## Facts

- Prudential Securities, a broker-dealer and NASD member, employed Kyle Andrews, John Meehan, and J. Stephen Stout as registered representatives before terminating their employment.
- After an SEC enforcement matter involving Prudential’s sale of limited partnership interests, a settlement created a customer claims-resolution process.
- Numerous customers submitted claims in that process naming the plaintiffs as the registered representatives for the limited partnership purchases.
- Prudential settled customer claims in amounts exceeding $5,000 and, under NASD rules, filed amended Forms U-5 for each plaintiff.
- The amended Forms U-5 reported the existence of investment-related, consumer-initiated complaints and the related settlements, including amounts and claimed losses.
- The plaintiffs sued Prudential in federal court (diversity jurisdiction), alleging defamation based on the amended U-5 disclosures.
- The district court granted summary judgment to Prudential, ruling that the statements were privileged absent actual malice and, independently, were true.
- The plaintiffs appealed.

## Issues

1. Whether truth or substantial truth is a complete defense to defamation claims based on statements in amended Forms U-5 reporting customer complaints and settlements.
2. Whether, given the regulatory reporting context of Form U-5, the plaintiffs produced evidence sufficient to defeat summary judgment on their defamation claim.

## Decision

- The Sixth Circuit affirmed summary judgment for Prudential.
- The court held that the plaintiffs’ defamation claim failed because the challenged U-5 statements were true in reporting that customer complaints were made and settlements above the reporting threshold occurred.
- Because falsity is an essential element of defamation, the absence of falsity was dispositive, making it unnecessary to resolve other theories as a basis for reversal.

## Legal Principles

- A defamation plaintiff must prove a false statement; truth (or substantial truth) is a complete defense.
- A Form U-5 disclosure that accurately reports the existence of customer complaints and the fact and amount of settlements is not rendered false merely because the former employee disputes the underlying allegations.
- Where the record establishes the accuracy of the reported events (complaints filed and settlements reached), summary judgment is proper on a defamation claim premised on those reports.

## Conclusion

The Sixth Circuit upheld summary judgment because the amended Forms U-5 accurately reported customer complaints and settlements, and truthful reporting defeats defamation liability even if the reported matters are damaging to a former broker’s reputation.


Andrews v. Prudential Sec., Inc., 160 F.3d 304 (6th Cir. 1998)