While statutory employment discrimination claims have historically been exempt from otherwise required arbitration under brokerage industry rules, on October 15, 2018, a New Jersey district court held that brokerage firms may require their employees to bring all claims—including statutory ones—through internal arbitration programs. Schmell v. Morgan Stanley & Co., No. 17-13080, 2018 U.S. Dist. LEXIS 176380 (D.N.J. Oct. 15, 2018).  Just two weeks ago, another district court—that time in New York—had reached the same conclusion.  Lockette v. Stanley, No. 18-cv-876, 2018 U.S. Dist. LEXIS 171156 (S.D.N.Y. Oct. 3, 2018).     

In Schmell v. Morgan Stanley, former employee Craig Schmell (“Schmell”) sued Morgan Stanley & Co. (“Morgan Stanley”) in federal court alleging claims of discriminatory and wrongful termination under the New Jersey Law Against Discrimination.  During Schmell’s employment, an internal employee dispute resolution program called “CARE” (Convenient Access to Resolutions for Employees) was implemented at Morgan Stanley through an opt-out system between September and October 2015.  The system implemented required the arbitration of all claims, statutory or not, unless the employee opted out of the program.  Notice of the program, which included instructions for opting out, was e-mailed to employees’ work e-mail accounts.   The e-mailed notice advised that, unless an employee opted out, his or her continued employment at Morgan Stanley would constitute agreement to the program’s expansion. 

In opposing Morgan Stanley’s motion to compel arbitration, Schmell argued that he did not have notice of the CARE program or agreement to arbitrate.  The district court initially denied Morgan Stanley’s motion, finding that a genuine dispute of material fact as to notice existed and granting the parties 60 days to conduct limited discovery on that issue.  Upon renewal of Morgan Stanley’s motion, the court compelled the statutory claims to arbitration, finding that “[t]he fact that the email appeared in [Schmell’s] inbox, combined with the expectation that [he] would read his email, is sufficient to indicate that [Schmell] had notice of the Agreement.”  2018 U.S. Dist. LEXIS 176380 at *6. 

Less than two weeks prior to the Schmell decision, a New York district court similarly compelled statutory employment claims against Morgan Stanley to arbitration under the CARE program in Lockette v. Stanley.  2018 U.S. Dist. LEXIS 171156.  These decisions demonstrate trending support for brokerage firms’ expansion of the scope of claims that their employees are required to arbitrate.


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