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Regulation and Compliance > Litigation

First Command Sues LPL Over Alleged Advisor Poaching

By Jeff Berman

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Two First Command Financial Services divisions sued LPL Financial, alleging it recruited three advisors from First Command’s Tampa, Florida office and caused them to violate their agreements with the hybrid RIA, which specializes in financial services for active-duty military clients.

In a complaint filed May 12 in U.S. District Court for the Middle District of Florida, Tampa Division, First Command Advisory Services and First Command Insurance Services said their case “arises from LPL’s repeated, intentional, and unjustified interference” with First Command contracts and business relationships with First Command advisors and clients.

Since December 2022, LPL has “affiliated with three First Command Advisors in knowing, direct violation of their Advisor Agreements with First Command,” the complaint alleges.

“Each of the First Command Advisors’ Agreements required the Advisors to provide First Command 30 days prior written notice before terminating their Agreements with First Command,” the complaint says.

But the complaint alleges that LPL, “knowing the terms of these Advisor Agreements, affiliated with each of these three First Command Advisors on the very day that the First Command Advisors provided First Command their resignation notices.”

The three First Command advisors have “repeatedly violated their Agreements with First Command, with LPL knowing and encouraging these violations and receiving benefits from these violations to the detriment and damage of First Command,” the complaint alleges.

Those “improper acts have also interfered with First Command’s business relationships with First Command’s clients and the terms of the Agreements, resulting in millions of dollars of assets moving away from First Command to LPL,” the complaint alleges.

First Command said in the complaint that Daniel Westuba joined First Command in 2009, and Jacqueline Jenkins and Andrew Vasquez joined First Command in 2013. The advisors were not named as defendants.

Each of the three were independent contractors. Westuba, Jenkins and Vasquez signed agreements with First Command promising to protect First Command’s confidential information and not to engage in certain activities during and after their relationship with First Command, according to the complaint.

Lawyer’s Take

“First Command is trying to demonstrate that LPL engaged in tortious interference of its contractual relationships with its departed reps,” Brian Hamburger, chief counsel at Hamburger Law Firm, told ThinkAdvisor by email on Thursday.

“Tortious interference with a contract occurs when a third party intentionally and improperly damages the contractual relationship between two parties,” he explained. “To show this, First Command would need to show that LPL had knowledge of the contractual obligations and improperly induced the reps to intentionally breach their obligations to First Command.”

However, he said: “Their complaint only generally alleges that LPL had knowledge of the contractual obligations but doesn’t specify the basis of that knowledge or what improper activity they believe LPL engaged in.”

Also, he pointed out, the claim “doesn’t actually allege any breach by the advisors,” adding: “It will likely be a challenge to bypass a showing of breach by the advisors and successfully demonstrate that the recruiting firm was engaged in tortious interference.  Most recruiting firms encourage or assist departing reps to seek legal counsel to assist them with this transition, in part, to avoid such claims.”

Jeff Berman

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