Court Says Morgan Stanley Employee Failed to Opt Out of Arbitration Clause

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 Human260.Resources@morganstanley.com sent an e-mail to the address rajesh.gupta2@morganstanleypwm.com, 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.

[I]n 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.

[G]upta'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." . . .

The Court concludes that a genuine dispute exists in this case. Gupta's declaration states "I have never seen [the September 2 e-mail] until I saw it attached to the declaration filed with the instant motion." D.E. 17, Pl.'s Ex. 1 ¶ 6. The most natural reading of this declaration is as a denial of receipt of the e-mail, not simply a denial that Gupta read the e-mail, which would not be enough to create a triable dispute. Morgan Stanley has offered two affidavits on this point. The first, submitted with its motion, is from Jessica Krentzman, an employee in Morgan Stanley's human resources department. Krentzman says that the relevant e-mail was received by Gupta via his Morgan Stanley e-mail account, using his assigned individual e-mail address. D.E. 7, Defs.' Ex. 1 ¶ 5 (Krentzman Decl.). A copy of the e-mail is attached to the affidavit; it is addressed to rajesh.gupta2@morganstanleypwm.com. Id., Defs.' Ex. 2 at 1. The second declaration, from Patricia Kenneally, a Morgan Stanley paralegal, was filed shortly after Morgan Stanley's reply brief. D.E. 22 (Kenneally Decl.). It says essentially the same thing as the earlier declaration, with the addition of the following: "Morgan Stanley cannot currently determine whether Mr. Gupta opened the September 2, 2015 email referenced above, it can only determine that it was sent and received on that date." Id. ¶ 4. Neither affidavit, however, attaches the documentation from which the affiants determined that the e-mail was received by Gupta or describes how that determination was made, so there is no way to assess the reliability of the affiants' statements. The Court also notes that Kenneally's affidavit states that Gupta's address was rajesh.gupta2@morganstanley.com, id. ¶ 3, which differs slightly from what appears on the face of the e-mail copies (the "pwm" is missing), though the Court cannot say that is significant. The Court concludes, for these reasons, that there is a genuine dispute regarding whether Gupta received the relevant e-mail and thus whether an agreement to arbitrate was formed.

[I]n light of the stipulation, there does not remain a genuine dispute requiring a trial. The arrival of the September 2, 2015 e-mail at Gupta's Morgan Stanley work e-mail in-box, combined with his failure to opt out of the company's arbitration program, gives rise to an agreement to arbitrate for the reasons described in the Court's May 9 decision. 

The pre-2015 CARE program explicitly stated its terms were subject to change after an "announce[ment] in advance," so Gupta had to keep abreast of the company's dispute resolution policies upon announcement. Morgan Stanley emailed the arbitration policy changes to Gupta personally, granted him thirty days to review the new arbitration agreement, circulated an opt-out form, conspicuously displayed the deadline to opt out, posted a continual company intranet reminder of the new arbitration policy and opt-out date, and repeatedly informed that it would construe silence as acceptance of mandatory arbitration. All these actions bolstered the company's expectation of a response. 

Gupta worked for Morgan Stanley for four years. That employment included regular email communication, and justified Morgan Stanley's expectation of a reply, and its assumption that Gupta's silence indicated his acceptance of mandatory arbitration. This case does not present an unsolicited offer-by-email from a stranger when the expectation of the offeree's response is rare, if not baseless. 

Instead, employment includes the understanding that employees will act with diligence in following an employer's instructions and responding to requests, whether transmitted by email or another reasonable mode of communication. Here, Gupta submits no evidence, policy, or prior course of dealings from which we can infer that Gupta was free as an employee to ignore Morgan Stanley's communications without repercussion. Instead, Gupta argues Morgan Stanley failed to provide enough notice to trigger his response  . . .

[M]organ Stanley reasonably construed Gupta's silence as acceptance of the arbitration agreement after he was given a clear offer, a reasonable opportunity to opt-out, and repeated instructions that silence and continued employment reflected acceptance. See Ragan, 824 N.E.2d at 1188-89 (holding silence reflected acceptance of arbitration agreement No. 18-3584 15 where plaintiff "had a reasonable opportunity to reject the offer but failed to do so"); see also Boomer v. AT & T Corp., 309 F.3d 404, 415 (7th Cir. 2002) (holding same under Illinois law). Similarly, the parties' employment relationship made it reasonable to expect Gupta would notify Morgan Stanley if he intended to decline its offer, as well as that silence would convey acceptance. Bauer, 743 F.3d at 228. When, as here, "inaction is indistinguishable from overt acceptance," Najd, 294 F.3d at 1109, we may infer the parties have agreed. For these reasons, we conclude the district court reasonably construed Gupta's silence and continued employment as assent to the arbitration agreement. 

• FINRA
• Arbitration
• Email
• Gupta
• Morgan Stanley
• EFL
• Promissory Notes
• USERRA
• Opt Out
• Silence
• Assent
• BrokeAndBroker
• Bill Singer