Non-Compete Obligations of Departing Star Partners and the Right of Clients to Their Continued Services

The interests of advisers and their clients may conflict in unexpected ways. One such situation arises when the adviser’s partners or managers (portfolio managers) sign a non-compete agreement with the adviser and later, when they leave, are sought after by clients who wish to continue the relationship. The case is clear if the departing portfolio manager solicits the clients of the adviser in violation of its non-compete undertaking. The case is less clear when the clients wish to follow the departing portfolio manager and press to engage her in violation of the non-compete undertaking. The conflict here is between the adviser’s right to protect itself against unfair competition by disloyal portfolio managers and to enforce its rights against breach of contract by portfolio managers, and the right of clients to have a portfolio manager of their choice.