Non-Service and Non-Acceptance Provisions: Selected State Law Survey for Financial Advisors Considering Transitions

This is a guest post by our friend and colleague, Andrew Shedlock, a Partner at Kutak Rock.

In the financial advisor transition space, one of the most intimidating contractual provisions that advisors face when considering a move is the dreaded “non-service” or “non-acceptance,” provision, whereby the firm which currently employs the advisor purports or tries to limit and bar the departing advisor from accepting or servicing clients that the advisor serviced at his or her former firm.

Common contractual clauses (often found in non-solicitation provisions) might prohibit an advisor for two years (or less) from “accepting” business from former clients, or “servicing” former clients or “working with” former clients. We won’t find these types of clauses, generally, with FINRA-registered firms, because of FINRA rules permitting customer/client choice of firms and brokers. 

Certain (unnamed!) firms and Registered Investment Advisor (“RIAs”) (both large and well-known and small) include these “non-service” provisions in almost all of their financial advisor agreements, and other RIAs have started using them as well. Non-solicitation clauses are well-worn and used, but these non-service provisions present potentially stark challenges for advisors since, in many people’s view (including my own) they seek to restrict and prevent advisors from working with clients that want to work with the advisor, even where there is no evidence of solicitation. Unfortunately, many courts (depending on state law) do not blanketly prohibit these provisions, which means that advisors in transition need to prepare to invalidate these clauses when considering a departure, because some courts can and will enforce them against departing advisors. 

These “non-service” and “non-acceptance” provisions are the third part of a trio of restrictions that firms seek to place on departing advisors: first, through non-competes (which are becoming less and less used in the RIA space); second, through non-solicits (which remain and will remain in popular use); and third, through these nefarious “non-acceptance” and “non-service” provisions (which are, unfortunately, becoming more and more popular.)

Below I briefly highlight five cases that analyzed the non-service issue (not all of which are in the financial advisor space): three cases that invalidated “non-service/non-acceptance” provisions and two cases that upheld their applicability. The main point is this: each state treats these clauses differently (and sometimes enforceability is fact specific, based on, for example, if there was solicitation or if it was truly passive acceptance of business.) There is no blanket public policy rule to win the day, so when analyzing a non-service provision, make sure to include plenty of lead time to understand your specific states’ law, as that will influence the riskiness of your transition.

Selected Cases Upholding “Non-Service” and “Non-Acceptance” Provisions

(a) Aitkin v. USI Ins. Servs., LLC, 607 F. Supp. 3d 1126 (D. Or. 2022) (Oregon law)

In the case of Aitkin v. USI Ins. Servs., LLC, 607 F. Supp. 3d 1126 (D. Or. 2022), applying Oregon law, the Court upheld the enforceability of a non-acceptance of business clause that stated as follows:

Non-Acceptance / Non-Service of Clients and Active Prospective Clients. In consideration of Producer's employment hereunder, and for other good and valuable consideration, Producer agrees that: (a) During the Term and for two (2) years after Producer is no longer employed hereunder, for any reason, Producer shall not, directly or indirectly, on behalf of any Competitive Business in any capacity: (i) sell, provide, or accept any request to provide services in competition with the Company to any Client Account; or (ii) sign or accept a broker of record letter to provide services in competition with the Company to any Client Account; in each case with respect to any Client Account that Producer managed or regularly serviced and/or about which Producer obtained Confidential Information on behalf of the Company or any Predecessor within the last two (2) years of Producer's employment hereunder.

The Aitkin opinion is interesting because the employee seeking to invalidate the “non-acceptance” clause cited to a Massachusetts state court opinion, Getman v. USI Holdings Corp., No. 05-3286BLS2, 2005 WL 2183159 (Mass. Super. Ct. Sept. 1, 2005) as support for invalidating the nonacceptance clause, because “the court in Getman noted that the non-solicitation clause should not ‘bar [the employee] from accepting insurance business from his former [employer's] clients if, without his solicitation of their business, they wish him to continue ... to service their insurance needs.’ Aitkin, 607 F.Supp.3d at 1142. The employer’s argument in Aitkin appear to focus solely on the allegations that the non-acceptance provision was unenforceable because the relationships that followed the employee to a new position were generated by the employee’s goodwill (rather than the employer’s goodwill.)

The Aitkin court soundly rejected the employee’s reasoning that the employee’s goodwill could invalidate the provision, writing that, “[t]hus, Plaintiff's argument that Defendants [employer] have no protectable interest in the personal goodwill he developed with his clients fails under Oregon law. Defendants have a sufficient protectable interest in their established business relationship with Plaintiff's former clients that justifies prohibiting Plaintiff from accepting or servicing the business of those clients.” The Aitkin court held that Oregon law mandated that the goodwill established by the employee primarily belongs to the employer and not the employee. Because of this lack of goodwill interest attributable to the employee, the court found the non-acceptance restrictions reasonable.

(b) Choreo, LLC v. Lors, et al, 777 F. Supp. 3d 947 (S.D. Iowa 2025) (Minnesota law)

In the ongoing Choreo case, a team of advisors departed a firm, and the departing firm sought to enforce non-service and non-acceptance provisions against the departing team.

The Choreo court rejected the advisors’ attempts to invalidate non-service provisions on public policy and regulatory grounds:

Defendants argue the non-service provisions in the Individual Defendants’ employee agreements are void in violation of public policy. This challenge must be rejected for two primary reasons. First, they have failed to identify any compelling Minnesota precedent supporting their position that non-service provisions violate public policy. Second, their attempt to cobble together a public policy argument from regulatory sources fails to overcome the clear contractual language. These deficiencies are fatal to their defense.

Choreo, 777 F. Supp. 3d at 963. Notably for advisors considering similar public policy-based arguments, the Choreo court held that the advisors failed to identify any Minnesota case law that supported their position that non-service provisions violate public policy. When the advisors made arguments that “SEC regulations and policy” are in favor of allowing clients to freely choose their financial advisors, the Court noted that the market is essentially flooded with financial advisors that can offer the same or similar services to these same clients. Id. Finally, the Choreo court held that: “[a]lthough client choice merits consideration in appropriate contexts, such general policy concerns cannot override specific contractual commitments absent clear direction from the Minnesota legislature or judiciary. The mere suggestion that clients might prefer unrestricted access to particular advisors—without empirical support or recognition of countervailing interests in contractual stability—provides no basis for judicial invalidation of the provisions at issue.”

For advisors considering transitions under Minnesota law, the point is clear: in order to invalidate a non-service provision under Minnesota law, the advisor and counsel should be able to point to Minnesota decisions (and those applying Minnesota law) that find such non-service and nonacceptance provisions invalid or unenforceable. Arguments regarding public policy and client choice may not win the day in a state that lacks decisions finding these types of provisions unenforceable.

Bonus Minnesota law analysis: not all is settled under Minnesota law on this issue, however. In a motion to dismiss opinion issued a few months before Choreo, U.S. District Court for the District of Minnesota Chief Judge Schiltz considered arguments by departing financial advisors that their non-solicitation agreements prohibit them from “accepting [firm] clients who approach [the advisor] on their own initiative- that is, without prompting from [the advisor]-thereby depriving [firm] clients of the right to work with the financial advisor of their choice.” Ballast Advisors, LLC. V. Peterson, No. 23-CV-3769 (PJS/TNL), 2024 WL 5075600, at *3 (D. Minn. Dec. 11, 2024). In a footnote that is a ringing endorsement of client choice in the financial advisor space, the Ballast court wrote:

The Court views this [non-service provisions] as a major concern. In finance, as in medicine and law, clients develop longstanding relationships with trusted experts to whom they disclose their most sensitive information and on whom they depend to advise them with respect to their most important decisions. Thus, at least in this Court's opinion, a strong argument can be made that contractual restrictions that interfere with a client's ability to continue to seek financial, medical, or legal advice from her longtime financial advisor, doctor, or lawyer should be invalid as against public policy. Such restrictions not only interfere with “the right of a party [i.e., the financial advisor, doctor, or lawyer] to work and earn a livelihood,” but also with the right of the party's clients or patients to choose to remain in a relationship with that party. See Freeman, 334 N.W.2d at 630–31. It is one thing to say that a financial advisor cannot solicit or initiate contact with a former client; it is quite another to say that the financial advisor's former employer can effectively bar the client from continuing her relationship with her financial advisor, even if the financial advisor has not solicited or even initiated contact with that client.

Ballast Advisors, LLC, 2024 WL 5075600, at *3 (D. Minn. Dec. 11, 2024) (emphasis added.)

Selected Cases Invalidating “Non-Service” and “Non-Acceptance” Provisions

(a) USI Ins. Servs. LLC v. Alliant Ins. Servs. Inc., No. CV-23-00192-PHX-SMB, 2025 WL 1179412 (D. Ariz. Apr. 23, 2025) (Arizona law)

Another USI insurance case, this time a recent case out of Arizona, turned out differently on the enforceability of non-service clauses than Aitkin. In USI Ins. Servs. LLC v. Alliant Ins. Servs. Inc., Alliant and the departing employees argued that the non-service provisions were “unreasonable, and thus unenforceable, because it prohibits the Individual Defendants from accepting or servicing any client after joining Alliant, even if they never solicited the client.” Id. at *12. Alliant and the departing advisors further argued that “an interest in protecting customer relationships under the [non-service] provision does not justify the restraint on the free-market and a client’s ability to choose a provider.” Id.

The Alliant court found that restrictions on acceptance or service of unsolicited business operated as an “unfettered restraint on the public by effectively denying a client the ability to choose the desired provider for two years.” Id. at *13. The court also noted that, “[a] client may choose to pursue the Individual Defendants at Alliant for any number of reasons, even if USI has demonstrated it can effectively service the account, but the provision impedes exercising that choice. Therefore, the Court finds the provision unreasonably harms the public, and thus unenforceable.” Id.

Advisors take note: this same case may have turned out differently under Minnesota law, but in Alliant, the Arizona court seemed to take hold of the public policy and restraint of trade arguments that the Choreo court seemed to reject. It is also worth noting how quickly the law develops in this area: from positive developments hinting at invalidation of non-service clauses in Ballast, to Choreo’s rejection of those same arguments, to the Alliant court’s acceptance of arguments that these types of non-service clauses restrain free trade within the span of six months.

(b) Diodato v. Wells Fargo Ins. Servs., USA, Inc., 44 F. Supp. 3d 541 (M.D. Pa. 2014) (Pennsylvania law)

The seminal case of Diodato is critical for advisors to understand (despite this being an insurance case). The non-service and non-acceptance clause in that case stated as follows:

The non-solicitation clause contained in Wells Fargo's TSA goes well beyond prohibiting the active solicitation of clients and prohibits the passive acceptance of unsolicited former clients who contact Diodato unilaterally. Pursuant to its terms, Diodato may not “directly or indirectly ... [a]ccept insurance business from or provide Competitive Products/Services to customers of [Wells Fargo] ... with whom [he] had Material Contact, and/or ... were clients or customers of [Wells Fargo] within six (6) months prior to [his] termination of employment.” By its disjunctive terms, the TSA prohibits Diodato from accepting the business of both clients of Wells Fargo with whom he had material contact and any customer that was a customer of any Wells Fargo affiliate or entity within six months preceding his termination, regardless of whether Diodato had contact with that client.

Diodato, 44 F. Supp. 3d 541, 569–70 (M.D. Pa. 2014). Like the Alliant court, the Diodato court found that the non-service provision “unreasonably restrains” the employees’ ability to earn a living following his termination but “more broadly restrains free trade.” Id. at 569-570. The court found that this non-service provision purports to “restrict the liberty of third parties who, of their own volition, unilaterally seek [employee’s] services.” The court held that, “[h]owever, Wells Fargo has not shown an interest so compelling as to warrant a blanket prohibition on Diodato's acceptance of unsolicited business from former customers, restricting both his ability to earn a living and the free will of the businesses that he formerly serviced.” Id. (emphasis in original.)

Because the court found that the contract’s post-employment prohibition on accepting the unsolicited business of former clients is “broader than necessary,” the court struck the nonacceptance provision from its contract. For advisors considering a transition under Pennsylvania law, this is a clarion decision (though always check recent developments in the case law to confirm!)

(c) Aon PLC v. Alliant Ins. Servs., Inc., No. 23-CV-03044, 2023 WL 3914886 (N.D. Ill. June 9, 2023) (Illinois law)

In Aon, an Illinois court considered non-service and non-acceptance provisions related to insurance policy brokering. Unlike in Aitkin and Choreo, which refused to consider public policy arguments made by departing employees to attempt to invalidate non-service provisions, the Aon court held that, “[n]on-servicing and non-acceptance restrictions that purport to bar employees from responding to unsolicited inquiries from customers pose unwarranted hardships on both the former employee and customers and are therefore contrary to Illinois public policy.” Aon PLC v. Alliant Ins. Servs., Inc., 2023 WL 3914886, at *10 (N.D. Ill. June 9, 2023).

In invalidating these provisions, the court cited to cases that refused to enforce restrictive covenants to “bar a former employee from responding to unsolicited requests for bids” and cases holding that employers cannot “prohibit the former employee from developing prospective business opportunity that their way through no fault of theirs.” Id. at *9 (citations omitted.) In addition to theme of non-service provisions being undue restraints on trade, courts are much more likely to invalidate non-service/non-acceptance provisions when there is no evidence that the departing employee solicited customers, but rather, the customers voluntarily reached out to the employee (at the customer’s behest) and sought to continue the professional relationship. Thus, while case law matters, the advisor’s actions during a transition matter greatly.

Conclusion

It is critical for advisors and their counsel to understand before a transition (not once the advisor has left!) what controlling state law holds about non-service and non-acceptance provisions. These provisions are not, unfortunately, void as a matter of public policy across every state. Instead, advisors and their counsel need to carefully consider state law (up to and including recent opinions issued the past few months) to prepare a transition roadmap that properly accounts for likely legal risks and challenges from former firms.