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MERRILL LYNCH, PIERCE, FENNER & SMITH v. CHAMBERLAIN

June 8, 2001

MERRILL LYNCH, PIERCE, FENNER & SMITH INC., PLAINTIFF,
V.
MARK W. CHAMBERLAIN, DEFENDANT.



The opinion of the court was delivered by: Muir, District Judge.

OPINION

I. Introduction.

On June 5, 2001, Plaintiff Merrill Lynch, Pierce, Fenner & Smith, Inc. (hereinafter "Merrill Lynch"), filed a five-count complaint against Defendant Mark W. Chamberlain for injunctive relief (Count I), breach of contract (Count II), conversion of trade secrets (Count III), breach of fiduciary duty (Count IV) and unfair competition (Count V). Also on June 5, 2001, Merrill Lynch filed a motion for a temporary restraining order and preliminary injunction. A hearing with respect to the request for preliminary injunctive relief was held on June 7, 2001.*fn1 The following are the Court's findings of fact, discussion, and conclusions of law with regard to Merrill Lynch's request for a preliminary injunction.

II. Findings of Fact.

1. Merrill Lynch is a Delaware corporation maintaining its principal place of business at the World Financial Center, North Tower, New York, New York and transacting business in this judicial district at 600 Baltimore Drive, Wilkes-Barre, Pennsylvania. (Undisputed, hereinafter "U")

2. Merrill Lynch is engaged in the business of, inter alia, providing financial services. (U)

3. Chamberlain is a citizen of the Commonwealth of Pennsylvania residing at 28 2nd Avenue, Kingston, Pennsylvania 18704.(U)

4. Chamberlain commenced his employment with Merrill Lynch in the Company's Wilkes-Barre Office as a financial advisor in July, 1995.(U)

5. Prior to his employment with Merrill Lynch, Chamberlain had worked for over 15 years in the Trust Departments of various institutions.

6. Chamberlain's business contacts through his prior employment resulted in some new clients for Merrill Lynch.

7. Prior to employment at Merrill Lynch, Chamberlain had no experience in the securities industry, held no securities industry licenses, and had never serviced any customers in the securities industry. (U)

8. As a Merrill Lynch financial consultant, Chamberlain serviced hundreds of Merrill Lynch households representing over $23 million in assets under Merrill Lynch management. These accounts generated in excess of $170,000 in gross commission revenues for Merrill Lynch in 2000 alone. (U)

9. Chamberlain resigned from Merrill Lynch's Wilkes-Barre, Pennsylvania office, without prior notice, at the close of business on Friday, June 1, 2001 and immediately joined a competitor of Merrill Lynch, Morgan Stanley Dean Witter Inc. ("Morgan Stanley"), located nearby. (U)

10. Prior to his resignation, Chamberlain removed and retained information pertaining to the customers he serviced at Merrill Lynch, including customers' names, addresses, and telephone numbers. (U)

11. The Merrill Lynch customer information that Chamberlain removed included customer information contained on a laptop computer as well as client account statements which contained the names, addresses, types of accounts and account numbers of clients Chamberlain serviced while employed at Merrill Lynch.

12. Chamberlain removed and retained the Merrill Lynch customer information from Merrill Lynch without Merrill Lynch's knowledge and permission. (U)

13. Chamberlain provided Merrill Lynch customer information to Morgan Stanley.

14. Morgan Stanley has used the customer information provided by Chamberlain to prepare mailings addressed to Merrill Lynch customers that Chamberlain serviced while employed at Merrill Lynch.

15. Chamberlain also used the customer information for the purpose of otherwise advising Merrill Lynch customers that they have the ability to transfer their Merrill Lynch accounts and business to Morgan Stanley. Chamberlain did so by contacting Merrill Lynch customers by telephone over the weekend of June 1-3, 2001.(U)

16. The targeted telephone contacts to Merrill Lynch customers were allegedly placed for the sole purpose of "informing" or "announcing" customers of Chamberlain's change of employment but, in fact, included and evolved into discussions regarding Morgan Stanley and ...


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