327 F. Supp. 3d 278
D.D.C.2018Background
- AER Advisors and clients William and Peter Deutsch (the Deutsches) allege Fidelity lent the Deutsches' China Medical shares without consent, triggering a June 2012 market disruption and a short squeeze.
- Fidelity filed a Suspicious Activity Report (SAR) on July 5, 2012, allegedly implicating AER and the Deutsches in attempting to influence the China Medical market; Plaintiffs claim the SAR was a cover-up for Fidelity's improper lending.
- Plaintiffs allege resulting state and federal investigations (including SEC), significant legal fees, lost business, and that Fidelity later solicited AER’s clients via January 2013 letters.
- Plaintiffs filed a Second Amended Complaint asserting 13 counts (negligent reporting, tortious interference, breach of contract, promissory estoppel, breach of fiduciary duty, unjust enrichment, negligence, deceptive/unfair trade practices, prima facie tort), primarily based on the SAR.
- Fidelity moved to dismiss under Rule 12(b)(6): asserting absolute immunity for SAR filings under 31 U.S.C. § 5318(g)(3), claim preclusion from a prior FINRA arbitration as to unlawful lending, and that AER’s tortious interference claim is time-barred.
- The Court granted Fidelity’s motion and dismissed all counts predicated on the SAR as barred by statutory immunity; it also dismissed AER’s tortious interference claim as time-barred (and because reliance on the SAR is barred by the immunity statute).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fidelity is civilly liable for harms arising from filing a SAR | SAR was not reporting a "possible violation" because Fidelity itself caused the short squeeze and knew Plaintiffs were innocent | §5318(g)(3) grants immunity for SAR disclosures; applies even if report is false or malicious under First Circuit law | Court applied First Circuit (Stoutt) and held Fidelity immune; dismissed claims premised on the SAR |
| Whether FINRA arbitration award precludes claims based on unlawful lending | Some counts refer to lending only as background; Plaintiffs disavow unlawful-lending claims here, basing claims on SAR/cover-up | Fidelity contends prior FINRA award precludes relitigation of lending-based claims | Court did not decide claim preclusion because Plaintiffs disclaimed reliance on unlawful lending; dismissed counts anyway based on SAR immunity |
| Whether AER’s tortious interference claim (letters to clients Jan 2013) is timely | Accrual should be delayed until discovery of the SAR in 2015, because malicious intent was unclear until then | The letters alone accrued the claim in 2013; Massachusetts 3-year (or Florida 4-year) statute bars suit filed in 2017 | Court held the claim is time-barred under applicable statutes and also rejected reliance on SAR for tolling because SAR-based claims are immune; dismissed Count III |
Key Cases Cited
- Stoutt v. Banco Popular de Puerto Rico, 320 F.3d 26 (1st Cir.) (statutory SAR immunity is broad and not limited by a good-faith requirement)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: factual allegations must permit plausible inference of liability)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Rule 12(b)(6) plausibility standard foundational authority)
- Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir.) (interpretation of SAR immunity without implied good-faith requirement)
- Lopez v. First Union Nat'l Bank of Fla., 129 F.3d 1186 (11th Cir.) (requires good-faith suspicion for SAR immunity)
- Comey v. Hill, 438 N.E.2d 811 (Mass.) (elements of tortious interference with existing business relationships)