Simmons Battles Encore Bank


Simmons Battles Encore Bank
The executive triumvirate of Encore Bank in Little Rock. From left: Chris Roberts, chairman and CEO, Phillip Jett, vice chairman and president and Burt Hicks, senior executive vice president, chief operating officer. (Karen E. Segrave)

Simmons Bank of Pine Bluff has accused former employees of taking customer and proprietary bank information when they left to work for Encore Bank of Little Rock.

Those confidential files, “including valuable risk and credit assessments, were stolen” by several departing employees, according to a Jan. 8 filing by Simmons in the case. “This information gave Encore the ammunition it needed to solicit these customers,” Simmons’ lawyers said.

Some details, including an allegation that one former executive downloaded Simmons files onto a thumb drive before departing, were included in a filing that was mistakenly made public and has since been removed from the court’s public digital database.

The thumb drive has since disappeared, according to the filing by attorneys James Gary and Teresa Wineland of the Little Rock office of Kutak Rock LLP, who represent Simmons. Simmons also said that in December it had recovered “hundreds of pages” of confidential data taken by employees leaving for Encore.

In November, Simmons and its parent company, Simmons First National Corp., sued Encore, several of its executives and Simmons’ former employees, saying Encore had improperly lured them away starting in 2019. The 64-page complaint named about a dozen bank officers as defendants, including Chris Roberts, Encore’s chairman and CEO; Burt Hicks, senior executive vice president and COO; and Phillip Jett, vice chairman and president. Unlike Roberts and Hicks, Jett never worked for Simmons.

“Roberts, Hicks and Jett conspired with other employees of Simmons to get Simmons’ customer information and valuable proprietary and confidential information for Encore’s use before those employees left Simmons for Encore,” according to Simmons’ court filing.

On Nov. 24, Jefferson County Circuit Court Judge Robert Wyatt Jr. entered a temporary restraining order against Encore to prevent it from poaching current Simmons employees and unlawfully soliciting established customers. Encore also is prevented from using Simmons’ trade secrets and information. The order remained in place until Friday, after Arkansas Business’ print deadline.

In the motion for the temporary restraining order, Simmons said that Encore’s access to its trade secrets and former employees gives it an unfair competitive advantage and hurts Simmons.

On Dec. 17, Wyatt said in a filing that the case “should be and hereby is ordered to mediation.” He appointed James Tilley of Little Rock as the mediator.

Simmons, founded in 1903 and publicly traded, said it tries to reduce unfair competition by awarding certain employees company shares if they agree to wait a year after leaving before trying to woo away other Simmons employees or customers. Ex-employees are also contractually prohibited from leaking or using Simmons’ trade secrets or other related data for five years or until the information enters the public domain.

Simmons alleges that the defendants breached their contractual duties owed to the bank by trying to move Simmons’ customers to Encore.

Simmons wants a judge to say that its employment agreements with several of the defendants are enforceable. It also wants the temporary injunction made permanent.

In addition, Simmons is seeking damages that include breach of contract and tortious interference with contractual relationships and business expectations.

On Jan. 8, Simmons filed a motion to amend its complaint and to respond to defendants’ motion to dismiss. That was motion meant to be sealed, but the document was obtained by Arkansas Business in the brief time it was in the public database.

“Encore Bank would like to respond to the allegations made against it by Simmons, as many are simply untrue,” said Patrick James of James House Downing & Lueken of Little Rock, who is representing Roberts, Hicks, Jett and Encore Bank. “However, the hearing and exhibits were sealed, and we are prohibited from commenting on those matters.”

Simmons’ filing, which was removed last week from the Administrative Office of the Courts’ CourtConnect website, lays out additional details of Simmons’ allegations against the defendants.

Simmons said Encore’s top management, including Roberts and Hicks, “set the example by disregarding their own contractual obligations, thereby encouraging lower level management and staff to do the same.”

Arkansas has a statute that covers agreements not to compete, said Theresa Beiner, dean of the University of Arkansas at Little Rock’s Bowen School of Law, who was unfamiliar with the facts in Simmons’ case but spoke generally in response to a reporter’s inquiry.

Judges consider whether the employer has a protectable business interest and whether such an agreement is reasonable in time and scope, she said. Beiner said customer lists are the kinds of items that are protectable by a noncompete agreement, and two years is considered a reasonable length of time to prohibit ex-employees from targeting their former employers’ customers.

But Beiner said judges scrutinize noncompete agreements. “Covenants not to compete, … they’re not looked on with favor for the most part,” she said. “You want people to be able to do their job, to find jobs and do whatever they’re trained to do in business. And we want people to be able to freely move from one opportunity to another.”

Starting Encore Bank

In 2013, Roberts became an employee of Simmons, where his duties included acquiring and retaining high-net-worth customers. He also was provided access to Simmons’ trade secrets and other confidential information.

Simmons said Roberts was awarded units and shares of the bank, and, as a condition of accepting those, he agreed that he would not target Simmons’ customers for business or persuade Simmons’ employees to follow him to a competing bank for a year after leaving Simmons. He left Simmons in February 2018.

Meanwhile, Capital Bank of Little Rock was going through some tough times, having churned through three CEOs since the beginning of 2018.

Boyd Rothwell and Warren Stephenson, Capital Bank’s shareholders, talked to Roberts about joining the bank to do some strategic work, Roberts told Arkansas Business in April 2019.

Those talks evolved into the reshaping of Capital Bank.

Roberts began working for Capital Bank in February 2019, according to his Linkedin profile. He told Arkansas Business in April 2019 that he then started assembling an executive team as he led an effort to rebrand and relaunch the bank with a $50 million stock offering and a new name. Roberts said his plan was to use the new investment to transform Capital Bank into a large community bank.

But during a December hearing on the temporary restraining order, Steve Wade, assistant general counsel, testified that it would have been “virtually impossible for Roberts to take over Encore and prepare the private placement offering without starting before his noncompete expired,” according to Simmons’ Jan. 8 filing.

Lunch Meeting

Simmons said that Roberts asked Hicks for a lunch meeting on Feb. 4, 2019. Simmons had hired Hicks in 2014, and his positions included senior vice president of mortgage, chief of staff and vice president of mergers and acquisitions. Hicks also received Simmons’ units and shares in exchange for agreeing to the same noncompete provisions as Roberts, Simmons said.

After the meeting, Hicks asked for, and received, permission to download personal files from his Simmons computer to a USB flash drive — called a “thumb drive” in the court documents — so he could transfer the information to his personal computer, Simmons said. But Simmons accused Hicks of downloading Simmons’ confidential and proprietary information to the thumb drive.

Hicks doesn’t have the thumb drive anymore, Simmons said in the January filing. “The alleged loss of the thumb drive gives rise to an inference that the data on the thumb drive would be unfavorable to his defense,” Simmons said.

On March 8, 2019, Hicks left Simmons and went to work for Encore. Roberts hired Hicks knowing “full well” of the restrictions in Hicks’ contract, Simmons alleged. Simmons also said it had reminded Roberts of Hicks’ restrictions to make sure they weren’t violated.

Simmons said that Hicks then courted other Simmons’ employees to join him at Encore, “with Roberts’ knowledge and encouragement.” Simmons said Hicks persuaded the employees to leave during his non-solicitation period.

Growing Encore

Within a few months becoming CEO of Encore Bank, Roberts and his team raised about $55 million, strengthening the bank’s financials and allowing it to grow. Assets jumped from $158 million on Sept. 30, 2018, when it was Capital Bank, to $247 million a year later. By Sept. 30, 2020, Encore’s total assets had soared to $584 million, still a fraction of Simmons’ $21 billion in assets.

Encore had one location in Little Rock when Roberts started. Now it also has branches in Rogers, Fayetteville and Jonesboro, and has expanded outside of the state to locations in Dallas and Fort Worth, Texas, and Springfield, Missouri.

“I describe [Encore] as a sleepy little bank,” Roberts told Arkansas Business in January 2020. “We are certainly a private boutique bank, and we are going to be branch-light. Our plan all along was to grow into a large community bank.”

Hicks, Roberts and Jett are the architects of Encore’s business model to poach employees and business groups to grow Encore, Simmons said.

By targeting specific Simmons employees, it allowed Encore to obtain Simmons’ policies, forms and customer information, which saved Encore the expense of developing their own, Simmons said.

At the preliminary injunction hearing in December, Simmons said that some of its former employees “took Simmons policies and forms that Encore was then able to use to set up its [Small Business Administration] lending and equipment finance departments,” according to the January filing.

Simmons said it recovered in mid-December hundreds of pages of its customer information and confidential and proprietary information taken by three of its former employees in electronic format and contained in six bankers boxes. How the material was recovered wasn’t explained.

Attorney Pat James told Arkansas Business in November that Encore Bank “strenuously” denies Simmons’ allegations in its complaint.

“While Encore Bank does not have the size and resources of Simmons Bank, it will nevertheless vigorously defend its reputation and business practices,” James said. “Encore Bank is confident that when all facts are revealed this lawsuit will be seen for what it is: an effort by Simmons Bank to suppress fair and open competition in the state of Arkansas.”