Garcia v. Wachovia Corp.

• Decision Date: 26 October 2012
• Docket Number: No. 11–16029.,11–16029.
• Citation: 699 F.3d 1273
• Parties: Melanie GARCIA, Marc Martinez, on behalf of himself and all others similarly situated, Dolores Gutierrez, on behalf of herself and all others similarly situated, Celia Spears–Haymond, as an individual and on behalf of all others similarly situated, Alex Zankich, Plaintiffs–Appellees, William Rucker, individually and on behalf of all others similarly situated, Plaintiff, v. WACHOVIA CORPORATION, et al., Defendants, Wells Fargo Bank, N.A., on its own behalf and on behalf of its predecessor, Wachovia Bank, N.A., Defendant–Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

699 F.3d 1273

Melanie GARCIA, Marc Martinez, on behalf of himself and all others similarly situated, Dolores Gutierrez, on behalf of herself and all others similarly situated, Celia Spears–Haymond, as an individual and on behalf of all others similarly situated, Alex Zankich, Plaintiffs–Appellees,William Rucker, individually and on behalf of all others similarly situated, Plaintiff,

v. WACHOVIA CORPORATION, et al., Defendants,Wells Fargo Bank, N.A., on its own behalf and on behalf of its predecessor, Wachovia Bank, N.A., Defendant–Appellant.

No. 11–16029.

United States Court of Appeals,Eleventh Circuit.

Oct. 26, 2012.

Jeremy William Alters, Alters Law Firm, Robert C. Josefsberg, Steven Craig Marks, Aaron S. Podhurst, Peter Prieto, Stephen F. Rosenthal, Podhurst Orseck, PA, Miami, FL, Kimberly L. Boldt, Boldt Law Firm, Hollywood, FL, David Marc Buckner, Robert Cecil Gilbert, Grossman Roth, PA, Coral Gables, FL, Bruce Stephen Rogow, Bruce S. Rogow, Fort Lauderdale, FL, Steve W. Berman, Ari Y. Brown, Genessa A. Stout, Hagens Berman Sobol Shapiro, LLP, John Matthew Geyman, John Wentworth Phillips, Phillips Law Group PLLC, Seattle, WA, Michael R. Comeau, Comeau Maldegen Templeman & Indall LLP, Santa Fe, NM, Edward Adam Webb, Webb Klase & Lemond, LLC, Atlanta, GA, Steve D. Larson, Joshua L. Ross, Stoll Stoll Berne Lokting & Schlachter, PC, Portland, OR, Mikaela Bernstein, Jordan Elias, Michael Walter Sobol, Lieff Cabraser Heimann & Bernstein, LLP, San Francisco, CA, Barry R. Himmelstein, Himmelstein Law Network, Emeryville, CA, Jae Kook Kim, Richard D. McCune, McCune Wright, LLP, Redlands, CA, for Plaintiffs–Appellees.

Sonya D. Winner, David M. Jolley, Cortlin H. Lannin, Philip Andrew Scarborough, Covington & Burling, LLP, San Francisco, CA, Barry R. Davidson, Hunton & Williams, LLP, Jamie Zysk Isani, Hunton & Williams, LLP, Miami, FL, Emily Johnson Henn, Covington & Burling LLP, Redwood Shores, CA, Brian J. Meenaghan, Lane Powell PC, Seattle, WA, Defendant–Appellant.

Appeal from the United States District Court for the Southern District of Florida.

Before BARKETT and PRYOR, Circuit Judges, and BATTEN,^* District Judge.

PRYOR, Circuit Judge:

This appeal presents the question whether Wells Fargo Bank, N.A., for itself and its predecessor, Wachovia Bank, N.A., waived its right to compel arbitration of claims brought by its customers as putative class action plaintiffs. The customer agreements that govern the claims provide that either party may move to compel arbitration and that all arbitrated claims must be arbitrated on an individual instead of a classwide basis. The district court twice invited Wells Fargo to move to compel arbitration, first in November 2009 and again in April 2010, but Wells Fargo declined those invitations. A year later, Wells Fargo reversed course and moved to compel arbitration soon after the Supreme Court held in AT&T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1753, 179 L.Ed.2d 742 (2011), that the Federal Arbitration Act, 9 U.S.C. § 1 et seq., preempts state laws that condition the enforceability of consumer arbitration agreements on the availability of classwide procedures. The district court denied the motion based on waiver. Wells Fargo argues that it did not waive its right to compel arbitration because it would have been futile to move to compel arbitration before the Supreme Court decided Concepcion. But we conclude that Concepcion established no new law. Because we conclude that it would not have been futile for Wells Fargo to argue that the Act preempts any state laws that purported to make the classwide arbitration provisions unenforceable, we affirm the denial of its motion to compel arbitration.

I. BACKGROUND

The plaintiffs in these five separate putative class actions allege that Wells Fargo and Wachovia Bank unlawfully charged them overdraft fees for their checking accounts, which are governed by agreements that provide for arbitration of disputes on an individual basis. The Wells Fargo customer agreement states that “[e]ither [the customer] or the Bank may require the submission of a dispute to binding arbitration at any reasonable time notwithstanding that a lawsuit or other proceeding has been commenced,” but that neither a customer nor the bank may consolidate disputes or “include in any arbitration any dispute as a representative or member of a class.” The Wachovia customer agreement states that, if either the customer or the bank requests, “any dispute or claim concerning [the customer's] account or [the customer's] relationship to [Wachovia] will be decided by binding arbitration,” and that the arbitration “will be brought individually and not as part of a class action.”

Wells Fargo and Wachovia are not the only banks accused of unlawfully charging checking account overdraft fees. In June 2009, the Judicial Panel on Multidistrict Litigation consolidated in the Southern District of Florida the five putative class actions involved in this appeal with dozens of similar cases filed against approximately thirty banks. This consolidated litigation has already been the subject of several appeals in this Court. See, e.g.,Barras v. Branch Banking & Trust Co., 685 F.3d 1269 (11th Cir.2012); Given v. M&T Bank Corp., 674 F.3d 1252 (11th Cir.2012); Hough v. Regions Fin. Corp., 672 F.3d 1224 (11th Cir.2012).

Wells Fargo acquired Wachovia in January 2009. Wachovia has since ceased to exist as a separate bank. For that reason, we refer to both banks jointly as Wells Fargo.

On November 6, 2009, the district court ordered Wells Fargo to file, by December 8, 2009, “all merits and non-merits motions directed to” the complaints, including any motions to compel arbitration. Wells Fargo and several other banks filed an omnibus motion to dismiss, but Wells Fargo did not move to compel arbitration of the plaintiffs' claims. The district court denied the motion to dismiss in most respects.

On April 14, 2010, the district court offered Wells Fargo a second opportunity to move to compel arbitration by April 19, 2010. Wells Fargo did not accept this second invitation. Wells Fargo instead responded that it declined to elect to arbitrate the disputes. Wells Fargo even told the district court that, as to all of the Wachovia customers involved in this appeal but one, it “did not move for an order compelling arbitration ... nor does it intend to seek arbitration of their claims in the future.”

For more than a year, the parties prepared their cases for trial. They engaged in extensive discovery: they served and answered interrogatories, produced approximately 900,000 pages of discovery documents, and took approximately 20 depositions. The parties also litigated several motions before the district court.

On April 27, 2011, the Supreme Court held in Concepcion that the Federal Arbitration Act preempts a California rule of contract law that conditioned the enforceability of consumer arbitration agreements on the availability of classwide arbitration. 131 S.Ct. at 1753. The California Supreme Court had held in Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005), that most consumer arbitration provisions that waive the right of the consumer to arbitrate on a classwide basis are unconscionable and unenforceable, but the Supreme Court ruled that the Act preempts the Discover Bank rule because the rule “interfere[d] with fundamental attributes of arbitration and thus create[d] a scheme inconsistent with the FAA.” Concepcion, 131 S.Ct. at 1748.

Two days later, on April 29, 2011, Wells Fargo filed a motion to dismiss the five putative class actions in favor of arbitration or, in the alternative, to stay the proceedings pending arbitration. Wells Fargo argued that it had not waived its right to compel arbitration because, before the Supreme Court decided Concepcion, the state laws governing the customer agreements foreclosed Wells Fargo from enforcing the agreements to arbitrate on an individual rather than classwide basis. The customer agreements in this case are governed by the laws of California, Florida,Georgia, New Jersey, New Mexico, Oregon, Texas, Virginia, and Washington. Wells Fargo argued that, before the Supreme Court decided Concepcion, those state laws made arbitration provisions that contained class action waivers unenforceable, so moving to compel would have been futile.

After the parties conducted limited arbitration-related discovery, the district court ruled that Wells Fargo had waived its right to compel arbitration, and it denied the motion to dismiss or stay the lawsuits in favor of arbitration. The district court concluded that, before the Supreme Court decided Concepcion, a motion to compel arbitration would not have been futile for several reasons, including that Wells Fargo could have argued that the Act preempted state laws that refused to enforce the arbitration agreements, that Wells Fargo could have argued that at least some of the state laws did not prohibit enforcement of the agreements, and that Wells Fargo could have severed the class action waiver provision and submitted to class arbitration.

II. STANDARD OF REVIEW

“We review de novo the denial of a motion to compel arbitration.” Hough, 672 F.3d at 1228.

III. DISCUSSION

We divide our discussion in two parts. First, we explain why Wells Fargo waived its right to compel arbitration. Second, we explain why it would not have been futile for Wells Fargo to move to compel arbitration before the Supreme Court decided Concepcion.

A. Wells Fargo Waived Its Right To Compel Arbitration.

“[D]espite the strong policy in favor of arbitration, a party may, by its conduct, waive its right to arbitration,” S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir.1990) (citation omitted), and we apply a two-part test to determine that issue. “First, we decide if, under the totality of the circumstances, the party has acted inconsistently with the arbitration...