Rosenberg v. MetLife, Inc.
8 N.Y.3d 359, 866 N.E.2d 439, 834 N.Y.S.2d 494, 2007 N.Y. Slip Op. 02627
New York Court of Appeals · March 29, 2007
What the court decided
A securities firm fired a registered representative and explained the termination on the Form U-5 it had to file with the NASD (now FINRA). He sued for defamation. Answering a question from the Second Circuit, the Court of Appeals held that statements an employer makes on a Form U-5 are protected by an absolute privilege in a defamation suit, because the form is mandatory and is the first step in the regulator's quasi-judicial process. The court noted that a representative is not without a remedy: he may bring an arbitration or court proceeding to expunge defamatory language.
Who won
The employer won. The Court of Appeals answered the certified question: statements on the termination notice are subject to an absolute privilege (4-2).
Why it matters for financial advisors
In New York you cannot recover defamation damages over what a firm wrote on your U5, even if it was false. The practical remedies are negotiating the wording before you leave and seeking expungement through FINRA arbitration. Other states treat U5 statements differently.
Key passage: 8 N.Y.3d 359 at 365-68.
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