Constantakis, K. v. Bryan Advisory ( 2022 )

J-S38014-21
2022 PA Super 81KATHYRN A. CONSTANTAKIS : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
BRYAN ADVISORY SERVICES, LLC :
AND RICHARD G. BRYAN :
: No. 533 WDA 2021
Appellants :
:
WILLIAM VESCIO AND BRYAN :
VESCIO :
v. :
:
:
BRYAN ADVISORY SERVICES, LLC :
AND RICHARD G. BRYAN :
:
Appellants :
Appeal from the Order Entered April 21, 2021
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): GD-21-001965,
GD-21-002478
KATHYRN A. CONSTANTAKIS : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
BRYAN ADVISORY SERVICES, LLC :
AND RICHARD G. BRYAN :
: No. 1034 WDA 2021
Appellants :
:
WILLIAM VESCIO AND BRYAN :
VESCIO :
v. :
:
:
:
J-S38014-21
BRYAN ADVISORY SERVICES, LLC :
AND RICHARD G. BRYAN :
:
Appellants
Appeal from the Order Entered April 21, 2021
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): GD-21-001965,
GD-21-002478
BEFORE: BENDER, P.J.E., DUBOW, J., and COLINS, J.*
OPINION BY BENDER, P.J.E.: FILED: MAY 5, 2022
Richard G. Bryan (“Mr. Bryan”) and Bryan Advisory Services, LLC
(“BAS”) (collectively “Appellants”) appeal from the orders entered by the
Court of Common Pleas of Allegheny County on April 21, 2021, granting the
requests for emergency special relief in the form of preliminary injunctions
filed by Kathryn A. Constantakis and Bryan Vescio (collectively “Appellees”).
After careful review, we affirm in part, reverse in part, and remand with
instructions.1
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* Retired Senior Judge assigned to the Superior Court.
1 On March 18, 2022, Faegre Drinker Biddle & Reath LLP (“Faegre Drinker”)
filed a petition to withdraw as counsel for Appellants, which was deferred to
this panel. Faegre Drinker assures that good cause exists for the filing of its
petition pursuant to Pennsylvania Rule of Professional Conduct 1.16(b)(5)-(6).
See Pa. Rule of Prof. Conduct 1.16(b)(5), (6) (providing that “a lawyer may
withdraw from representing a client if … the client fails substantially to fulfill
an obligation to the lawyer regarding the lawyer’s services and has been given
reasonable warning that the lawyer will withdraw unless the obligation is
fulfilled[,]” or if “the representation will result in an unreasonable financial
burden on the lawyer or has been rendered unreasonably difficult by the
client”). We remand this petition for consideration by the trial court.
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The trial court summarized the relevant factual and procedural
background of these matters in its Pa.R.A.P. 1925(a) opinion, as follows:
I. The Parties
[BAS] is a limited liability company dually incorporated under the
laws of the Commonwealth of Pennsylvania, with a registered
business address at 125 Technology Drive, Suite 105,
Canonsburg, Washington County, Pennsylvania 15057. Mr. Bryan
is President and Chief Compliance Officer of Bryan Funding, Inc.,
which is under common control with BAS, and both are owned by
Mr. Bryan.
… Kathryn A. Constantakis (“Ms. Constantakis”), William Vescio
and Bryan Vescio[] are all associated through Vescio Asset
Management, LLC (“VAM”), a limited liability company located at
Waterfront II Office Building, 2100 Georgetown Drive, Suite 304,
Sewickley, [Pennsylvania] 15243. Ms. Constantakis is an
Investment Adviser Representative (“IAR”). She has been
employed with VAM since October 2012[,] in her role as a Senior
Portfolio Manager. William Vescio is the sole owner and managing
member of VAM. Bryan Vescio is the Vice President of Operations
and Investment Manager at VAM, and the son of William Vescio.
II. Factual and Procedural Background
VAM is currently identified as a branch office of Bryan Funding,
Inc. From approximately August 2010 until January 2021, VAM
provided investment management services to clients through
BAS, an [sic] Securities Exchange Commission (“SEC”)-Registered
Investment Adviser (“RIA”). As the RIA under which VAM
operated, BAS provided VAM with compliance services, including
receiving payments from VAM clients and monitoring VAM emails
under bryanfunding.com. Other than its supervisory
responsibilities, BAS was not involved in the day-to-day
investment management services that VAM provides.
Ms. Constantakis is the Senior Portfolio Manager at VAM, and as a
condition of her employment, BAS directed Ms. Constantakis to
register with [the] Financial Industry Regulatory Authority
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(“FINRA”) as a broker.[2] Ms. Constantakis thereafter registered
with FINRA as a broker from April 2016 through November 2019[,]
until Bryan Funding, Inc. terminated its registration as a broker-
dealer and the registration of Ms. Constantakis as a broker. As
noted above, William Vescio is the sole owner and managing
member of VAM, and Bryan Vescio is the Vice President of
Operations and Investment Manager at VAM.
In approximately December [of] 2020, VAM applied for
registration as an RIA. VAM intended to establish itself as a new
advisory firm separate and independent from BAS. In tandem
with that process, the administrative assistant of VAM created new
firm letterhead, e-mail addresses, and prototype invoices in
anticipation of its eventual registration so that all invoices would
be ready for finalization when VAM received its SEC registration.
VAM’s administrative assistant sent the prototype invoices for
review using the BAS interoffice e-mail. Mr. Bryan was able to
access and view the prototypes in the email. Upon seeing the
protype [sic] invoices, Mr. Bryan and BAS were alarmed, and
subsequently conducted a physical audit of VAM’s office.
According to Mr. Bryan, if those invoices had actually been sent to
BAS clients, BAS clients would have been defrauded into diverting
fees to VAM that were contractually owed to BAS.
On or about January 13, 2021, Appellees learned that Mr. Bryan
filed [Uniform Termination Notices for Securities Industry
Registration (“Form U5”)3] accusing William Vescio, Bryan Vescio,
and Ms. Constantakis of unspecified SEC violations. The Form U5s
contain allegations that William Vescio, Bryan Vescio, and Ms.
Constantakis actually sent out the protype [sic] invoices with
intent to defraud clients. Mr. Bryan also filed an Investment
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2“FINRA is responsible for regulatory oversight of all securities firms that do
business with the public[] and has the power to initiate a disciplinary
proceeding against any FINRA member for violating any FINRA rule.”
NASDAQ OMX PHLX, Inc. v. PennMont Secs., 52 A.3d 296, 310 (Pa.
Super. 2012) (internal citation, quotation marks, and ellipses omitted).
3 FINRA requires the use of Form U5 to update the Investment Adviser
Registration Depository (“IARD”), “an electronic filing system for investment
advisers sponsored by the SEC and [the] North American Securities
Administrators Association (‘NASAA’),” regarding the termination of IARs and
the reason for their termination. Appellants’ Brief, 10/1/21, at 5-6 (citations
omitted).
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Adviser Public Disclosure (“IAPD”) concerning Ms. Constantakis.
The IAPD explains that a termination is disclosed when the IAR
was discharged after allegations were made that accused the IAR
“of violating investment-related statutes, regulations, rules or
industry standards of conduct; fraud or the wrongful taking of
property….” The IAPD which Mr. Bryan filed for Ms. Constantakis
contains essentially the same allegations as the Form U5s. Like
the Form U5, the IAPD is publicly available.
BAS and Mr. Bryan blocked VAM’s ability to access any of its client
accounts and left VAM without a platform on which to operate,
effectively halting the ability of Appellees to provide direct
financial services and fulfill fiduciary obligations to clients.
Additionally, BAS and Mr. Bryan wrote letters to VAM’s clients
informing them that it had terminated the employment of William
Vescio, Bryan Vescio and Ms. Constantakis. On or about January
21, 2021, VAM finalized its registration with the SEC as an
investment adviser.
On March 8, 2021, William and Bryan Vescio filed a complaint at
GD[-]21-001965, which alleged breach of contract, tortious
interference with contractual relations, and defamation. Then, on
March 17, 2021, Ms. Constantakis filed a complaint at GD[-]21-
002478, which also alleged a count of tortious interference with
contractual relations and another count of defamation. Both
complaints name [BAS] and [Mr.] Bryan as defendants.
Appellees maintain that, as a result of the allegations in the Form
U5s and the IAPD, Appellants are (1) interfering with current and
potential future contractual relations with clients; (2) interfering
with Appellees’ ability to obtain IAR registration with VAM or
another RIA; (3) interfering with the ability of Appellees to be
approved by an investment management platform to service such
clients; (4) interfering with Appellees’ ability to obtain
employment (presently or in the future) that requires FINRA or
IAR registration or approval; and (5) generally interfering with
Appellees’ professional reputation in a manner that does, and will,
interfere with their ability to be employed.
On March 31, 2021, this court consolidated the actions at GD[-
]21-001965 and GD[-]21-002478, and assigned them upon
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motion to the Commerce and Complex Litigation Center.[4]
Thereafter, this court held a multi-day evidentiary hearing on
Appellees’ motions for special injunctive relief. During the
hearing, despite having several months to investigate the
allegations contained in the Form U5s and the IAPD, this court
found that Appellants failed to present any evidence that Bryan
Vescio or Ms. Constantakis violated any investment-related
statutes, regulations, rules, and/or industry standards of conduct.
Additionally, this court found that, even if the VAM prototype
invoices were sent out to BAS clients prior to the filing of the Form
U5s and IAPD report, Appellants failed to demonstrate that Bryan
Vescio or Ms. Constantakis had anything to do with the alleged
event. Beyond valuing accounts and verifying fee calculations,
Bryan Vescio demonstrated that he had no involvement in creating
or sending invoices to clients: [H]e never saw them and did not
have authority to prepare or transmit them. Similarly, Ms.
Constantakis demonstrated that she never created, sent, or
collected invoices in the name of VAM. Finally, Mr. Bryan’s text
messages demonstrate that he was willing to amend the Form U5s
so long as the parties came to an agreement, and Mr. Bryan could
somehow recapture William Vescio’s and VAM’s clients.
On April 21, 2021, following the conclusion of the multi-day
hearing, this court granted Ms. Constantakis’[s] and Bryan
____________________________________________
4 Although the trial court purported to consolidate Appellees’ two separate
cases, complete consolidation could not have occurred because there is no
complete identity of parties in these cases. See Malanchuk v. Tsimura, 137
A.3d 1283, 1288 (Pa. 2016) (“[C]omplete consolidation (or merger or fusion
of actions) does not occur absent a complete identity of parties and claims;
separate actions lacking such overlap retain their separate identities and
require distinct judgments; these principles pertain equally to appealability
determinations; and they continue to operate even in the face of an order
purporting to consolidate the actions ‘for all purposes.’”); Azinger v.
Pennsylvania R. Co., 105 A. 87, 88 (Pa. 1918) (“Where separate actions in
favor of or against two or more persons have arisen out of a single transaction,
and the evidence by which they are supported is largely the same, although
the rights and liabilities of parties may differ, it is within the discretion of the
trial judge to order all to be tried together, though in every other respect the
actions remain distinct and require separate verdicts and judgments.”). Thus,
we conclude the trial court properly exercised its discretion in consolidating
these two matters for administrative convenience, but because the parties are
not identical, the consolidation order does not supplant the requirement for
the entry of separate judgments in each case.
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Vescio’s requests for injunctive relief. The injunctions enjoined
Appellants from making false, unsubstantiated, and defamatory
statements about Ms. Constantakis and Bryan Vescio. This court
further ordered that the defamatory language in the Form U5s and
IAPD be expunged, and required Appellants to file neutral,
amended Form U5s for Ms. Constantakis and Bryan Vescio, as well
as a neutral, amended IAPD for Ms. Constantakis.[5]
On April 29, 2021, Appellants appealed to the Superior Court of
Pennsylvania from the [Injunction Orders].[6] On May 17, 2021,
Appellants filed their Statement of Errors Complained of on
Appeal.
Trial Court Opinion (“TCO”), 8/17/21, at 1-5 (unnecessary capitalization and
footnote omitted).
On July 16, 2021, this Court directed Appellants to show cause as to
why this appeal should not be quashed in whole or in part as to the claims
stemming from GD-21-001965, where no notice of appeal was filed on that
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5 The trial court entered three separate orders dated April 21, 2021, granting
relief with respect to each plaintiff. The orders as to William Vescio and Bryan
Vescio were entered on both dockets. The order as to Ms. Constantakis was
only entered at GD-21-002478. The order regarding William Vescio is not at
issue in this appeal. We further note that the orders regarding Bryan Vescio
and Ms. Constantakis (“the Injunction Orders”) contain almost identical
language, granting Appellees’ motions for emergency special relief, enjoining
Appellants “from making false, unsubstantiated, and defamatory statements”
about Appellees, and requiring Appellants to replace the “defamatory
language” in the Form U5s with “neutral, amended Form U5[s] … in
accordance with Schedule A” attached to the orders, except that the order
pertaining to Ms. Constantakis also requires Appellants to file a neutral,
amended IAPD.
6 Appellants filed only one notice of appeal at GD-21-002478, which was
docketed by this Court at 533 WDA 2021. The notice includes both trial court
docket numbers and purports to appeal from the orders pertaining to both
Bryan Vescio and Ms. Constantakis. The notice further indicates that it was
filed at GD-21-002478 “pursuant to the consolidation order of the Court of
Common Pleas and the instructions of the Department of Court Records.” See
Appellants’ Notice of Appeal, 4/29/21, at 1.
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docket, for failure to comply with Pennsylvania Rule of Appellate Procedure
341(a) and its Note. See Per Curiam Order (“Rule to Show Cause”), 7/16/21
(single page) (citing Pa.R.A.P. 341, Official Note (“Where … one or more orders
resolves issues arising on more than one docket or relating to more than one
judgment, separate notices of appeals must be filed.”); Commonwealth v.
Walker, 185 A.3d 969, 977 (Pa. 2018) (confirming that failure to comply with
Rule 341(a) and its Note shall result in quashal of the appeal)).7, 8
In response, Appellants averred that the trial court and the parties have
treated these matters as one case from the beginning. See Appellants’
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7 Since the issuance of the Rule to Show Cause, our Supreme Court has
expressly overruled the statements in its Walker opinion that indicate the
failure to file separate appeals in compliance with Rule 341(a) “requires the
appellate court to quash the appeal.” Commonwealth v. Young, 265 A.3d
462, 477 n.19 (Pa. 2021) (emphasis in original). The Young Court clarified:
“Rule 341 requires that when a single order resolves issues arising on more
than one docket, separate notices of appeal must be filed from that order at
each docket; but, where a timely appeal is erroneously filed at only one
docket, Rule 902 permits the appellate court, in its discretion, to allow
correction of the error, where appropriate.” Id. at 477.
8 In the Rule to Show Cause, we acknowledged our Supreme Court’s recent
clarification that “filing a single notice of appeal from a single order entered
at the lead docket number for ‘consolidated civil matters where all record
information necessary to adjudication of the appeal exists, and which involves
identical parties, claims and issues, does not run afoul of Walker, Rule 341,
or its Official Note.’” Rule to Show Cause (single page) (quoting Always Busy
Consulting, LLC v. Babford & Company, Inc., 247 A.3d 1033, 1043 (Pa.
2021)). Moreover, we noted, “it does not appear that these cases involve
identical parties, claims and issues.” Id.-8-
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Response to Rule to Show Cause, 7/28/21, at 1-2 (unpaginated).9 In fact,
Appellants state that “less than a month after the complaints were filed, the
[c]ourt directed the cases to be consolidated (not coordinated or otherwise
administratively linked), and GD-21-002478 was designated as the lead
docket.” Id. at 1 (unpaginated).10 Importantly, Appellants noted that,
following consolidation but prior to the entry of the orders from which they
appeal, the Allegheny County Department of Court Records rejected their
attempted filings at the secondary docket of GD-21-001965. See id. at
Exhibit E (“Rejection Notice”) (indicating that the case had been consolidated
at GD-21-002478 and informing Appellants’ counsel that his attempted filing
at GD-21-001965 was rejected because “once a case is consolidated, the
pleadings must only be filed at the lead case number”). Moreover, Appellants’
counsel indicated that he contacted the Department of Court Records in
preparation for the filing of Appellants’ notice(s) of appeal and was instructed
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9 Appellants explained, “the Plaintiffs at both dockets brought the same
challenges to the same alleged conduct of the same Defendants-Appellants.”
Id. at 1 (unpaginated). “The allegations arise out of the same series of
events…. [T]he parties are pursuing the same causes of action, and the court
filings have been mirrored in both actions.” Id.
10 We observe that some confusion was created by the trial court’s
“consolidation” of these cases. Following entry of the consolidation order on
each docket, some documents were filed at only GD-21-001965, some only at
GD-21-002478, and others were filed at both dockets. Although not explicitly
stated in its order, it does appear that the trial court intended to designate
GD-21-002478 as the lead case. See Docket No. GD-21-001965 at 1
(reflecting the following notation in the upper righthand corner: “Case
Consolidated at GD-21-002478[.]”).
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to file only a single notice at GD-21-002478, the lead case number. Id. at 2
(unpaginated). Hence, Appellants requested that we not quash their appeal,
as they “acted in accordance with the information received from the
Department of Court Records and within the physical constraint of being able
to file only on docket GD-21-002478.” Id. (citing Always Busy Consulting,
LLC, 247 A.3d at 1042 (concluding that where the appellant’s attempt to file
separate notices of appeal at separate docket numbers was rejected by the
court on the basis that all filings must be made at the lead docket number in
consolidated matters, such circumstances constitute “a breakdown in court
operations that ordinarily would preclude quashal”)).
Based on Appellants’ response, this Court discharged the rule to show
cause and referred the issue to this panel. Per Curiam Order, 9/2/21 (single
page). The discharge order further directed the trial court prothonotary “to
enter the notice of appeal filed at GD-21-002478 on the docket for GD-21-
001965[,] on or before September 15, 2021.” Id. The trial court
prothonotary complied. Upon receipt of the notice of appeal docketed at GD-
21-001965, this Court assigned that appeal a separate docket number (1034
WDA 2021). We then consolidated the appeals at 533 and 1034 WDA 2021
by per curiam order dated September 27, 2021. See Pa.R.A.P. 513 (“[W]here
the same question is involved in two or more appeals in different cases, the
appellate court may, in its discretion, order them to be argued together in all
particulars as if but a single appeal.”).
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We now consider whether Rule 341(a) and Walker require quashal of
this appeal. While we agree with Appellants that a breakdown in court
operations occurred here,11 Appellants have failed to convince us the
exception to Walker established in Always Busy Consulting, LLC, extends
to this matter where there is no complete identity of parties and, thus, no
consolidation of the underlying cases. See Young, 265 A.3d at 464-65
(concluding the exception to the Walker rule enunciated in Always Busy
Consulting, LLC, “is not broad enough to encompass the present matter[,]”
where the appeal arises from the prosecution of two defendants proceeding
at multiple docket numbers for each defendant and where the trial court
consolidated the docket numbers for trial purposes only);12 Always Busy
Consulting, LLC, 247 A.3d at 1043 (distinguishing consolidated cases
involving complete identity of parties and claims from Walker); Malanchuk,
137 A.3d at 1288 (requiring complete identity of parties and claims for true
consolidation of cases).
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11 See Always Busy Consulting, LLC, supra; Commonwealth v.
Stansbury, 219 A.3d 157, 160 (Pa. Super. 2019) (concluding that
misstatements by the PCRA court as to the manner the appellant could
effectuate an appeal from the PCRA court’s order amounted to “a breakdown
in court operations”).
12 The Young Court emphasized that “parties are not permitted unilaterally to
consolidate matters for appellate review by filing a single notice of appeal from
an order arising on multiple dockets…. [C]onsolidation is a determination that
must be made by the appellate court, at its discretion, absent a stipulation by
all parties to the several appeals.” Young, 265 A.3d at 474 (citing Always
Busy Consulting, LLC, 247 A.3d at 1042).
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Nevertheless, the Young Court stated, “there is another rule with a role
to play in matters like this one: Pa.R.A.P. 902 (manner of taking appeal).”
Young, 265 A.3d at 475. Rule 902 provides:
Failure of an appellant to take any step other than the timely filing
of a notice of appeal does not affect the validity of the appeal, but
it is subject to such action as the appellate court deems
appropriate, which may include, but is not limited to, remand of
the matter to the lower court so that the omitted procedural step
may be taken.
Pa.R.A.P. 902. The rule was revised in 1986 to reflect a change in approach
to formal defects. See id. at Note (“The reference to dismissal of the appeal
has been deleted in favor of a preference toward[] remanding the matter to
the lower court so that the omitted procedural step may be taken, thereby
enabling the appellate court to reach the merits of the appeal.”).
In considering the Commonwealth’s request for an opportunity to
amend its notice of appeal to include a separate notice for each lower court
number in compliance with Walker, the Young Court acknowledged that
“nothing practical is achieved by the reflexive quashal of appeals for easily
corrected, non-jurisdictional defects. Indeed, Rule 902 is designed specifically
to eliminate such quashals as it eliminates the ‘trap’ of failure to perfect an
appeal by making timely notices of appeal ‘self-perfecting.’” Young, 265 A.3d
at 477 (citing Pa.R.A.P. 902, Note; some internal quotation marks omitted).
The Court further opined:
We realize permitting parties to rectify non-jurisdictional
procedural missteps relating to notices of appeal will, for all
practical purposes, largely blunt the bright-line rule the Walker
Court sought to impose with respect to Rule 341(a). However, as
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we also expressly noted in Walker, “[p]rocedural rules should be
construed to give effect to all their provisions, and a single rule
should not be read in a vacuum, especially where there is a
relationship between different rules.”
Id. at 477 (quoting Walker, 185 A.3d at 976 (citations omitted)).
Moreover, this Court has established that we may overlook the
requirements of Walker where a breakdown occurs in the court system and
a defendant was misinformed or misled regarding his appellate rights. See
Commonwealth v. Larkin, 235 A.3d 350, 354 (Pa. Super. 2020); see also
Commonwealth v. Stansbury, 219 A.3d 157, 160 (Pa. Super. 2019) (“We
have many times declined to quash an appeal when the defect resulted from
an appellant’s acting in accordance with misinformation relayed to him by the
trial court.”).
In light of Young and having determined that Appellants’ failure to file
a separate notice of appeal at GD-21-001965 in compliance with Rule 341(a)
was the result of a breakdown in court operations, we decline to quash this
appeal. Additionally, because the trial court has already complied with this
Court’s directions to correct the procedural missteps regarding Appellants’
appeal from the order entered at GD-21-001965, we need not remand for the
filing of amended notices of appeal or other corrective action and, thus, we
proceed with addressing the merits of Appellants’ claims.
Herein, Appellants present the following issues for our review:
1. Did the [trial court] err by granting preliminary injunctions for
alleged defamation in contravention of Art. I, § 7 of the
Pennsylvania Constitution and the First Amendment of the
Constitution of the United States?
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2. Did the [trial court] err when it ordered … [BAS] to file
amended Form[] U5[s] that contain objectively false
statements, even according to Ms. Constantakis’[s] and
[Bryan] Vescio’s pleadings, where those filings would subject
BAS to potential regulatory consequences?
3. Did the [trial court] err by finding that Ms. Constantakis and
[Bryan] Vescio satisfied the requirements for a mandatory
preliminary injunction under Summit Towne Centre[, Inc.]
v. Shoe Show of Rocky Mount, Inc[.], 828 A.2d 995 (Pa.
2003)[,] and Big Bass Community Association v. Warren,
950 A.2d 1137 (Pa. Cmwlth. 2008)?
Appellants’ Brief at 4.
I. Constitutionality of Injunction Orders
We first examine Appellants’ claim regarding the constitutionality of the
Injunction Orders entered against them by the trial court. As Appellants’
challenge presents questions of law, our standard of review is de novo and
our scope of review is plenary. S.B. v. S.S., 243 A.3d 90, 104 (Pa. 2020)
(citing Gentile v. State Bar of Nevada, 501 U.S. 1030, 1038 (1991)
(acknowledging that where First Amendment issues are raised, “an appellate
court has an obligation to make an independent examination of the whole
record in order to make sure that the judgment does not constitute a forbidden
intrusion on the field of free expression”) (internal quotation marks and
citation omitted)).
Preliminarily, we note Article I of the Pennsylvania Constitution consists
of the Pennsylvania Declaration of Rights, which affirms that all citizens “have
certain inherent and indefeasible rights[.]” Pa. Const. Art. I, § 1. Among
those inherent rights are those delineated in Section 7, which addresses
“Freedom of press and speech; libels[,]” and provides:
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The free communication of thoughts and opinions is one of the
invaluable rights of man, and every citizen may freely speak, write
and print on any subject, being responsible for the abuse of that
liberty.
Pa. Const. Art. I, § 7.13 In comparison, the text of the First Amendment of
the federal Constitution provides, in relevant part, that, “Congress shall make
no law respecting an establishment of religion, or prohibiting the free exercise
thereof; or abridging the freedom of speech, or of the press….” U.S. Const.
Amend. I. “It is well settled that a state may provide through its constitution
a basis for the rights and liberties of its citizens independent from that
provided by the [f]ederal Constitution, and that the rights so guaranteed may
be more expansive than their federal counterparts.” Commonwealth v.
Tate, 432 A.2d 1382, 1387 (Pa. 1981). Because our Supreme Court has long
recognized Article I, Section 7 as providing broader freedom of expression
than the federal Constitution, we focus our analysis herein on the Pennsylvania
Constitution. See Pap’s A.M. v. City of Erie, 812 A.2d 591, 603 (Pa. 2002);
____________________________________________
13 The last sentence of Article I, Section 7, which is cited in part by Appellants
infra, is omitted above, as it was declared contrary to the federal Constitution
in Commonwealth v. Armao, 286 A.2d 626 (Pa. 1972). That sentence read:
No conviction shall be had in any prosecution for the publication
of papers relating to the official conduct of officers or men in public
capacity, or to any other matter proper for public investigation or
formation, where the fact that such publication was not
maliciously or negligently made shall be established to the
satisfaction of the jury; and in all indictments for libels the
jury shall have the right to determine the law and the facts,
under the discretion of the court, as in other cases.
Id. at 632 (emphasis added).
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Bureau of Professional and Occupational Affairs v. State Bd. of
Physical Therapy, 728 A.2d 340, 343-44 (Pa. 1999).
First, Appellants assert that the Injunction Orders, which enjoin them
from making false, unsubstantiated, and defamatory statements about
Appellees and direct them to file neutral, amended Form U5s and an amended
IAPD, constitute “unconstitutional prior restraints under both the Pennsylvania
and federal constitutions.” Appellants’ Brief at 27.14 In support of their
argument, Appellants cite a string of cases upholding the long-established
prohibition of prior restraint on the exercise of an individual’s right to freely
communicate thoughts and opinions. See id. at 29-30 (citing, inter alia,
Willing v. Mazzocone, 393 A.2d 1155 (Pa. 1978); Franklin Chalfont
Associates v. Kalikow, 573 A.2d 550 (Pa. Super. 1990); Long v. 130
Market St. Gift & Novelty of Johnstown, 440 A.2d 517 (Pa. Super. 1982)).
Appellants’ argument relies heavily on Willing, in which the Court
emphasized that Article I, Section 7 is designed “[t]o prohibit the imposition
of prior restraints upon the communications of thoughts and opinions, leaving
the utterer liable only for an abuse of the privilege.” Willing, 393 A.2d at
1157 (quoting Goldman Theatres, Inc. v. Dana, 173 A.2d 59, 62 (Pa.
1961)). As summarized by the trial court:
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14 We observe that while Appellants claim the trial court’s granting of
preliminary injunctive relief violated both the Pennsylvania and federal
Constitutions, Appellants focus on Article I, Section 7 in the argument section
of their brief.
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In Willing, two lawyers, Carl M. Mazzocone and Charles F. Quinn
(“the Lawyers”), filed a lawsuit against a former client, Helen
Willing (“Ms. Willing”). [Willing, 393 A.2d] at 1156. The Lawyers
previously assisted Ms. Willing with a workmen’s compensation
matter. Ms. Willing believed that the Lawyers engaged in
misconduct while representing her. Id. In order to protest the
Lawyers’ alleged misconduct, Ms. Willing crafted a “sandwich-
board” sign. Id. On the sign, Ms. Willing hand[-]lettered the
following: LAW FIRM of QUINN MAZZOCONE Stole money from me
and Sold-me-out-to-the INSURANCE COMPANY. Id. On two
separate days, Ms. Willing wore the “sandwich-board” sign and
demonstrated in public by marching back and forth along a well-
traveled pedestrian walkway between two court buildings for
several hours each day. Id. As she marched, Ms. Willing also
pushed a shopping cart with an American flag on it, continuously
rang a cow bell, and blew a whistle to attract as much attention
as possible. Id. With their lawsuit, the Lawyers sought to enjoin
Ms. Willing from engaging in further demonstration. Id.The trial court held multiple hearings and ultimately concluded
that Ms. Willing failed to present any evidence to support her
misconduct allegations against the Lawyers. Accordingly, the trial
court issued an injunction that precluded Ms. Willing from “further
unlawful demonstration, picketing, carrying placards which
contain defamatory and libelous statements and or uttering,
publishing and declaring defamatory statements against … [the
Lawyers].” Id. at 1157. The Superior Court affirmed the trial
court’s decision on appeal. Id. However, the Superior Court
modified the injunction to read, “Helen R. Willing, be and is
permanently enjoined from further demonstrating against and/or
picketing Mazzocone and Quinn, Attorneys-at-Law, by uttering or
publishing statements to the effect that Mazzocone and Quinn,
Attorneys-at-Law stole money from her and sold her out to the
insurance company.” Id. The Supreme Court of Pennsylvania
granted Ms. Willing’s petition for allowance of appeal and reversed
the lower courts’ decisions.
In reversing the lower courts’ decisions, the Supreme Court of
Pennsylvania reasoned that Art. I, § 7 of the Pennsylvania
Constitution is “intended to prohibit prior restraint on
Pennsylvanians’ right to speak.” Id. The Court clarified that the
lower courts’ orders violated Pennsylvania’s prohibition on prior
restraints because the orders precluded Ms. Willing from speaking
her opinion freely in the future. Id. at 1157-58. The Court
explained that injunctive relief that prohibits future speech
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violates the Pennsylvania Constitution, “regardless of whether
that opinion is based on fact or fantasy regarding [the Lawyers’]
professional integrity….” Id. at 1158.
TCO at 6-8 (capitalization in original).
In support of its granting of injunctive relief in the present matter, the
trial court asserts that it “by no means aims to diminish the importance of
Appellants’ constitutional rights to freedom of speech[;]” however, it attempts
to justify its decision by distinguishing this matter from Willing. Id. at 8.
The trial court opined:
First, unlike Willing, this court’s injunctive orders do not involve
prior restraints on speech.[15] In general, prior restraints on
speech involve some kind of control over speech prior to any
publication of the speech at issue. See Times Film Corp. v. City
of Chicago, 365 U.S. 43, 45-46 (1961). Thus, a system of prior
____________________________________________
15The trial court acknowledged that its injunctive orders are comprised of two
aspects. The first portion of its orders enjoins Appellants from making false,
unsubstantiated, and defamatory statements about Ms. Constantakis and
Bryan Vescio. The second dictates that the defamatory language in the Form
U5s and IAPD be expunged and requires Appellants to file neutral, amended
Form U5s for Ms. Constantakis and Bryan Vescio, and a neutral, amended
IAPD for Ms. Constantakis. See id. at 8 n.3. The trial court explained:
The second aspect is the principal means of relief this [c]ourt
determined is necessary in this case, as the current Form U5s and
the IAPD effectively prevent Ms. Constantakis and Bryan Vescio
from working in the investment industry entirely. This [c]ourt
determined the second aspect is not a prior restraint for the
reasons contained in this opinion. While this [c]ourt believes the
first aspect of the injunction orders is merely an extension of the
second aspect, to the extent that the first aspect of this [c]ourt’s
order could be considered a prior restraint on future speech, this
[c]ourt invites the Superior Court to modify the order as it deems
necessary.
Id.- 18 -
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restraint is one that would prevent the communication of speech
from occurring in the first instance. See id. In Willing, the
Supreme Court of Pennsylvania cited to Blackstone when it
discussed the history of the Pennsylvania Constitution and the
importance of Pennsylvania’s prohibition on prior restraints. See
Willing, 393 A.2d at 1157-58. Specifically, the Court cited the
following passage from Blackstone:
The liberty of the press is indeed essential to the nature of
a free state; but, this consists of laying no previous
restraints upon publications, and not in freedom from
censure for criminal matter when published. Every
freeman had an undoubted right to lay what sentiments he
please before the public; to forbid this is to destroy the
freedom of the press; but if he publishes what is
improper, mischievous, or illegal, he must take the
consequence of his own temerity.
Id. at 1158 (emphasis added). The Court’s reference to
Blackstone demonstrates not only that prior restraints are
essential to the nature of a free state, but also that post restraints
are treated differently than prior restraints. Id. Notably, once
speech has been published, the speech and/or the speaker are no
longer immune from consequences, including censure. Id.
Indeed, Art. I, § 7 of the Pennsylvania Constitution also makes
this distinction clear, as it embodies Blackstone’s commentary by
providing that “[t]he free communication of thoughts and opinions
is one of the invaluable rights of man, and every citizen may freely
speak, write and print on any subject, being responsible for the
abuse of that liberty.” Pa. Const. Art. I, § 7 (emphasis added).
Here, Appellants filed the Form U5s and the IAPD prior to this
court’s granting injunctive relief. Because Appellants[] already
published the Form U5s and the IAPD, this court’s orders are
better categrized [sic] as post restraints on speech, rather than
prior restraints. Here, this court issued the post restraints on
speech, and required Appellants[] to amend and update the Form
U5s and the IAPD with regard to Bryan Vescio and Ms.
Constantakis, only after a multi-day evidentiary hearing, at which
Appellants produced no evidence that Bryan Vescio or Ms.
Constantakis violated any investment-related statutes,
regulations, rules, and/or industry standards of conduct. This
court found that, even if the VAM prototype invoices were sent out
to BAS clients prior to the filing of the Form U5s and IAPD report
(a fact which is still questionable)[,] Appellants failed to
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demonstrate that Bryan Vescio or Ms. Constantakis had anything
to do with that alleged event. Beyond valuing accounts and
verifying fee calculations, Bryan Vescio demonstrated that he had
no involvement in creating or sending invoices to clients: [H]e
never saw them and did not have authority to prepare or transmit
them. Similarly, Ms. Constantakis demonstrated that she never
created, sent, or collected invoices in the name of VAM. Moreover,
Mr. Bryan’s text messages demonstrate that he was willing to
amend the filings so long as the parties came to an agreement,
and Mr. Bryan could somehow recapture William Vescio’s and
VAM’s clients.
Based upon the evidence presented at the multi-day hearing, this
court concluded that Appellants originally filed the Form U5s and
IAPD relating to Bryan Vescio and Ms. Constantakis with reckless,
and potentially malicious, allegations that, as far as this court
could surmise, had no basis in fact whatsoever. Thus, this court’s
orders are, at most, merely post restraints on improper,
mischievous, unprivileged, and unjustifiable speech. As the
Supreme Court of Pennsylvania recognized in Willing, such
consequences were explicitly contemplated by both Blackstone
and Art. I, § 7 of the Pennsylvania Constitution.
Id. at 8-10 (unnecessary capitalization omitted).
We disagree with the trial court’s categorizing the first aspect of its
Injunction Orders as “post restraints.” To the extent that the orders enjoin
Appellants “from making false, unsubstantiated, and defamatory statements”
about Appellees, we conclude that this language clearly restricts Appellants’
future speech and, thus, comprises an unconstitutional prior restraint. See
Willing, 393 A.2d at 1157 (concluding that the orders enjoining the appellant
from further demonstrating and/or picketing were clearly prohibited by Article
I, Section 7, and by Goldman Theatres, supra, regardless of the
truthfulness of her speech). Accordingly, we direct the trial court to strike
said language from the Injunction Orders.
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As to the remaining portion of the Injunction Orders, which pertains to
the expungement of defamatory language and the amendment of the
previously filed Form U5s and IAPD, Appellants have failed to convince us that
such injunctive relief constitutes a ‘prior restraint’ as prohibited by Article I,
Section 7, Willing, and Goldman Theatres. A ‘prior restraint’ involves an
order forbidding future communications. See Alexander v. U.S., 509 U.S.
544, 550 (1993) (explaining that the term ‘prior restraint’ is used “to describe
administrative and judicial orders forbidding certain communications when
issued in advance of the time that such communications are to occur”). In
fact, the term ‘prior restraint’ in and of itself implies a restraint imposed on
communications prior to or before the communications occur. As noted by
the trial court, in Willing, the injunction orders were found to violate
Pennsylvania’s prohibition on prior restraints “because the orders precluded
Ms. Willing from speaking her opinion freely in the future.” TCO at 8 (citing
Willing, 393 A.2d at 1157-58 (emphasis added)). Moreover, the cases cited
by Appellants in support of their argument similarly involve the overturning of
orders that restricted an individual’s right to freely communicate their
thoughts and feelings in the future.16
____________________________________________
16 See, e.g., Organization for a Better Austin v. Keefe, 402 U.S. 415,
418-19 (1971) (holding that a state court’s injunction prohibiting the
distribution of leaflets critical of the respondent’s real estate practices was an
unconstitutional prior restraint on speech, while noting that the injunction
operated “not to redress alleged private wrongs, but to suppress …
distribution of literature …”) (emphasis added); Franklin Chalfont, 573 A.2d
(Footnote Continued Next Page)
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Here, the trial court ordered Appellants to expunge the defamatory
language in the January 13, 2021 Form U5s and IAPD and to file neutral,
amended forms, only after conducting a two-day evidentiary hearing, at which
the trial court found Appellants failed to produce any evidence in support of
the allegations contained in those forms. The Injunction Orders were entered
on April 21, 2021, months after the disputed communications had taken
place, and only after the trial court made a factual finding that Appellants
filed the Form U5s and IAPD “with reckless, and potentially malicious,
allegations that … had no basis in fact whatsoever.” TCO at 10. See also id.(referring to the allegations in the forms as “improper, mischievous,
unprivileged, and unjustifiable speech”). Thus, we agree with the trial court
that the second portion of its Injunction Orders does no more than require
Appellants to amend and update forms which precipitated the underlying
action. See Willing, 393 A.2d at 1157-58 (recognizing that such
consequences were contemplated by both Blackstone and Article I, Section
____________________________________________
at 557-58 (concluding that the injunction orders which prevented the
appellants from further picketing, displaying signs, and publishing statements
tending to impute the appellee’s lack of skill, competence, or integrity should
not have been granted as such activities “are clearly protected from prior
restraint under Pennsylvania law”); Johnson v. Pilgrim Mut. Ins. Co., 425
A.2d 1119, 1123 (Pa. Super. 1981) (determining that, “[h]owever noble its
intended purpose,” the portion of the lower court’s order which enjoins the
appellant from further cautioning or advising its policyholders through the use
of printed flyers attached to its policies and/or sending letters were improperly
issued “as that type of restraint is clearly prohibited by the Pennsylvania
Constitution, Art. I, [§] 7, by Goldman Theatres …, and by Willing …”).
Notably, in each of these cases, the injunction orders had no effect on the
communications which had precipitated the filing of the underlying actions.
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7). Hence, Appellants are due no relief on their prior restraint claim as it
pertains to the remaining portion of the Injunction Orders.
Next, Appellants argue that a defamation action requires a trial before
a jury of one’s peers and that the two partial days of hearings held by the trial
court in this matter “simply do not satisfy the constitutional requirements of
a jury trial. Therefore, the [trial court’s] orders plainly violate both the
Pennsylvania and the federal constitutions.” Appellants’ Brief at 31 (citing Pa.
Const. Art. I § 7 (“[A]nd in all indictments for libels the jury shall have the
right to determine the law and the facts, under the direction of the court, as
in other cases[.]”)).17
We recognize that the right to a jury trial, as preserved by Article I,
Section 6, extends to all causes of action that existed at the time the
Pennsylvania Constitution was adopted. Mishoe v. Erie Ins. Co., 824 A.2d
1153 (Pa. 2003) (citations omitted). The Pennsylvania Constitution does not
prescribe, however, at what stage of an action a trial by jury, if demanded,
must be had. See Application of Smith, 112 A.2d 625, 629 (Pa. 1955). The
only purpose of Article I, Section 6 “is to secure the right of trial by jury before
rights of person or property are finally determined.” Id. (emphasis in
original).
____________________________________________
17 As noted supra, the language cited by Appellants in support of their
argument was found to be unconstitutional. See Pa. Const. Art. I, § 7, Note
(citing Armao, supra). Appellants should have more appropriately cited
Article I, Section 6 of the Pennsylvania Constitution, which provides for the
right to a jury trial. See Pa. Const. Art. I, § 6 (“Trial by jury shall be as
heretofore, and the right thereof remain inviolate.”).
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Given that no final determination has yet been made on the underlying
causes of action in this matter, we reject Appellants’ argument that the
Injunction Orders have deprived them of their right to a jury trial. In reaching
this conclusion, we emphasize that “[t]he purposes of a preliminary injunction
are to preserve the status quo and prevent imminent and irreparable harm
which might occur before the merits of the case can be heard and
determined.” Soja v. Factoryville Sportsmen’s Club, 522 A.2d 1129, 1131
(Pa. Super. 1987). We agree with the trial court that it was necessary to grant
injunctive relief before final disposition in this case, in order to preserve
Appellees’ ability to work in their chosen field. See TCO at 12; see also id.
at 10-11 (enumerating the significant harms that would be endured by
Appellees if the Form U5s and the IAPD are not corrected and noting that
Appellants’ actions have effectively black-balled Appellees from working in the
financial services industry).
“The procedural steps which must be followed when a preliminary
injunction is sought are enumerated in Rule 1531 of the Pennsylvania Rules
of Civil Procedure. Ordinarily, a preliminary injunction may be issued only
after a written notice and hearing.” Soja, 522 A.2d at 1131 (citing Pa.R.Civ.P.
1531(a)). Moreover, as the trial court noted, Rule 1531(f) specifically outlines
procedures for preliminary or special injunctions involving freedom of
expression. See Pa.R.Civ.P. 1531(f)(1) (providing the defendant the right to
demand a final hearing within three days following the issuance of a
preliminary injunction involving freedom of expression). We discern that the
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trial court properly entered the Injunction Orders in the instant matter
following notice and an evidentiary hearing, in compliance with the
Pennsylvania Rules of Civil Procedure. No final hearing was requested by
Appellants.
After the award of a preliminary injunction, the case proceeds for a
disposition on the merits. Soja, 522 A.2d at 1131. “This final determination
is independent of the court’s prior determination as to the plaintiff’s right to
preliminary relief.” Id. Thus, we agree with the trial court that the remaining
portions of the Injunctive Orders “do no more than preserve the status quo
while this case proceeds to a final determination on the merits[,] which can
still be determined by a jury.” TCO at 12. Appellants have not been deprived
of their right to a jury trial, as they still have the opportunity to fully litigate
the underlying claims.
II. Amendment of the Form U5s and the IAPD
In their second claim, Appellants aver that the trial court erred in
directing them to file “neutral,” amended Form U5s in accordance with
Schedule A, attached to the injunction orders — and in the case of Ms.
Constantakis, a neutral, amended IAPD — as the Injunction Orders improperly
compel speech that is “demonstrably false.” Appellants’ Brief at 33, 52.
Appellants acknowledge that “both FINRA and Pennsylvania law require
updates to Form U5s if the forms are inaccurate or incomplete based on new
information.” Id. at 39. They argue, however, “it does not follow that a
preliminary injunction mandating a plaintiff’s version of disputed facts is a
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permissible remedy.” Id. at 40-41. Rather, Appellants suggest that the
regulations require updates from their perspective, i.e., what Appellants know
and/or believe to be true, and not from the perspective of Appellees. Id. at
41. They particularly take issue with the trial court’s proposed, amended
language, which suggests that Appellees were “permitted to resign” rather
than “terminated[,]” and that Appellees were “not under internal review for
fraud or wrongful taking of property, or [for] violating investment-related
statutes, regulations, rules or industry standards of conduct.” Id. at 52-53;
see also id. at 43 (citing N.T. Hearing, 4/9/21, at 36-37 (Mr. Bryan’s
testifying that he still firmly believes the Form U5s he filled out are accurate)).
Appellees counter that the injunctive relief requiring the filing of neutral,
amended Form U5s and an amended IAPD is consistent with the regulatory
obligations imposed upon Appellants,18 as well as the evidence presented at
trial. They contend that Appellants continue to fail in their obligation to amend
the forms in light of the lower court’s findings and lack of evidence to support
those statements. See Ms. Constantakis’s Brief at 33; Bryan Vescio’s Brief at
27. FINRA requires firms to provide “timely, complete and accurate”
information on the Form U5 and IAPD and to amend and update these forms
____________________________________________
18Appellees note that the Pennsylvania Securities Act of 1972 (70 P.S. §1-
101 et seq.) and the FINRA Guidelines set forth obligations of a reporting
entity or supervisor concerning a Form U5 and/or IAPD. See Ms.
Constantakis’s Brief at 34 (citing 70 P.S. § 1-304(c) (requiring the prompt
amendment of such forms if the information contained in the document “is or
becomes inaccurate or incomplete in any material respect”)) (some citations
omitted).
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when new information is identified. See Bryan Vescio’s Brief at 23 (citations
omitted). Appellees assert that amending the Form U5s to indicate they were
“permitted to resign” rather than “terminated” will restore the parties to their
status as it existed immediately prior to the wrongful conduct at issue. Id. at
30. Additionally, they contend that any internal review by Appellants was
aimed at actions carried out solely by William Vescio, not Appellees. Id. at
31 (stating that clear evidence was provided during the evidentiary hearings
to establish Appellees were not involved with the invoicing of clients).
The trial court rejected Appellants’ argument that its orders requiring
amendment of the Form U5s and the IAPD constitute impermissible compelled
speech:
In their post[-]hearing brief, Appellants admit that they had a
regulatory duty to file the Form U5s and the IAPD in the first
instance. In addition to Appellants’ regulatory duty to file Form
U5s in certain instances, FINRA’s Form U5 Uniform Termination
Notice for Securities Industry Registration General Instructions
provides that “[f]irms are under a continuing to [sic] obligation to
amend and update Section 7 (Disclosure Questions) until final
disposition, including reportable matters that occur or became
known after initial submission of [the Form U5].”5 Just as
Appellants contend they were required to file the Form U5s and
the IAPD, Appellants are also required to amend and update the
filings before final disposition. Id.
5FINRA’s Form U5 Uniform Termination Notice for Securities
Industry Registration General Instructions, accessible at
https://www.finra.org/sites/default/files/AppSupportDoc/p
015113.pdf (emphasis added).
Here, Appellants had several months to investigate the
accusations contained in the Form U5s and the IAPD.
Nonetheless, Appellants failed to obtain any credible evidence to
support the allegations as to Ms. Constantakis and Bryan Vescio.
Thus, this court’s orders requiring Appellants to amend and
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update the Form U5 and the IAPD after the multi-day evidentiary
hearing were required by FINRA. Because this court’s orders were
in accordance with … FINRA’s regulatory scheme, the orders do
not constitute compelled speech any more than Appellants’ initial
filings might be considered compelled speech. Appellants cannot
use the FINRA rules as both a shield and a sword. A firm’s
obligation to make an initial filing, and to amend and update any
erroneous initial filing are equally part of FINRA’s system for
regulatory compliance. This court’s orders merely required
Appellants to complete their regulatory duties by filing the
required amendments due to their lack of evidence….
TCO at 11-12 (unnecessary capitalization and footnote omitted).
Moreover, the trial court explained:
Unlike in Willing, the Form U5s and the IAPD do not merely
exhibit Appellants’ opinion regarding Bryan Vescio’s and Ms.
Constantakis’[s] professional integrity. In this case, Appellants’
filing of the unsubstantiated Form U5s and the IAPD also impact
Bryan Vescio’s and Ms. Constantakis’[s] very livelihoods and their
ability to work in the investment industry in any capacity.
At the hearing, it became clear to this court that, if the record is
not corrected, Bryan Vescio and Ms. Constantakis will be harmed
in the following unique and significant ways: (1) they cannot get
on a trading platform and manage the money of their clients; (2)
they cannot work in the industry for other registered investment
advisory firms; and (3) they are at risk of losing the clients that
they have not already lost…. Appellants’ actions in this case
effectively black-ball Bryan Vescio and Ms. Constantakis from
working in the financial services industry in any manner.
Id. at 10-11.
Finally, the trial court emphasized:
[I]t does not take any restraint on freedom of expression or
speech lightly. However, considering the fact that Appellants’
filings were made merely to comply with Appellants’ regulatory
duties, and weighing this against the importance of Bryan Vescio’s
and Ms. Constantakis’[s] right to not be black-balled from their
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profession,[19] this court could not turn its back on Bryan Vescio’s
and Ms. Constantakis’[s] requests for injunctive relief. See
Rosenberg v. MetLife, Inc., 966 N.E.2d 439, 498-500 (N.Y.
2007) (clarifying that, even under New York law where Form U5s
are subject to absolute privilege, individuals are not wholly
without remedy as they may commence an arbitration proceeding
or court action to expunge any alleged defamatory language); see
also Stega v. New York Downtown Hosp., 107 N.E.3d 545,
545 (N.Y. 2018) (clarifying that even absolute privilege does not
shield statements, made in an administrative proceeding, that
defame a person who has no adequate recourse to challenge the
accusations).
Appellants had the opportunity to present any and all evidence to
support the accusations in the Form U5s and the IAPD. However,
as to Bryan Vescio and Ms. Constantakis, Appellants failed to
provide this court with any credible, substantive evidence that
might suggest that Appellants’ filings were made in good faith.
Moreover, Mr. Bryan’s text messages demonstrate that he was
willing to amend the filings if the parties could somehow make a
deal regarding VAM’s clients and the client fees, which Appellants
feared to lose. This fact alone suggests that Appellants’ filings
were made with malicious intent. In sum, without any facts to
support the accusations in the Form U5s and the IAPD, this court
could not in good conscience permit Appellants [to] use the filings
to essentially hold Bryan Vescio’s and Ms. Constantakis’[s] careers
hostage while this case proceeds to a determination on the merits.
Id. at 14-15 (unnecessary capitalization omitted).
Accordingly, the trial court ordered Appellants to expunge the
defamatory language in the January 13, 2021 Form U5s and IAPD, and to file
neutral, amended forms in accordance with Schedule A, attached to its
____________________________________________
19 “[A] license to pursue a livelihood or engage in a profession … has been
held to be a property right protected by Article I, Section 1 of the Pennsylvania
Constitution[.]” Pennsylvania Game Com’n v. Marich, 666 A.2d 253, 256
(Pa. 1995) (citing Lyness v. Commonwealth, State Bd. of Medicine, 605
A.2d 1204, 1207 (Pa. 1992) (recognizing an individual’s right to pursue a
livelihood or profession as a property right protected by procedural due
process)).
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Injunction Orders. Pursuant to Schedule A, Appellants are to amend the Form
U5s to indicate that Appellees were “permitted to resign” rather than
“discharged” and to provide the following explanations for their termination.
In the case of Bryan Vescio:
New information came to light regarding the circumstances
surrounding [VAM’s] transition to an independent registered
investment adviser while Mr. Vescio was an investment adviser
representative of this firm. Upon further review, the firm did not
find any violations of investment-related statutes, regulations,
rules or industry standards of conduct. In addition, the firm did
not find that there was any fraud or wrongful taking of property.
Appellants’ Brief at Appendix C (Amended Form U5 at 1). As to Ms.
Constantakis, the amended Form U5 shall indicate:
New information came to light regarding the circumstances
involving Ms. Constantakis’[s] activities. Upon further review, the
firm did not find any violations of investment-related statutes,
regulations, rules or industry standards of conduct. In addition,
the firm did not find that there was any fraud or wrongful taking
of property.
Id. at Appendix B (Amended Form U5 at 1). Additionally, the amended Form
U5s are to reflect “No” as the answer to each of the disclosure questions in
Section 7.
We agree with the trial court that Appellants are obligated to amend the
Form U5s and the IAPD to reflect new developments regarding Appellees’
termination. In fact, FINRA’s Regulatory Notice 10-39 emphasizes the
importance of amending the Form U5 to reflect accurate and complete
information.
It is imperative that firms file complete and accurate Form[ U5s]
in a timely manner because the reported information is used by a
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number of constituencies for a variety of reasons. For instance,
FINRA uses the information to help identify and sanction
individuals who violate FINRA rules and applicable federal statutes
and regulations. FINRA, other self-regulatory organizations and
state regulatory and licensing authorities also use the information
to make informed employment decisions. Further, investors use
the Form U5 information that is displayed through BrokerCheck
when considering whether to do business with a registered (or
formerly registered) person.
See Regulatory Notice 10-39, Obligation to Provide Timely, Complete and
Accurate Information on Form U5, FINRA (Sept. 7, 2010),
https://www.finra.org/rules-guidance/notices/10-39.
Instantly, the trial court made significant factual findings following an
evidentiary hearing on Appellees’ requests for special preliminary injunctive
relief. The court determined that Appellants failed to produce any evidence in
support of their allegations that Appellees violated any investment-related
statutes, regulations, rules, or industry standards of conduct, and concluded
that Appellants’ filing of the Form U5s and the IAPD was done with reckless,
and potentially malicious, intent. See TCO at 9-10. We believe such findings
constitute “facts or circumstances” which Appellants certainly should be aware
cause the forms they originally filed to be “inaccurate or incomplete.” See id.However, we also agree with Appellants that, to the extent the amended
language proposed by the trial court indicates “the firm” did not find any
wrongdoing on the part of Appellees, such language should not be compelled
at this juncture. See Appellants’ Brief at 43 (citing N.T. Hearing, 4/9/21, at
36-37 (Mr. Bryan’s insisting that he has not changed his mind and still firmly
believes the forms are accurate)). The Form U5s and IAPD should be
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amended, rather, to report the trial court’s preliminary findings regarding
Appellees in the pending litigation. We believe such amendments will comply
with FINRA’s regulations, providing the public with accurate information, while
also meeting the trial court’s objective of preventing Appellants from
essentially holding Appellees’ careers hostage while this case proceeds to a
final determination on the merits. Thus, we remand for the trial court to make
the appropriate changes to Schedule A.
III. Prerequisites for Imposing a Preliminary Injunction
Initially, we note that the Injunction Orders, as amended supra, are
mandatory preliminary injunctions, in that they command positive acts on the
part of Appellants, i.e., the filing of amended Form U5s and an amended IAPD,
to maintain the status quo of the parties. See Greenmoor, Inc. v. Burchick
Const. Co., Inc., 908 A.2d 310, 312-13 (Pa. Super. 2006). “[I]n general,
appellate inquiry is limited to a determination of whether an examination of
the record reveals that any apparently reasonable grounds support the trial
court’s disposition of the preliminary injunction request.” Summit Towne
Centre, Inc., 828 A.2d at 1001 (internal quotation marks and citation
omitted). The standard of review differs, however, where the trial court has
granted a mandatory preliminary injunction. See id. at 1001 n.7. Such a
remedy is extraordinary and should be utilized only in the rarest of cases. See
id. at 1005 n.13.
This Court has explained:
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Generally, preliminary injunctions are preventive in nature
and are designed to maintain the status quo until the rights
of the parties are finally determined. There is, however, a
distinction between mandatory injunctions, which command
the performance of some positive act to preserve the status
quo, and prohibitory injunctions, which enjoin the doing of
an act that will change the status quo. This Court has
engaged in greater scrutiny of mandatory injunctions and
has often stated that they should be issued more sparingly
than injunctions that are merely prohibitory. Thus, in
reviewing the grant of a mandatory injunction, we have
insisted that a clear right to relief in the plaintiff be
established.
As the above elucidates, in reviewing the grant of a mandatory
preliminary injunction, we must examine the merits of the
controversy and ensure that “a clear right to relief in the plaintiff
is established.”
Greenmoor, Inc., 908 A.2d at 313 (quoting Mazzie v. Commonwealth,
432 A.2d 985, 988 (Pa. 1981)). Moreover, “[t]o establish a clear right to
relief, the party seeking an injunction need not prove the merits of the
underlying claim, but need only demonstrate that substantial legal questions
must be resolved to determine the rights of the parties.” SEIU Healthcare
Pennsylvania v. Commonwealth, 104 A.3d 495, 591 (Pa. 2014). See also
Ambrogi v. Reber, 932 A.2d 969, 980 (Pa. Super. 2007) (“For a right to be
‘clear,’ it must be more than merely ‘viable’ or ‘plausible.’ However, this
requirement is not the equivalent of stating that no factual disputes exist
between the parties.”) (citations omitted); Fischer v. Department of Public
Welfare, 439 A.2d 1172, 1174 (Pa. 1982) (explaining that “since a
preliminary injunction is designed to preserve the status quo pending final
resolution of the underlying issues, it is obvious that the ‘clear right’
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requirement is not intended to mandate that one seeking a preliminary
injunction establish his or her claim absolutely”).
The law of this Commonwealth requires that a petitioner seeking a
preliminary injunction must establish every one of the following prerequisites:
The party must show: 1) that the injunction is necessary to
prevent immediate and irreparable harm that cannot be
adequately compensated by damages; 2) that greater injury
would result from refusing an injunction than from granting it, and
concomitantly, that issuance of an injunction will not substantially
harm other interested parties in the proceedings; 3) that a
preliminary injunction will properly restore the parties to their
status as it existed immediately prior to the alleged wrongful
conduct; 4) that the activity it seeks to restrain is actionable, that
its right to relief is clear, and that the wrong is manifest, or, in
other words, must show that it is likely to prevail on the merits;
5) that the injunction it seeks is reasonably suited to abate the
offending activity; and 6) that a preliminary injunction will not
adversely affect the public interest.
Warehime v. Warehime, 860 A.2d 41, 46-47 (Pa. 2004) (citing Summit
Towne Centre, Inc., 828 A.2d at 1002 (internal citations and quotation
marks omitted)). The burden is on the party who requested injunctive relief.
Id. at 47. If the petitioner fails to establish any one of the aforementioned
prerequisites, a reviewing court need not address the others. Greenmoor,
Inc., 908 A.2d at 313-14.
Here, Appellants maintain the trial court erred in its determination that
Appellees established each of the foregoing elements in connection with their
requests for special injunctive relief. We begin our analysis with the fourth
prerequisite, i.e., that the petitioner must show the activity it seeks to restrain
is actionable, that its right to relief is clear, and that the wrong is manifest,
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or, in other words, that it is likely to prevail on the merits, see Warehime,
860 A.2d at 46-47, because our discussion of that element impacts our
discussion of the other five requirements. Appellants assert that Appellees’
right to relief “is far from clear,” and that Appellees are not likely to succeed
on the merits. Appellants’ Brief at 54, 56-62. Thus, we must determine
whether Appellees produced substantial, credible evidence in support of their
claims. See Kessler v. Broder, 851 A.2d 944, 948 (Pa. Super. 2004).
To prevail on the merits of a defamation claim, the plaintiff must prove:
(1) the defamatory character of the communication; (2) publication by the
defendant; (3) its application to the plaintiff; (4) understanding by the
recipient of its defamatory meaning; (5) understanding by the recipient of it
as intended to be applied to the plaintiff; (6) special harm resulting to the
plaintiff from its publication; and (7) abuse of a conditionally privileged
occasion. 42 Pa.C.S. § 8343(a). When the issue is properly raised, the
defendant has the burden of proving: (1) the truth of the defamatory
communication; (2) the privileged character of the occasion on which it was
published; and (3) the character of the subject matter of defamatory comment
as of public concern. 42 Pa.C.S. § 8343(b).
Instantly, the content of the statements made by Appellants on the
publicly available Form U5s and the IAPD is not contested, nor is the
applicability of those statements to Appellees. As to the defamatory nature
of these statements, we discern from the record that Appellees have produced
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sufficient credible evidence to establish the defamatory character of said
communications. It is well-established that:
A communication is defamatory if it tends to harm the reputation
of another as to lower him in the estimation of the community or
to deter third persons from associating or dealing with him. A
communication is also defamatory if it ascribes to another
conduct, character or a condition that would adversely affect his
fitness for the proper conduct of his proper business, trade or
profession. If the court determines that the challenged publication
is not capable of a defamatory meaning, there is no basis for the
matter to proceed to trial; however, if there is an innocent
interpretation and an alternate defamatory interpretation, the
issue must proceed to the jury.
Krajewski v. Gusoff, 53 A.3d 793, 802-03 (Pa. Super. 2012) (quoting Maier
v. Maretti, 671 A.2d 701 (Pa. Super. 1995)). “[W]hen determining whether
a communication is defamatory, the court will consider what effect the
statement would have on the minds of the average persons among whom the
statement would circulate.” Id. at 803. Notably, communications which
merely “annoy or embarrass” an individual are not sufficient as a matter of
law to create an action in defamation. Maier, 671 A.2d at 704.
Furthermore, “the nature of the audience hearing the remarks is a
critical factor in determining whether the communication is defamatory.” Id.(citing Gordon v. Lancaster Osteopathic Hospital Ass’n, 489 A.2d 1364(Pa. Super. 1985) (noting that the court must consider the expertise and
knowledge of those to whom the publication is circulated and consider the
effect it is fairly calculated to produce)). See id. (citing Rybas v. Wapner,
457 A.2d 108, 111 (Pa. Super. 1983) (concluding that since the statement
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was made only to a fellow attorney, the intended publication was extremely
limited and, thus, it would not harm the reputation of the plaintiff in the
community); Agriss v. Roadway Express, Inc., 483 A.2d 456, 462 (Pa.
Super. 1984) (determining a statement published to an employee’s
supervisors and co-workers concerning the employee’s opening of company
mail was defamatory because public contempt and ridicule was clear)).
Appellees testified at length during the preliminary injunction hearing
regarding their roles at VAM, the validity of the allegations made against them
by Appellants, and the detrimental effect that the Form U5 and IAPD
statements have had on their careers.20 Appellees’ testimony supports the
trial court’s finding that there was no factual basis for the wrongdoings alleged
by Appellants in the published forms. For instance, Bryan Vescio
demonstrated that he had no involvement in creating or sending invoices to
clients. See N.T. Hearing, 4/6/21, at 107 (Bryan Vescio’s testifying that he
never saw the invoices at any point and that he had no authority to create or
send invoices to clients). Likewise, Ms. Constantakis established that she
never created, sent, or collected invoices in the name of VAM. See id. at 128(Ms. Constantakis’s stating that she was not involved with the invoicing
____________________________________________
20The trial court found Appellees’ testimony credible. See C.H.L. v. W.D.L.,
214 A.3d 1272, 1276 (Pa. Super. 2019) (“[T]he credibility of witnesses and
the weight to be accorded to their testimony is within the exclusive province
of the trial court as the fact finder.”); Samuel-Bassett v. Kia Motors
America, Inc., 34 A.3d 1, 32 (Pa. 2011) (“Where … the evidentiary record
supports the trial court’s credibility determinations, we are bound to accept
them.”).
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process at all, other than checking the accuracy of numbers); Id. at 95-97,
100 (William Vescio’s confirming that Ms. Constantakis had no direct
involvement in billing customers, that Mr. Vescio always prepared the
invoices, and that he even mailed them himself).
Conversely, Appellants have failed to meet their burden of proving the
truth of the challenged statements. See 42 Pa.C.S. § 8343(b)(1). As the trial
court stated,
Appellants had a full, multi-day evidentiary hearing before
adjudication of the request for immediate relief. At this hearing,
Appellants had the opportunity to present relevant evidence,
testimony, and perform cross-examination. Nevertheless,
Appellants failed to produce any credible, substantive evidence
that Ms. Constantakis or Bryan Vescio violated any investment-
related statutes, regulations, rules, and industry standards of
conduct. Appellants also failed to present any evidence that Ms.
Constantakis or Bryan Vescio violated their fiduciary duties with
intent to defraud clients by sending client invoices and requesting
that funds be paid to an unlicensed and unregistered advisor
entity. In fact, Appellants presented no evidence that Bryan
Vescio or Ms. Constantakis ever did anything with the invoices at
all.
TCO at 18. We further observe that Appellants’ brief contains only bald denials
of the falsity and defamatory character of the challenged statements.
Additionally, Appellees demonstrated that their professional reputations
have been damaged and that Appellants’ statements have negatively affected
their ability to properly conduct business. See N.T. Hearing, 4/6/21, at 146-
51 (Ms. Constantakis’s recounting her damaged reputation with wholesalers
and clients, her inability to secure a relationship with a custodian and/or to
service clients, and her client’s waning comfort level as a result); Id. at 109-
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11 (Bryan Vescio’s describing the “extremely damaging” impact that the Form
U5 has had on his career, i.e., his inability to work in the industry and/or to
service existing clients, and the negative impact it has had on current client
relationships, as well as building relationships with potential future clients).
Moreover, due to the purpose of the Form U5 and IAPD and the forms’
accessibility by the public, statements contained therein are certainly wide-
reaching. See FINRA Regulatory Notice 10-39, supra (acknowledging that
the information contained in a Form U5 is utilized by state regulatory and
licensing authorities to make informed registration and licensing decisions, by
firms to help them make informed employment decisions, and by investors
when considering whether to do business with a registered person). Hence,
allegations of SEC violations, wrongful taking of property, and intent to
defraud clients would undoubtedly damage Appellees’ professional reputations
and adversely affect their ability to conduct business in the financial services
industry. We agree with the trial court that as a result of Appellants’
defamatory statements, “Ms. Constantakis and Bryan Vescio continue to
experience ongoing harm, including but not limited to, loss of clients, loss of
business opportunity, reputational harm, and loss of customer goodwill.” TCO
at 19.
Lastly, in determining whether Appellees have established a clear right
to relief regarding their defamation claims against Appellants, we consider the
privileged nature of Appellants’ statements and whether such privilege has
been abused. By way of background, “a publisher of defamatory matter is not
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liable if the publication was made subject to a privilege, and the privilege was
not abused. Communications made on a proper occasion, from a proper
motive, in a proper manner, and based upon reasonable cause are privileged.”
Elia v. Erie Ins. Exchange, 634 A.2d 657, 661 (Pa. Super. 1993) (internal
citations and quotation marks omitted). “Depending upon the importance of
the publisher’s actions to society, the privilege may be absolute or
conditional/qualified.” Id. Compare Baird v. Dun & Bradstreet, Inc., 285
A.2d 166 (Pa. 1971) (finding credit reports conditionally privileged since a
credit reporting agency is in the business of reporting financial information to
subscribers who request such service), with Paintz v. Behrend, 632 A.2d
562 (Pa. Super. 1993) (recognizing an absolute privilege for judges, lawyers,
litigants, and witnesses regarding statements made during legal actions). We
observe that Pennsylvania case law reflects a narrow scope intended for the
grant of an absolute privilege. See Miketic v. Baron, 675 A.2d 324, 329 (Pa.
Super. 1996) (citations omitted).21
____________________________________________
21 The Pennsylvania Supreme Court explained the reasons for the absolute
privilege:
A judge must be free to administer the law without fear of
consequences. This independence would be impaired were he to
be in daily apprehension of defamation suits. The privilege is also
extended to parties to afford freedom of access to the courts, to
witnesses to encourage their complete and unintimidated
testimony in court, and to counsel to enable him to best represent
his client’s interests.
Id. at 328 (citing Binder v. Triangle Publications, Inc., 275 A.2d 53, 56
(Pa. 1971) (some citations omitted)).
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In Miketic, this Court examined a series of Pennsylvania cases in which
a conditional privilege was found to apply and recognized:
“An occasion is conditionally privileged when the
circumstances are such as to lead any one of several
persons having a common interest in a particular subject
matter correctly or reasonably to believe that facts exist
which another sharing such common interest is entitled to
know.” Rankin v. Phillippe, … 211 A.2d 56, 58 ([Pa.
Super.] 1965) [(]quoting[] Restatement of Torts § 596
(1939)[)].
Thus, proper occasions giving rise to a conditional privilege exist
when (1) some interest of the person who publishes defamatory
matter is involved; (2) some interest of the person to whom the
matter is published or some other third person is involved; or (3)
a recognized interest of the public is involved.
Miketic, 675 A.2d at 329 (some citations omitted). Moreover, we have
determined:
Once a conditional privilege applies, a plaintiff’s defamation cause
of action can survive only if the privilege was abused.
Abuse of a conditional privilege is indicated when the
publication is actuated by malice or negligence, is made for
a purpose other than that for which the privilege is given,
or to a person not reasonably believed to be necessary for
the accomplishment of the purpose of the privilege, or
included defamatory matter not reasonably believed to be
necessary for the accomplishment of the purpose.
Foster v. UPMC South Side Hosp., 2 A.3d 655, 665 (Pa. Super. 2010)
(internal citations omitted).
It is not settled under Pennsylvania law whether statements made in a
Form U5 are subject to a conditional or absolute privilege. Instantly, while
acknowledging the majority view in other states is to afford such statements
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a conditional privilege,22 Appellants suggest that an absolute privilege should
be applied in this case. Appellants’ Brief at 56 (citing Merkam v. Wachovia
Corp., 2008 WL 2214649 at *6 (Pa. Com. Pl. Phila. Cty. April 8, 2008)). As
Appellees point out, however, Merkam applies New York law and is not
binding on this Court. See Ms. Constantakis’s Brief at 44; Bryan Vescio’s Brief
at 35; see also Branham v. Rohm and Haas Co., 19 A.3d 1094, 1103 (Pa.
Super. 2011) (stating “common pleas court decisions are not binding on
appellate courts”) (citation omitted). Appellants have failed to provide any
other Pennsylvania case law to support their claim of absolute privilege. See
42 Pa.C.S. § 8343(b)(2) (providing the defendant has the burden of proving,
when properly raised, that the statements were privileged). Given the narrow
scope generally prescribed for an absolute privilege in this Commonwealth and
Appellants’ lack of relevant authority, we are unconvinced by their argument.
See Miketic, 675 A.2d at 329.
Appellees, on the other hand, argue that the Form U5 statements are
subject to a conditional privilege, which can be overcome by a showing that
the statement was made with malice or negligence. In support of their
position, they cite Preston v. Fid. Brokerage Servs., 2020 WL 822134____________________________________________
22See Bryan Vescio’s Brief at 36 n.11 (citing numerous cases reflecting that
the majority of jurisdictions that have considered this issue applied a
conditional privilege to Form U5 statements).
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(W.D. Pa. Feb. 19, 2020).23 In Preston, the plaintiff alleged that his employer
engaged in a scheme to unlawfully terminate him because of his age by falsely
accusing him of professional wrongdoing, and then published defamatory
statements on a Form U5 as to why he was terminated. Id. at *1. Similar to
the matter presently before us, the employer in Preston argued that an
absolute privilege should apply to statements made in a Form U5, citing
Merkam and relying solely on New York case law, while the plaintiff argued
that Pennsylvania case law supports the majority view of affording conditional
privilege for FINRA Form U5 disclosures. Id. at *10. The plaintiff persuasively
argued that the Pennsylvania Constitution protects an individual’s right to
reputation, and that pursuant to defamation case law in Pennsylvania,
Pennsylvania courts would not apply absolute privilege to Form U5 disclosures.
Id. (citing Pa. Const. Art. I, § 1 (naming the protection of an individual’s
reputation as an inherent and indefeasible right)).
In the circumstances of conditional privilege, the parties differed as to
whether malice or negligence is required to overcome such a privilege;24
____________________________________________
23 “While we recognize that federal district court cases are not binding on this
[C]ourt, Pennsylvania appellate courts may utilize the analysis in those cases
to the extent we find them persuasive.” Umbelina v. Adams, 34 A.3d 151,
159 n.2 (Pa. Super. 2011) (citations omitted).
24The plaintiff argued that Pennsylvania would permit a showing of negligence
to overcome the conditional privilege in Preston. Id. (citing Menkowitz v.
Peerless Publications, Inc., 211 A.3d 797, 806 (Pa. 2019) (quoting
American Future Systems, Inc. v. Better Business Bureau of Eastern
Pennsylvania, 923 A.2d 389, 400 (Pa. 2007)) (“In general, in Pennsylvania,
(Footnote Continued Next Page)
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however, they agreed that the majority view requires a showing of malice to
defeat a conditional privilege for a Form U5 disclosure. Id. at *11.
The Preston Court deemed there was sufficient evidence to establish
that the employer’s Form U5 statements were “sound and reasonable” and
concluded that the plaintiff failed to produce any contrary evidence to
demonstrate a question of material fact regarding negligence on the part of
the employer to defeat conditional privilege. Id. For the purpose of its
analysis, it considered the lowest standard for privilege – conditional privilege
to be defeated by negligence – and determined that the employer’s conduct
“qualified for conditional privilege to preclude the plaintiff’s defamation claim.”
Id. Accordingly, the Preston Court granted the employer’s motion for
summary judgment on the defamation claim arising from the Form U5 filing.
Id. at *12. Notably, the applicable standard for overcoming privilege under
these circumstances was left unresolved by Preston, as the Preston Court
merely stated “regardless of whether conditional privilege can be defeated by
negligence or malice,” the plaintiff failed to establish even the lowest standard
of negligence. Id.
Although there remains uncertainty as to the level of privilege that
should be granted to Form U5 statements, we conclude Appellees have
____________________________________________
for a private figure defamation plaintiff to establish a defamation claim, the
plaintiff must prove that the defamatory matter was negligently published to
overcome [the] defendant’s conditional privilege.”). The employer argued
that, “where the defamatory statements are made on the required FINRA
Form U5, Pennsylvania would require plaintiff to demonstrate malice in order
to overcome the conditional privilege.” Id.
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established a likelihood that the trial court in this matter would apply a
conditional rather than absolute privilege. We further believe that Appellees
have produced sufficient evidence to overcome the conditional privilege by a
showing of negligence on the part of Appellants.25 “[T]he appropriate
standard of fault depends on whether the plaintiff is a public or private figure.”
American Future Systems, 923 A.2d at 400 (citing Gertz v. Robert Welch,
Inc., 418 U.S. 323 (1974)).26 As Appellees are clearly private figures, the
standard of negligence would most likely be applied. However, we need not
make a definitive determination as to the applicable standard to overcome
Appellants’ conditionally privileged statements at this juncture, as this
constitutes a substantial legal question which must be resolved in order to
determine the parties’ rights. See SEIU Healthcare Pennsylvania, 104
A.3d at 591 (“To establish a clear right to relief, the party seeking an injunction
need not prove the merits of the underlying claim, but need only demonstrate
____________________________________________
25 The trial court found Appellants filed the Form U5s and the IAPD “with
reckless, and potentially malicious, allegations[,]” which is a higher threshold
to overcome than negligence.
26See id. (explaining that if the plaintiff is a public official or public figure and
the statement relates to a matter of public concern, the plaintiff must establish
that the defendant made a false and defamatory statement with actual malice,
whereas a private figure defamation plaintiff must prove that the defamatory
matter was published with “want of reasonable care and diligence to ascertain
the truth” or, more simply, “with negligence”); see also id. at 399 (noting
that the courts’ previous focus on whether the speech is of public or private
concern has been replaced by an inquiry into whether the plaintiff is a public
or private figure for the purpose of determining the appropriate standard of
fault).
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that substantial legal questions must be resolved to determine the rights of
the parties.”); Agriss v. Roadway Exp., Inc., 483 A.2d 456, 463 (Pa. Super.
1984) (“It is a question of law whether privilege applies in a given case, but a
question of fact for the jury whether a privilege has been abused.”). Based
on the foregoing, we conclude that Appellees have established a clear right to
relief on their defamation claims.27
We now consider the first prerequisite to the issuance of a preliminary
injunction, i.e., whether the injunction is necessary to prevent immediate and
____________________________________________
27 Accordingly, we need not address whether Appellees’ right to relief is clear
on their other claims. Nevertheless, we note that the trial court found
Appellees would also likely proceed on their tortious interference claims. See
TCO at 19 (citing Strickland v. University of Scranton, 700 A.2d 979, 985
(Pa. Super. 1997) (indicating that to prevail on the merits for a tortious
interference claim, a party must prove there was: (1) the existence of a
contractual relation between the complainant and a third party; (2) the
purposeful action on the part of the defendant, specifically intended to harm
the existing relation; (3) the absence of privilege or justification on the part
of the defendant; and (4) the occasioning of actual legal damage as a result
of the defendant’s conduct)). The trial court stated:
For the same reasons articulated with regard to the claim for
defamation, this court determined Appellants acted recklessly,
and perhaps maliciously, by filing the Form U5s and the IAPD
without any evidence to support the accusations therein.
Therefore, Appellants cannot claim the protection of any
conditional privilege. Furthermore, these statements intentionally
caused damage to Ms. Constantakis[’s] and Bryan Vescio’s
livelihoods by interfering with their ability to fulfill their contractual
and fiduciary duties to existing clients. Accordingly, this court
determined that Ms. Constantakis and Bryan Vescio are also likely
to succeed on their claims for tortious interference.
Id. We would conclude there is sufficient evidence in the record to support
the trial court’s determination.
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irreparable harm that cannot be adequately compensated by damages.
Appellants challenge the trial court’s determination that this prerequisite has
been satisfied, arguing that Appellees’ alleged harm can be adequately
compensated by money damages. Appellants’ Brief at 65. They further
contend that Appellees remain licensed to act as investment advisers and,
thus, have not suffered irreparable harm. Id. at 65-66 (noting that VAM
obtained its RIA after the filing of the Form U5s and remains an RIA). We find
this argument unconvincing.
“An injury is regarded as ‘irreparable’ if it will cause damage which can
be estimated only by conjecture and not by accurate pecuniary standard.”
West Penn Specialty MSO, Inc. v. Nolan, 737 A.2d 295, 299 (Pa. Super.
1999) (citation omitted); see also id. (explaining that “the unbridled threat”
of the continuation of the challenged action and “incumbent disruption of …
customer relationships” establishes the existence of irreparable harm).
Pennsylvania courts have consistently maintained that the disruption of
business relationships and the “impending loss of a business opportunity or
market advantage may be aptly characterized as an ‘irreparable injury’ for …
the purpose of a preliminary injunction.” The York Group, Inc. v.
Yorktowne Caskets, Inc., 924 A.2d 1234, 1242-43 (Pa. Super. 2007)
(quoting Kessler v. Broder, 851 A.2d 944, 951 (Pa. Super. 2004)).
Instantly, the trial court found the preliminary injunctions necessary to
prevent immediate and irreparable harm, “as every day the defamatory Form
U5s and IAPD remain in place, Bryan Vescio and Ms. Constantakis stand to
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lose clients, business opportunities, and customer goodwill.” TCO at 16. The
court added, “[t]he extent of [their] lost business opportunity can be
estimated only by conjecture.” Id. Upon review, we conclude that the record
contains substantial evidence to support the trial court’s finding that this
element has been met.
At the evidentiary hearing, William Vescio, owner and President of VAM,
testified that the consequences of Appellants’ filing of the Form U5s have been
“devastating” and have stopped him from earning a livelihood. N.T. Hearing,
4/6/21, at 50. He explained:
Our business is completely shut down. We have no revenues, we
can’t see our clients’ accounts, municipal accounts. We can’t
make trades in them and we need to make trades. These are
important accounts because they are public funds. We can’t get
on any investment platforms even though we are RIA approved,
RIA now. They won’t allow us until the U5s are changed. We can’t
even affiliate with another new RIA now to get on other platforms
because of the U5s. It basically stops us from doing any business.
Id. Additionally, he stated that he lost one of his largest and oldest clients
and that multiple other clients have expressed concern over the pending
litigation and, therefore, were exploring the option of taking their business
elsewhere. Id.Likewise, Bryan Vescio testified that the effects of the Form U5s have
been “extremely damaging” to his career. Id. at 109. He stated that he is
unable to control his client’s assets because VAM cannot land a securities
platform, and he fears that he will be unemployable in the industry as long as
the Form U5s remain unchanged. Id. He explained that Form U5s become
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part of an employee’s public, permanent record, and that an IAR with a record
indicating such allegations as made against him by Appellants would be seen
as a liability to another RIA. Id. at 109-10.
Ms. Constantakis also provided testimony at the evidentiary hearings
regarding the impact Appellants’ statements have had on her, professionally.
She stated that the Form U5 and IAPD have damaged her reputation with
wholesalers and clients and that she has been unable to secure a relationship
with a custodian to service her clients. Id. at 146. She has been turned down
by prior colleagues and two potential employers expressly because of the Form
U5. Id. at 146-47. She also explained that as time goes by, the damage only
grows, because the comfort level of existing clients wanes. Id. at 150.
Notably, the testimonial evidence produced by Appellees is consistent with the
purpose of the Form U5, as recognized by FINRA. See FINRA Regulatory
Notice 10-39, supra (noting that the Form U5 is used by “FINRA, other self-
regulatory organizations and state regulatory and licensing authorities … to
make informed registration and licensing decisions,” by firms “to help them
make informed employment decisions,” and by investors “when considering
whether to do business with a registered (or formerly registered) person”).
We believe that the unbridled threat to Appellees’ careers in the financial
industry caused by the existence of the Form U5s and the IAPD, which contain
damaging allegations found at this juncture to have no basis in fact, as well
as the incumbent disruption of Appellees’ business relationships constitute
irreparable harm, necessitating preliminary injunctive relief. See Nolan, 737
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A.2d at 299 (citing New Castle Orthopedic Associates v. Burns, 392 A.2d
1383, 1386 (Pa. 1978) (determining that grounds for an injunction are
established where the plaintiff’s proof of injury “foreshadows the disruption of
established business relations which would result in incalculable damage”
should the disruption continue)); see also John G. Bryant Co., Inc. v. Sling
Testing and Repair, Inc., 369 A.2d 1164, 1167 (Pa. 1977) (affirming the
granting of a preliminary injunction to enforce a restrictive covenant in an
employment agreement and explaining that “the possible consequences of
[the] unwarranted interference with customer relationships … is
unascertainable and not capable of being fully compensated by money
damages”); Nolan, 737 A.2d at 299 (explaining that the disruption of
established business relations “may manifest itself in a loss of new business
not subject to documentation, the quantity and quality of which are ‘inherently
unascertainable’”) (citation omitted).
Next, Appellants contend the second and sixth prerequisites have not
been satisfied. See Warehime, 860 A.2d at 46-47 (requiring as the second
prerequisite that a party show “greater injury would result from refusing an
injunction than from granting it, and, concomitantly, that issuance of an
injunction will not substantially harm other interested parties in the
proceedings[,]” and to demonstrate that “a preliminary injunction will not
adversely affect the public interest[,]” as the sixth prerequisite).
Regarding the second element, Appellants claim that granting the
injunctions would substantially cause harm to them, because the Injunction
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Orders intrude on their First Amendment rights. Appellants’ Brief at 62 (citing
Elrod v. Burns, 427 U.S. 347, 373-74 (1976) (providing that the loss of First
Amendment freedoms constitutes irreparable injury)). Given our disposition
regarding the constitutionality of the Injunction Orders and the striking of the
prior restraint language, this claim has been rendered moot. See Orfield v.
Weindel, 52 A.3d 275, 277 (Pa. Super. 2012) (“Our Courts cannot decide
moot or abstract questions….”) (citation omitted). Nevertheless, we would
agree with the trial court that greater injury would result here from refusing
the injunction rather than granting it, because Appellees’ livelihoods are at
stake. As the trial court explained,
Ms. Constantakis and Bryan Vescio are incapable of earning
employment or income in their chosen profession solely because
of the language included in the Form U5s and the IAPD. The
unsubstantiated accusations of securities violations, fraud, and
breach of fiduciary duty to clients effectively black-ball Ms.
Constantakis and Bryan Vescio from working in the financial
services industry.
TCO at 16. On the other hand, there is no risk of harm to Appellants or other
interested parties in granting the injunctions. As amended supra, the
Injunction Orders merely require Appellants to update the forms to reflect the
trial court’s findings and to inform the public of the pending litigation arising
from Appellees’ termination. The trial court acknowledged:
[I]t agrees with Appellants’ contention that, if Form U5s or an
IAPD were subject to improper amendment, there could be a risk
of harm to the public in that regulators and the public are not on
notice of potential misconduct[;] however, in this case, because
Appellants’ accusations against Ms. Constantakis and Bryan
Vescio were made recklessly and without any basis in fact, there
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is no risk of harm to the public or to existing or potential clients
of VAM or BAS.
Id. at 16-17. Thus, we would agree with the trial court that the second
prerequisite is satisfied.
As to the sixth factor, Appellants suggest the Injunction Orders are
“adverse to the public interest” because they undermine the system in place
to protect the public from unscrupulous actors in the securities industry.
Appellants’ Brief at 63. We reject this argument. Indeed, “[t]he rules of
FINRA ‘are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in general,
to protect investors and the public interest.’” Preston, 2020 WL 822134 at
*4 (quoting 15 U.S.C. § 78o-3(b)). However, in this instance, it is “Appellants’
unsubstantiated accusations in the Form U5s and the IAPD [that] ultimately
mislead the public and prevent Ms. Constantakis and Bryan Vescio from
conducting business and from making a living.” TCO at 20. Hence, we agree
with the trial court’s conclusion that “precluding Appellants from black-balling
Bryan Vescio and Ms. Constantakis with the unsubstantiated Form U5 and
IAPD disclosures will not adversely affect the public interest.” Id. (citing
Bancroft Life & Cas. ICC, Ltd. v. Intercontinental Management Ltd.,
456 Fed. Appx. 184, 189 (3d. Cir. 2012) (holding that preventing companies
from interfering with another’s existing or prospective business relations,
especially when such interference involves defamation, furthers the public
interest)). Moreover, we note that Appellants are entitled to further update
the forms in the event of any future developments in the pending litigation.
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Finally, Appellants allege that Appellees have failed to establish the third
and fifth prerequisites for imposition of a preliminary injunction. They claim
that the Injunction Orders will not properly restore the parties to their status
quo prior to the alleged wrongful conduct, nor are they reasonably suited to
abate the offending activity. Appellants’ Brief at 70. These claims are also
meritless.
In support of its finding that the third prerequisite has been satisfied,
i.e., the preliminary injunction will properly restore the parties to their status
as it existed immediately prior to the wrongful conduct, the trial court opined:
“The status quo to be maintained by a preliminary injunction is
the last actual, peaceable and lawful noncontested status which
proceeded the pending controversy.” Allegheny
Anesthesiology Associates, Inc. v. Allegheny General
Hosp., 826 A.2d 886, 894 (Pa. Super. 2003) (citation omitted).
This court’s order[s] provide[] Ms. Constantakis and Bryan Vescio
with the opportunity to continue to work in the financial services
industry, as they did prior to the filing of the unsubstantiated
statements in the Form U5s and the IAPD.
TCO at 17. We agree.
With respect to the fifth prerequisite, i.e., whether the injunction is
reasonably suited to abate the offending activity, Appellants aver that the
Injunction Orders are “overly broad” and “outright unconstitutional.”
Appellants’ Brief at 70. Having already stricken the language enjoining
Appellants from exercising their freedom of speech and having declared the
remaining portion of the Injunction Orders constitutional as amended, supra,
we need only address Appellants’ broadness challenge. The Injunction Orders
merely require Appellants to amend the Form U5s and the IAPD to reflect the
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trial court’s findings. “Because Appellants presented no evidence that Ms.
Constantakis or Bryan Vescio actually participated in any nefarious conduct,
or that Appellants had any legitimate reason to believe this might have been
the case, [the trial] court determined that an injunction is reasonably suited
to abate the offending activity.” TCO at 20. Given the lack of evidence
produced by Appellants, we agree.
In sum, we conclude that all six prerequisites for the imposition of
preliminary injunctions have been satisfied.
Accordingly, we vacate the portion of the Injunction Orders that enjoin
Appellants from “making false, unsubstantiated, and defamatory statements”
about Appellees. We affirm the remaining portion of the Injunction Orders
and remand with instructions for the trial court to amend Schedule A in
accordance with this opinion.
Vacated in part. Affirmed in part. Case remanded. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/5/2022
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