The Hill
Tuesday 20 November 2007
A Wall Street investment firm co-owned by Edward Kennedy Jr. has filed suit against a well-connected Washington healthcare lobbying shop in a case that points up the legal gray area in the governance of political-intelligence gathering.
The Marwood Group, an asset management company that provides investment advice to hedge funds, mutual funds and institutional investors, filed suit against Health Policy Source, a lobbying firm specializing in healthcare legislation and regulations, on Oct. 30 in federal court in Washington, D.C.
Marwood filed a separate suit against its former employee, Katie Simons Pahner, in New York City.
If the currency of Washington is information, investment firms and lobby shops use the same coinage. Employees of investment firms and lobbying operations both seek to gain advance knowledge of legislation or federal regulations that could have a big impact on business.
Though Marwood and Health Policy Source serve different markets - investors versus lobbying clients - and have different motives - targeting investment dollars versus influencing public policy - they each perform similar services in the political intelligence realm and provide specialized, inside information to clients that pay dearly for it.
Kennedy, son of Sen. Edward Kennedy (D-Mass.) and brother of Rep. Patrick Kennedy (D-R.I.), founded Marwood with John Moore in 2002. The firm has more than 60 employees split among its New York, Washington and London offices and specializes in healthcare matters. Health Policy Source is co-owned by lobbyists Daniel Boston and Monica Tencate.
The result of the lawsuits could have important implications for lobbying firms, investment firms and other industries in Washington that depend on the information trade. A favorable ruling for Marwood could, for example, constrict the regular flow of knowledgeable, connected employees from one firm to another.
The lawsuit stems from the decision of Pahner, 27 as of last month, to quit Marwood in September after working there for roughly one year. Pahner, who previously worked as an aide at the Centers for Medicare and Medicaid Services, then accepted a position as a lobbyist at Health Policy Source.
Marwood claims that Pahner's employment at Health Policy Source violates the non-compete and non-disclosure clauses of her contract, which stipulated that she could not work for a competitor for two years after leaving Marwood.
Pahner rose to the position of vice president at Marwood even though it was her second job after completing her master's degree at George Washington University.
The plaintiff and defendants laid out their arguments in filings to the New York City court and the federal court in D.C.
Marwood's Vienna, Va.-based attorney, Tyler Brown, of Jackson Lewis, declined to comment and a call to Marwood's New York office was not returned. Boston would not comment and Pahner could not be reached.
Marwood is seeking $2.5 million plus punitive damages from Health Policy Source, saying the lobbying firm has benefited from information known to Pahner about Marwood's clients, business practices and pricing structure that has given it an unfair competitive advantage.
Marwood's cases against Pahner and Health Policy Source, respectively, rest on its assertion that Pahner's activities collecting information about pending healthcare legislation and regulation for Marwood's clients is materially the same as the work she performs for her new employer.
Marwood has not registered its employees as lobbyists since 2004, according to pubic records. Pahner has never registered to lobby, but Health Policy Source will add her name to its lobbying registrations next year, according to court documents.
Health Policy Source argued in its filing that its activities as a lobbying firm are entirely different from Marwood's role as investment adviser.
Health Policy Source disputes Marwood's assertion that the two companies share any clients. Unlike lobbying firms, investment shops are not required to disclose their client lists. Health Policy Source's clients include the American Medical Group Association and the American Society for Anesthesiologists.
In its filing, Health Policy Source also noted that it offered to agree not to do business with any of Marwood's clients for two years in order to settle the matter.
The lobbying shop does work for one of Marwood's competitors, however. Health Policy Source provides coverage of congressional hearings and other public events for an investment firm, the Stanford Washington Research Group, which competes directly with Marwood. Health Policy Source insists that its work for Stanford does not involve providing investment advice and that Pahner will not provide investment-related services to this client.
If the lawsuits are decided by the courts, the outcome will depend largely on the courts' interpretation of Pahner's employment contract with Marwood, said Brett Kappel, a Washington-based attorney and lobbyist with Vorys, Sater, Seymour and Pease.
"This is a pretty much typical employment case over confidentiality and a non-compete clause,"; Kappel said. The specificity and breadth of the non-compete clauses in Pahner's contract will be closely read, he said.
Marwood faces an uphill climb winning such as case, Kappel added. The common disposition of judges in such employment disputes favors Pahner and her new employer, he said.
"Courts are generally hostile to these non-compete clauses,"; Kappel said, because of a desire to protect workers' rights to seek employment freely. "You have a 'liberty interest' in choosing who you work for,"; he said.
Marwood's first two forays with the courts have been unsuccessful. The judge in New York rejected the firm's requests for a temporary restraining order and a preliminary injunction against the defendants. The New York case is still pending; Health Policy Source has not yet filed its response in the federal court in D.C.
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