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Gupta v. Morgan Stanley Smith Barney, LLC

United States District Court, N.D. Illinois, Eastern Division

May 9, 2018

RAJESH GUPTA, Plaintiff,



         Rajesh Gupta is a former employee of Morgan Stanley Smith Barney, LLC. He contends in this lawsuit that Morgan Stanley unlawfully terminated and defamed him. Morgan Stanley has moved to compel arbitration and stay the lawsuit, arguing that Gupta agreed to arbitrate any disputes concerning his employment.


         Gupta is a reserve member of the United States Navy Judge Advocate General Corps (JAG). Gupta contends that, in early 2017, the Navy called him for at least six months of JAG duty, but his supervisors at Morgan Stanley disliked this. He contends that they "effectively terminated" him and tried to recoup his unvested bonuses, which are held as promissory notes by the second defendant named in the complaint. (The Court will refer to the defendants collectively as Morgan Stanley.) Under the Uniformed Services Employment and Reemployment Rights Act (USERRA), 38 U.S.C. § 4311(a), an employer may not terminate an employee for serving in one of the uniformed services.

         Gupta has sued Morgan Stanley for defamation (in relation to comments made about his departure) and for violations of the USERRA. Morgan Stanley argues Gupta is bound to arbitrate these claims by an agreement that it contends was formed via email. On September 2, 2015, a person using the address sent an e-mail to the address, stating:

By continuing your employment with Morgan Stanley, you accept . . . the terms of the Arbitration Agreement and the arbitration provisions of the CARE Guidebook, unless you elect to opt out of the CARE Arbitration Program by completing, signing and submitting an effective CARE Arbitration Program Opt-Out Form by October 2, 2015.

D.E. 7, Defs.' Ex. 2 at 1. Gupta never completed an opt-out form, but he contends he never saw this e-mail and would have opted out of arbitration if he had. Morgan Stanley introduced by affidavit evidence that Gupta, using the same e-mail address, received, and responded to, numerous e-mails on the same day this e-mail was sent.


         Under the Federal Arbitration Act, a court must compel arbitration of a dispute that the parties agreed to arbitrate. 9 U.S.C. § 4. To prevail on a motion to compel arbitration, a party must demonstrate that (1) the parties agreed to arbitrate and (2) the dispute falls within the agreement. Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 297 (2010). Whether an enforceable arbitration agreement was formed is determined by applying state contract law. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

         Gupta argues that no arbitration agreement was formed, for two reasons. First, he describes his failure to respond to the September 2 e-mail as silence and argues that silence constitutes assent only if "the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction." Restatement (Second) of Contracts ¶ 69. Gupta contends that Morgan Stanley never gave him such a reason. Gupta also contends that a party must assent to the existence of a contract, not just its terms, and he did not do so by his silence. Morgan Stanley argues that Illinois law permits an employer to reasonably conclude that an employee who does not opt out of an agreement of the type at issue has assented to it.

         The Court agrees with Morgan Stanley. Illinois law permits an offeror to construe silence as acceptance if circumstances make it reasonable to do so. First Nat'l Bank of Chicago v. Atl. Tele-Network Co., 946 F.2d 516, 519 (7th Cir. 1991). In Winters v. AT&T Mobility Services, LLC, No. 17 C 4053, 2017 WL 2936800 (C.D. Ill. July 10, 2017), the court found that an employer could reasonably construe an employee's silence as consent when the employer had clearly communicated the offer to the employee and provided a means to opt out. Id. at *4-5. See also Pohlman v. NCR Corp., No. 12 C 6731, 2013 WL 3776965, at *5 (N.D. Ill. July 17, 2013); Mecherle v. Trugreen, Inc., No. 12 C 1617, 2012 WL 4097221, at *3-5 (N.D. Ill. Sept. 14, 2012); Ragan v. AT&T Corp., 355 Ill.App.3d 1143, 1150, 824 N.E.2d 1183, 1188-89 (2005). In the September 2 e-mail, Morgan Stanley described an arbitration program, stated in plain terms that recipients had a month to opt out, and provided a way to do so. D.E. 7, Defs.' Ex. 2 at 1. Under these circumstances, Morgan Stanley could reasonably construe an employee's silence as acceptance.

         But Gupta also presents a second argument against finding an agreement was formed. He contends that he never got the September 2 e-mail and offers a sworn declaration in support of his contention. See D.E. 17, Pl.'s Ex. 1 ¶ 6 (Gupta Decl.). Gupta concludes that this is sufficient to require denial of Morgan Stanley's motion to compel. The Court disagrees; Gupta's declaration does not warrant denying arbitration outright. But, under the FAA, Gupta may be entitled to a trial on whether the parties formed an agreement requiring arbitration. 9 U.S.C. § 4. The standard for whether a trial is required on the question of the existence of an arbitration agreement is similar to the standard on a motion for summary judgment; "the party must identify specific evidence in the record demonstrating a material factual dispute for trial." Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002).

         On a motion for summary judgment, a genuine dispute requiring a trial typically exists when a party directly denies receiving a letter or e-mail. See In re Longardner & Assocs., Inc., 855 F.2d 455, 459 (7th Cir. 1988); Jones v. Citibank, F.S.B., 844 F.Supp. 437, 442 (N.D. Ill. 1994); Hall v. Kmart Corp., No. 04 C 6240, 2005 WL 6349832, at *2 (N.D. Ill. Aug. 25, 2005). In Vaden v. IndyMac Bank, F.S.B., No. 02 C 1150, 2003 WL 22136306 (N.D. Ill. Sept. 16, 2003), the plaintiff sued a financial institution in part for failing to comply with notice requirements imposed by the Truth in Lending Act. Id. at *1. The defendant moved for summary judgment, arguing that it sent a letter to his residence that properly provided notice. Id. But the plaintiff, in a deposition, denied ever receiving the letter. Id. at *4. The Court concluded that the denial created a factual dispute requiring a trial. Id. at *5.

         Morgan Stanley contends that courts "routinely" conclude that the denial of receipt cannot defeat a motion for summary judgment without further evidence. The only controlling case on which Morgan Stanley relies, however, creates no such general rule. In Tinder, the Seventh Circuit held that the district court correctly compelled arbitration, despite the fact that the plaintiff presented an affidavit purportedly contesting receipt of a mailing. Tinder, 305 F.3d at 730. In the affidavit, however, the plaintiff stated that she did not recall seeing the relevant arbitration document-not that she never saw it. Id. at 735-36. The Seventh Circuit found this was insufficient to create an issue for trial. Id. at 736. Tinder can be read alongside Longardner to impose a straightforward rule: when the plaintiff submits an affidavit stating that he does not recall receiving a ...

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