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BMO Harris Bank N.A. v. Lailer

United States District Court, E.D. Wisconsin

August 2, 2016

BMO HARRIS BANK, N.A., Plaintiff,


          J.P. Stadtmueller, U.S. District Judge

         This action, filed on May 5, 2016, arises out an employment dispute. (Docket #1). On June 21, 2016, however, the defendants filed a motion to stay the case and compel arbitration. (Docket #8). They argue that the case is subject to arbitration because: (1) the dispute is governed by the Financial Industry Regulatory Authority’s (“FINRA”) arbitration rules, which generally mandate the arbitration of disputes between participants in the securities industry; and (2) that the plaintiff is bound to arbitrate under a theory of estoppel. (Docket #9).[1] The plaintiff responds by arguing that: (1) it never contractually agreed to arbitrate any claims before FINRA; (2) as a bank who not registered with FINRA, it does not meet the definition of a “member” or an “associated person” who may be compelled to arbitrate; and (3) the doctrine of direct benefits estoppel does not apply to the facts of this case. (Docket #13).

         The motion is now fully briefed. (Docket #8, #13, #18). For the reasons stated herein, the Court agrees that the plaintiff does not meet the criteria for mandatory arbitration before FINRA and that compelling arbitration by estoppel is not appropriate. Accordingly, the defendants’ motion will be denied.

         1. BACKGROUND

         The plaintiff, BMO Harris Bank, N.A. (“BMO Harris”), is a national bank organized and existing under the banking laws of the United States with its headquarters and principal place of business at 111 West Monroe Street, Chicago, Illinois 60603. (Docket #1 ¶ 4). According to the complaint,[2]Elizabeth Lailer (“Ms. Lailer”) is a former employee of BMO Harris and is a citizen of the State of Wisconsin. (Docket #1 ¶ 5). Effective March 10, 2016, Ms. Lailer began to work for Robert W. Baird & Co. (“Baird”) in its Waukesha office. (Docket #1 ¶ 2). The instant dispute centers on a non-solicitation clause embedded in Ms. Lailer’s former employment contract that was allegedly violated during the course of her transfer to Baird. (See Docket #1 ¶¶ 2-3).

         Ms. Lailer allegedly held two different positions while working for BMO Harris. Ms. Lailer was first employed as a Private Banker. (Docket #1 ¶ 8). Her responsibilities in that role were to provide banking services to BMO Harris’s high net-worth clientele. (Docket #1 ¶ 8). However, on December 14, 2015, BMO Harris offered Ms. Lailer a new position as a Private Wealth Advisor Director II – Grade 8 with the title of “Vice President” of the bank. (Docket #1 ¶ 9; see also Docket #14 at 8). The terms of the offer were set forth in an electronic letter provided to Ms. Lailer on that date (the “Offer Letter”). (Docket #1 ¶ 9). While Ms. Lailer disputes having been presented with this letter, the defendants have submitted an electronic, date-stamped message that purports to confirm Ms. Lailer’s acceptance of the offer. (Docket #10 ¶ 8; Docket #14 at 5).

         The Offer Letter to Ms. Lailer is marked as being sent from Leslie Meisner, Managing Director of BMO Harris. (Docket #14 at 10). It begins, by stating, “Dear Elizabeth, I am pleased to offer you a transfer to a new role with BMO Harris Bank N.A., part of BMO Financial Group (Company).” (Docket #14 at 8). Among other things, the Offer Letter also provided that Ms. Lailer would “protect the confidential and proprietary information of the Company, our clients, suppliers and employees.” (Docket #14 at 9). Were she to accept the offer, Ms. Lailer would become obligated to “comply with all laws and Company policies that restrict the use, disclosure, collection and access of confidential and proprietary information.” (Docket #14 at 9). Finally, the Offer Letter stated: “When your employment with the Company ends, you must return all Company property, and all Company and client information, in all formats, and you must not keep any copies.” (Docket #14 at 9). Specific to the solicitation of BMO Harris employees and customers, the Offer Letter provided:

During your employment and for twelve months following the end of your employment with the Company, you must not, directly or indirectly solicit: (i) a person who you know is an employee of the Company to leave his or her employment; and (ii) any client of the Company that you serviced during your last twelve months with the Company to offer any product or service that is the same as or similar to any product or service that you provided to that client previously.

(Docket #14 at 9). Ms. Lailer does not dispute that she accepted the role described therein on or about December 15, 2015. (Docket #10 ¶¶ 8-11).

         On or about January 11, 2016, Ms. Lailer gave notice that she was quitting the Vice President position. (Docket #1 ¶ 16). Approximately two months later, Ms. Lailer allegedly sent an email to her customers soliciting them to Defendant Robert W. Baird & Co. (“Baird”). (Docket #1 ¶ 17). According to the complaint, Ms. Lailer also wrote that she was “eager to put Baird’s global resources and client first culture to work toward your goals” and that she and her assistant would “contact you shortly about the transition process….” (Docket #1 ¶ 17).

         As a result of this conduct, the plaintiff claims that Ms. Lailer: (1) breached her employment contract with BMO Harris; and (2) violated the Misappropriation of Trade Secrets in Violation of the Wisconsin Trade Secrets Act (Wis. Stat. Ann. § 134.90). (Docket #1).

         2. LEGAL STANDARD

         Pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”), “a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction…shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under the Act, arbitration may be compelled if the following three elements are shown: “(1) an agreement to arbitrate, (2) a dispute within the scope of the arbitration agreement, and (3) a refusal by the opposing party to proceed to arbitration.” Zurich Am. Ins. Co. v. Watts Indus., Inc., 466 F.3d 577, 580 (7th Cir. 2006). “Whether a particular dispute must be arbitrated is generally a question for judicial determination, unless the parties ‘clearly and unmistakably’ provided otherwise in their agreement.” Duthie v. Matria Healthcare, Inc., 540 F.3d 533, 536 (7th Cir.2008) (quoting Howsam v. Dean Witter Reynolds Inc., 537 U.S. 79, 82 (2002)).

         “Whether or not [a] company [is] bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the court on the basis of the contract entered into by the parties.” AT&T Tech., Inc. v. Comm’ns Workers of Am., 475 U.S. 643, 649 (1986). Thus, because arbitration is “contractual by nature,” a “party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Zurich Am. ...

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