On October 7, 2015, ONB filed a motion asking that Defendants be found in
contempt, alleging that Cain and Wells Fargo were violating the injunction.
The Defendants filed a notice of appeal and a motion to stay the preliminary
injunction on October 9, 2015.
[10] The trial court held a contempt hearing on October 12, 2015. At the hearing,
Defendants’ counsel acknowledged the preliminary injunction, and noted that
while he would not have agreed to an injunction regarding LPL customers, he
“did not have any objection with regard to ONB customers.” Appellee’s App.
26. ONB presented evidence that since Cain’s departure, clients have requested
transfers of their funds from ONB to Wells Fargo in the amount of $11.2
million. After both parties presented evidence and argument, the trial court
ruled that Defendants had violated the preliminary injunction, and it took the
issue of sanctions under advisement.2 Defendants now appeal.
2
Since no punishment has been ordered yet, the contempt ruling is not ripe for review. State ex rel. Neal v.
Hamilton Cir. Ct., 248 Ind. 130, 134, 224 N.E.2d 55, 58 (1967).
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 5 of 8
Discussion and Decision
[11] Defendants have two sets of arguments on appeal: first, that the trial court
abused its discretion by issuing the preliminary injunction order; and second,
that the 2003 Agreement is unenforceable under state and federal law.
[12] We find both sets of arguments to be misplaced. When reviewing the grant of a
preliminary injunction, “[t]he question for the court upon the interlocutory
application is not the final merits of the case. When the cause comes to be
heard, the final merits may be very different.” Tuf-Tread Corp. v. Kilborn, 202
Ind. 154, 154, 172 N.E. 352, 354 (Ind. 1930). The real question in this case is
whether the Defendants consented to the issuance of the preliminary injunction
order, and whether they will be held to it.
[13] As is made clear by the verified statement of evidence, which was certified as
accurate by the trial court, the parties consented to the issuance of the
preliminary injunction order. More proof of the agreement is the email
exchange that followed ONB’s drafting of the order: Defendants’ counsel
responded positively and without objection. Further proof of the agreement is
the fact that Defendants did not object to the order until after ONB filed an
information to hold them in contempt. It has long been the law in Indiana that,
In the absence of fraud, parties who are competent to contract
and not standing in confidential relations to each other may
agree to the rendition of a judgment or a decree respecting any
right which may be the subject of litigation. When such a decree
is entered it is a decree by consent. A consent decree is not a
judicial determination of the rights of the parties. It does not
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 6 of 8
purport to represent the judgment of the court, but merely
records the agreement of the parties with respect to the matters in
litigation. Such decree cannot be reviewed by appeal.
State v. Huebner, 230 Ind. 461, 467, 104 N.E.2d 385, 387 (1952).
[14] The verified statement of evidence also makes clear that the trial court was
willing to hear evidence and arguments on the matter, but only decided not to
when Defendants’ counsel waived that right and agreed to the order. Counsel
also consented to the preliminary injunction order despite the fact that ONB
had not filed a verified complaint. Therefore, insofar as the lack of evidence or
the lack of a verified complaint constitutes an error, it is an invited error.
Invited error is not subject to appellate review. Countrymark Coop., Inc. v.
Hammes, 892 N.E.2d 683, 695 (Ind. Ct. App. 2008).
[15] Defendants request us “to appreciate that under any conceivable scenario, it
would make no sense for Cain and Wells Fargo’s counsel to agree to an
exceedingly broad non-compete injunction order. . . .” Appellant’s Reply Br. 5
(emphasis omitted). Counsel for Defendants also stated in an affidavit, “It was
my understanding from the Court’s comments that the Order it was entering
would not impose any restraining provision on the Defendants’ right to accept
or service securities customers and was only entered as to ‘bank customers’ for
the non-securities work.” Appellee’s App. 220.
[16] We find counsel’s decision to agree to the order to certainly be lacking in, but
not totally devoid of, sense. Counsel believed that Cain was servicing
customers of LPL and not of ONB. He was confident enough in his assessment
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 7 of 8
to risk the eventuality that came to pass: that a court might disagree.
Defendants’ counsel might have made an error, in tactics and in legal analysis,
but it was not induced by any fraud on the part of ONB or ONB’s counsel. We
cannot save litigants from their own mistakes.
[17] We note that, by deciding this appeal in ONB’s favor, we make no comment on
the enforceability of the underlying 2003 Agreement. We reiterate that “a
preliminary injunction proceeding is exactly that: preliminary.” Mercho-
Roushdi-Shoemaker-Dilley Thoraco-Vascular Corp. v. Blatchford, 900 N.E.2d 786,
795 (Ind. Ct. App. 2009). Defendants remain free to argue to the trial court that
the 2003 Agreement is overbroad, oppressive, and unenforceable. But whereas
courts will find covenants in restraint of trade void, we will not find poor
litigation strategies to entitle a party to relief.
[18] ONB requests appellate attorney fees pursuant to Appellate Rule 66(E). This is
a power we exercise with extreme restraint because of the potential chilling
effect upon the exercise of the right to appeal. Wagler v. West Boggs Sewer Dist.,
Inc., 980 N.E.2d 363, 384 (Ind. Ct. App. 2012). Accordingly, we decline
ONB’s request.
[19] The judgment of the trial court is affirmed.
Bradford, J., and Altice, J., concur.
Court of Appeals of Indiana | Memorandum Decision 82A04-1510-PL-1646 | January 29, 2016 Page 8 of 8