UPDATE 2: Law Professor FINRA NAC Member Files Defamation Complaint

August 12, 2015

This article provides a second update to "Law Professor FINRA NAC Member Files Defamation Complaint" (BrokeAndBroker.com, June 29, 2015), which is reprinted below with a discussion of the Defendant's August 10, 2015, Motion to Dismiss 

On June 26, 2015, the Financial Industry Regulatory Authority ("FINRA") published this somewhat unusual and intriguing press release:


For Release: 
Friday, June 26, 2015
Washington - FINRA commends Georgetown Law Professor Chris Brummer and other National Adjudicatory Council (NAC) members for their ongoing contributions to FINRA's mission despite online attacks.

Prof. Brummer and several other NAC members and FINRA staff have been the target of a number of disparaging online attacks. The attacks followed a decision by a NAC appellate panel, which upheld a disciplinary action that barred two individuals from working in the securities industry. The SEC has denied a motion by the two individuals to stay their bar from associating with any FINRA firm while the case is on appeal, pending before the SEC.

Prof. Brummer has filed a lawsuit in state trial court in New York against the individual behind the defamatory website and the firms that own it. The lawsuit, filed in the Supreme Court of New York - No. 153583/2015, alleges "a retaliatory internet defamation campaign against FINRA, the FINRA panelists who issued the decision, and members of the advisory council that upheld it," including Brummer.

Plaintiff Blummer alleges three causes of action: Defamation Per Se, Defamation, and Intentional Infliction of Emotional Distress. Christopher Brummer, Plaintiff, v. Benjamin Wey, FNI Media LLC, and NYG Capital LLC d/b/a New York Global Group, Defendants ( Supreme Court of the State of New York, New York County, File No. 153583/2015, April 22, 2015).  

NOTE: A Complaint merely contains allegations and defendants are presumed innocent unless and until proven guilty beyond a preponderance of the evidence in a court of law. 

In the "INTRODUCTION" portion of the Complaint, the following is set forth:

1. This action arises out of the vindictive and mendacious conduct of defendant Benjamin Wey (the self-described "Saint of Wall Street, Journalist, Financier") and the defendant companies he controls, which, because Defendant Wey disagreed with a decision rendered by the Financial Industry Regulatory Authority, Inc. ("FINRA"), have been waging a retaliatory internet defamation campaign against FINRA, the FINRA panelists who issued the decision, and members of the advisory cowlcil that upheld FINRA's decision on appeal. 

Plaintiff Christopher Brummer, a Professor of Law at Georgetown University Law Center, served on that advisory council.

2. One of many weapons in defendants' arsenal of defamatory internet publications is "TheBlot Magazine" ("TheBlot"),1 a digital magazine published by Defendant Wey that purportedly "brings traditional journalism to the modern day" but that Defendant Wey, in fact, utilizes to maliciously defame, harass, and intimidate private individuals under the guise of legitimate investigative journalism. Here, Defendant Wey has used TheBlot to sling knowingly false information in various articles about Professor Brummer specifically intended to blot Professor Brummer's character, destroy his reputation, harass and intimidate him, and incite others to harass him (e.g., by publishing his telephone number and email address). Defendant Wey has also spewed falsehoods about Professor Brummer that seep into each category of the cause of action for defamation per se except for the "loathsome disease" category (e.g., "Chris Brummer, charged with regulatory abuses, FINRA's 'Uncle Tom,'" "Chris Brummer, caught in multiple fraud," "Georgetown Law School Chris Brummer caught lying, exaggerated biography," and "In December 2014, Brummer was caught messing with another man's wife"). In an effort to inflict maximum damage on his victims, Defendant Wey has even gone to such outrageous lengths as to perform internet search engine optimization to increase the exposure of his defamatory articles and to create phony names for reporters and post sham comments about their articles to intensify the illusion of legitimate journalism and thereby lend an air of credibility to his knowing and malicious libel. 

3. Professor Brummer accordingly seeks, among other things, compensatory and punitive damages and an order enjoining defendants from continuing their deliberate and relentless campaign of defamation, harassment, and intimidation, and from further tarring Professor Brummer's reputation.
____________________

Blot (blot) n. An association of disgrace with one's character or reputation. See The American Heritage Dictionary of the English Language, Houghton Mifflin Harcourt Publishing Company (Slh ed. 20 14).  

According to Brummer's Complaint, the alleged personal attacks upon him by Defendants were instigated as a result of the following:

Defendant Wey's Retaliation for a FINRA Decision that Punished His Associates For Acts of Fraud 

24. In August 20 13, after a fully-litigated proceeding, a FINRA hearing panel found that two of Defendant Wey's business associates (William Scholander and Talman Harris) had violated Section 1 O(b) of the Securities Exchange Act of 1934, SEC Rule 10b-5, and FINRA Rules 2020 and 2010. This decision (the "Hearing Panel Decision") prohibited the patties from associating with any FINRA finn in any capacity. This Hearing Panel Decision was appealed to the NAC and ultimately affirmed on December 29,2014. Professor Brummer served on the NAC panel that issued this decision (the "NAC Decision"). 

25. The Hearing Panel Decision that was issued in August 2013 referred to Defendant Wey's involvement in the activities of Scholander and Harris. On August 29, 2013, Defendant Wey's legal counsel wrote a letter to FINRA demanding that Defendant Wey's name be removed from the Hearing Panel Decision. FINRA accommodated that request. 

26. On or about September 24,2013, Defendant Wey emailed one of the FINRA hearing panelists, falsely accusing the panelist of participating in a racist, baseless, and vindictive decision. Defendant Wey wrote, "Read this media story, it is disgusting" and provided a link to an article he had written for TheBlot under a fake name falsely maligning FINRA. Defendant Wey threatened to "start talking to the New York times (sic) and other media organizations" and to tell those organizations that the FINRA panelist was racist and had called Defendant Wey a "Chinese negro," which Defendant Wey well knew to be false. 

27. In furtherance of their retaliation against the Hearing Panel Decision, defendants, via TheBlot, began publishing vicious, defamatory, and false stories about FINRA and individuals associated with FINRA, such as: 
  • "FINRA REGULATORS JEFFREY P. BLOOM, LUCINDA O. MCCONATHY IMPLICATED IN RONEN ZAKAI FELONY"2 
  • "OP-ED: SEX, LIES AND IMPOTENT FINRA REGULATOR JEFFREY BLOOM MISSED NEW BERNIE MADOFF"
  • "MYLES EDWARDS, DISGRACED CONSTELLATION WEALTH ADVISOR LAWYER IMPLICATED IN RONEN ZAKAI FELONY CONVICTION."4 
  • "CAPTURED: FACEBOOK CRIMINAL RONEN ZAKAI, THE NEW BERNIE MADOFF FRAUD." 5
  • "AEGIS CAP IT AL FIGHTS BACK AT FINRA BLACKMAIL, RACISM" 6
These articles falsely and maliciously accused various FINRA employees and associates with making false statements, being implicated in various frauds, and making racist and bigoted comments. 

28. On or about January 9, 2014, Defendant Wey created a fake email in an effort to impersonate Michael Dixon, a FINRA enforcement attorney, and make it appear as if Mr. Dixon were sending one of the articles above to another FINRA enforcement attorney, Jeffrey Bloom, with the question, "Is this true?" 

29. On or about February 11,2014, February 27, 2014, and March 8, 2014, Defendant Wey created further fake emails to Jeffrey Bloom that he falsely attributed to Maureen Gearty, a witness whose testimony was cited in the Hearing Panel Decision. In these emails, Defendant Wey made it appear as if Ms. Gearty were writing such things as: (i) "I have lied many times. Sorry that you were duped also. Maureen"; (ii) "Jeffrey, I have run out of money. Could you pay me again? Sorry that I have lied many times to you and duped FINRA. Maureen"; and (iii) "Jeffrey, you have screwed me so bad. Then you left me alone in the cold. You are an evil person." 

30. By fabricating these emails, Defendant Wey manufactured evidence that a witness had lied during her testimony about Scholander and Harris and that FINRA's employees had engaged in wrongdoing by paying for this false testimony. Defendant Wey fabricated this evidence for the purpose of obstructing FINRA's adjudicatory process and any appeal of FINRA's decision-making to the SEC. Upon information and belief, Defendant Wey has manufactured other kinds of false evidence in order to undermine these and other proceedings. 

31. Defendant Wey's associates, Scholander and Harris, appealed the NAC decision to the SEC in January 2015. FINRA submitted a brief concerning the circumstances of the 10 disciplinary action to the SEC. On February 27, 20 15, Defendant Wey called Michael Garawski, Associate General Counsel at FINRA, and left a threatening voicemail, transcribed here: "Hey, Michael, hi, this is Benjamin Wey from New York. I'm calling regarding a publicly-available document, searchable on the SEC website regarding FINRA v. Talman Harris. My name is mentioned as a stock promoter. What is the basis for that mentioning? I'm an investigative reporter. I'm investigating you, and your patties involved. Remove my name or you will face litigation. Okay? Call me back. Be a man, not a coward. 212-566-0499. This is 2:37 pm, Friday, February 27th " 

32. This voicemail is but one more example of defendants' using the power of TheBlot to spread falsehoods about FINRA and its employees and affiliates in retaliation for the enforcement actions against Scholander and Harris and as unlawful leverage to attempt to get FINRA to abandon and/or rescind the sanctions against them.
____________________

http://www.theblot.com/finra-regulators-jeffrey-p-bloom-lucinda-o-mcconathy-implicated-ronen-zakai-felony-777110 
3 http://www.theblot.com/op-ed-sex-lies-impotent-finra-regulator-jeffrey-bloom-missed-new-bemie-madoff-774216 
4 http://www.theblot.com/myles-edwards-disgraced-constellation-wealth-advisor-lawyer-implicated-ronen-zakai-felony-conviction-777695
 http://www.theblot.com/captured-facebook-criminal-ronen-zakai-new-bemie-madoff-fraud-771524 
http://www.theblot.com/aegis-capital-fights-back-at-fima-blackmail-7728404 



For additional details about the underlying regulatory case against Scholander and Harris, read: 

"SEC Declines To Stay FINRA Bars Pending Appeal" (BrokeAndBroker.com Blog, March 11, 2015)

For the online version of the five blog entries cited in the Complaint:


On August 10, 2015, Defendants filed a Motion to Dismiss, Christopher Brummer, Plaintiff, v. Benjamin Wey, FNL Media LLC, and NYG Capital LLC d/b/a New York Global Group, Defendants (NYS Supreme Court, NY County, No.. 153583/2015, August 10, 2015). As set forth in Defendants' Memorandum of Law in Support of the Motion to Dismiss, the Defendants make the following arguments, in part:

PRELIMINARY STATEMENT 

Plaintiff's Complaint is an attempt to chill the free speech rights afforded by both the United States and New York State Constitutions to individuals who voice their opinions in protest of unjust decisions, matters of public concern, and the individuals responsible for such injustice. In Plaintiff's capacity as a member of FINRA's National Adjudicatory Council, a panel of 14 people who review appeals from the decisions of FINRA to discipline brokers, Plaintiff undisputedly co-authored a 36-page decision, available to the public on FINRA's website, in which Plaintiff affirmed FINRA's lifetime ban from the securities industry of two African-American stockbrokers who had never previously been the subject of any disciplinary proceedings based upon the testimony of a convicted felon and a witness who changed her story several times during FINRA's investigation. Plaintiff, a limited-purpose public figure, now attempts to silence an internet website called theBlot.com that (1) expressly disclaims to its readers that it prints sensationalist and opinionated contents, and (2) is allegedly owned and controlled by Defendants, including Defendant Wey, who has successfully petitioned to compel FINRA to remove references to him that FINRA improperly included in its original decision to ban these brokers. Yet as a matter of well-settled law decided by both the Court of Appeals and the First Department, the content that these authors have posted to the Blot, a well-known and self-described repository of opinions, cannot state a claim for defamation as a matter of law

SUMMARY OF ALLEGATIONS 

Plaintiff alleges that Defendants own and control a self-styled "sensationalist" internet website called "TheBlot.com" (the "Blot"). In addition to describing its style as "sensationlist: the Blot also disclaims to its readers on its "About Us" page that it is a website on which third party users, including internet journalists, post their own "opinionated content" on, among other things, matters of public concern. A copy of the Blot's "About Us" page, a link to which is contained on every other page of the Blot, including the Posts attached to the Complaint is attached to the Wipper Aff. as Ex. B. The Blot also self-styles to readers that its own motto is sex, scandal, sarcasm, and sensationalism. It features pictures of individuals satirically posted, who feel they were "wronged" and who are "pouring out their opinions" and "complaints." 

Plaintiff's defamation claims are based solely upon statements contained three internet posts on the Blot, dated January and February 2015, which, on their face were by three separate individuals, Noah Zuss, whose Linkedin.com profile page and other personality profile pages are attached to the Wipper Aff. as Ex. C and Thomas Greenfield, and Sam Patterson (the "Posts"). (Compl. Ex. A, C, D, E.) Plaintiff alleges that Defendants published these three Posts to the Blot as part of a larger series of posts that retaliated against Plaintiff and other members of FINRA's regulatory and disciplinary arm for the decisions they wrote in 2013 and 2014, all of which are publicly available on FINRA's website, banning for life two African-American stockbrokers, William Scholander and Talman Harris who prior to that proceeding had unblemished records as brokers. (Compl. ¶ 43.) 

Plaintiff alleges that, in retaliation for his writing a December 2014 decision, the Blot began publishing content about him one month later, just as it had published content about FINRA and its judges who were involved in the original decision to ban Mr. Scholander and Mr. Harris. 

On their face, in a forum that is devoted to opinionated content, editorials, and sensationalism, the Posts express the authors' opinions that Messrs. Scholander and Harris are innocent and the ban was unjust, not least of which because FINRA's judicial panel, Plaintiff included, Maureen Gearty, who undisputedly changed her sworn testimony several times during FINRA's investigation and who was closely associated with Ronen Zakai, a person who is presently serving a sentence in prison after his conviction for 11 felonies. (Compl. ¶ 11,16.) In addition, the authors of the Posts also express their opinions about the various individuals at FINRA who participated in and coauthored the decisions made publicly available on FINRA's website resulting in the lifetime ban. The Posts discuss the publicly available information about their close associations, such as Plaintiff's employment by the Milken Institute, an institute associated with and controlled by Michael Milken, an individual known for his felony conviction for securities fraud, Milken's lifetime ban from the securities industry and for being the subject of a recent investigation probing a suspected violation of that ban. 

Because the content of the Posts about Plaintiff are unquestionably protected opinions about a public figure in the arena of investor protection and the discipline of licensed securities brokers, the Complaint avoids a substantive discussion of the statements that allegedly defamed Plaintiff until paragraph 33. Prior to that, Plaintiff details statements published on the Blot about other people at FINRA. Underscoring the fact that Plaintiff, a law professor, knows that the Blot's statements about him are protected opinions, his citations to statements on the Blot that discuss him are far less detailed that those about his associates. The Complaint's discussion of the Blot's statements is bulleted, quoted in full, and discussed in depth. But when Plaintiff moves on to discussing statements alleged to be about him and his role in this public controversy, his allegations abruptly shift from the detailed discussion contained in the previous allegations about others to a hodgepodge of soundbites, partial sentences and fragments from the Posts. (Id. ¶ 27.)

Plaintiff's blunderbuss of statements from the Blot in the 13 paragraphs of his complaint purporting to discuss statements that defame him can be distilled to four categories: 

(i) Name-calling, including statements Plaintiff characterizes as "Race baiting," both in the text of the posts to the Blot and in text superimposed onto satirical pictures of him, calling Plaintiff an "Uncle Tom," a "racist," a "vacuum brain," an "abuser," a "failure," "worthless academic," and a "bookworm" who can't "survive a day in real life." (Compl. ¶¶ 34-35.) 

(ii) Loose and imprecise assertions, made after a fulsome discussion of the author's basis for making them, which conclude that "Plaintiff ruined the lives of innocent black men," "many investors lost their life savings thanks to Chris Brummer's endorsement [of the Milken Institute]," Plaintiff was "implicated in a fraud," and that Plaintiff "messed with another man's wife;" (Id. ¶¶ 34-36, 42.) 

(iii) Quotes attributed to Plaintiff but which, according to Plaintiff, were "fabricated" and never spoken by him; (Id. ¶ 35) and 

(iv) Statements about Plaintiff's close associates, such as Michael Milken who the Blot accurately describes as "a criminal" and Charles Senatore who the Blot states was "caught on tape lying.:

In addition to alleging defamation based upon statements that are, as a matter of law, opinions of the author, Plaintiff's own Complaint pleads ample facts to demonstrate that he is a public figure for purposes of the publicly available decision he authored banning Mr. Harris and Mr. Scholander as well as for many other related matters. Yet the Complaint makes only a conclusory assertion that the statements were made with actual malice. Plaintiff parrots the legal standard for actual malice, but fails to specify any facts demonstrating that the author of these statements knows any of them to be false. Plaintiff also fails to allege facts demonstrating that any of the Defendants is the author of those statements.

SUMMARY OF ARGUMENT 

As demonstrated infra in Section I, all of Plaintiff's claims must be dismissed because (i) all of the statements posted on the Blot are constitutionally protected statements of opinion and (ii) many of the statements are not about Plaintiff at all. 

As demonstrated infra in Section II, Plaintiff's defamation claims must be dismissed because Plaintiff is a limited purpose public figure who has failed to plead actual malice with specificity. As demonstrated infra in Section III, Plaintiffs' claims against Defendants, who are the alleged "publishers," are immune under the Communications Decency Act of 1996 because Plaintiff fails to plead facts showing that any of the defendants authored these posts. 

As demonstrated infra in Section IV, Plaintiffs' third cause of action for Intentional Infliction of Emotional Distress fails because its allegations are duplicative of the defamation claims and the conduct alleged does not satisfy the legal standard for extreme and outrageous conduct. 

Finally, as demonstrated infra in Point V, at a minimum, Defendant Wey must be dismissed from this lawsuit because Plaintiff failed to serve him in accordance with CPLR 308(2).

Pages 1 - 5 of Defendants' Motion to Dismiss

READ the FULL TEXT Memo of Law