Matter of Dunn
v.
Ladenburg Thalmann Co.

Not overruled or negatively treated on appealinfoCoverage
Appellate Division of the Supreme Court of New York, Second DepartmentMar 8, 1999
259 A.D.2d 544 (N.Y. App. Div. 1999)
259 A.D.2d 544686 N.Y.S.2d 471

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March 8, 1999

Appeal from the Supreme Court, Nassau County (Levitt, J.).


Ordered that the order and judgment is reversed, on the law, with costs, the motion is denied, the cross motion is granted, the arbitration award is vacated, and the petition is dismissed.

We agree with the appellant that the subject arbitration award must be vacated since it is violative of public policy (see, Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354; cf., Matter of Sprinzen [Nomberg], 46 N.Y.2d 623, 631; cf., Matter of Meehan v. Nassau Community Coll., 152 A.D.2d 313). The record demonstrates that the statements underlying the petitioner's defamation claim against his former employer were made during the course of a quasi-judicial administrative investigation conducted by the National Association of Securities Dealers, and that the statements in question were therefore absolutely privileged (see, Herzfeld Stern v. Beck, 175 A.D.2d 689, 691; cf., Ritzcovan v. Burger, 251 A.D.2d 393; Harms v. Riordan-Bellizi, 223 A.D.2d 624, 625).

It is well settled that "[p]ublic policy mandates that certain communications, although defamatory, cannot serve as the basis for the imposition of liability in a defamation action" (Toker v. Pollak, 44 N.Y.2d 211, 218). In accord with this principle, it has been held that due to compelling public policy reasons (see, Liberman v. Gelstein, 80 N.Y.2d 429, 437), statements uttered in the course of judicial or quasi-judicial proceedings are absolutely privileged so long as they are material and pertinent to the questions involved notwithstanding the motive with which they are made (see, Herzfeld Stern v. Beck, supra; see also, Wiener v. Weintraub, 22 N.Y.2d 330; Allan Allan Arts v. Rosenblum, 201 A.D.2d 136, cert denied 516 U.S. 914; Park Knoll Assocs. v. Schmidt, 59 N.Y.2d 205, 208-209; Romeo v. Village of Fishkill, 248 A.D.2d 700). Moreover, while arbitrators are afforded wide discretion in matters submitted to them upon the consent of the parties, an award which is violative of public policy will not be permitted to stand (see, Garrity v. Lyle Stuart, Inc. supra; Matter of Meehan v. Nassau Community Coll., supra; cf., Hackett v. Milbank, Tweed, Hadley McCoy, 86 N.Y.2d 146, 155).

The challenged arbitration award operates to completely negate the compelling public policy concerns underlying the privilege, i.e., the need to encourage the free and open disclosure of information relevant to potential securities violations (see, Toker v. Pollak, supra, at 223; Herzfeld Stern v. Beck, supra, at 691-692; Wiener v. Weintraub, supra, at 332; cf., Matter of Board of Educ. [Buffalo Council of Supervisors Adm'rs], 52 A.D.2d 220). Under the circumstances, the arbitration award must be vacated and the petition dismissed.

S. Miller, J. P., Thompson, Friedmann and Florio, JJ., concur.