Thomas Preston v. Fidelity Brokerage Services, 20-1612

Background

Preston was hired by Fidelity as a Financial Consultant and was subject to a Temporary Lockout (TLO) policy requiring a value‑add, investment‑related conversation and a Siebel entry to claim customer attribution and compensation.
An anonymous complaint prompted an internal Fidelity investigation that flagged several of Preston’s TLOs, including a Siebel entry describing a substantive call with “Customer A” despite a six‑second outbound call and no incoming call recorded in phone logs.
Investigators reported that Preston admitted falsifying books and records; Preston denies making that admission. Fidelity concluded he falsified records to obtain compensation, terminated him, and filed a Form U5 stating he had recorded a detailed customer interaction without having had the requisite interaction.
Preston sued for age discrimination and defamation; after discovery and exclusion of his expert, both parties moved for summary judgment. The District Court granted Fidelity’s motion as to defamation.
The Third Circuit affirmed, adopting the District Court’s reasoning: it applied the more plaintiff‑friendly conditional privilege standard (defeatable by negligence), found Fidelity conducted a reasonable investigation and accurately reported its conclusion on the Form U5, and held Preston failed to raise a genuine issue of negligence or material fact.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether statements on the FINRA Form U5 enjoy absolute or conditional privilege	Preston: Pennsylvania law does not clearly afford absolute privilege for Form U5 statements; conditional privilege should apply	Fidelity: Form U5 is integral to FINRA regulation and should receive absolute privilege; if conditional, only malice (not negligence) should defeat it	Court did not decide absolute vs. conditional; assumed conditional (plaintiff‑friendly) and proceeded to analysis
Whether Preston can defeat conditional privilege by showing negligence (or malice) in preparing the Form U5	Preston: Fidelity was negligent in preparing/submitting the Form U5 and thus lost conditional privilege protection	Fidelity: Its investigation and review were reasonable and careful; no negligence (and no malice)	Held for Fidelity: under the negligence standard, no genuine issue of negligence; summary judgment affirmed
Whether the Form U5 statements were false/defamatory	Preston: Statements asserted falsification and were defamatory	Fidelity: Statements accurately reflected its investigation and conclusion that Preston misreported customer interactions	Court found undisputed record support for Fidelity’s description; not defeated as false
Whether summary judgment was appropriate	Preston: Material facts remain in dispute (e.g., alleged incoming call, investigators’ statements)	Fidelity: Evidence shows reasonable investigation and undisputed facts supporting its conclusion and Form U5 statements	Court: No genuine issue of material fact; summary judgment for Fidelity affirmed

Key Cases Cited

Goldenstein v. Repossessors Inc., 815 F.3d 142 (3d Cir. 2016) (standards for de novo appellate review of summary judgment)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (trial judge’s role on summary judgment and standard for genuine issue of material fact)
Kelly v. Borough of Carlisle, 622 F.3d 248 (3d Cir. 2010) (summary judgment standard and view of evidence for nonmovant)
Agriss v. Roadway Exp., Inc., 334 Pa. Super. 295 (Pa. Super. Ct. 1984) (absolute privilege doctrine for defamatory publications)
Sciandra v. Lynett, 409 Pa. 595 (Pa. 1963) (discussion of absolute immunity for certain communications)
U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914 (3d Cir. 1990) (burden on defendant to prove privilege exists)
Miketic v. Baron, 675 A.2d 324 (Pa. Super. Ct. 1996) (elements and scope of conditional privilege in Pennsylvania)
R. v. Commonwealth, Dep’t of Pub. Welfare, 636 A.2d 142 (Pa. 1994) (Pennsylvania recognition of reputation as a protected interest)