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United States District Court, Southern District of New York

August 14, 2003


The opinion of the court was delivered by: Shira Scheindlin, District Judge

On September 27, 2002, Metropolitan Life Insurance Company ("MetLife") terminated Kenneth Jordan and subsequently filed a termination report with the National Association of Securities Dealers ("NASD"). The report, referred to as a Uniform Termination Notice for Securities Industry Registration ("Form U-5"), states that Jordan was terminated due to his unethical conduct.

Jordan brings this action against MetLife seeking damages for: (1) defamation; (2) violation of the New Jersey "Whistle Blower Statute"; (3) age discrimination; and (4) retaliation.*fn1 He now moves for a preliminary injunction ordering MetLife to amend the Form U-5 and enjoining MetLife from making [ Page 2]

defamatory statements to his clients. For the reasons stated below, Jordan's motion is denied.


A. Jordan's Employment History

In December 1982, Jordan began working for MetLife as a Financial Services Representative ("FSR") at the Jersey Shore Financial Group (Jersey Shore Group") located in Tinton Falls, New Jersey. Complaint ("Compl.") ¶ 5. An FSR is responsible for finding prospective clients, learning about their family situation, objectives and financial needs, and assisting them in planning their financial futures. In the course of the relationship, the FSR advises the clients on various types of life insurance, annuities, or mutual funds and sells them the most beneficial financial instruments. Id. ¶ 6.

During Jordan's twenty-year employment with MetLife, he developed a personal client base of over 1,000 clients. See Jordan's Memorandum in Support of Motion for Preliminary Injunction ("P1. Mem.") at 5-7. In addition, he was nationally honored by MetLife for fifteen years, both for his productivity and his continued compliance with MetLife's ethical standards. Compl. ¶ 12.

In the spring of 2002, Jordan contacted MetLife's Regional Vice President, David Mancini, and requested a transfer out of the Jersey Shore Group because its management was [ Page 3]

committing, encouraging and allowing unethical and possibly illegal practices.*fn2 Id. ¶¶ 19-21. The alleged practices included forging signatures on policies and writing new policies for existing clients, which inappropriately generated new and substantial commissions for MetLife management to the detriment of the clients.*fn3 Id.

On September 27, 2002, a few months after Jordan alerted senior management to the unethical practices of the Jersey Shore Group, he was terminated. Jordan's supervisors — Chris Riddle, Managing Director, and Frank Dunn, Agency Director — claim that during the summer of 2002, they received customer complaints about Jordan's sales. Jordan allegedly engaged in the prohibited practice of replacement and "financing."*fn4 See Def. Mem. at 4. [ Page 4]

B. The NASD Form U-5

In order to sell variable life insurance, annuities and mutual funds, a dealer must be registered with the NASD. When a company such as MetLife, which is regulated by the NASD, terminates an NASD registered employee (e.g., Jordan), the company must file a Form U-5 with the NASD. See Pl. Mem. at 8. On October 2, 2002, MetLife filed a Form U-5 for Jordan in New York City, which accused Jordan of "misrepresentation of client policy values and policy options." Id. The next day, the NASD began an inquiry into MetLife's allegations and requested Jordan's response to the allegations, and on March 14, 2003, the NASD closed the inquiry without taking any action against Jordan. See id. at 10.

As a result of the Form U-5, Jordan claims that he has been "effectively blackballed" from the industry. Id. at 13. Jordan attempted to obtain employment with John Hancock Life and was told that the Form U-5 "make[s] it impossible for John Hancock or any like quality carrier to offer [Jordan] employment until the Metropolitan U-5 is amended." 4/15/03 Letter from Richard Davis, Associate General Agent of John Hancock, to Jordan ("Hancock Ltr."), Ex. 9 to Compl. In addition, Jordan claims that MetLife representatives have called many of his clients and "intentionally made false statements to these clients impugning [his] ethics, honesty and business practices." PI. Mem. at 11. [ Page 5]

C. Procedural History

On June 4, 2003, Jordan filed this action. On the same day, Jordan also submitted the underlying dispute regarding the Form U-5 to arbitration, pursuant to the NASD Code of Arbitration Procedure. See Tr. at 8. Jordan seeks a preliminary injunction from this Court, pending the arbitration.*fn5

On June 10, Judge Victor Marrero of this Court issued an Order to Show Cause why an order should not be entered directing MetLife to amend the Form U-5 against Jordan and enjoining MetLife from making false, disparaging and defamatory statements and writings to Jordan's clients. On July 7 and 11, this Court held a preliminary injunction hearing, during which Jordan and MetLife called witnesses and presented documentary evidence.


Although the decision whether to grant a preliminary injunction lies squarely within the court's discretion, "a preliminary injunction is an extraordinary measure that should not be routinely granted." Tactica Int'l, Inc. v. Atlantic [ Page 6]

Horizon Int'l, Inc., 154 F. Supp.2d 586, 597 (S.D.N.Y. 2001) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)). In order to obtain a preliminary injunction, a plaintiff must ordinarily demonstrate: (1) the possibility of irreparable harm; and (2) either (a) a likelihood of success on the merits, or (b) a sufficiently serious question going to the merits combined with a balance of hardships tipping decidedly in favor of the moving party. See SmithKline Beecham Consumer Healthcare. L.P. v. Watson Pharms., Inc., 211 F.3d 21, 24 (2d Cir. 2000). "Irreparable harm is injury for which a monetary award cannot be adequate compensation." International Dairy Foods Ass'n v. Amestoy, 92 F.3d 67, 71 (2d Cir. 1996).

A heightened standard applies where the injunction which plaintiff seeks is mandatory in nature. See Tom Doherty Assocs., Inc. v. Saban Entm't. Inc., 60 F.3d 27, 34 (2d Cir. 1995). A mandatory injunction is one which would "alter the status quo by commanding some positive act." Id. A court should only issue a mandatory injunction if the party seeking the injunction shows "a clear or substantial likelihood of success on the merits." McKenna v. Wright, No. 01 Civ. 6571, 2002 WL 338375, at *4 (S.D.N.Y. Mar. 4, 2002) (citing Jolly v. Coughlin, 76 F.3d 468, 473-74 (2d Cir. 1996) and S.E.C. v. Unifund SAL, 910 F.2d 1028, 1040 (2d Cir. 1990)). [ Page 7]


A. Irreparable Harm

Jordan contends that the Form U-5 will cause him irreparable harm by damaging his business reputation, employment opportunities with comparable insurance companies, and client base. See Pl. Mem. at 12-13. There is no doubt that the negative Form U-5 will substantially damage Jordan's reputation in the insurance industry.*fn6 As a result, Jordan, who is now deemed an unethical agent, will have difficulties attracting prospective employers and clients and maintaining his client base.*fn7

The disputed Form U-5 effectively prevents Jordan from providing any of his clients with the NASD regulated financial instruments,*fn8 which comprised 85% of his business, because he is unlikely to find work with a registered dealer. Consequently, if Jordan's clients want to continue using him as their insurance [ Page 8]

agent or refer him to others, he will not be able to provide full service. He will inevitably lose clients to other agents who can provide full service. Indeed, if an extended period of time passes before the arbitration panel renders its decision, Jordan may lose the majority of the 1000 clients he has developed over two decades. It is unlikely that many of these clients will return to Jordan if and when he again obtains employment with a registered dealer thereby enabling him to sell NASD regulated financial instruments.

There is no adequate remedy at law for Jordan's damages if MetLife mistakenly filed a false Form U-5. The disputed Form U-5 is subject to qualified immunity and Jordan will receive compensation for his damages only if he can establish that MetLife acted with actual malice when making the statement. See Fahnestock & Co. v. Waltman, 935 F.2d 512, 516 (2d Cir. 1991); Acciardo, 83 F. Supp.2d at 419. Thus, even if Jordan prevails before the arbitration panel, he is unlikely to receive compensation from MetLife for the loss of his client base. In sum, Jordan will suffer irreparable harm,*fn9 especially if there is [ Page 9]

any delay in the arbitration proceeding.*fn10 See, e.g., Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 69 (2d Cir. 1999) (finding irreparable harm because "it would be very difficult to calculate monetary damages that would successfully redress the loss of a relationship with a client that would produce an indeterminate amount of business in years to come"); Towers Fin. Corp. v. Dun & Bradstreet, Inc., 903 F. Supp. 820, 822-23 (S.D.N.Y. 1992) (finding irreparable harm where "[plaintiff's] reputation among customers and potential customers will be severely damaged . . . [and the injury] is both imminent and `incapable of being fully remedied by monetary damages'") (quoting Reuters Ltd, v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990)).*fn11

B. Success on the Merits

Although Jordan has shown irreparable harm, he cannot compel MetLife to amend the disputed Form U-5 because he has not [ Page 10]

shown a clear or substantial likelihood of success on the merits. Jordan contends that he complied with MetLife's ethical standards and that he was terminated in retaliation for alerting management of the unethical conduct of other employees. However, there is substantial evidence supporting MetLife's claim that Jordan was terminated for his own unethical activity. Furthermore, the NASD's decision not to take action against Jordan has no bearing on his likelihood of success on the merits.

1. Jordan's History of Non-Compliance

Jordan has an extensive and documented history of non-compliance with MetLife's ethical standards. MetLife confronted Jordan about these issues throughout his employment. As early as 1996, MetLife was aware of Jordan having compliance issues. See 7/7/03 Transcript of Preliminary Injunction Hearing ("Tr.") at 90 (Testimony of Chris Riddle). In 1999, the compliance issues persisted, and Riddle met with Jordan on several more occasions. These meetings specifically addressed Jordan's conduct concerning "the movement of funds, complaints, misunderstandings and replacement issues." 1/13/99 Letter from Riddle to Vince Vitiello, Zone Vice President, Defendant's Exhibit ("Def. Ex.") A, at 1. MetLife implemented a corrective action plan with Jordan and he signed an agreement confirming that he would cooperate to resolve the compliance problems or face "serious consequences." Id. at 2. In 2000, Riddle met with Jordan again regarding compliance procedures. See July 2000 Letter from [ Page 11]

Riddle to Jordan, Def. Ex. B, at 2; Tr. at 96 (Riddle). In a letter written in July 2000, Riddle referred to the 1999 corrective action plan, and stated that "for [Jordan] to continue [his] career with MetLife an immediate and complete reversal is needed on compliance issues based on [his] past performance." Id. Jordan signed the letter, stating "I understand this is my final warning to rectify the above concerns and to follow all rules/regulations in the future." Id. at 2 (emphasis added).*fn12

In 2002, MetLife became aware of several questionable sales by Jordan. See Def. Mem. at 5; 7/10/02 Letter from Dunn and Riddle to Pamela Prohanic, Supervisor of Ethics and Compliance, Def. Ex. C. In particular, Jordan allegedly advised one client to replace an existing policy by purchasing a policy of a smaller value. See Def. Mem. at 7. Defendant argues that Jordan's advice was motivated by the substantial commissions he received as a result of the sales rather than by the client's financial needs. See id. at 8. Defendant contends that Jordan did not disclose various options to the client and misrepresented the transaction. See id. at 7-8. Although Jordan claims that [ Page 12]

proper disclosure was made and that his manager approved the transaction, see 8/2/00 Managers Report on Replacement, Plaintiff's Exhibit ("P1. Ex.") 30, Jordan has not shown that his version is substantially likely to prevail at trial.

2. The NASD's Inaction Contrary to Jordan's argument, the NASD's decision to close its investigation of his activities without any action against him does not indicate that the Form U-5 is false. See Pl. Mem. at 14-15. More importantly, the decision is not entitled to any weight in these proceedings. Indeed, the letter that the NASD sent to Jordan informing him of the close of the investigation states:

It is our view that determination by NASD not to take action against an NASD member or a member's associated person has no evidentiary weight in any mediation, arbitration or judicial proceeding. Further, we consider it inconsistent with just and equitable principle of trade for an NASD member or a member's associated person to attempt to introduce such a determination into evidence in any of these forums.
3/14/03 Letter from Robert J. McCarthy, NASD Staff Supervisor, to Jordan, Ex. 8 to Compl. (emphasis added). In sum, MetLife's stated reason for terminating Jordan is not clearly pretextual. MetLife has submitted evidence that Jordan has had compliance problems pending for years that could lead to his termination if not rectified. As a result, Jordan has not shown a clear likelihood of success on the merits. [ Page 13]

C. Expedited Arbitration Hearing

A preliminary injunction cannot be issued because Jordan does not satisfy the heightened standard for a mandatory injunction. In addition, this Court cannot order that an amended U-5 be filed, because there has been no determination of the merits of the dispute. However, if Jordan loses his clients pending a lengthy arbitration proceeding, which may easily last a year, his client base will be depleted and unrecoverable. An expedited arbitration proceeding is the only option that provides Jordan with any adequate and practical relief before he is substantially injured. Therefore, the NASD is directed to resolve this dispute within 120 days.*fn13


Jordan seeks to enjoin MetLife from making any defamatory statements to his clients. He contends that MetLife has called his clients and made false and disparaging statements about the reasons for his termination. However, "absent extraordinary circumstances, injunctions should not ordinarily issue in defamation cases." Metropolitan Opera Assoc., Inc. v. [ Page 14]

Local 100. H.E.R.E.I., 239 F.3d 172, 177 (2d Cir. 2001); see also Organization for a Better Austin v. Keefe, 402 U.S. 415, 418-19 (1971); New Era Publ'n Int'l v. Henry Holt and Co., 695 F. Supp. 1493, 1525 (S.D.N.Y. 1988), aff'd, 873 F.2d 576 (2d Cir. 1989) ("It is black letter law that injunctions are not available to suppress defamatory speech."). Enjoining such speech would be unconstitutional as a prior restraint on freedom of expression. "The special vice of a prior restraint is that the communication will be suppressed . . . before an adequate determination that it is unprotected by the First Amendment." Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376, 390 (1973). Prior restraints of future speech are particularly dangerous because of the difficulty courts face in designing an order that does not chill protected speech. See Latino Officers Ass'n, New York, Inc. v. City of New York, 196 F.3d 458, 465 (2d Cir. 1999).

It is impossible for the Court to tailor an injunction that would prevent defamatory remarks while preserving MetLife's interest in notifying Jordan's clients of his termination. MetLife should not be prevented from describing in general terms why Jordan was terminated. The speech concerns the alleged unethical conduct of an insurance agent who was entrusted with the financial planning of a large number of clients. Indeed, this speech is arguably within the sphere of legitimate public concern, which imbues the speech with a heavy presumption of constitutional protection. See Vasbinder v. Ambach, [ Page 15]

926 F.2d 1333, 1339 (2d Cir. 1991); Rockland v. Health and Hospitals Corp., 710 F.2d 41, 46 (2d Cir. 1983).*fn14 This case does not have any extraordinary circumstances that warrant deviation from the well-established rule against preliminarily enjoining alleged defamatory speech.*fn15

Although an injunction cannot be issued in this case, a serious concern remains that MetLife is in fact defaming Jordan to his clients. Elizabeth Laverty, one of Jordan's clients, testified that Dunn called her after Jordan's termination and insinuated that Jordan was a crook. See 7/16/03 Deposition of Elizabeth Laverty, Attachment to 7/21/03 Letter to the Court from Peter G. Eikenberry ("Eikenberry Ltr."), counsel for Jordan, at 35. Dunn allegedly told her that "[Jordan] was dishonest [and] not to trust him." Id. However, Dunn denies that he told Laverty or any other MetLife client that Jordan was dishonest. See 7/16/03 Deposition of Frank Dunn, Attachment to Eikenberry Ltr., at 5-6. Because of the risk that MetLife is lying to Jordan's clients and actively encouraging them to leave him and use a [ Page 16]

MetLife agent instead, any delay deciding the merits of this case will exacerbate Jordan's injuries.


For the foregoing reasons, Jordan's motion for a preliminary injunction is denied. The NASD is directed to hold an expedited arbitration concerning claims regarding the disputed Form U-5 and defamation.


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