Gupta v. Morgan Stanley Smith Barney, LLC et al

Filing 24

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 5/9/2018: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court defers ruling on Morgan Stanley's motion to compel arbitration and stay the action pending a trial regarding whether an agreement to arbitrate exists [dkt. no. 7]. The case is set for a status hearing on May 18, 2018 at 8:30 a.m. to set a trial date. (mk)

Case: 1:17-cv-08375 Document #: 24 Filed: 05/09/18 Page 1 of 7 PageID #:144

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

RAJESH GUPTA,
Plaintiff,
vs.
MORGAN STANLEY SMITH BARNEY,
LLC and MORGAN STANLEY SMITH
BARNEY FA NOTES HOLDINGS, LLC,
Defendants.

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Case No. 17 C 8375

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
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.
Background
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),

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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 [e-mail] sent an e-mail to the address
[e-mail], 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.
Discussion
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).

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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.

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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

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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 letter, there is no triable factual dispute, but when the plaintiff submits
an affidavit in which he denies receiving a letter, a triable dispute exists. See also
Pohlman, 2013 WL 3776965, at *4; Mecherle, 2012 WL 4097221, at *4.
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 [e-mail]. Id., Defs.' Ex. 2 at 1. The

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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 [e-mail], 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.
Morgan Stanley argues that a party who has properly mailed an item is entitled to
the presumption that it was delivered. See Ball v. Kotter, 723 F.3d 813, 830 (7th Cir.
2013) (applying the presumption of delivery to properly sent e-mails). And it offers
several cases that appear to hold that a plaintiff's sworn, unequivocal denial of receipt—
like Gupta's affidavit—does not create an issue of fact. See, e.g., Johnson v. Harvest
Mgmt. Sub TRS Corp.—Holiday Ret., No. 3:15-cv-00026-RLY-WGH, 2015 WL
5692567, at *3 (S.D. Ind. Sept. 25, 2015); Versmesse v. AT&T Mobility LLC, No. 3:13
CV 171, 2014 WL 856447, at *4 (N.D. Ind. Mar. 4, 2014); Corbin v. Affiliated Comput.
Servs., Inc., No. 6:13-cv-180-Orl-36TBS, 2013 WL 3804862, at *6 (M.D. Fla. July 19,

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2013). The Court respectfully disagrees with those courts that conclude that an affidavit
in which the plaintiff denies receiving a mailing cannot create an issue of fact; that would
be tantamount to making a rebuttable presumption irrebuttable. The Court also notes
that Johnson relies on dicta in a Seventh Circuit decision from a different context in
which this issue wasn't decided in the way urged by Morgan Stanley, see Joshi v.
Ashcroft, 389 F.3d 732, 735-36 (7th Cir. 2004), and in Versmesse there was undisputed
evidence that the e-mail was viewed, see Versmesse, 2014 WL 856447, at *5. Indeed,
although Morgan Stanley quotes Joshi as describing such affidavits as "weak"
evidence, in that case the court made it clear that it is for the trier of fact to weigh such
evidence. 1 Joshi, 389 F.3d at 735. The Court concludes, as stated earlier, that there is
a genuine dispute about the existence of an agreement to arbitrate.
Because a trial is required on whether the parties agreed to arbitrate, the Court
does not resolve Morgan Stanley's arguments regarding the scope of the agreement or
the propriety of the JAMS forum.
Conclusion
For the foregoing reasons, the Court defers ruling on Morgan Stanley's motion to
compel arbitration and stay the action pending a trial regarding whether an agreement
to arbitrate exists [dkt. no. 7]. The case is set for a status hearing on May 18, 2018 at
8:30 a.m. to set a trial date.
Date: May 9, 2018
________________________________
MATTHEW F. KENNELLY
United States District Judge
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In a related context, the Seventh Circuit has tried to cure the "misconception" that a
"self-serving" affidavit cannot defeat a motion for summary judgment. McKinney v.
Office of Sheriff of Whitley Cty., 866 F.3d 803, 814 (7th Cir. 2017).
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