First Horizon Bank Sues Former Chairman’s New Venture

First Horizon Bank, a regional financial institution that expanded into Louisiana six years ago via its acquisition of Iberia Bank, has taken legal action against a new company established by Darryl Byrd, the former chairman of Iberia Bank. This lawsuit marks the beginning of a fresh dispute in the southeastern Louisiana banking sector.

After transforming Iberia Bank into a significant regional player, Byrd facilitated its merger with First Horizon. Last year, he revealed plans to start a new firm alongside several former executives, aimed at purchasing MC Bank & Trust, based in Morgan City.

As his new company rapidly assembles its team, conflicts have emerged between him and his previous associates. First Horizon’s lawsuit, filed on February 20 in the U.S. District Court for the Middle District of Louisiana, claims that Byrd’s venture, DMMS Holding, and Carl Hoefer—another ex-First Horizon executive now affiliated with Byrd—are pursuing an “unfair competitive advantage” by improperly targeting the bank’s staff and clientele.

The complaint states that since the beginning of the year, 27 employees from First Horizon have joined Byrd’s group. To retain its existing employees, First Horizon has reportedly spent over $5 million on bonuses and raises.

Notably, this legal battle unfolds just two months after Byrd, aged 72, emerged from retirement, surprising local business circles with his announcement of DMMS’s formation to acquire MC Bank. Among those joining him are several former colleagues from Iberia Bank, including Mark Tipton, Michael Brown, and Scott Price.

“We categorically deny these unfounded claims and will vigorously defend this lawsuit. Our response will be available this week in federal court records. We’re committed to pursuing our agenda while protecting our interests,” Byrd stated on Wednesday.

According to the statement, “This lawsuit was filed amidst the company’s successful fundraising initiatives.” It showcases how Byrd, a well-known figure in the local banking field, has reentered the tightly interwoven banking community of south Louisiana, prompting reactions from competitors.

First Horizon significantly outweighs MC Bank; it’s the fifth-largest bank in the state, boasting nearly $8 billion in deposits and a market share of almost 6%, with approximately 360 branches, including 55 located in Louisiana. In contrast, MC Bank ranks as the 50th largest in the state, with only nine branches and less than $385 million in deposits, representing under 0.3% market share.

Peter Licchiuti, a professor at Tulane University’s AB Freeman School of Business, points out that Byrd’s history at Iberia Bank proves he can influence the market, albeit on a smaller scale this time. “There was speculation about him planning something significant when he made his announcement,” Licchiuti mentioned. “This certainly has the potential to introduce new competition.”

The lawsuit focuses on DMMS rather than Byrd personally, targeting Hoefer, who resigned from First Horizon in December after serving as regional president. He joined DMMS in January as a special consultant and is set to be named regional president for Louisiana and Texas upon the acquisition’s completion later this year.

The claims allege that First Horizon paid Hoefer over $1 million throughout his tenure, contingent on his promise not to recruit employees if he departed. The 24-page lawsuit details that either Byrd or Tipton would initially contact affected First Horizon employees, directing them to Hoefer for further discussions regarding job opportunities. Hoefer allegedly “negotiated” employment offers with DMMS, presenting “above-market salaries and bonuses.”

The complaint lists several First Horizon executives approached by Hoefer recently, including a vice president from the bank’s Houston office, who was reportedly offered a $750,000 signing bonus and $1 million in MC Bank stock.

Additionally, Hoefer targeted a private banking manager in Baton Rouge, proposing a salary increase of $30,000 plus a $40,000 signing bonus. Should he join MC Bank, an extra $150,000 bonus and $6,000 for country club membership fees were on the table. However, the bankers, along with others named in the lawsuit, declined the offers.

First Horizon’s legal representatives informed Hoefer in early February that he was violating his agreement with the bank. Hoefer’s attorney rejected the lawsuit’s claims in a letter referenced in the suit, stating, “Mr. Hoefer has never—whether directly or indirectly—encouraged any employee of FHC to leave their job with FHC.” The letter further asserted that he does not have the power to hire any contractors or employees for DMMS Holdings.

Hoefer has not responded to requests for comments. First Horizon’s lawsuit seeks a court order to prevent Hoefer and DMMS from bringing on more bank employees, alongside unspecified damages.

Marketplace Dynamics

Throughout his two-decade career at Iberia Bank, Byrd earned a reputation for making astute acquisitions and expanding quickly. After assuming leadership in 1999, he orchestrated the acquisition of about two dozen banks, helping to convert smaller financial institutions into multistate lenders. Iberia Bank entered New Orleans in 2011 through the acquisition of Omni Bank, culminating in its 2019 sale to First Horizon for approximately $3.9 billion.

Reflecting on the acquisition of MC Bank, Byrd admitted, “I made a mistake when I left.” His renewed involvement in banking coincides with challenging economic conditions, where low oil prices and a sluggish housing market have lessened loan demand, potentially leading to smaller banks considering selling under favorable terms.

Licchiuti observed that Byrd and his team may hold several advantages over First Horizon and the larger banks currently dominating the landscape, such as JPMorgan Chase and Capital One. “Bird possesses considerable experience in bank acquisitions and navigating the complexities of cultural integration,” he stated. Additionally, some First Horizon employees may find the idea of working for a local bank appealing, especially given that they are now part of a much larger institution based in Tennessee.

While Licchiuti had not reviewed the lawsuit and couldn’t comment on its specific claims, he noted that non-compete and non-solicitation disputes are frequent in the corporate world, and such cases rarely derail business plans.

“When you have a lawsuit, it typically proves effective,” he suggested. “It’s not akin to robbing a bank.”