The advisors at the center of an ongoing legal spat between Ameriprise and LPL Financial are urging the court to pause the case while FINRA arbitration proceedings play out.
In an order issued last week by District Court Judge Jinsook Ohta, the advisors who were previously ordered to allow their personal devices to be searched for confidential client information as part of the litigation are allowed to request a pause in the case (as well as the digital searches).
Ohta’s ruling comes after a federal appeals court overruled the court’s previous decision that the advisors could not intercede in the case to stop the data investigation.
Ameriprise initially filed a lawsuit against LPL Financial in the summer of 2024, alleging that LPL directed recruits leaving Ameriprise for the IBD to procure confidential information, subjecting them to “regulatory, and in some cases, even criminal exposure,” in a “widespread” misuse of client information. LPL responded by accusing Ameriprise of “remarkable hypocrisy,” while touting its support for advisors’ rights.
Ameriprise argued that advisors who had left the firm should be required to undergo a review of their retention of client information on personal devices.
LPL and Ameriprise agreed to hire a third-party forensic examiner to investigate the claims, but some of the advisors objected, filing their own motion to enter the lawsuit and to stop the forensic search of their devices.
In their motion filed last May, the advisors argued that they weren’t parties to the agreement between the two companies that authorized searches of their devices for evidence of client information.
“The intervening advisors are caught between two corporate behemoths engaged in a massive and multi-front recruiting battle,” the motion read. “Unfortunately, as a result, they risk the invasion of their privacy and the trampling of their rights.”
The advisors said LPL supported their move, while Ameriprise claimed the advisors were coordinating with LPL to “either delay or disrupt” the agreement.
Last fall, Ohta struck down the advisors’ attempt to intervene in the case, in which they’d asked the court to pause the data search and stay the lawsuit altogether in order to allow the case to play out in FINRA arbitration proceedings.
However, the advisors took their case to the Ninth Circuit Court of Appeals, which ruled in their favor, vacating the decision denying them intervention and the decision mandating the search of their devices.
The advisors also claimed the FINRA arbitration on the same issues “has been proceeding in an orderly fashion” toward a final hearing set to begin on October 5.
The advisors claimed that although Ameriprise has been free to petition the FINRA arbitration panel for a forensic review akin to what it requested in litigation, it has not done so. The newest order from the court effectively resets the board, allowing the advisors to intercede in the case and press for a pause.
Ameriprise declined to comment. LPL did not respond to a request for comment prior to publication.
