MCBANCSHARES says it won battle over recruiting First Horizon employees

MC Bancshares Inc. announced Monday that a federal court has refused to block MCBANK from recruiting employees of First Horizon Corp.
U.S. District Court Judge Brian Jackson denied First Horizon Corp.’s request for a preliminary injunction in a ruling issued on May 29. The injunction sought to prevent MCBANK Louisiana and Texas Regional President Karl Hoefer and DMMS Holdings LLC from recruiting First Horizon employees.
Based in New Orleans, Hoefer had been employed by First Horizon as executive vice president and Louisiana and Texas regional president from July 2020 until his resignation in January. While employed there, Hoefer received awards of restrictive stock, “Grant Notices,” as did other executives, MC Bancshares said.
In February, First Horizon filed suit against Hoefer and DMMS Holdings LLC in the U.S. District Court for the Middle District of Louisiana, located in Baton Rouge. First Horizon’s complaint alleged that Hoefer’s stock agreement prohibited him from soliciting or encouraging First Horizon’s employees to leave that company for employment elsewhere.
The lawsuit said Hoefer violated that alleged contractual prohibition, conspiring with DMMS, and that as a result the court should issue a preliminary injunction to stop them from continuing to do so. The lawsuit also sought millions of dollars in money damages under other legal theories, such as an alleged bad faith breach of contract, and an alleged breach of the Louisiana Unfair Trade Practices Act for which First Horizon demanded treble damages.
Jackson rejected First Horizon’s claim that Hoefer was prohibited from soliciting First Horizon employees. Instead, the agreement simply provides that Hoefer was free to solicit First Horizon employees, and that if he chose to do so, he would just have to return the equity that he had been given.
“On the record currently before the Court, the Court agrees with [Hoefer and DMMS’s] interpretation of the Grant Notices,” Jackson wrote. “In contrast to the cases cited by [First Horizon], the Grant Notices do not contain an express prohibition on employee solicitation. Nowhere in the Grant Notice does Defendant Hoefer unconditionally agree to refrain from recruiting First Horizon employees.
“Indeed, the Grant Notices contemplate that Hoefer might recruit from First Horizon: ‘[I]f during the restrictive period applicable to this award [Hoefer] [solicits]’ a First Horizon employee, then Hoefer must return the award.”
DMMS Holdings LLC was an operating company formed to raise capital to acquire MC Bancshares Inc., which is the holding company of MCBANK and Trust based in Morgan City. Ultimately, an affiliated company, DMMS Purchaser Inc., acquired MCBI and became the bank’s holding company.
Daryl Byrd, MCBI’s chairman and CEO, said that Hoefer and his team are “elated” by the court’s ruling and especially pleased that the judge rejected First Horizon’s attempt to impose on Hoefer and DMMS an overbroad interpretation of Hoefer’s stock award agreement. Byrd further expressed that MCBANK is committed to building a formidable banking franchise in the Southeastern United States within the bounds of the law, based on a special banking relationship among its associates and clients.
Despite the filing of this lawsuit by First Horizon, DMMS raised over $225 million in a short period from “friends and family” in a private placement stock offering, unprecedented for a bank deal of this kind. MCBI was acquired for $104 million by DMMS Purchaser. With the excess capital MCBANK already had, the “new company” is extremely well capitalized with over 30 percent in shareholders’ equity on its balance sheet, MC Bancshares said.
In addition to Byrd and Hoefer, MCBANK is led by President Mark Tipton, Chief Operating Officer and Chief Risk Officer Michael Brown, Chief Financial Officer Scott Price and Chief Human Resources Officer Mike Pelletier.
DMMS/MCBANK is represented by Kyle Schonekas and Joelle Evans of Schonekas, Evans, McGoey and McEachin. Hoefer is represented by Thomas Flanagan of Flanagan Partners.