A U.S. district judge in Camden found sufficient evidence yesterday to move forward on a suit brought by one of the casino industry's highest-ranking female executives against Morgan Stanley.

In her suit, Audrey S. Oswell claims Morgan Stanley recruited her to run its planned $1 billion gambling project in Atlantic City. The investment house used her and did not follow through on a promise to hire her, she said, after she helped it get what it really wanted: an agreement to buy a parcel in Atlantic City, where available land is very scarce, on which to build a casino.

"This is a simple story about an individual named Audrey Oswell standing up for her rights because Morgan Stanley failed to honor its commitments to her," lawyer Charles A. Ercole, who is representing Oswell, said in court yesterday. "The point of the case is that companies like Morgan Stanley should honor their contractual obligation."

Oswell, who eventually landed a job as chief executive officer of the Cosmopolitan Resort Casino in Las Vegas last fall, is seeking unspecified damages.

Morgan Stanley claims that it was Oswell who sought out the firm as a potential casino investor.

"The case is wholly without merit. We plan to defend ourselves vigorously," Mark Lake, spokesman for Morgan Stanley, said after yesterday's decision.

Newark, N.J., lawyer A. Ross Pearlson, who is defending Morgan Stanley, argued to dismiss Oswell's complaint on grounds that Oswell did not provide Morgan Stanley an advantage in securing the 20-acre tract to build a $1 billion casino in Atlantic City and that the firm never promised to hire her as CEO of the casino.

"Where is there anything to suggest that her potential for buying that property was better than anyone else's?" Pearlson asked.

Judge Jerome B. Simandle said that, although Oswell still needed to develop more facts in the case, there was enough evidence to let the case proceed.

A Center City lawyer who concentrates on labor and employment law said the complaint by Oswell would hinge on the binding noncompete clause that she was under while CEO and president of Resorts Atlantic City Casino Hotel.

"If Morgan Stanley had said to her: 'Do you have a noncompetition clause, and she demonstrates she does not, then they had every right to talk to her," said Alan Epstein, chairman of Spector Gadon & Rosen's Employment Law Group. "Asking her to come over, however, if they knew or neglected to ask, if she was bound by a noncompetition agreement, could be a problem for them."

Epstein said Oswell must prove that there was a waiver of the noncompete provision.

"Otherwise, she couldn't have taken the job anyhow," he said.

Morgan Stanley faces a second complaint from its dealings with Oswell.

Resorts claims that the Wall Street firm knew all along that Oswell was under a noncompete contract, but still induced her to negotiate a land deal on Morgan Stanley's behalf.

As a result of Morgan Stanley's interference, Resorts claims it lost Oswell's skills and expertise. The CEO position remains unfilled at Resorts.

In its complaint, Resorts seeks to have the land that Oswell presumably negotiated for Morgan Stanley placed in a trust, plus a share of profit from the casino to be built on it.

Lake said Morgan Stanley had not yet responded to Resorts' complaint and had until Feb. 27 to do so.

"In very simple terms, Resorts is saying to Morgan Stanley: 'You stole our employee when you knew she had a contract with us,' " Epstein said.

Harvey Perkins, senior vice president of Spectrum Gaming Group L.L.C., who tracks trends in the casino industry, and who is a consultant to several gambling corporations and Wall Street banking firms, said one outcome of the case might be "stronger, more constrictive language" between an employer and employee over noncompete issues.

The current understanding of such contracts "lends to one thinking about a phone conversation as violating a noncompete clause," he said.

Perkins said such cases would likely increase as the booming gambling industry struggles to find enough top executives to run new casinos. Wall Street firms like Morgan Stanley, hedge funds, and private-equity firms are entering the business.

Besides building its Atlantic City casino, Morgan Stanley also has an 18 percent stake in Trump Entertainment Resorts Inc. as the largest institutional investor in the company. Trump Entertainment owns three casinos in Atlantic City. Donald J. Trump, who owns 31 percent of the company, is the largest individual shareholder.

Morgan Stanley is not the only Wall Street firm looking for gambling profit. Earlier this month, Credit Suisse First Boston's private-equity fund, DLJ Merchant Banking Partners III L.P., became an equity investor of the Hard Rock Hotel & Casino in Las Vegas, putting up $115 million of the $770 million purchase price.

Contact staff writer Suzette Parmley at 215-854-2594 or sparmley@phillynews.com.