Leznik v. Lincoln Financial Advisors Corporation

Background

Jeffrey Lesnik sued Lincoln Financial Advisors Corporation over the termination of his relationship with the firm. His claims included bankruptcy discrimination, unjust enrichment, defamation or slander per se, and tortious interference with prospective economic advantage. The parties disputed whether Lesnik was an employee or an independent contractor; the court expressly took no position on that issue because it was not necessary to decide the motions.

The parties filed cross-motions for summary judgment. Summary judgment is a ruling without a trial when the evidence shows that no genuine dispute exists about a fact important to the case. The court denied Lincoln Financial’s motion based on judicial estoppel, a doctrine that can prevent a party from taking positions in different legal proceedings that are clearly inconsistent.

Bankruptcy Discrimination

Lesnik filed for Chapter 7 bankruptcy on July 20, 2017. After he was discharged from Lincoln Financial, he amended a bankruptcy schedule to correct the valuation of property, but the amended schedule did not list his bankruptcy-discrimination claim. Lincoln Financial argued that Lesnik should be barred from pursuing that claim because of the bankruptcy filing.

The court rejected that argument. It held that the amended schedule was not clearly inconsistent with Lesnik’s position in this case, that the bankruptcy court had not adopted a position that included this claim, and that Lincoln Financial had not shown an unfair advantage. Lincoln Financial’s motion for summary judgment on judicial estoppel was therefore denied.

The parties also cross-moved for summary judgment on the substance of the bankruptcy-discrimination claim under Section 525(b) of the Bankruptcy Code. That provision prohibits an employer from terminating or discriminating against an employee solely because the person is or has been a bankruptcy debtor. Lincoln Financial argued that other concerns, including financial fitness and sales practices, contributed to Lesnik’s termination. Lesnik argued that Lincoln Financial subjected him to an internal review and terminated him solely because he filed for bankruptcy.

The court concluded that the competing evidence created genuine factual disputes about whether Lesnik was discriminated against or terminated solely because of his bankruptcy filing. It did not decide the parties’ disagreement about how to interpret the word solely. Both summary-judgment motions on bankruptcy discrimination were denied, so that claim requires a trial.

Unjust Enrichment

Lesnik alleged that Lincoln Financial was unjustly enriched by retaining employer contributions to the Internal Revenue Service, unemployment compensation, and workers’ compensation because he had been classified as an independent contractor. The court rejected that theory, stating that any remedy for taxes Lesnik paid in excess of what he would have paid as an employee would lie with the IRS and other taxing authorities, not Lincoln Financial.

Lesnik also proposed that Lincoln Financial was unjustly enriched by inheriting his client relationships and the commissions they generated. The court noted that this theory was not stated in the complaint and lacked merit because Lesnik was not deprived of anything and had no preexisting right to the fees or commissions. Lincoln Financial’s motion for summary judgment on unjust enrichment was granted.

Defamation

Lesnik challenged statements in a Form U5 that Lincoln Financial filed with the Financial Industry Regulatory Authority describing the reasons for his termination. He also relied on alleged statements by another representative to one of Lesnik’s former clients.

The court held that statements made by an employer on Form U5 are absolutely privileged against defamation claims under New York law. As to the alleged statement to the former client, Lesnik did not provide evidence from the client or representative. The court found that the supervisor’s testimony about what the client had told him was hearsay and could not be used to defeat summary judgment. Lincoln Financial’s motion for summary judgment on defamation was granted.

Tortious Interference

Lesnik claimed that Lincoln Financial interfered with his prospective economic relationships by assigning his clients to another broker, filing a defamatory Form U5, and ending the relationship rather than allowing him to resign voluntarily.

The court held that the claim failed for two separate reasons. First, Lesnik did not identify a specific prospective business relationship with which Lincoln Financial interfered. Second, he did not identify conduct that was criminal or independently tortious, as New York law requires in the circumstances described by the court. The court also stated that the termination of Lesnik’s at-will relationship with Lincoln Financial did not support the claim. Lincoln Financial’s motion for summary judgment on tortious interference with prospective economic advantage was granted.

Disposition

The court stated that Lincoln Financial’s motion for summary judgment was granted in part and denied in part. More specifically, its motion was denied on bankruptcy discrimination and granted on unjust enrichment, defamation, and tortious interference with prospective economic advantage. Lesnik’s motion for summary judgment was denied. The court directed the Clerk to close the two motion docket entries and scheduled a status conference for June 22, 2020.