LPL Financial has dropped a defamation lawsuit against Ameriprise in which it accused the rival broker/dealer of sending misleading notifications to clients about potential data breaches.
On Thursday, LPL told the U.S. District Court of the Southern District of California that it had agreed to dismiss the case with prejudice. However, both parties agreed that LPL would have the right to pursue the defamation claims with the Financial Industry Regulatory Authority.
In its initial complaint, filed in April, LPL accused Ameriprise of sending “misleading” notifications to clients about a potential data breach, including many who had moved to LPL from Ameriprise. Ameriprise shot back, arguing that it had been obligated to send the letter to customers whose personal information had been exposed by former Ameriprise advisors who had moved to LPL.
Part of the dispute was based on a spreadsheet Ameriprise called the “Bulk Upload Tool.” It said that 30 former advisors who moved to LPL used it to access customer information, which required them to send the data breach notification by law.
Last week, 10 advisors at the center of the legal battle asked the federal court to stay the lawsuit while FINRA arbitrates the case. Those advisors, whose names were redacted in court documents, had argued in a motion that they were not party to an agreement between the two companies allowing their personal devices to be searched for evidence of client information.
In the latest court agreement, LPL agreed to provide, within a week from the filing, a list of any names of people whose information was provided via the “bulk upload tool” that are not LPL clients.
After receiving that list, Ameriprise will have two weeks to send the names of any LPL clients to the broker/dealer that received the data breach notices.
In addition, both firms agreed to give 48 hours’ notice to the other before sending any notice to clients regarding the data breach communication “for review and comments.”
“We are pleased with the outcome,” an LPL spokesperson said via email. “Ameriprise must provide a list of individuals who received what we see as misleading data breach notices, and protections are now in place to prevent this from happening in the future. This agreement helps to safeguard the trust and transparency that are vital to our advisors and their clients.”
Ameriprise also said it was “pleased this case was dismissed with prejudice, calling it “a recognition that LPL brought baseless charges and sought unwarranted relief,” an Ameriprise spokesperson said via email. “In fact, this underscores that we took the lawful steps in clients’ best interests to inform impacted individuals of their data being shared without their authorization and contrary to our privacy policy, which protects them.”
LPL and Ameriprise are still engaged in other legal disputes related to advisor and client poaching.