Office 365 | Files Tab | New Document -- Does not work ?? (E1)

For an Enterprise E1 type account...

User1 is looking at SkyDrive Pro page...

Case 1:

At the top are three Tabs -- Browse | Files | Library

Clicking -- Files | New Document | Create a New Document in this Library

Does not create a new document ??

Case 2:

While Clicking -- "New Document" in the middle of the screen by the "+" symbol does allow a new document to be created.

This is confusing. Why doesn't Case 1 create a new document?

Thanks for any help.