Sexual Bondage, Videotapes, Divorce, Criminal Charges, Revenge Porn and FINRA

February 26, 2020

Upon first glance, today's featured litigation seems little more than a garden-variety torts case. In August 2018, Plaintiff Pagliara sued Defendants asserting  negligent infliction of emotional distress, intentional infliction of emotional distress, civil conspiracy, and malicious prosecution. Timothy J. Pagliara, Plaintiff, v. Marlene Moses and MTR Family Law, PLLC, Defendants (Opinion, Court of Appeals of Tennessee, No. M2018-02188-COA-R3-CV / February 20, 2020)
http://brokeandbroker.com/PDF/PagliaraTNApp200220.pdf  When we drill down into the underlying facts, however, we enter into a truly bizarre world of sexual bondage, videotapes, divorce, criminal charges, and the Financial Industry Regulatory Authority. FINRA? Yeah, FINRA. 

The Wife of the Man On the Bondage Video

Frankly, I can't present the fact pattern of Pagliara v. Moses any better ability than the Tennessee Court of Appeals, so let me quote from the Opinion [Ed; footnotes omitted]:

[P]laintiff and his wife ("Wife") were married in July 2015. Plaintiff and Wife began dating prior to January 2013. In January 2013, Wife and another man met at a hotel, "used Ecstasy and engaged in sexual relations," and videotaped their encounter. 

In September 2016, the wife of the man on the video discovered the videotape. The man's wife thereafter forwarded the "full high-definition videotape" to Plaintiff via "Dropbox." She also sent him a fifteen-second "snippet" of the videotape via text message, as well as a "bondage photograph" reflecting Wife with her hands bound behind her with a neck tie. Plaintiff was on a business trip in San Diego, California when he received these images. Plaintiff forwarded the fifteen-second "snippet" and the "bondage photograph" to close friends of him and Wife, in part, "to help him understand and process these materials."

According to Plaintiff's complaint, the video and photograph caused discord in his marriage. Wife filed a complaint for divorce against Plaintiff in the Williamson County Chancery Court. Defendants represented Wife in the divorce proceedings. 

After learning of the videotape, Wife sought to have criminal charges brought against the man's wife for forwarding the images to Plaintiff. Subsequently, Wife inquired with Ms. Moses whether Wife should file a police report against Plaintiff for forwarding the images to their close friends. This inquiry was made during a meeting at MTR Family Law, PLLC's office in the presence of a third party. According to Plaintiff's complaint, Wife's financial prospects were limited in the divorce proceeding due to an antenuptial agreement. Plaintiff's complaint alleges that Ms. Moses responded to Wife's inquiry that "filing criminal charges seemed to be the only way to obtain leverage over Plaintiff." After rendering this legal advice to Wife, Ms. Moses provided Wife with the name of her son-in-law, a criminal defense attorney. 

When this discussion transpired, Wife and Ms. Moses "were well aware that Plaintiff is a prominent financial advisor in Middle Tennessee" and that Plaintiff's investment advisory firm was registered with the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Plaintiff alleged that "FINRA Rule 8312 requires registered representatives, like Plaintiff, to disclose on Form U4 prior felony and misdemeanor criminal convictions" and that Ms. Moses and Wife pursuing criminal charges to obtain leverage against Plaintiff was "outrageous." 

According to the complaint, Wife thereafter contacted the Franklin Police Department to file a report regarding Plaintiff's action of forwarding the images and sought to initiate a criminal proceeding against him. Wife met with two police officers and described that she was devastated by Plaintiff's action of forwarding the images to their close friends. According to Plaintiff's complaint, Wife failed to disclose to the officers that "she had used the illegal narcotic Ecstasy just prior to making the sex tape," that the man in the video was married during "the illicit sexual encounter, that Plaintiff was himself 'devastated' to have received such materials, and that she was pursuing criminal charges against Plaintiff to obtain 'leverage' in a pending divorce action." Wife later returned to the Franklin Police Department to provide a videotaped interview. During that interview, Wife inquired of potential punishment if Plaintiff were convicted of criminal charges and stated that she hoped Plaintiff would not get probation. 

In May 2017, Plaintiff also participated in a videotaped interview at the Franklin Police Department. According to Plaintiff's complaint, the police officers informed Plaintiff that he had been accused of committing the crime of "unlawful exposure" in violation of Tennessee Code Annotated § 39-17-318(a), which Plaintiff described as "Tennessee's 'revenge porn' statute." According to Plaintiff, that statute was not relevant to him because he was not a party to the videotape or photograph and he had not agreed to keep the images private all as required for that statute to apply. As such, Plaintiff alleged that "no probable cause existed, or could exist, to justify [Wife's] claim that Plaintiff violated Section 39-17-318(a), or any other statute known to Tennessee criminal jurisprudence." Plaintiff attached to his complaint the incident report from the Franklin Police Department, which reflected Plaintiff as the suspect and the criminal offense as "Pornography/Obscene Material," pursuant to Tennessee Code Annotated § 39-17-902. 

Plaintiff alleged that he was forced to retain counsel to represent him in defending against the criminal charge. Plaintiff's counsel advised the district attorney's office of the deficiencies in the prosecution and that venue was not appropriate in Williamson County because the message containing the images had been sent by Plaintiff while in San Diego, California to friends in Nashville, Tennessee. The Franklin Police Department transferred the case to the "Domestic Violence Unit of the San Diego Police Department." Plaintiff further alleged that Wife continued to pursue criminal charges against Plaintiff and filed a police report with the San Diego Police Department. According to Plaintiff's complaint, the San Diego Police Department closed their case "but not until after Plaintiff had incurred significant legal expense and suffered severe emotional distress." Plaintiff alleged that the case was closed, at least in part, because "Plaintiff did not violate any applicable criminal law."

At Pages 2 - 4 of the Court of Appeals Opinion


Get Yer Program Here, Get Yer Program

Just by way of summary, the cast of characters included:
  • Plaintiff Pagliara, a financial advisor whose investment advisory firm was registered with the SEC and FINRA
  • Pagliara's Wife
  • The "Other Man" in the hotel with Pagliara's Wife
  • The "Other Man's" Wife, who sent the videotape snippet to Plaintiff Pagliara
  • Defendants Lawyer and Law Firm, which represented Plaintiff Pagliara's Wife in her divorce
The Rulebook


Criminal Disclosure
14A. 

(1) Have you ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic, foreign, or military court to any felony?
(b) been charged with any felony? 
. . .

According to FINRA's online Form U4 Explanation of Terms:

Charged: Means being accused of a crime in a formal complaint, information, or indictment (or equivalent formal charge).

Note the distinction between a mere "arrest" and that of "charged," as set forth online in  FINRA "Form U4 and U5 Interpretive Questions and Answers" :

Q3: If a registered person is arrested but not charged with a crime, is the arrest required to be reported?

A: No. An arrest without a charge is not required to be reported. (02/13/98)

FINRA Rule 4530. Reporting Requirements provides:

(a) Each member shall promptly report to FINRA, but in any event not later than 30 calendar days, after the member knows or should have known of the existence of any of the following:

(1) the member or an associated person of the member:
. . .
(E) is indicted, or convicted of, or pleads guilty to, or pleads no contest to, any felony; or any misdemeanor that involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary, larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds, or securities, or a conspiracy to commit any of these offenses, or substantially equivalent activity in a domestic, military or foreign court . . .

FINRA Rule 8312: FINRA BrokerCheck Disclosure provides:

. . .
(c)
(1) Except as otherwise provided in paragraph (d) below, FINRA shall release the information specified in subparagraph (2) below for inquiries regarding a person who was formerly associated with a BrokerCheck Firm, but who has not been associated with a BrokerCheck Firm within the preceding ten years, and:
(A) was ever the subject of a final regulatory action as defined in Form U4 that has been reported to the CRD system on a Registration Form; or
(B) was registered with FINRA or a CRD Exchange on or after August 16, 1999, and any of the following applies, as reported to the CRD system on a Registration Form:
(i) was convicted of or pled guilty or nolo contendere to a crime; . . .


The Trial Court Dismisses: No Proceeding and No Wrongful Conduct

At the state Circuit Court level, that Trial Court granted Defendants' Motion to Dismiss after finding that: 

[A] judicial proceeding had not been initiated against Plaintiff to support a claim for malicious prosecution. According to the Trial Court, Plaintiff had not been arrested, charged, or indicted and a mere investigation was not sufficient to constitute a criminal proceeding, as Plaintiff alleged. The Trial Court further found that it was not necessary to address whether probable cause existed to support a prosecution under either Tennessee Code Annotated § 39-17-318 or § 39-17-902 because "a prior suit or judicial proceeding" had not been instituted against Plaintiff under either of those statutes.2 The Trial Court, thus, determined that Plaintiff had failed to sufficiently state a claim for malicious prosecution.

Concerning Plaintiff's claim of civil conspiracy, the Trial Court found that there was no "underlying wrongful conduct" and that no criminal process ever was initiated against Plaintiff. The Trial Court emphasized that Plaintiff had admitted to the actions that were the subject of the complaint to the police department. The Trial Court found that Ms. Moses's action of providing legal advice to her client of reporting truthful allegations to police "cannot possibly be construed as either malicious prosecution or civil conspiracy." Therefore, the Trial Court found that Plaintiff had failed to sufficiently state a claim for civil conspiracy. 

The Trial Court further found that the conduct alleged in Plaintiff's complaint "cannot reasonably be regarded as 'so extreme and outrageous as to go beyond all possible bounds of decency, and to be regard[ed] as atrocious, and utterly intolerable in a civilized community.' " Quoting Odom v. Claiborne Cty., Tennessee, 498 S.W.3d 882, 887 (Tenn. Ct. App. 2016). As such, the Trial Court found that Plaintiff's complaint had failed to sufficiently state a claim for intentional infliction of emotional distress. 

Additionally, the Trial Court found that the allegations in the complaint were "simply insufficient to create a duty on the part of the Defendants to Plaintiff, an adverse party in litigation." Thus, the Trial Court found that Plaintiff had failed to sufficiently allege a claim for negligent infliction of emotional distress. Upon its determination that Plaintiff's complaint had failed to state a claim for which relief could be granted, the Trial Court granted Defendants' motion to dismiss. Plaintiff timely appealed to this Court.

= = = = =
Footnote 2: Although the Plaintiff alleged a criminal proceeding under Tennessee Code Annotated § 39-17-318, the Trial Court found that the incident report prepared by the Franklin Police Department, which Plaintiff had attached to his complaint, reflected that Plaintiff was not being investigated for Tennessee Code Annotated § 39-17-318, but instead for § 39-17-902, which pertains to the production or distribution of obscene materials.

At Pages 4 - 5 of the Court of Appeals Opinion

Court of Appeals Affirms Trial Court

The Court of Appeals affirmed the Trial Court and remanded for the sole purpose of the collection of costs. In tackling the issue as to whether the Defendants' legal advice to Pagliara's wife to file a criminal complaint prompted a "criminal proceeding," the Court of Appeals offered this rationale:

As the Trial Court found, the present case yielded no criminal proceeding against Plaintiff. Plaintiff stated in his complaint that Defendants provided Wife legal advice to initiate a "criminal proceeding" against him to obtain leverage. Whether a process or action constitutes a judicial proceeding for purposes of malicious prosecution is a legal conclusion or argument couched as a fact, which the Trial Court is not required to take as true for purposes of the Rule 12.02(6) motion. Wife, after receiving legal advice from Ms. Moses, consulted law enforcement concerning Plaintiff's action of forwarding the video and photograph to other individuals. An investigation was conducted which did not result in an arrest, criminal charges, or an indictment. 

A criminal investigation by law enforcement is neither a judicial proceeding nor a quasi-judicial administrative proceeding with the authority "to make adjudicatory findings that may adversely affect legally protected interests of persons subject to its jurisdiction." See Lewis, 698 S.W.2d at 60. A criminal investigation by law enforcement, without a subsequent prosecution, does not have an adjudicatory function. The facts stated in Plaintiff's complaint simply do not support that a judicial proceeding, criminal or otherwise, ever was initiated against him following the investigation by law enforcement. Because no "prior suit or judicial proceeding" was instituted against Plaintiff, he cannot satisfy an essential requirement for malicious prosecution. Therefore, we find and hold, as did the Trial Court, that Plaintiff's claim of malicious prosecution should be dismissed for failure to state a claim, pursuant to Tennessee Rule of Civil Procedure 12.02(6).

At Page 8 of the Court of Appeals Opinion

A Threat to Contact Versus Actual Contact

As to the dismissed charge of a civil conspiracy, in part, the Court of Appeals found that:

[T]his Court questions whether consulting with law enforcement as opposed to threatening to so consult could ever be a means to gain an advantage in another matter. It is the threat of going to the police that might be used to gain an advantage in a civil matter. Once Wife contacted law enforcement and provided them with information, the matter was in the hands of law enforcement, not Wife or Defendants. We fail to see how contacting law enforcement rather than threatening to contact law enforcement could give Wife and Defendants an advantage in the pending divorce proceedings. 

At Page 9 of the Court of Appeals Opinion