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MERRILL LYNCH, PIERCE, FENNER & SMITH v. RAHN

November 2, 1999

MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., PLAINTIFF,
v.
TREVOR B. RAHN AND JACQUELINE BENDERSKI, DEFENDANTS.



The opinion of the court was delivered by: Berman, District Judge.

ORDER

I. Background

On October 26, 1999, Merrill Lynch, Pierce, Fenner & Smith Inc. ("Plaintiff" or "Merrill Lynch") filed this action seeking (temporary) injunctive relief against Trevor B. Rahn and Jacqueline Benderski (together, "Defendants") for (i) breach of contract; (ii) conversion of trade secrets, customer lists, and confidential business information; (iii) breach of duty of loyalty; and (iv) unfair competition.

On the same day, October 26, 1999, United States District Judge Milton Pollack, sitting as the Part I judge, signed a Temporary Restraining Order ("TRO"). The TRO provided, among other things, that "Defendants shall show cause . . . on the 1st day of November, 1999 at 10:30 a.m., or as soon thereafter as counsel may be heard, why a Preliminary Injunction should not be ordered according to the terms and conditions set forth above." (TRO at 3). A copy of the TRO is attached hereto as Exhibit A and incorporated into the record of these proceedings.

II. Discussion

Based upon the parties' written submissions, as well as oral argument on November 1, 1999, the Court has determined that a preliminary injunction is appropriate. The preliminary injunction shall contain substantially (but not entirely) the same terms and conditions as the TRO. This injunction, an "extraordinary" remedy, is intended only as an interim measure pending the expedited determination of the merits of this case through securities industry arbitration pursuant to Rule 10335 of the National Association of Securities Dealers Code of Arbitration Procedure.

A. Facts

    Briefly stated, the relevant facts include the
  following:
    (i) Defendant Rahn was employed as a registered
  representative with Merrill Lynch in its Grand
  Central Financial Complex in New York City until
  October 22, 1999. (See Rahn Affidavit at ¶ 3).
  Defendant Benderski was employed as a sales assistant
  with Merrill Lynch in its Grand Central Financial
  Complex in New York City until October 22, 1999.
  (See Benderski Affidavit at ¶ 3);
    All records of Merrill Lynch, including the names
    and addresses of its clients are and shall remain
    the property of Merrill Lynch at all times during
    my employment with Merrill Lynch and after
    termination of my employment for any reason with
    Merrill Lynch. None of such records, nor any part
    of them is to be removed by me from the premises of
    Merrill Lynch either in original form or in
    computerized, duplicated, or copied form except
    with the permission of an office manager . . .
  Defendant Rahn also expressly agreed in paragraph 3
  of the "Financial Consultant Agreement" "to the
  issuance of a temporary restraining order or a
  preliminary or permanent injunction to prohibit the
  breach of any provision of this contract or to
  maintain the status quo pending the outcome of any
  arbitration proceeding which may be initiated."
  (emphasis added);
    (iii) Defendant Benderski did not execute the
  "Financial Consultant Agreement";
    (iv) both Defendants executed Merrill Lynch's
  "Compliance Outline for Private Client Financial
  Consultants" and "Guidelines for Business Conduct."
  (See ...

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