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BSSC V. Howard Stolzer Court Complaint .pdf



Original filename: BSSC V. Howard Stolzer Court Complaint.pdf

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JOHN M. BOWENS, ESQ. -ATTORNEY ID
SCHENCK, PRICE, SMITH & KING, LLP
220 Park Avenue
Florham Park, New Jersey 07932
(973) 539-1000
Attorneysfor Plaintiff Benefits Sources &
. SdlUtiori,fChadler, LLC

BENEFITS SOURCES & SOLUTIONS

CHADLER, LLC,


SUPERIOR COURT OF NEW JERSEY
CHANCERY DIVISION: MORRIS COUNTY
GENERAL EQUITY PART
DOCKET NO.

Plaintiff,


. v.

c.. ." , I ~ -Ji
Civil Action

STOLZER, ROTHSCHILD, LEVY, LLC, and
HOWARD N. STOLZER,

VERIFIED COMPLAINT

Defendants.

Plaintiff, Benefits Sources & Solutions Chadler, LLC by and through its attorneys,
Schenck, Price, Smith & King, LLP, 220 Park Avenue, Florham Park, New Jersey 07932, by
way of Verified Complaint against Defendants, Stolzer, Rothschild, Levy, LLC and Howard N.
Stolzer (collectively "Defendants"), alleges as follows:
THE PARTIES
Plaintiff, Benefits Sources & Solutions Chadler, LLC ("BSSC") is an employee

1.

benefits brokerage and advisory firm organized and existing under the laws ofthe State of New
-

Jersey. BSSC has a principal place of business at 100 Passaic Avenue, Suite

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Jersey 07004.

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BSSC designs, implements and administers employee benefit P~d13ro~~

2.

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wealth management and retirement advisory services to businesses and empTo')7&s
industry sectors.

:0142374l. DOCX:I

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3.

Defendant, Stolzer, Rothschild, Levy, LLC ("SRL") is a registered investment

advisory firm organized and existing under the laws of the State of Delaware. SLR is a foreign
entity authorized to conduct business in the State of New Jersey and has a principal place of
business at 51 JFK Parkway, First F166fWest, Short Hills; New Jersey 07078~
4.

Upon information and belief, SRL specializes in investment management and

advisory services, pension and defined contribution plans, consulting services, and money
management.
5.

Defendant, Howard N. Stolzer ("Stolzer") is a former employee of BSSC and he

resides at 40 Winding Lane, Basking Ridge, New Jersey 07920.
6.

Upon information and belief, Stolzer is a member, officer, investor and/or equity

holder in SRL.

SUMMARY OF ACTION
7.

BSSC seeks equitable relief against the Defendants arising from Stolzer's breach

of an employment agreement. Specifically. Stolzer directly solicited, and continues to solicit,
business from BSSC's existing ru:1d prospective clients for SRL's immediate financial benefit.
Stolzer further seeks to expand SRL's client base by inducing BSSC's clients to leave BSSC in
favor of working with SRL.

Finally, Stolzer misappropriated proprietary information from

BSSe including non·public business and client information for SLR's use which constitutes a
breach of fiduciary duty owed to BSSC.
8.

The actions taken by Stolzer violate both common law ru:1d an enforceable non­

compete and confidentiality agreement he executed as a condition of his employment.
9.

Consequently, SLR's use ofBSSCs proprietary information in the investment and

advisory marketplace has caused Plaintiff to suffer damages in the form of lost management fees

(0142J742 DOCX;I )

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and commissions as well as a loss of existing clients. Moreover, BSSC has suffered irreparable
harm to its reputation and goodwill.
10.

If Defendants are not temporarily restrained and preliminariJy and permanently

enjoined from the foregoing aCtions, BSSC wi11contitrLie tosl.ifter iiiuilediate; severe and
irreparable harm.
FACTS COMMON TO ALL COUNTS

Background: Benefits Sources & Solutions Chadler, LLC


11.

BSSC was established in or about October, 2012 by way of merger between Scott

Rappoport, CLU, ChFC d/b/a Benefits Sources & Solutions ("BSSI") and The Chadler Group
("Chadler").
12.

BSSC's predecessor, BSSI was formed in 1989 and, prior to merger, operated as a

registered investment advisory firm in Bound Brook, New Jersey for approximately seventeen
(17) years. BSSI specialized in insurance sales and services, employee benefits consulting and
administration, pension services, and asset management.
13.

BSSI was a member of United Benefits Advisors ("UBA") which is a consortium

of more than 140 employee benefits advisory firms in North America and Europe. UBA is the
nation's leading employee benefits advisory organization having partners in 46 states, Canada
and the United Kingdom. BSSI's affiliation with UBA provided it national and international
recognition.
14.

BSSI's founder, Scott B. Rappoport, CLU, ChFC, RHU, CEBS ("Rappoport")

served as President and Chief Executive Officer.

He personally oversaw business operations,

developed client services and new business, established firm policies and procedures, and

(0142J742.DOCX;1

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implemented strategic marketing programs to promote BSSI. Rappoport now serves as President
and CEO of BSSC.
15.

Throughout the past several decades, Rappoport invested substantial amounts of

time and~moneyon behalfbfBSSland its successor, BSSC in developing long-term, loyal
relationships with clients. The names, addresses and financial infoflllation of those clients are
neither open to the public nor ascertainable by their competitors. Such information is proprietary
and remains property of BSSC.
16.

BSSC developed a substantial expertise and well-earned reputation by providing

best-in-class employee benefit conSUlting, brokerage, and retirement services. Its unique and
protected approach to providing these services served as the foundation for its continued growth
and success. Last year, BSSC's gross earnings exceeded $3 million dollars. Approximately
$400,000 of those earnings were attributed to the department within which Stolzer worked.
17.

When BSSI's merged with Chadler to form BSSC, Stolzer continued as an

employee and served as Chief Compliance Officer and Chief Investment Officer.
Defendant StoJzer Joins BSSI and Agrees to be
Bound by BSSI's Employment Agreement

18.

On or about December 26, 1996, Stolzer was first employed by BSSI as Group

Insurance Account Manager. He was primarily responsible for providing client service, running
investment reports and providing IT support. Stolzer was later promoted to Chief Compliance
Officer and Chief Investment Officer, in the mid 2000s, overseeing and managing regulatory
compliance issues as well as managing and monitoring' BSSI's portfolio of assets.
19.

Throughout his employment with BSSI and its successor, BSSC, Stolzer had

direct access to the names, addresses, professional needs, and personal and financial information
of existing and prospective clients. Additionally, Stolzer had access to information pertaining to

{01423142 DOCX; 1 }

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business operations and activities, personnel, computer systems, services, data, trade knowledge,
trade secrets, business procedures, financial affairs and other non-public information relating to
policies, marketing and sales, and operational methods.
20.

At the time he Was hired,-Btolzer voluntarily executed an employment agreement

which included reasonable and critical non-competition and non-solicitation restrictions as well
as confidentiality provisions. This agreement was necessary so that BSSC could protect its
legitimate business interests and proprietary information, including private client information.
See Conditions of Employment agreement ("Agreement") executed by Stolzer on May 19, 1998,
attached hereto as Exhibit A.
21.

Paragraph 2 of the Agreement states:
2.
In order to preserve the relationship between BSSI (or any affiliate
of BSSI) and its clients, and in consideration of my employment and the
benefits which I will derive therefrom, I agree that, so long as I am
employed by BSSI (or any affiliate or successor of BSSI)and for a period_
of two (2) years thereafter (regardless of why my employment is
Iterminatea), I will not, directly or indirectly, on my own behalf or on
behalf of any other person or entity without the prior written consent of
BSSI:

J

(a) solicit, service, sell or provide business in the nature of insurance sales
and service, employee benefits consulting and administration, pension
services and asset management, from or for any client served by BSSI (or
any affiliate of BSSI) in any capacity during the two (2) year period
preceding termination of my employment, or any client being solicited by
BSSI (or any affiliate of BSSI), nor will I seek to induce any such client to )
reduce, terminate or otherwise alter its relationship with BSSI (or any
affiliate of BSSI) or in any other way seek to damage or interfere with the
relationship between BSSI (or any affiliate of BS SI) and any of its existing
or potential clients;

(b) disclose, use, publish or in any other manner· reveal, directly or \
indirectly, to any third party any "Proprietary Information," as defined)
below, acquired during the course of, or incident to, my employment by
BSSI; and

{01423742.DOCX;1

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(c) induce or attempt to induce in any way any employee or independant
contractor or consultant of BSSI (or of any affiliate of BSS!) or any
person, firm or corporation having any contract with BSSI (or any affiliate
of BSSI), either to leave such employment or association with BSSI or to
breach or terminate its contract with BSSI (or with any affiliate ofBSSI).
ld.
22.

The Agreement clearly prohibits Stalzer from soliciting existing clients of

Bsse within a two year span following his termination from employment. It further
prohibits him from inducing any such client to terminate its relationship with BSSe or
otherwise interfere with any of its existing or potential clients. Finally, the Agreement
prohibits Stalzer from using any proprietary information such as client information
acquired during the course of his employment.
23.

By signing the agreement, Stalzer acknowledged that the restrictions

contained therein were reasonable and that any violations thereof would result in
irreparable harm and constitute a breach of fiduciary duty to BSSI and its successors.
Paragraph 7 states:
7.
1 agree that the foregoing restrictions are fair and
reasonable and will not interfere with my ability to practice my
profession and earn a livelihood in the field after I leave the
employ of BSS!. 1 further agree that my violation of the provisions
of this Agreement will cause irreparable harm to BSSI and will
constitute a breach of my fiduciary relationship to BSS! since,
among other things, 1 will have used my special relationship with
BSSI and its clients, as well as confidential information belonging
to BSSI, for my personal benefit. Therefore, if 1 breach the terms
of this Agreement, BSSI shall be entitled, in addition to all other
available remedies, to a temporary and permanent injunction
restraining me from violating the provisions hereof and a decree of
specific performance of the terms of this Agreement, without being
required to prove damages or to furnish any bond or other
security ...

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24.

Paragraph 8 of the Agreement makes the foregoing restrictions binding on Stolzer

and BSSI as well as their respective successors and assigns, i.e. BSSC and SLR. Id.
25.

Stolzer worked as an employee of BSSI and its successor, BSSC for more than

seventeen (17) yeats. During that time he became deeply

involved~with

virtuaIlyallaspects of

the business and client base.
26.

On July 1, 2014, Sto1zer resigned from BSSC without giving any advanced

notice.
Breach of Employment Agreement

27.

Within one week after Stolzer resigned, Rappoport learned that Stolzer had been

involved with a "new" employment venture known as "Stolzer, Rothschild, Levy, LLC."
28.

According to its website, SLR specializes in, and provides many of the same

services offered by BSSC. See www.srlam.com. As such, SLR competes directly with BSSC in
the investment and advisory marketplace.
29.

Upon information and belief, Stolzer formed SLR and registered same with the

requisite national and state regulatory authorities while still employed at BSSC.
30.

According to SLR's Firm Brochure affixed to Form ADV filed with both the

United States Securities and Exchange Commission ("SEC") and state securities authorities, SLR
registered as an Investment Advisor in January, 2014. See SLR Firm Brochure, Part 2A dated

------

January, 2014 attached hereto as Exhibit B.

The reported address of SLR is the personal

residence of Stolzer in Basking Ridge, NJ. Id.
31.

According to the Investment Advisor Representative Report Summary also filed

with the SEC, Stolzer is listed as having been registered with employer, SLR since March 12,
2014. See Investment Advisor Representative Report Summary attached hereto as Exhibit C.

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32.

According to the State of New Jersey Division of Revenue & Enterprise Services,

Business Records Services, SLR filed as a foreign business entity in the State of New Jersey in
June, 2014. See Business Record Service attached hereto as Exhibit D.
33.

The foregoing actioris bYStolzetdemonstrate hispremeditated~intention to violate

the Agreement and leave the Plaintiff with a fait accompli.
34.

After B sse management learned that Stolzer was working at SLR, it was further

revealed through written communications that Stolzer directly solicited BSSC's existing clients
seeking to induce them to terminate their relationship with BSSC. This occurred both before and
after July 1,2014, Stolzer's resignation date.
35.

For example, on July 10, 2014, Rappoport received an e-mail from long term

BSSe client, Michael Rubin stating that he decided to "cutoff" his relationship with BSSC and
use Stolzer to manage his personal accounts as well as the 401K plans for Garylin and Attitudes,
another one of BSSC's corporate clients. See e-mail from Rubin to Rappoport dated July 10,
2014 attached hereto as Exhibit E.
36.

On July 14, 2014, BSSe client Timothy Iverson advised BSSe that he received

an e-mail from Stolzer stating that he is a principal in a new firm. He further advised that he is
on Stolzer's distribution list and has been receiving e-mails from him related to investment
guidance for "quite a while." See e-mail from Iverson to Rappoport dated July 14,2014 attached
hereto as Exhibit F.
37.

On July 24, 2014, BSSC discovered an e-mail sent to Stalzer from a BSSe vendor

Janeane Savino advising him that another BSSC client contact at paychex.com would like to
speak with him about business concerning Sandy Lane. See e-mail from Savino to Stolzer dated
July 24, 2014 attached hereto as Exhibit G.

(G!423742.DOCX;! )

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38.

Surprisingly, on July 14, 2014, even Mr. Rappoport's parents received an

investment communication update from Stolzer's SLR e-mail account.

See e-mail from G.

Rappoport to S. Rappoport dated July 14, 2014 attached hereto as Exhibit H.
39.

On May 8, 2014, Stolzer ditectlye-tnailed BSSe clients, Farren International,

LLC and web401 K.com, Inc. regarding an issue with payroll accounts. See e-mail from Stolzer
to Rugel and others dated May 8, 2014 attached hereto as Exhibit I. In a response e-mail dated
July 28, 2014, Ronald A. Cohen, Director at web401K.com, Inc., indicated that Stolzer followed
up with him to inquire about the issue. Id.
In addition to the foregoing, Stolzer made deliberate attempts to divert BSSe's e-

40.

mail correspondence to SLR. On July 14, 2014, Charles Schwab & Co., Inc. sent an e-mail to
Stolzer's BSSC e-mail account confirming that his primary e-mail has been changed. See e-mail
from Schwab Email Admin to Stolzer dated July 14,2014 attached hereto as Exhibit J.
41.

Stolzer's actions have had a direct negative impact on BSSC's existing business

and ability to attract new clients. BSSC has already lost more than 40 accounts and upwards of
approximately $100,000 in management fees and commissions. In addition, the Defendant's
duplicity has resulted in an unquantifiable loss of good will.
Stolzer's actions have also caused a great deal of confusion, concern, and inquiry

42.

from BSSC's existing and prospective clients which has significantly damaged and continues to
damage BSSC's reputation and good will. One client, whose account is valued at approximately
$150,000 has already threatened to terminate its relationship with BSSC because of the
confusion caused by Stolzer's abrupt departure and subsequent solicitations.

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