Galarneau v. Merrill Lynch, No. 06-2410. The plaintiff was fairly sophisticated stock broker at Merrill that handled accounts of the moderately wealthy, and developed somewhat (though not extremely) sophisticated tax strategies for them. They vetted the strategies with Merrill’s in-house counsel who seemed to approve. Her strategies were initially successful, but a client complained and sued and settled. Merrill thought she was “churning,” (see, lawyers are not the only ones that do it) Merrill fired her and told the NASD that she had engaged in “inappropriate bond trading.”
There were a number of communications between counsel for the plaintiff and defendant that were excluded under FRE 403, but the First basically says that this wasn’t an abuse of discretion.
Merrill had conducted an internal and external investigation. It also notified the Maine Securities division and NASD via a form U-5.
The First notes that under Maine law, a statement in a U-5 is conditionally privileged under Maine law, and “While a conditional (or qualified) privilege does not change the actionable quality of words published, it rebuts the inference of malice that is imputed in the absence of the privilege...[and] A conditional privilege may be abused if the defamatory statement is made with reckless disregard as to its falsity.
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