Veteran Advisors Challenge Focus Financial Overbroad Non-Competes in Federal Court
From the desk of Jim Eccleston at 麻花传媒
Two former advisors from Edge Capital Group have filed a federal lawsuit challenging what they describe as excessively restrictive employment agreements following their departure amid a major merger. The case marks another test of how far wealth management consolidators like Focus Financial Partners can push non-compete and non-solicitation covenants in a rapidly consolidating industry.
James T. Patrick and William deButts, both industry veterans, filed their complaint in the Southern District of New York. As reported by AdvisorHub, the pair seeks to prevent Focus, Edge Capital, and SCS Capital Management from enforcing contractual restrictions they argue are “staggeringly overbroad” and anticompetitive.
The disputed provisions bar Patrick and deButts from working with any former or prospective Focus clients for two years, including individuals or entities with whom they had no prior interaction, and from soliciting former colleagues for one year. The agreements also prohibit disclosure of any non-public client information. The advisors argue these restrictions violate New York law, which limits non-competes to what is necessary to protect a legitimate business interest and forbids clauses that impose undue hardship or harm the public.
The dispute arises from Focus’s full acquisition of Edge Capital earlier this year and its merger with another Focus-owned firm, SCS Capital Management. Patrick and deButts claim the deal disproportionately benefited large stakeholders at the expense of themselves and their clients. The advisors subsequently joined NewEdge Wealth, a firm unaffiliated with Edge or Focus.
AdvisorHub reports that although both advisors signed non-compete agreements during Focus’s 2018 acquisition of Edge Capital, their complaint contends that those restrictions should not apply here. They also accuse Edge executives of intimidating and defaming them to clients and contacts after their departure.
Adding to the dispute, Focus has filed arbitration claims against the pair, alleging violations of the same restrictive covenants. However, Patrick and deButts counter that their agreements exclude disputes involving termination or claims seeking injunctive relief from arbitration.
The case reflects mounting tensions in the wealth management industry, where private equity-backed consolidators are prioritizing firm value and scale, often clashing with advisor independence and long-standing client relationships. Advisors are increasingly pushing back on restrictive employment terms that they say conflict with client interests and industry norms. The complaint also invokes a key FINRA principle, which generally prohibits contractual restrictions that limit a client’s right to choose their advisor.
麻花传媒 LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law
