Arbitrators struck down Hightower’s makes an attempt to implement a non-compete clause in opposition to a Washington state-based advisor locked in a multi-year authorized battle with the agency.
In its choice, arbitrators wrote that Hightower’s non-compete clause (and subsequent try and revise its geographic restrictions) have been “designed extra to punish Knudsen than to advance Hightower’s official enterprise pursuits.”
Along with putting down Hightower’s makes an attempt to implement its non-compete clause, arbitrators additionally denied the agency’s request for a preliminary injunction to implement a non-solicitation settlement. Although arbitrators deemed the non-solicitation clause “affordable and enforceable,” they surmised most clients coated by the rule “have probably already been solicited.”
In an announcement, Knudsen stated he’d been “clear from the beginning” that he needed a fast decision to the dispute together with his former agency however felt Hightower had chosen to tug it on to punish him for taking his case into federal court docket (and later earlier than arbitrators).
“This can be a case that showcases Hightower’s vindictive conduct—threatening me with ongoing lawsuits and threatening my former shoppers with authorized motion all to harm me,” he stated. “However the true hurt is to their repute and to my shoppers which were unnecessarily harmed by their actions. Frankly, what Hightower has completed is shameful.”
Based on Hightower’s Counsel Matt Henneman, a managing companion with Henneman Rau & Kirkin, Knudsen’s perspective on the panel’s choice was “at finest, deceptive.”
Henneman argued that the arbitrators rejected Knudsen’s try and invalidate the agreements below Washington state statute, and famous that the panel thought of the non-solicitation settlement affordable and that the choice of non-solicitation turned on the truth that most clients had already been reached.
“In gentle of the Panel’s Order explicitly confirming the accessible contractual financial treatment, and its recognition of Knudsen’s admissions that he has already violated his obligations below the SPA, Hightower is assured of its potential to recuperate significant damages on the conclusion of the arbitration continuing,” Henneman stated.
Based on authorized filings, Knudsen based Triad Wealth Administration earlier than transitioning the enterprise into Hightower in 2014. 4 years later, the principals at Hightower’s Bellevue department (together with Knudsen) opted for a brand new relationship, protecting them below Hightower however providing extra autonomy (and possession stakes).
The arbitration ruling particulars how Hightower claims it carried out an inner investigation in 2023 and 2024, allegedly studying that Knudsen diverted shopper funds to exterior companies, together with $30 million to 11 actual property ventures he managed exterior the agency.
Hightower additionally alleged Knudsen engaged in “extreme verbal abuse and bullying” and violated Hightower’s coverage by bringing a gun into the workplace (Knudsen has denied the allegations).
Knudsen was fired final 12 months, and the agency later sued the advisor, claiming he was breaking non-compete clauses he’d signed with Hightower after the 2018 deal.
However Knudsen retaliated in federal court docket, arguing that Hightower “hijacks” advisors’ books of enterprise earlier than pushing them out the door (whereas protecting their clientele).
Final fall, Hightower dismissed a suit against Knudsen in Illinois federal court docket days earlier than a choose would rule on an injunction demanding Knudsen observe the purported non-solicitation vow. On the time, Hightower stated they have been opting to pursue the case “in binding arbitration.”
Nonetheless, Hightower also filed a suit against Hohimer Wealth Management, the agency the place Knudsen ultimately went to work after leaving Hightower.
Within the go well with, Hightower claimed the RIA conspired with Knudsen (who was not named as a defendant) to steal confidential shopper data, allegedly costing Hightower $150 million in shopper property. The case is ongoing in Washington State Courtroom.
