Rosenberg v. Metlife, Inc.

• Decision Date: 29 March 2007
• Docket Number: No. 23.,23.
• Citation: Rosenberg v. Metlife, Inc., 8 N.Y.3d 359, 866 N.E.2d 439, 834 NYS2d 494 (N.Y. 2007)
• Parties: Chaskie J. ROSENBERG, Appellant, v. METLIFE, INC., et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

866 N.E.2d 439

8 N.Y.3d 359

Chaskie J. ROSENBERG, Appellant, v. METLIFE, INC., et al., Respondents.

No. 23.

Court of Appeals of New York.

March 29, 2007.

Heller, Horowitz & Feit, P.C., New York City (Maurice W. Heller, Jacob W. Heller, Allen M. Eisenberg and Evan R. Shusterman of counsel), for appellant.

Proskauer Rose LLP, Newark, New Jersey (Steven E. Obus, Steven Yarusinsky and Steven H. Holinstat of counsel), for respondents.

Schlam Stone & Dolan LLP, New York City (David J. Katz of counsel), for Matthew N. Murray, amicus curiae.

Zamansky & Associates, LLC, New York City (Jacob H. Zamansky and Edward H. Glenn, Jr., of counsel), for National Employment Lawyers Association/New York, amicus curiae.

Orrick, Herrington & Sutcliffe LLP, New York City (Michael Delikat and Robert S. Whitman of counsel), for the Securities Industry and Financial Markets Association, amicus curiae.

Liddle & Robinson, L.L.P., New York City (Jeffrey L. Liddle and Ethan A. Brecher of counsel), amicus curiae.

OPINION OF THE COURT

GRAFFEO, J.

The United States Court of Appeals for the Second Circuit has asked us whether statements made by an employer on a National Association of Securities Dealers (NASD) employee termination notice (Form U-5) are subject to an absolute or qualified privilege in a defamation lawsuit. For the reasons that follow, we conclude that such statements are protected by an absolute privilege.

In 1997, defendant MetLife, Inc. hired plaintiff Chaskie Rosenberg to work as a financial service representative in MetLife's All-Boro agency in Brooklyn. The All-Boro office primarily serviced the local Hasidic Jewish community and a majority of the agency's employees, including plaintiff, were Hasidic Jews. MetLife audited the All-Boro agency in 1999 because of the agency's acceptance of third-party checks for the payment of premiums for life insurance policies. According to MetLife, third-party payments can be indicative of speculative insurance practices¹ and possible money-laundering activities. After a subsequent audit in 2000, MetLife closed the All-Boro agency, concluding that such practices were continuing at the agency.² Plaintiff and other All-Boro agency representatives were transferred to another office. In April 2003, MetLife terminated plaintiff's employment following another audit.

Upon termination of a registered representative, the NASD requires member firms to complete and file with the NASD a Uniform Termination Notice for Securities Industry Registration (Form U-5) within 30 days of dismissal and to provide a copy of the form to the employee (see NASD By-Laws, art. V, § 3[a]). The employer must explain the reasons for termination on the Form U-5. In addition, the form contains a number of disclosure questions that address whether the employee had been subject to criminal charges, customer complaints or an internal review for violating investment-related rules. If any of these inquiries is answered in the affirmative, a corresponding disclosure reporting page directs the employer to explain the nature of these allegations.³

Consistent with these requirements, MetLife prepared a Form U-5 after plaintiff's dismissal and filed it with the NASD in May 2003. The form stated the following reason for plaintiff's termination: "AN INTERNAL REVIEW DISCLOSED MR[.] ROSENBERG APPEARED TO HAVE VIOLATED COMPANY POLICIES AND PROCEDURES INVOLVING SPECULATIVE INSURANCE SALES AND POSSIBLE ACCESSORY TO MONEY LAUNDERING VIOLATIONS." MetLife also indicated that plaintiff had been under an internal review for violating investor-related rules in response to the relevant disclosure question. On the disclosure reporting page, MetLife restated this reason for termination.⁴

Plaintiff commenced this action in federal court seeking damages for employment discrimination, fraudulent misrepresentation, breach of contract and libel against defendants MetLife, Inc., Metropolitan Life Insurance Company and MetLife Securities, Inc. (collectively, MetLife). Plaintiff alleged that MetLife terminated his employment because he is a Hasidic Jew. With respect to his libel claim, plaintiff asserted that MetLife's statements on the Form U-5 were defamatory and made with malicious intent. After discovery, MetLife moved for summary judgment dismissing the complaint in its entirety.

The United States District Court for the Southern District of New York denied MetLife's motion as to plaintiff's discrimination claims and a breach of contract cause of action, but granted the motion dismissing plaintiff's fraudulent misrepresentation and libel claims. The court held that, under New York law, MetLife's statements on the Form U-5 were absolutely privileged. Following a trial on the remaining issues, the court dismissed plaintiff's contract claim and the jury found MetLife not liable on the discrimination claims.

On appeal, plaintiff contended that the District Court erroneously dismissed his libel claim on the basis that Form U-5 statements are absolutely privileged under New York law. The Second Circuit concluded that plaintiff presented an unsettled issue of New York law and certified a question to this Court: "Are statements made by an employer on an NASD employee termination notice (`Form U-5') subject to an absolute or a qualified privilege in a suit for defamation?" (453 F.3d 122, 128 [2006].)

Plaintiff argues that a qualified, but not absolute, privilege attaches to statements made on a Form U-5. He submits that the filing of a Form U-5 is too remote from the NASD's quasi-judicial functions to warrant the application of an absolute privilege and asserts that one of the purposes of the form is to provide member firms with background information about a prospective employee. MetLife counters that an absolute privilege should apply because the filing of a Form U-5 with the NASD is a preliminary step in a quasi-judicial process and because such a privilege best serves the public interest in encouraging full and truthful disclosure.

It is well settled that "[p]ublic policy mandates that certain communications, although defamatory, cannot serve as the basis for the imposition of liability in a defamation action" (Toker v. Pollak, 44 N.Y.2d 211, 218, 405 N.Y.S.2d 1, 376 N.E.2d 163 [1978]). "When compelling public policy requires that the speaker be immune from suit, the law affords an absolute privilege, while statements fostering a lesser public interest are only [qualifiedly] privileged" (Liberman v. Gelstein, 80 N.Y.2d 429, 437, 590 N.Y.S.2d 857, 605 N.E.2d 344 [1992]).

Communications that are protected by a qualified privilege are not actionable unless a plaintiff can demonstrate that the declarant made the statement with malice. Malice in this context has been interpreted to mean spite or a knowing or reckless disregard of a statement's falsity (see id. at 437-438, 590 N.Y.S.2d 857, 605 N.E.2d 344). Generally, a statement is subject to a qualified privilege when "it is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned" (Toker, 44 N.Y.2d at 219, 405 N.Y.S.2d 1, 376 N.E.2d 163 [internal quotation marks and citation omitted]).

In contrast, an absolute privilege immunizes a communicant from liability in a defamation action. The absolute privilege generally is reserved for communications made by individuals participating in a public function, such as executive, legislative, judicial or quasi-judicial proceedings. This protection is designed to ensure that such persons' "own personal interests — especially fear of a civil action, whether successful or otherwise — do not have an adverse impact upon the discharge of their public function" (id.; see also Park Knoll Assoc. v. Schmidt, 59 N.Y.2d 205, 209, 464 N.Y.S.2d 424, 451 N.E.2d 182 [1983] [participants are granted immunity "for the benefit of the public, to promote the administration of justice, and only incidentally for the protection of the participants"]).

Although statements made during the course of a judicial or quasi-judicial proceeding are clearly protected by an absolute privilege "as long as such statements are material and pertinent to the questions involved," we have indicated that the absolute privilege can extend to preliminary or investigative stages of the process, particularly where compelling public interests are at stake (Wiener v. Weintraub, 22 N.Y.2d 330, 331, 292 N.Y.S.2d 667, 239 N.E.2d 540 [1968] [internal quotation marks and citations omitted]; see also Julien J. Studley, Inc. v. Lefrak, 50 A.D.2d 162, 165, 376 N.Y.S.2d 200 [2d Dept.1975], affd. insofar as appealed 41 N.Y.2d 881, 393 N.Y.S.2d 980, 362 N.E.2d 611 [1977]). In Wiener, we held that a complaint letter accusing an attorney of misconduct that had been sent to the grievance committee of a bar association was absolutely privileged. We observed that the grievance committee functions as a quasi-judicial body through its investigation of complaints and administration of disciplinary proceedings. We also emphasized the strong policy reasons warranting the extension of an absolute privilege to such complaints:

"Assuredly, it is in the public interest to encourage those who have knowledge of dishonest or unethical conduct on the part of lawyers to impart that knowledge to a Grievance Committee or some other designated body for investigation. 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. We may assume that on occasion false and malicious complaints will be made. But, whatever the hardship on a particular attorney, the necessity of maintaining the high standards of our bar — indeed, the proper administration of justice — requires that there be a forum in which clients or other persons, unlearned in the law, may state their complaints, have them examined and, if...