Usher v. Merrill Lynch, Pierce, Fenner & Smith Inc. et al

Filing 25

MEMORANDUM AND ORDER granting 18 defendants' motion to dismiss plaintiff's defamation claim and, because that claim was the only claim asserted against defendant Holleran, defendant Holleran is dismissed as a party to this action. Signed by District Judge John W. Lungstrum on 04/02/2014. (ses)

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS
James D. Clinton Usher,
Plaintiff,
v.

Case No. 13-CV-2645

Merrill Lynch, Pierce, Fenner &
Smith Incorporated dba Merrill Lynch
Wealth Management; and Rhonda Holleran,
Defendants.
MEMORANDUM & ORDER
Plaintiff James Clinton Usher filed this suit against defendant Merrill Lynch, his former
employer, asserting claims for disability discrimination, disability harassment and retaliation
under the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. Additionally, plaintiff has
asserted a claim for defamation under Kansas law against Merrill Lynch and against defendant
Rhonda Holleran, plaintiff’s supervisor during his employment. This matter is presently before
the court on defendants’ motion to dismiss (doc. 18) plaintiff’s defamation claim under Federal
Rule of Civil Procedure 12(b)(6) on the grounds that the claim is barred by the statute of
limitations. As will be explained, the motion is granted.
Defendants’ motion to dismiss is based on Federal Rule of Civil Procedure 12(b)(6). In
analyzing that motion, the court accepts as true “all well-pleaded factual allegations in the
complaint and view[s] them in the light most favorable to the plaintiff.” Burnett v. Mortgage
Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013) (citation omitted). “To
survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,

to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007))). Consistent
with this standard, the following well-pleaded allegations, taken from plaintiff’s complaint, are
accepted as true for purposes of defendants’ motion. Plaintiff was employed by Merrill Lynch
first as a financial advisor and, most recently, as an Administrative Manager in Kansas City.
When plaintiff accepted the position of Administrative Manager in Kansas City, defendant
Rhonda Holleran became plaintiff’s supervisor. According to plaintiff, who was born with
spastic diplegia cerebral palsy, Ms. Holleran soon began a campaign of discrimination,
harassment and retaliation against plaintiff based on plaintiff’s disability and his requests for
accommodations in an effort to trigger plaintiff’s resignation. Ultimately, defendant Merrill
Lynch terminated plaintiff’s employment in August 2012 after ten years of employment.
According to plaintiff, the Financial Industry Regulatory Authority (FINRA) requires that
employers in the securities industry complete a Form U-5 or Uniform Termination Notice for
Securities Industry Registration upon the termination of a licensed professional, describing the
reason for an employee’s termination. Plaintiff alleges that the Form U-5 is available to the
public and is reviewed by potential employers in the securities industry when making hiring
decisions. In support of his defamation claim, plaintiff alleges that defendant Merrill Lynch,
acting through defendant Rhonda Holleran, branded plaintiff’s Form U-5 with negative, untrue
reasons for plaintiff’s termination and stated on the form that plaintiff’s employment was
terminated based on “loss of management’s confidence resulting from failure to meet
performance expectations.” Plaintiff alleges that he was unable to secure employment for 8

2

months after his termination in light of the negative Form U-5 and that defendants’ statement on
the Form harmed plaintiff’s professional reputation.
Defendants move to dismiss this claim on the grounds that it is barred by the applicable
statute of limitations. In support of their motion, defendants have submitted a copy of the Form
U-5 indicating that defendant Merrill Lynch filed the form on October 2, 2012. See Burnett v.
Mortgage Elec. Registration Sys., Inc., 706 F.3d 1231, 1234 n.1 (10th Cir. 2013) (a document
central to the plaintiff’s claim and referred to in the complaint may be considered in resolving a
motion to dismiss where the document’s authenticity is not in dispute).

According to

defendants, plaintiff was thus required to file his defamation claim no later than October 2, 2013
pursuant to the one-year statute of limitations. See K.S.A. § 60-514(a) (actions for libel or
slander must be brought within one year). Plaintiff filed his complaint on December 19, 2013
and defendants contend that this filing was untimely as to plaintiff’s defamation claim.
Plaintiff does not dispute that the Form U5 was filed in October 2012 or that the
applicable limitations period is one year.

Nonetheless, plaintiff contends that defendants’

motion must be denied because discovery is required to determine when “republication” of the
defamatory statement occurred. According to plaintiff, republication arguably occurred as late
as March 2013, when plaintiff applied for new employment and FINRA would have republished
the U-5 to plaintiff’s prospective employer. Plaintiff’s republication argument is based on
Wright v. Bachmurski, 29 Kan. App. 2d 595 (2001)—a case that is distinguishable from this
one. In Wright, two individuals told a newspaper reporter that the plaintiff had committed tax
evasion. Id. at 597-98. The paper then published a story about the plaintiff’s tax evasion. Id. at
598. The plaintiff settled his claim with the newspaper, but filed and pursued a separate claim
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for defamation against the two individuals. Id. The district court granted summary judgment in
favor of the individual defendants on the grounds that they were joint tortfeasors with the
newspaper such that the newspaper’s release also released the individuals. Id. at 599.
The Kansas Court of Appeals reversed the district court, holding that the individuals were
independent tortfeasors and that two separate and distinct causes of actions existed against the
individuals based on two publications of the defamatory statements:
The first action arose from the communication between [the individuals] and the
reporter for the newspaper (the original publication). The second cause of action
resulted from the newspaper’s story based on the communication with [the
individuals] (republication).
Id. at 601. Relying on the Restatement (Second) of Torts, the Court of Appeals explained that
each communication of a defamatory statement to a third person constitutes a new publication
and when that third person then communicates the defamatory statement to a fourth person, the
original publisher may be separately liable for the republication if the repetition by the third
person was reasonably expected as the natural and probable consequence of the original
publication. Id. at 601-02. According to the Court of Appeals, the newspaper republished the
defamation by writing a story based on the individuals’ defamatory statements to the reporter
and the individuals could have reasonably expected the newspaper to write a story as a probable
consequence of the defamatory communication between them and the reporter. Id.
Plaintiff here contends that each time he applied for new employment and a prospective
employer obtained a copy of plaintiff’s Form U-5, the defamatory statements therein were
“republished” and each republication creates a separate basis for liability against defendants
because they could have reasonably expected that prospective employers would obtain a copy of
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the Form U-5. But unlike the facts of Wright, where two separate and distinct publications
occurred (the communication with the reporter and then the republication of the article in the
newspaper), plaintiff here relies on the subsequent transmittal or distribution of the single Form
U-5 that defendants filed in October 2012. In such circumstances, defendants contend that the
“single publication rule” applies and precludes liability for any subsequent distribution of the
Form U-5. As explained by the Court of Appeals in Wright:
[U]nder the single publication rule any single integrated publication, such as one
edition of a newspaper, book, or magazine, or one broadcast, is treated as a unit,
giving rise to only one cause of action, even though widely distributed, and
regardless of the number of times it is exposed to different people. Under the rule,
distinct causes of action do not arise by virtue of the sale of copies of an edition of
a newspaper, or by reason of the sale of copies of a book from stock . . . .
Id. at 602 (citing Restatement (Second) of Torts § 577A). In Wright, the court determined that
the single publication rule did not apply to the individual defendants because the cause of action
against them “did not arise from [the] sale of copies of an edition of a newspaper, magazine,
broadcast, or [the] sale of copies of a single book.” Id.
In the absence of any Kansas case supporting plaintiff’s republication theory under
analogous facts, the court believes that Kansas courts, if faced with this issue, would conclude
that the facts alleged in plaintiff’s complaint demonstrate that a single publication of the U-5
occurred in October 2012 and that subsequent transmissions of the Form U-5 do not constitute
new publications sufficient to restart the running of the statute of limitations. In discussing the
single publication rule, the Kansas Court of Appeals relied in large part on the Restatement
(Second) of Torts § 577A which explains that if a magazine publishes a defamatory article in
one month but receives an order the following month for a large number of copies of the
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magazine containing the defamatory article, only a “single publication” has occurred.
Restatement (Second) of Torts § 577A, illustration 6. According to the Restatement, the rule is
“justified by the necessity of protecting defendants and the courts from the numerous suits that
might be brought for the same words if each person reached by such a large-scale
communication could serve as the foundation for a new action.”

Id. comment c.

The

Restatement also clarifies that the examples given in § 577A (that is, books, newspapers,
broadcasts, motion pictures) are not intended in any way as limitations on the single publication
rule. Id. comment d.
Treating the Form U-5 as a single, integrated unit akin to one edition of a book or
newspaper is consistent with both Wright and the Restatement; otherwise the statute of
limitations would never run so long as the Form U-5 was available for transmittal.

See

Kalinowski v. Boeing Co., 1992 WL 321613, at *2 (D. Kan. 1992) (purported republication of
documents in personnel file each time a supervisor reviewed file was insufficient to toll statute
of limitations under Kansas law). Relying on Ohio law, the Sixth Circuit has explained that
allegedly defamatory statements contained in a Form U-5 are not “republished” each time the
form is transmitted to a prospective employer and that NASD’s action in sending the form on a
date subsequent to the filing of the form does not restart the statute of limitations. Friedler v.
Equitable Life Assurance Society, 86 Fed. Appx. 50, 55 (6th Cir. 2003). The Sixth Circuit
analogized a Form U-5 to any other publication which has already been published but is simply
retransmitted to new consumers. See also Wang v. Prudential Ins. Co., 439 Fed. 359, 366 (5th
Cir. 2011) (defamation claim barred by one-year statute of limitations where Form U-5 was filed
in November 2007 and claim was not filed until July 2009); Wietecha v. Ameritas Life Ins.
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Corp., 2006 WL 2772838, at *4-5 (D. Ariz. Sept. 27, 2006) (plaintiff’s claims regarding
defamatory statements in U-4 hiring form were barred by statute of limitations in the absence of
any allegation that the form was submitted secretly or that he could not have discovered form
earlier).
For the foregoing reasons, defendants’ motion is granted.1

IT IS THEREFORE ORDERED BY THE COURT THAT defendants’ motion to
dismiss plaintiff’s defamation claim (doc. 18) is granted and, because that claim was the only
claim asserted against defendant Holleran, defendant Holleran is dismissed as a party to this
action.

IT IS SO ORDERED.

Dated this 2nd day of April, 2014, at Kansas City, Kansas.

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

1

The court questions the viability of this claim in any event in light of the fact that, under
Kansas law, statements made in the context of a Form U-5 are entitled to a qualified privilege
such that plaintiff would have to prove that the statements were made with actual malice. See
Moreland v. Perkins, Smart & Boyd, 44 Kan. App. 2d 628, 638 (2010). Plaintiff has not alleged
in his complaint that defendants’ U-5 statements were made with actual malice.
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