SEI Hits Apex with Suit Over Non-Compete
This article was originally posted at http://fundfire.com/c/2043973/239963
By Lydia Tomkiw July 25, 2018
SEI Investments has filed suit against Apex Fund Services and former SEI sales director John Lumley, who it claims violated a non-compete agreement by joining a direct rival. SEI is claiming breach of contract, breach of fiduciary duty, unfair competition, and interference with contractual relations.
SEI accuses Lumley of using “confidential trade secrets” as well as proprietary information to contact prospective customers, both before and after his departure from the firm, in violation of a non-disclosure and non-compete agreement he signed in late 2016.
Lumley served as sales director in SEI’s investment manager services division until his resignation in May 2018 when he joined Apex as head of product, “a position that would directly compete with SEI’s business,” according to the mid-July filing.
The filing alleges Lumley had three meetings with Genstar Capital Management, a firm that has backed recent Apex acquisitions, and that as a result of those meetings Apex CEO Peter Hughes offered Lumley a job.
The filing describes Apex as “a direct competitor of SEI” listing the fields of fund accounting, administrative services, investor relations services, and tax and audit services as services offered by both firms.
Apex declined to comment on the case. SEI, through its attorney, also declined to comment on the case while the matter is in court.
In the filing, SEI managing director James Cipriano stated in an affidavit that the value of Lumley’s “new business pipeline,” along with business SEI is “in jeopardy of losing,” is valued at $12 million.
The non-compete agreement Lumley signed with SEI states that for a period of two years following the termination of his employment he would not “directly or indirectly, either individually or with others, own, manage, operate, join, control, act as consultant to or agent for, or participate in the ownership, management, operation or control of, or be employed by or connected in any manner with, any business…that competes with the business…,” according to the filing.
This type of non-compete is usually employed for high-level employees, says Jim Eccleston, managing member with Eccleston Law, who is not involved in the case.
“This is typical in terms of preventing a high-level employee from removing confidential information and using it and also from competing with his former employer and, finally, with not allowing that person to solicit clients or prospective clients of his former employer,” he says.
One area of such cases that defendants often contest is the non-compete covenant, he adds. “In most states, the covenant not to compete is disfavored by the courts and as a result of that the employer must show the covenant not to compete is reasonable in terms of geographic scope, time, and scope [of] subject matter,” he says.
SEI is seeking an injunction requiring Lumley to comply with the terms of his contract with the firm as well as monetary damages.
Related Attorneys: James J. Eccleston
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