A New York Law Journal news report said Acting Supreme Court Justice Judith J. Gische made the ruling in a case involving a former Barclays Capital employee who sued over statements made in a U-5 filing required to be submitted to regulators when a securities firm terminates an employee. Gische ruled that the arbitration panel did not follow the dictates of a 2007 state Court of Appeals ruling that the U-5 submissions are privileged and cannot be the subject of a defamation suit.
According to the Law Journal, the statements that were the subject of the suit stemmed from Elizabeth Bing Shen’s termination by Barclays on January 26, 2006, after issues arose with information provided to an investor.
The resulting Barclays U-5 form filed in February 2006, stated that Shen had been let go for “gross misconduct — non securities related.” She then filed a claim alleging that the “false language” in the U-5 amounted to libel and entitled her to $5 million in punitive damages.
The Law Journal said that following a three-day hearing, the arbitration panel awarded Shen $90,000 in compensatory damages for an unpaid bonus and $95,000 in punitive damages. It also recommended that the explanation for her termination be expunged from the U-5 form and replaced with the explanation that her termination was “due to a regrettable act of misjudgment — non-securities related.”
Gische held that the 2007 case, “which unequivocally rules out monetary damages, of any kind, for a claimed defamation in a required U-5 filing,” is “explicitly and directly applicable” to Shen’s case.
“[T]his is one of those rare cases where the panel, aware of the applicable law and attendant policy considerations, chose to ignore it,” Gische concluded in vacating the $95,000 punitive damages award.
The panel’s $90,000 compensatory damages award and expungement recommendation, neither of which Barclays challenged, were confirmed.
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