On 4 August, UBS was granted a “springboard” injunction against Vestra Wealth and certain UBS staff to prevent them from poaching UBS customers and staff until a court hearing in relation to claims of breach of contract by UBS staff and unlawful conspiracy. The parties have now settled so a full hearing on the claims will not take place.
UBS alleged that Vestra Wealth, and particularly its founder David Scott together with four senior managers who quit UBS to join Vestra, unlawfully conspired to solicit UBS clients and staff. Further, the four senior managers (whose garden leave did not expire until 11 August) were accused of breaching their duty of fidelity as senior employees of UBS.
Vestra argued that UBS was seeking the injunction in order to block legitimate competition and that any such restriction would damage their business. The evidence presented by Vestra included 40 letters and emails from departing UBS employees detailing their concerns over the way the UBS wealth management business was being run. In his judgment, Mr Justice Openshaw said that he found this evidence unconvincing. He believed there was a common thread in the emails which suggested that employees may have been encouraged to use a “party line”.
In awarding the injunction, Mr. Justice Openshaw said that he believed Vestra had undertaken “unlawful conspiracy dressed up as lawful competition”. In particular, he said it was “inherently unlikely that nearly the whole department would leave UBS without extensive discussions between staff beforehand.” According to The Times, on 19 May 2008, David Scott presented UBS with a letter signed by 52 employees announcing they were to join Vestra. A further 23 resignations followed later, and one team was so depleted that it was left with only a secretary.
The publicity surrounding the case was not surprising given the large numbers of employees involved. The parties have now settled, and, according to newspaper reports, have agreed that Vestra will refrain from soliciting UBS clients until the end of the year and from offering employment to UBS staff until August of next year. Had the case gone to a full hearing, this would have resulted in considerable adverse publicity for both sides.
The “springboard injunction” obtained by UBS is so-named because it prevents an employee or former employee from gaining an unfair competitive advantage where he has misused confidential information, even if the information has since come into the public domain. In determining the injunction period, the court will consider the period for which the employee has gained an unfair advantage and the amount of time it would have taken the employee to gather the information which is available from public sources. This type of injunction is a useful tool in preventing employees from using confidential information effectively to damage an employer’s business.
The employees who left to establish Vestra could have handled this differently. When recruiting staff from a competitor, there are steps that can be taken to minimize the risk of litigation. In particular, the new employer should make it clear to potential employees that they will not be able to commence work until they are free of any notice period owed to their employer. New recruits should be told that they must not breach their contract of employment with their existing employer (including any restrictive covenants), that they must not solicit other staff members and that they must not bring with them any confidential information. Should any employee bring their previous employer’s confidential information to work it is important that they are told to send it back to their former employer. All of these steps should be documented, thereby evidencing the new employer’s lack of involvement in any unlawful conspiracy or employee misconduct.
The Vestra founders could also have reached agreement with UBS on the terms of their departure. While such agreement would surely not have allowed them to poach dozens of employees or to target UBS clients specifically, it might have allowed them to approach certain UBS employees and could have seen the founders released from their contracts before the expiry of their notice periods. More importantly, this could have saved both UBS and Vestra the detrimental publicity associated with the application for the springboard injunction which resulted in details of the internal problems at UBS being made public.