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BOSTON — A federal judge in the U.S. District of Massachusetts recently rejected Bear Stearns & Co. Inc.’s bid to enforce an employment contract provision banning a high-level employee from working for a competitor for 90 days after leaving Bear Stearns on the ground that the ban could harm investors. On March 26, Bear Stearns asked the court for a temporary restraining order and preliminary injunction prohibiting the defendant from joining Morgan Stanley or another competitor for 90 days after his employment ended at Bear Stearns. The defendant, a stockbroker and the executive director of Bear Stearns’ Private Client Services Group in Boston, signed an employment contact that required a 90-day notice period, or a so-called “garden leave” provision common in the investment industry. Bear Stearns & Co. Inc. v. Sharon, No. 1:08-cv-10505 (D. Mass.) According to Bear Stearns’ complaint, the defendant resigned from the company on March 17 and immediately began working for Morgan Stanley. Before he resigned, the defendant earned about $5.1 million in annual commissions and managed more than $867 million in assets. Bear Stearns sued the ex-employee for breach of contract, misappropriation of trade secrets and confidential information, conversion, breach of fiduciary duty and intentional interference with actual and prospective economic advantages. In an April 4 order, Judge Nathaniel M. Gorton said the balance of hardships in the case tips in favor of the defendant and his investor clients. “[The defendant's] financial wherewithal and ability to earn a living are not in jeopardy but an injunction will likely result in a loss of professional standing and the inability to advise his clients in times of economic turmoil,” wrote Gorton. “The loss from such a prohibition may not ever be fully restored.” Bear Stearns’ attorneys at Paduano & Weintraub in New York declined to comment, its counsel at Seegel, Lipshutz & Wilchins in Wellesley, Mass. did not return a call for comment. Bear Stearns also did not respond to a request for comment. The defendant’s attorney Michael P. Boudett, a partner at Boston’s Foley Hoag, said his client didn’t lead investment clients away from Bear Stearns. “He followed them,” Boudett said. “They were leaving already.” Goodwin Procter’s Rob Hale, a Boston labor & employment partner, said there’s not much case law about garden leave provisions. Hale, whose firm wasn’t involved in the case, also said the order illustrates that companies shouldn’t rely on garden leave clauses instead of non-compete agreements. “A garden leave provision in an employment arrangement is not going to give the employers the right to be sure they’re going to be able to get a non-competition provision enforced,” Hale said.

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