Fourth Circuit Narrows Broker Protocol “Raiding” Exception, Enforces Employment Agreements in Wealth Management Dispute

On August 12, 2025, the U.S. Court of Appeals for the Fourth Circuit issued its decision in Salomon & Ludwin, LLC v. Winters, a significant case at the intersection of financial advisor mobility, the Broker Protocol, and restrictive employment covenants. The court affirmed in part and vacated in part a preliminary injunction obtained by a Richmond-based wealth management firm against several departing employees and their newly formed competitor firm.

The opinion underscores two key points: First, employment agreements with non-solicitation and confidentiality provisions control even where the firm is a Broker Protocol member. Second, the Broker Protocol’s “raiding” exception is narrowly construed, applying only to pre-existing, outside firms targeting another firm’s employees – not to employees leaving to form their own competing venture.

Background

Financial advisory firm Salomon & Ludwin hired four professionals (the “Individual Employees”) between 2009 and 2017. In 2018, Salomon signed onto an industry-wide Protocol for Broker Recruiting (the “Broker Protocol”), which the Fourth Circuit described as “a separate voluntary agreement among firms in the financial services industry that allows a departing financial advisor, with written notice, to take certain client information with them when leaving one member-firm to join another member-firm.” However, the Broker Protocol specifically creates an exception for “raiding,” stating that the Broker Protocol “does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for ‘raiding.’”

In 2022, four years after joining the Broker Protocol, Salomon required the Individual Employees to sign employment agreements containing non-solicitation and confidentiality obligations. The agreements declared client information a trade secret and prohibited solicitation of clients for two years following departure. Notably, these employment agreements stated that they would prevail over the Broker Protocol in the event of any conflict.

In 2024, while still employees of Salomon, the Individual Employees launched a competing firm, Albero Advisors, later renamed Founders Grove Wealth Partners. A month and a half later, they resigned from Salomon. On the day of their resignations, Founders Grove joined the Broker Protocol, and the Individual Employees began contacting their clients from Salomon, transferring hundreds of accounts representing more than $300 million in assets and constituting approximately 30% of Salomon’s business. Salomon sued for violation of federal and Virginia trade secret laws, breach of contract, and related claims. The district court granted a preliminary injunction barring solicitation and use of client information, reasoning that the defendants’ conduct constituted “raiding” under the Broker Protocol and that Salomon was likely to succeed on the merits. The defendants appealed.

Fourth Circuit Decision

The Fourth Circuit published a nuanced opinion by Judge A. Marvin Quattlebaum (1) affirming the preliminary injunction as to the Individual Employees purely on the basis of their employment agreements with Salomon but not on the basis of the Broker Protocol, and (2) vacating the preliminary injunction as to Founders Grove, which was not a party to the employment agreements.

Raiding Under the Protocol

The Fourth Circuit rejected the district court’s expansive definition of “raiding.” The district court had relied on the parties’ experts in defining “raiding” as “a severe economic impact on the prior firm resulting from a raider’s malice/predation and/or improper means.” The Fourth Circuit turned instead to text, ordinary meaning, and industry usage, holding that “raiding” involves one firm predating upon another’s employees, not employees striking out on their own. In one particularly memorable analogy, the court explained that “the Continental Congress did not raid Great Britain when it declared that the 13 colonies were ‘absolved from all allegiance to the British Crown.’” Ultimately, the opinion reasoned that “a raid requires one party attacking another” and interpreted “raiding” to cover any significant client transfer would render the Broker Protocol’s client-solicitation provisions meaningless. Therefore, the defendants had not “raided” Salomon, and the Fourth Circuit reversed the district court on this point.

Employment Agreements Control

Even though the raiding rationale failed, the court affirmed the injunction as to the Individual Employees on alternative grounds. The employment agreements expressly overrode the Broker Protocol and barred solicitation and use of confidential information. The court emphasized Virginia’s rule that contracts must be enforced as written and concluded that the agreements governed regardless of Salomon’s Broker Protocol membership status. Although the court reached this conclusion based on Virginia law, every state in the Fourth Circuit abides by this principal of contract interpretation (see, e.g., Lithko Contracting, LLC v. XL Ins. Am., Inc., 487 Md. 385, 401, 318 A.3d 1221, 1230 (2024); Dawes v. Nash County, 357 N.C. 442, 449, 584 S.E.2d 760, 764 (2003); Gamble, Givens & Moody by Gamble v. Moise, 288 S.C. 210, 216, 341 S.E.2d 147, 150 (Ct. App. 1986); Bischoff v. Francesa, 133 W. Va. 474, 483, 56 S.E.2d 865, 870 (1949); Ames v. Am. Nat’l Bank of Portsmouth, 176 S.E. 204, 216 (Va. 1934)). Accordingly, individual employment agreements expressly overriding the Broker Protocol will almost certainly prevail in any federal court in the Fourth Circuit following Salomon & Ludwin.

Limits on Entity Liability

The Fourth Circuit vacated the injunction against Founders Grove itself, reasoning that the entity was not a party to the employment agreements. However, the injunction remains binding on the Individual Employees, including actions they take through their new firm.

The Impact

The decision provides several lessons for firms in the financial services sector and beyond.

First, contract language prevails over the Protocol. Well-drafted non-solicitation and confidentiality agreements remain enforceable even when the firm participates in the Broker Protocol. However, the Fourth Circuit clarified this point only for contracts which, by their own terms, take precedence over the Broker Protocol. It remains unclear whether an employment agreement that does not address the Broker Protocol would prevail. Financial services firms that have already sign onto the Broker Protocol or may do so in the future would be well-served by reexamining their existing employment agreements to ensure they contain the appropriate protections.

Second, “raiding” is narrowly defined. The Broker Protocol’s “raiding” exception is limited to predatory hiring by competitor firms, not voluntary departures by groups of employees. Perhaps even more consequentially, the “raiding” exception also does not apply to a newly formed venture specifically created by a firm’s employees as a landing place for them and their clients following their impending departure. Under such circumstances, the firm may be left only with contractual claims against its departing financial advisors – again emphasizing the importance of well-drafted, enforceable non-solicitation and confidentiality agreements.

Third, financial advisors are not their firms. Injunctive relief based on the breach of employment contracts may be granted as to the individual signatories of those contracts (in this case, the former employees) but not automatically to their new business entities, even when those new entities are made up entirely of signatories to employment contracts.

Finally, loss of customers and goodwill constitutes irreparable harm. In a lengthy footnote, the court reiterated that the permanent loss of clients or goodwill can serve as the irreparable harm necessary to support injunctive relief under these circumstances.

Taken together, Salomon & Ludwin reinforces the importance of clear, enforceable non-solicitation agreements and limits the circumstances in which the Broker Protocol shields firms from attack by departing financial advisors. Firms should review their agreements to ensure alignment with their strategic objectives, while advisors contemplating departure for another firm or formation of a new firm should be cautious in assuming the Broker Protocol provides safe harbor.