Arbitrators, Like Judges, Are Immune from Libel Lawsuits Based on Their Opinions

[UPDATE 12/5/2023: See the end of the post for links to, and an excerpt from, Seltzer's arguments.]

[UPDATE 4/17/2024: In March, the D.C. Circuit affirmed the dismissal on statute of limitations grounds, without having to reach the arbitral immunity question.]

From today's decision by Judge Jia Cobb in Seltzer v. Financial Industry Regulatory Authority:

Plaintiff Susan Seltzer participated in an arbitration proceeding before the Financial Industry Regulatory Authority (FINRA). The arbitration concluded with a written award that was published online. Seltzer alleges that the award defamed her by incorrectly describing her actions in the arbitration proceeding. She also contends that FINRA took actions to "tag" the award to her name in a Google search. Seeking to recover for the harms she allegedly suffered from the publication of those statements, Seltzer sued FINRA….

The Court can make out the following from Seltzer's allegations. The events giving rise to this case involve an arbitration Seltzer initiated in FINRA's arbitration forum in 2017. The arbitration panel issued a written award dismissing Seltzer's claim. The award included some descriptions of the arbitration proceedings and characterized Seltzer as acting "vicious[ly]" and making "ad hominem attacks" against other parties, among other things. Seltzer acknowledges that FINRA's Codes of Arbitration Procedure requires that it make all arbitration awards publicly available. Accordingly, FINRA posted the arbitration award online…. Seltzer knew about the statements as early as November 6, 2018 ….

Seltzer also alleges that on July 13, 2020, FINRA began "publish[ing] the false and defamatory award tagged to [her] name in a Google Search."  Seltzer does not clearly explain how she claims FINRA did this, but she seems to allege that FINRA was responsible for the award appearing in Google searches of her name. She alleges that in 2022, FINRA created "knowledge graphs" that also linked the "defamatory award" to her. Her Complaint includes allegations that FINRA altered the complaint that she filed in the arbitration by removing the names of certain individuals, but she does not allege that FINRA altered any allegedly defamatory statements in the award.

The court held that plaintiff's claims were barred by D.C.'s one-year statute of limitations for libel claims:

Seltzer tries to avoid the statute of limitations problem by alleging that FINRA somehow linked the award to her on the web, or otherwise caused the award to appear in Google search results for her name and business, in 2021 and 2022, well after FINRA first posted the award. Seltzer contends that by manipulating Google search results to "tag" the award to online searches that include her name, FINRA republished the defamatory statements (or caused them to be republished) and thus restarted the statute of limitations clock.

The Court disagrees. In the District of Columbia, the "single publication" rule governs the statute of limitations for defamatory statements. Under this rule, the statute of limitations begins to run on the date the statement is published or is "first generally available to the public." The statute of limitations does not restart simply because "[c]opies of the original" are made, as such copies are "still part of the single publication." However, the statute of limitations will restart if the statement is republished in a "a new publication" that is intended to "reach a new audience." Although this rule is most easily applied to traditional media, courts resolving claims for web-based defamation have found that "a statement on a website is not republished unless the statement itself is substantively altered or added to, or the website is directed to a new audience." …

Certainly, the statute of limitations does not restart every time that Seltzer performs a Google search and can pull up the arbitration award or other information about her. The award is available on the same online portal and has not been republished. Even taking Seltzer's factual assertions as true, she seems to describe Google's search engine operating as it normally does. There is nothing surprising or nefarious about Seltzer's allegation that when she enters "FINRA Awards Seltzer" into the Google search engine, the arbitration award and other results relating to Seltzer appear. And if the Court has misunderstood Seltzer's allegations, FINRA has not republished the arbitration panel's conclusions to a "new audience" simply because a third-party search engine brings up a previously published award when a user searches related key terms….

And the court held that FINRA was in any event protected by arbitral immunity:

"Judges, advocates, and witnesses" enjoy "absolute immunity" when acting in their official capacity "because of the special nature of their responsibilities" and because the "loser in one forum will frequently seek another, charging the participants in the first with unconstitutional animus" or other wrongs. Absolute immunity is thus "necessary to assure judges, advocates, and witnesses can perform their respective functions without harassment or intimidation." Courts in this District, in agreement with most circuit courts that have considered the issue, have extended this privilege to cover both individual arbitrators and arbitration forums because of their quasi-judicial nature.  The Court is persuaded by this precedent and finds that FINRA is immune from suit….

UPDATE 12/5/2023: You can read Seltzer's argument to the district court here, and her  appellate statement of issues here. An excerpt from the statement of issues, though you can read the entire filings (which also discusses the statute of limitations, arbitral immunity, and more) at the links:

IV. Tort of Defamation in the Digital Age

1. Misunderstanding of Google Tags and Defamatory Republication: Did the district court err in its understanding of the intentional use of Google tags by FINRA, failing to recognize their potential role in the alleged defamatory republication of content about Mrs. Seltzer, thereby reaching a new and broader audience?

2. Recognition of Defamation Evidence in Arbitration Award: Did the district court overlook clear evidence of defamation in the FINRA arbitration award against Mrs. Seltzer, particularly given email evidence that the removal of the Panel Chair was orchestrated by FINRA's Director of Arbitration, contrary to allegations of 'vicious' behavior by Mrs. Seltzer, thus indicating a known defamation perpetuated by FINRA through denying her constitutional right to be heard?

3. Negligent Dissemination of False Information: Did the Court err by not recognizing that the knowing dissemination of false information on digital platforms by an entity like FINRA might constitute negligence or reckless disregard, especially considering evolving public policy towards enhanced consumer protection and considering the significant harm imposed upon Mrs. Seltzer?

Note: Google tags, far from being incidental, are tools actively used in digital marketing and SEO strategies, potentially influencing the visibility and association of online content.

4. Active vs. Passive Dissemination Discrepancy: Did the lower court fail to differentiate between passive online availability and the active, intentional use of Google Tags linked to Mrs. Seltzer's name in disseminating the arbitration award, thereby misinterpreting the nature of the dissemination?

5. Violation of FINRA Rule 12904(h) Through Active Dissemination: Did the lower court neglect to address the violation of FINRA Rule 12904(h), originally intended for passive dissemination of awards, in the context of FINRA's transition to active dissemination methods, such as individual tagging for awards?

6. Incompatibility of FINRA's Actions with the Exchange Act: Given the SEC's approval of the public posting of awards to aid investor confidence, does FINRA's application of these postings, which has led to defamatory and harassing consequences for an investor like Mrs. Seltzer, contravene the intended spirit of the Exchange Act by creating a chilling effect on investors' willingness to file complaints against member firms?