26. Chamberlain also agreed in writing to comply with Merrill
Lynch's Compliance Outline for Private Client Financial
Consultant's, Conflict of Interest Agreement and Guidelines
for Business Conduct, each of which contain statements
confirming the confidentiality of Merrill Lynch customer
information and prohibiting its disclosure to third parties. (U)
27. Chamberlain failed to abide by the terms of the Financial
Consultant Employment Agreement and Restrictive Covenants.
Preliminary injunctive relief is extraordinary in nature, and
is discretionary with the trial judge. Frank's GMC Truck
Center, Inc. vs. General Motors Corp., 847 F.2d 100, 101-102
(3d Cir. 1988); Glasco vs. Hills, 558 F.2d 179, 179 (3d Cir.
1977); Orson, Inc. vs. Miramax Film Corp., 836 F. Supp. 309,
311 (E.D.Pa. 1993). This discretion is necessary because of the
"infinite variety of situations which may confront" the trial
judge. A.L.K Corp. vs. Columbia Pictures Indus., Inc.,
440 F.2d 761, 763 (3d Cir. 1971). In considering a motion for
preliminary injunctive relief, the court must consider, when
appropriate, the following four factors: (1) whether the movant
has shown a reasonable probability of success on the merits; (2)
whether the plaintiff will be irreparably injured by denial of
such relief; (3) whether granting preliminary relief will result
in even greater harm to the non-moving party; and (4) whether
granting preliminary relief will be in the public interest.
ECRI vs. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987);
SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244, 1254 (3d
Cir. 1985). Where a movant fails to show either a reasonable
probability of success on the merits or irreparable injury,
preliminary relief must be denied. In re Arthur Treacher's
Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir. 1982).
A plaintiff need not establish with certainty that the
plaintiff will succeed on the merits. The burden is on the
moving party, however, to make a prima facie showing that the
plaintiff has a reasonable probability of succeeding on the
merits. Oburn vs. Shapp, 521 F.2d 142, 148 (3d Cir. 1975).
The Court of Appeals for this circuit has held that "[i]n
order to demonstrate irreparable harm the plaintiff must
demonstrate potential harm which cannot be redressed by a legal
or an equitable remedy following a trial. The preliminary
injunction must be the only way of protecting the plaintiff from
harm." Instant Air Freight Co. vs. C.F. Air Freight, Inc.,
882 F.2d 797, 801 (3d Cir. 1989). In light of the foregoing
standard, we will now address the merits of Merrill Lynch's
motion for a preliminary injunction.
First, under Pennsylvania law restrictive covenants such as
those agreed to by Chamberlain are enforceable. See John G.
Bryant Company, Inc. v. Sling Testing & Repair, Inc.,
471 Pa. 1, 369 A.2d 1164 (1977). The terms of Chamberlain's employment
agreement along with the undisputed evidence that Chamberlain
breached that agreement establish that there is clearly a
reasonable probability that Merrill Lynch will succeed on the
Second, it is well recognized that injunctive relief is
necessary in cases involving violations or threatened violations
of restrictive covenants such as are set forth in Chamberlain's
employment agreement. See Merrill Lynch vs. Bradley,
756 F.2d 1048 (4th Cir. 1985). In Bradley, a case virtually identical
to the instant case, the Court of Appeals for the Fourth Circuit
held that immediate injunctive relief is
necessary to avoid irreparable harm to Merrill Lynch and to
maintain the status quo. The Court of Appeals stated:
When an account executive breaches his employment
contract by soliciting his former employer's
customers, a nonsolicitation clause requires
immediate application to have any effect. An
injunction even a few days after solicitation has
begun is unsatisfactory because the damage is done.
The customers cannot be "unsolicited."
756 F.2d at 1054; see also Merrill Lynch vs. Stidham,
658 F.2d 1098 (5th Cir. 1981) (breach of employment agreement and
misappropriation of trade secrets caused irreparable harm).
Merrill Lynch will suffer irreparable harm in the absence of
immediate injunctive relief.
The third factor requires us to balance the irreparable harm
to Merrill Lynch against the harm to Chamberlain if an
injunction is granted. In the year 2000 Chamberlain earned less
than $50,000.00. At the present time Chamberlain is guaranteed a
salary of $50,000.00 by Morgan Stanley. Also, Chamberlain's
employment agreement with Morgan Stanley entitles him to
commissions. The issuance of an injunction in this case will not
harm Chamberlain but only maintain the status quo. Furthermore,
the parties agree that the final merits of this dispute will be
resolved in arbitration before the National Association of
Securities Dealers. That arbitration is expected to take place
within a few weeks. Consequently, any injunction we issue will
only be in effect for a relatively short time.
The fourth and final factor we must consider is whether
granting preliminary relief will be in the public interest. We
are satisfied that the issuance of an injunction would benefit
the public because it would promote the enforcement of
reasonable contracts. Moreover, an injunction would protect
Merrill Lynch's highly sought after client list and the
confidentiality of those clients' records and discourage Merrill
Lynch's competitors from inducing Merrill Lynch's employees to
breach their contracts and convert Merrill Lynch trade secrets.
See, e.g., Merrill Lynch v. Napolitano, 85 F. Supp.2d 491
(E.D.Pa. 2000) ("Merrill Lynch persuasively argues that an
injunction would serve the public interest by enforcing valid
contractual provisions.") (Newcomer, J.); Merrill Lynch vs.
Masri, 1996 WL 283644 at *5 (E.D.Pa. 1996) ("Issuing a
preliminary injunction serves the public interest of enforcing
valid contractual provisions and protecting business investments
and confidential customer information.") (Kelly, J.).
Numerous federal and state courts have granted Merrill Lynch
and other securities firms the identical injunctive relief
requested in this case, including injunctions granted by the
United States District Court for the Eastern, Middle and Western
Districts of Pennsylvania. See, e.g., Merrill Lynch vs.
Rodger, 75 F. Supp.2d 375 (M.D.Pa. 1999) (Caldwell, J.). We
will, likewise, grant Merrill Lynch's motion for injunctive
IV. Conclusions of Law.
1. Merrill Lynch has a reasonable probability of success on
2. Merrill Lynch will be irreparably injured in the event an
injunction is denied.
3. Greater injury would be inflicted upon Merrill Lynch by the
denial of the motion for a preliminary injunction than will be
inflicted upon Chamberlain by granting such relief.
4. The issuance of a preliminary injunction is in the public
An appropriate order will be entered.
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. Pursuant to the requirements of Sections 3 and 4 of the
Federal Arbitration Act, 9 U.S.C. § 3 and 4, the parties are
directed to proceed expeditiously with an arbitration in
accordance with the procedures established by the National
Association of Securities Dealers.
2. The motion of Merrill Lynch for a preliminary injunction
filed on June 5, 2001, is granted.
3. Merrill Lynch shall post a bond in the amount of $5,000
within 3 working days of the date of this order. Failure by
Merrill Lynch to post such bond in accordance with this
paragraph will result in our vacation of this order.
4. Chamberlain is enjoined and restrained, directly or
indirectly, and whether alone or in concert with others,
including any officer, agent, representative, or employee of
Chamberlain's new employer, Morgan Stanley, until completion of
4.1 soliciting any business from any account of
Merrill Lynch whom Chamberlain served or whose name
became known to Chamberlain while employed by Merrill
Lynch in any office and in any capacity;
4.2 accepting business from any account who was
solicited in violation of paragraph 2 of the
Financial Consultant Employment Agreement and
Restrictive Covenants ("Agreement") or whose records
and information were used in violation of paragraph 1
of that Agreement;
4.3 using, disclosing, or transmitting for any
purpose, including solicitation of said accounts, the
information contained in the records of Merrill
5. All original records and copies, computerized recordings or
any and all other reproductions thereof, in whatever form, shall
be returned by Chamberlain to Merrill Lynch's Wilkes-Barre,
Pennsylvania, office within 2 working days of the issuance of
6. This order shall remain in full force and effect until the
completion of arbitration.
7. The Clerk of Court shall forthwith transmit a copy of this
order by FAX to the offices of those counsel who may be so
reached, shall read the dispositive provisions to other counsel
over the telephone, and shall mail a copy to each counsel.
8. The Clerk of Court shall close this case.
9. The court retains jurisdiction of this case for the purpose
of enforcing, modifying or rescinding, if necessary or
advisable, any of the provisions of this order.