Friday, March 06, 2009, 3/06/2009 08:51:00 AM

Merrill Lynch Accuses Deutsche Bank of Employee Raid and Trade Secret Misappropriation

By Todd

Portfolio Media, Inc. is reporting that investment giant Merrill Lynch & Co. Inc. is seeking $100 million in damages from rival investment firm Deutsche Bank, claiming Deutsche Bank compromised its trade secrets when it improperly hired 12 former employees from Merrill's financial institutions group last February.

The suit, filed on Tuesday in the New York State Supreme Court, accuses Deutsche Bank of raiding and unfair competition, aiding and abetting breaches of loyalty and fiduciary duty, tortious interference, breach of contract and misappropriation of trade secrets and confidential information.

The suit also names former Merrill Lynch treasurer Eric Heaton as a defendant in the case. The plaintiffs claim that Heaton, as former co-head of the financial institutions group, played a critical role in coordinating the employees' departure for Deutsche Bank.

In addition to the $100 million and additional punitive damages, Merrill Lynch is asking the courts to issue a preliminary injunction barring Heaton from working for Deutsche Bank. In response, Deutsche Bank has agreed to put a 90-day hold on hiring Heaton.

“We believe these mass resignations were part of a carefully orchestrated plot by Deutsche Bank to raid a key Merrill Lynch business unit in violation of Merrill's trade secret and fiduciary rights and to encourage employees with ongoing obligations and common law duties to Merrill to breach them and leave,” the bank said in a prepared statement.

Heaton and the 11 other Merrill employees – coming from offices in New York, London and Hong Kong – all tendered their voluntary resignations on Feb. 3 without advanced notice. As a former top executive, Heaton was required to give at least six months' advanced notice before handing in his resignation, the suit contends.

In the complaint, Merrill Lynch notes that its former employees will be responsible for performing nearly identical duties in the same arenas, putting Merrill's own ability to make money with those investments at risk.

"The only real difference is that, instead of generating tens of millions of dollars in annual revenues for Merrill Lynch, now they will be generating these enormous revenues for Deutsche Bank,” the complaint said.

The lawsuit also claims that Deutsche Bank is legally prohibited from hiring nine out of the 12 employees for a period of between 30 and 90 days after they left Merrill.

Eric Heaton is allegedly bound by a separate noncompete agreement.

According to the complaint, these employees were contractually prohibited from directly or indirectly soliciting co-workers, working for a competitors or sharing confidential business information. David Heaton, Eric Heaton's brother and one of the disputed Deutsche Bank hires, is accused of sending proprietary information about Merrill to himself via e-mail in the days and weeks before his departure.

A Deutsche Bank representative said the company has no comment on the pending complaint.

The case is scheduled to go before New York State Supreme Court Justice Eileen Bransten for a hearing on Merrill's order on March 16.

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