## Facts

- Salomon Smith Barney Inc. (Smith Barney) employed Stewart M. Vockel III as a financial consultant in its Philadelphia office after he left Merrill Lynch in 1994.
- In early 2000, Vockel negotiated to join PaineWebber Inc. and received an offer that included a signing bonus.
- Vockel resigned from Smith Barney on April 28, 2000 and joined PaineWebber.
- Smith Barney alleged that, before resigning, Vockel provided PaineWebber with Smith Barney client account statements and other customer information to prepare solicitation packages urging clients to transfer their accounts.
- Smith Barney filed a federal diversity action seeking interim equitable relief (TRO and preliminary injunction) pending completion of an NASD arbitration in which it primarily sought monetary relief.
- The court denied a TRO and held an evidentiary hearing on the request for a preliminary injunction.
- Evidence showed that when Vockel moved from Merrill Lynch to Smith Barney in 1994, he brought Merrill Lynch client information, and Smith Barney encouraged and benefitted from solicitations using that information.
- Vockel had not signed a non-compete agreement barring solicitation of former customers.

## Issues

1. Whether the equitable doctrine of unclean hands barred Smith Barney from obtaining a preliminary injunction restricting Vockel’s use of customer information and solicitation of clients after his departure.
2. Whether, given Smith Barney’s prior participation in similar conduct, the court should exercise discretion to grant interim injunctive relief pending arbitration.

## Decision

- The court denied Smith Barney’s motion for a preliminary injunction.
- The court applied the clean-hands doctrine as a threshold equitable bar because Smith Barney previously encouraged and profited from substantially similar conduct involving the same employee and the same type of customer information.
- The court limited its ruling to the availability of interim equitable relief and left the merits and any monetary remedies to arbitration.

## Legal Principles

- A preliminary injunction is an extraordinary, discretionary equitable remedy assessed under the four-factor test: likelihood of success, irreparable harm, balance of harms, and public interest.
- Under the clean-hands doctrine, a court may deny equitable relief to a party whose conduct relating directly to the matter in dispute has been inequitable.
- Misconduct supporting unclean hands must bear a direct relationship to the subject matter of the requested equitable relief, not merely reflect general wrongdoing.
- A party may be denied injunctive relief when it seeks to restrain conduct substantially similar to conduct it previously encouraged or from which it profited in closely related circumstances.

## Conclusion

The court refused to issue interim injunctive relief because Smith Barney’s prior involvement in comparable client-information transfer and solicitation defeated its request for equity under the clean-hands doctrine, leaving the underlying dispute for arbitration.


Salomon Smith Barney Inc. v. Vockel, 137 F. Supp. 2d 599 (E.D. Pa. 2000)