Edelman Financial Engines LLC can’t proceed with its suit against two former employees who allegedly violated non-compete clauses and solicited its customers for their new business, a federal court in Kansas ruled.
And a temporary restraining order issued Jan. 25 against the breakaway employees, Erik Harpsoe and Brian K. Fowles, is no longer in effect, the U.S. District Court for the District of Kansas said June 7.
The court has also asked the parties for their positions on whether Harpsoe and Fowles are entitled to collect damages for lost business under a $100,000 bond that Edelman posted when the court issued the restraining order.
The case is among a string of similar cases in several states, according to Eliott Good, an attorney for Harpsoe and Fowles who practices in Columbus, Ohio.
The financial-planning giant filed the suit Jan. 17, the same day the men resigned and announced their new company.
Ohio residents Harpsoe and Fowles had signed agreements not to compete with their then-employer, The Mutual Fund Store, in 2011. Financial Engines, which later merged with Edelman Financial Services, acquired the company in 2016.
Here, the District of Kansas said no jurisdiction existed for it to hear the case.
The case initially appeared to meet federal jurisdictional requirements based on diversity of citizenship, according to the court. But then Edelman conceded that, as a limited liability company, it likely had an Ohio member who would give the company Ohio citizenship, destroying diversity.
Edelman’s argument that it had an implicit federal claim under the Defend Trade Secrets Act is unpersuasive, the court said. No basis for federal-question jurisdiction exists, it said.
Bryan Cave Leighton Paisner LLP represented Edelman.
Foulston Siefkin LLP and Good Law Co. represented Harpsoe and Fowles.
The case is Edelman Fin. Engines, LLC v. Harpsoe, D. Kan., No. 2:19-cv-02026, 6/7/19.