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Morgan Stanley’s arbitration program survives lawsuit challenge

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A federal judge backed Morgan Stanley’s bid to force a black former employee’s claims of discrimination into private arbitration.

The firm’s victory bolsters the company’s mandatory arbitration program, known as CARE, which had come under criticism as an unlevel playing field foisted upon employees.

John Lockette, who sued Morgan Stanley earlier this year, made similar arguments in his suit filed in New York federal court. In addition to claims of racial discrimination, Lockette argued that the firm’s mandatory arbitration program was unfair and that he had not been adequately notified of changes made in 2015.

In a ruling issued Wednesday, U.S. District Judge John Koeltl disagreed.

At issue was whether Lockette and the firm had entered into a “validly formed and enforceable arbitration agreement,” the judge said in his ruling.

The company has denied discriminating against Lockette. Morgan Stanley also says it properly notified employees via email and other methods of impending changes to its CARE program and how to opt out.

Lockette was employed with Morgan Stanley first as an assistant vice president and later as a regional training officer from 2013 to until his termination in 2016, according to court documents. He argued that he neither saw nor heard about changes to CARE until after his termination, and, furthermore, that the firm’s email notification was misleading about those changes.

“None of these arguments are persuasive,” the judge wrote.

Under New York State law, it is only necessary that a party has received an email in accordance with regular office procedures.

“The plaintiff [Lockette] offers only a mere denial of receipt, a litany of more efficacious means by which the defendants could has issued its CARE-expansion proposal, and a case applying Illinois contract law in concluding that the plaintiff’s denial of receipt of an email created a genuine dispute of fact. None of these grounds are sufficient to rebut the presumption,” the judge wrote.

He also said it was sufficiently clear in the email what Morgan Stanley was doing to its CARE program, pointing to its subject line: “Expansion of CARE Arbitration Program.”

“The email is not misleading,” the judge said.

Lockette’s claims will now be heard in private arbitration, according to the judge’s ruling.

Regarding his charges of discrimination, Lockette accuses his ex-employer of failing to live up to the requirements of a class action lawsuit Morgan Stanley settled in 2007.

"Morgan Stanley has no genuine intent to reform, to provide equal opportunities to African-Americans, or to abide by the spirit of its agreement" to settle the racial discrimination claims, Lockette says in his lawsuit filed earlier this year in the U.S. District Court in the Southern District of New York.

Neither a spokeswoman for Morgan Stanley nor an attorney representing Lockette could be reached for immediate comment.

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