Gupta v. Morgan Stanley Smith Barney, LLC

• Decision Date: 19 August 2019
• Docket Number: No. 18-3584,18-3584
• Parties: Rajesh GUPTA, Plaintiff-Appellant, v. MORGAN STANLEY SMITH BARNEY, LLC, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

934 F.3d 705

Rajesh GUPTA, Plaintiff-Appellant,

v.MORGAN STANLEY SMITH BARNEY, LLC, et al., Defendants-Appellees.

No. 18-3584

United States Court of Appeals, Seventh Circuit.

Argued April 17, 2019

Decided August 19, 2019

Aaron Benjamin Maduff, Attorney, MADUFF & MADUFF, LLC, Chicago, IL, for Plaintiff - Appellant.

Brigid F. Cech Samole, Jonathan H. Claydon, Attorneys, GREENBERG TRAURIG, LLP, Miami, FL, Jonathan H. Claydon, Attorney, GREENBERG TRAURIG, LLP, Chicago, IL, Tracy Lynn Gerber, Attorney, GREENBERG TRAURIG, P.A., West Palm Beach, FL, for Defendants - Appellees.

Before Sykes, Brennan, and Scudder, Circuit Judges.

Brennan, Circuit Judge.

This appeal presents a question of contract formation. After Rajesh Gupta sued his former employer Morgan Stanley for discrimination, retaliation, and defamation, the company moved to compel arbitration.¹ Morgan Stanley contends Gupta agreed to arbitrate these claims after he did not opt out of the company’s arbitration agreement. Gupta responds that during his employment he neither saw an arbitration offer nor agreed to arbitrate employment-related disputes. The district court sided with Morgan Stanley and sent the parties off to arbitration. Gupta appeals this ruling, and we affirm.

I

Morgan Stanley hired Gupta as a financial advisor in 2013. Upon joining the company, Gupta signed an employment agreement containing an arbitration clause "agree[ing] to arbitrate any dispute, claim, or controversy that may arise between you and Morgan Stanley ... that is required to be arbitrated ... pursuant to any arbitration agreement to which you are a party." That agreement also contained a merger clause providing:

All terms and conditions of your employment with Morgan Stanley are contained in this Agreement and other written agreements between you and Morgan Stanley, and the policies and procedures of the Firm ... This writing constitutes the entire agreement of the parties with respect to the subject matter recited in this Agreement. This Agreement may be amended only by a writing signed by both you and Morgan Stanley.

Among the additional terms and conditions, Morgan Stanley administered an employee dispute resolution program called "CARE," an acronym for "Convenient Access to Resolutions for Employees." CARE applied to all U.S. employees of Morgan Stanley, and the company posted a "CARE guidebook" explaining the program on its intranet site for employee access.

When Gupta joined Morgan Stanley, the CARE program did not require employees to arbitrate employment discrimination claims. But it did specify that the program’s terms "may change or be discontinued," and that any such changes would be "announced in advance" before becoming "equally binding upon [the employee] and the Firm." That change came in 2015, when Morgan Stanley amended its CARE program to compel mandatory arbitration for all employment-related disputes, including discrimination claims. To announce the amended program, Morgan Stanley sent an email to the account of each of its employees in the U.S.

Morgan Stanley emailed Gupta the new arbitration agreement on September 2, 2015. The email’s subject line read "Expansion of CARE Arbitration Program," and the email itself explained that, effective October 2, 2015, "final and binding arbitration" under the new "CARE arbitration program" would be "mandatory for all employees" unless an employee individually elected to opt out. The email included links to the new arbitration agreement and Morgan Stanley’s revised CARE guidebook, and it encouraged employees to "read and understand" both documents because "they describe the terms, features and details of this program." The revised CARE guidebook similarly explained that "employment discrimination claims under ... any federal ... law (including claims of harassment and retaliation under those laws) will be resolved by final and binding arbitration."

The final section of the company’s September 2 email to Gupta, entitled "Next Steps," attached a link to the arbitration agreement opt-out form, explained instructions for submitting that form, and again notified that Gupta had until October 2, 2015, to decline. The email twice cautioned that, if the employee did not opt out, continued employment would reflect that the employee "consented and agreed to the terms" of the arbitration agreement and CARE guidebook. The email concluded with an assurance that opting out of the arbitration agreement would not adversely affect Gupta’s employment status. The one page opt-out form attached to the email prominently placed the opt-out deadline in bold capital letters, allowed for submission by email, and provided directions if Morgan Stanley failed to confirm the employee’s rejection of mandatory arbitration.

Over the next thirty days, Gupta had access via links on the September 2 email to the arbitration agreement, CARE guidebook, and arbitration opt-out form. During this period, Morgan Stanley also maintained on its intranet page (accessible by all Morgan Stanley employees) a reminder notification about the upcoming expansion to mandatory arbitration and the deadline to opt out. The reminder encouraged employees to "carefully review the September 2 email from Human Resources" and once more instructed that, unless they chose to opt out, continued employment would bind them to the terms of the new arbitration agreement.

The October 2015 deadline to opt out came and went. Gupta did not submit an opt-out form, respond to the September 2 email, or otherwise communicate with human resources about the mandatory arbitration program. He continued to work at Morgan Stanley for two more years until, he alleges, the company forced him to resign because of imminent military leave.² Gupta sued Morgan Stanley for discrimination and retaliation in violation of the Uniformed Services Employment and Reemployment Rights Act, 38 U.S.C. §§ 4301 – 35, and a related defamation claim.

Morgan Stanley moved to compel arbitration under the terms of the 2015 CARE arbitration program and agreement. Gupta resisted, asserting he never agreed to arbitrate. He said he first saw the September 2 email and arbitration agreement when Morgan Stanley filed its motion to compel and filed a declaration to that effect.³

The district court deferred ruling on Morgan Stanley’s motion to compel "pending a trial regarding whether an agreement to arbitrate exists." The court agreed with Morgan Stanley that Illinois law permits an offeror to construe silence as acceptance if circumstances make it reasonable to do so. But it treated Gupta’s sworn statement that he had "never seen" the September 2 email as a denial that he received the email, not simply a denial that he read it. At that point, the court found Morgan Stanley had not reliably demonstrated that Gupta had received the email. Because Gupta said Morgan Stanley never sent him an offer, the court reasoned, "there [was] a genuine dispute about the existence of an agreement to arbitrate." See 9 U.S.C. § 4 ("If the making of the arbitration agreement ... be in issue, the court shall proceed summarily to the trial thereof."). After the parties’ submitted pretrial evidence, however, Gupta could no longer dispute he received the September 2 email in his work email account. As a result, he stipulated "that the email arrived at his inbox," but he maintains he first saw the email only after this lawsuit was filed.

With Gupta’s stipulation, the district court concluded no genuine dispute of material fact required a trial. The court found that Gupta’s receipt of the September 2 email, combined with his continued employment and failure to opt out of mandatory arbitration, gave rise to an agreement to arbitrate. So the court granted Morgan Stanley’s motion to compel arbitration and stayed the litigation. The district court certified its ruling for interlocutory appeal under 28 U.S.C. § 1292(b), which we agreed to accept.

II

We review de novo a district court’s ruling on a motion to compel arbitration. A.D. v. Credit One Bank, N.A. , 885 F.3d 1054, 1059 (7th Cir. 2018).

Gupta’s appeal implicates the Federal Arbitration Act, which reflects "both a liberal federal policy favoring arbitration ... and the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (citations omitted). Specifically, the act mandates enforcement of valid arbitration agreements. 9 U.S.C. §§ 2, 4. Although it requires arbitration agreements to be in writing, it does not require them to be signed. Id . § 3; Tinder v. Pinkerton Sec. , 305 F.3d 728, 736 (7th Cir. 2002). The act also extends to employment contracts. Circuit City Stores, Inc. v. Adams , 532 U.S. 105, 118–19, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Even still, courts cannot require a party to submit a dispute to arbitration unless he has agreed to do so. See A.D. v. Credit One Bank , 885 F.3d at 1060 (citations omitted); Int’l Bhd. of Elec. Workers Local 2150 v. NextEra Energy Point Beach, LLC , 762 F.3d 592, 594 (7th Cir. 2014) (citations omitted) (holding a party seeking arbitration must present a claim that is, "on its face," governed by an arbitration clause).

Against this backdrop, we must resolve whether a valid agreement to arbitrate exists between Gupta and Morgan Stanley. If yes, we consider whether Gupta’s claims fall within the scope of that agreement. We apply state-law principles of contract formation to answer these questions. Gore v. Alltel Commc’ns, LLC , 666 F.3d 1027, 1032 (7th Cir. 2012). "Our role in interpreting a question of state law is to predict how the highest court of the state would answer the question." Cannon v. Burge , 752 F.3d 1079, 1091 (7th Cir. 2014). "In the absence of guiding decisions by the state’s highest court, we consult and follow the decisions of intermediate appellate courts unless there is a convincing reason to predict the state’s highest court would disagree." ADT Sec....