Rosenberg v. MetLife, Inc., 8 N.Y.3d 359 (2007)
Statements made by an employer on a National Association of Securities Dealers (NASD) employee termination notice (Form U-5) are subject to an absolute privilege in a defamation lawsuit, promoting full and truthful disclosure to protect the investing public.
Summary
Chaskie Rosenberg sued MetLife for libel based on statements made in his Form U-5, a termination notice filed with the NASD. MetLife stated Rosenberg appeared to have violated company policies involving speculative insurance sales and possible money laundering. The New York Court of Appeals held that statements on Form U-5 are protected by an absolute privilege. This privilege encourages employers to provide candid assessments, crucial for the NASD’s regulatory function and investor protection, outweighing the risk of potential defamation claims.
Facts
MetLife hired Rosenberg as a financial service representative in 1997. After audits revealed improper acceptance of third-party checks, indicative of speculative insurance practices and money laundering, MetLife closed Rosenberg’s office in 2000. In April 2003, MetLife terminated Rosenberg’s employment following another audit. Upon termination, MetLife filed a Form U-5 with the NASD, stating Rosenberg appeared to have violated company policies and procedures involving speculative insurance sales and possible accessory to money laundering violations.
Procedural History
Rosenberg sued MetLife in federal court, alleging employment discrimination, fraudulent misrepresentation, breach of contract, and libel. The District Court dismissed the libel claim, holding the Form U-5 statements were absolutely privileged under New York law. After a trial, the remaining claims were dismissed. On appeal, the Second Circuit certified the question of whether statements on a Form U-5 are subject to an absolute or qualified privilege to the New York Court of Appeals.
Issue(s)
Whether statements made by an employer on an NASD employee termination notice (Form U-5) are subject to an absolute or a qualified privilege in a suit for defamation?
Holding
Yes, statements made by an employer on an NASD employee termination notice are subject to an absolute privilege in a suit for defamation because the Form U-5 is a critical component of the NASD’s self-regulatory process, promoting accurate disclosure and aiding in the protection of the investing public.
Court’s Reasoning
The Court reasoned that public policy mandates certain communications, though defamatory, should not serve as the basis for liability. An absolute privilege is reserved for communications in public functions, like quasi-judicial proceedings, ensuring individuals’ personal interests do not adversely impact their public function. The NASD, as a self-regulatory organization (SRO) overseen by the SEC, acts as a quasi-governmental entity with the authority to enforce securities laws. The Form U-5 plays a significant role in the NASD’s process, alerting the NASD to potential misconduct. Accurate and forthright responses are critical to the NASD’s ability to investigate, sanction, and deter misconduct, ultimately benefiting the investing public. The court analogized this to the absolute privilege afforded to complaints involving attorneys, stating, “Assuredly, it is in the public interest to encourage those who have knowledge of dishonest or unethical conduct…to impart that knowledge to a Grievance Committee…If a complainant were to be subject to a libel action by the accused attorney, the effect in many instances might well be to deter the filing of legitimate charges.” The court noted that while Form U-5 information can be reviewed by prospective employers and indirectly become available to the public via BrokerCheck, registered employees maliciously defamed on a Form U-5 can still seek expungement of defamatory language through arbitration or court action.