Mitchell v. Wells Fargo Bank, Case 2:16–cv–00966–CW–DBP

Citation280 F.Supp.3d 1261
Decision Date29 November 2017
Docket NumberCase 2:16–cv–00966–CW–DBP
Parties Lawrence J. MITCHELL, et al., Plaintiffs, v. WELLS FARGO BANK, et al., Defendants.
CourtUnited States District Courts. 10th Circuit. United States District Court of Utah

Zane L. Christensen, Steven A. Christensen, Christensen Young & Associates, PLLC, Sandy, UT, for Plaintiffs.

David H. Fry, Eric P. Tuttle, Erin J. Cox, Munger Tolles & Olson, LLP, Los Angeles, CA, Elaina M. Maragakis, James S. Jardine, Michael D. Mayfield, Ray Quinney & Nebeker, Salt Lake City, UT, for Defendants.


Clark Waddoups, United States District Judge

Sixty-seven plaintiffs1 have sued Wells Fargo Bank, N.A. and Wells Fargo & Company ("Wells Fargo") for engaging in various unauthorized and fraudulent activities using their personal information. (See ECF No. 69 (Third Am. Compl. [hereinafter "TAC"] ).) Plaintiffs purport to represent a class of individuals who opened accounts with or purchased services from Wells Fargo, or a bank later acquired by Wells Fargo, and/or were notified that Wells Fargo had opened an account or service on their behalf without their knowledge or consent, and who thereby suffered damages from the unauthorized and fraudulent activities. (TAC ¶¶ 24, 582.)

Wells Fargo has moved to compel all but two of the Plaintiffs to arbitrate their claims pursuant to arbitration agreements embedded in the Plaintiffs' authorized account agreements or other agreements. (See generally ECF No. 88 ("Mot").)2

For the reasons discussed below, the court RESERVES ruling on Wells Fargo's Motion to Compel, (ECF No. 88). Material questions of fact preclude the court from finding, as a matter law, that (1) certain Plaintiffs have formed agreements to arbitrate with Wells Fargo; (2) the remaining Plaintiffs have formed valid agreements to delegate all threshold questions to an arbitrator; and (3) Wells Fargo has not intentionally waived its right to seek arbitration in the circumstances. As further elaborated below, the court must proceed to a summary trial under the Federal Arbitration Act (FAA or Act) to resolve these factual disputes. See Howard v. Ferrellgas Partners, L.P. , 748 F.3d 975, 984 (10th Cir. 2014) (observing that "when factual disputes may determine whether the parties agreed to arbitrate, the way to resolve them ... is by proceeding summarily to trial").

A. Wells Fargo's Unauthorized Accounts Scandal

In September 2016, news broke that Wells Fargo had entered into a consent order including penalties of $185 million with three governmental agencies, after investigations revealed that Wells Fargo had opened millions of unauthorized accounts and products without consumer knowledge. (See TAC ¶ 66 & Ex. 1, p. 5; Consent Order, Consumer Fin. Prot. Bureau (CFPB), 2016–CFPB–0015 (Sept. 8, 2016).)3 An independent review going back to 2011 "identified approximately 2.1 million potentially unauthorized consumer and small business accounts, including 623,000 consumer and small business unsecured credit card accounts." Wells Fargo Form 10–Q, Quarterly Report for period ending September 30, 2016, p. 3 (hereinafter, "Form 10–Q").4 Wells Fargo's CEO at the time, John Stumpf, was called to testify before the U.S. Senate Banking Committee regarding the misconduct, and he acknowledged the opening of unauthorized accounts and widespread misconduct in sales practices. See U.S. Senate Comm. on Banking, Hous., & Urban Affairs, "An Examination of Wells Fargo's Unauthorized Accounts and the Regulatory Response" (Sept. 20, 2016)5 ; see also Form 10–Q at 3, 67, 121 (acknowledging investigations by and settlements with government agencies and numerous lawsuits related to wrongdoing in sales practices).

Investigations have concluded that sales practice violations were widespread and recognized within the company for many years. A report commissioned by Wells Fargo's Board of Directors noted that internal departments first noticed an increase in sales practice violations in 2002. Independent Directors of the Board of Wells Fargo & Co., Sales Practices Investigation Report , pp. 31, 88–90 (April 10, 2017) (ECF No. 69–5 [hereinafter Sales Practices Report ] ).6 In 2004, a sales integrity taskforce, including representatives in Wells Fargo's Community Bank, Internal Investigations, and Law Department, produced a report finding that employees could not meet the bank's aggressive sales goals without cheating or gaming the system. Id. at 89. The taskforce recommended eliminating sales goals for employees, and the report was relayed to senior Wells Fargo management, but no action appears to have been taken at the time. Id. at 31, 89–90. The Board's report noted an "array of misconduct" continued to occur, including issues with "customer consent, generally employees opening unauthorized personal checking or savings accounts for existing customers; falsification of bank records, generally falsifying customer identification or contact information or forging customer signatures; funding manipulation, generally employees funding an account held by a customer with their own money or money from another account held by that customer; and the creation of unnecessary accounts, generally employees opening accounts which served no customer financial need ...." Id. at 36. The report found that "sales integrity issues reflected a systemic breakdown in Wells Fargo's culture and values and an ongoing failure to correct the widespread breaches of trust in the misuse of customers' personal data and financial information." Id. at 78. Sales practice violations continued and increased through at least 2013, after which more attention was brought to the issue and violations apparently declined. Id. at 6.7 Wells Fargo finally eliminated sales goals in October 2016, after the announcement of the Consent Order and attendant penalties. See Form 10–Q at 3.

In August 2017, Wells Fargo announced that a third-party review had revealed more potentially unauthorized cases, bringing the total reported unauthorized accounts, credit cards, and other services between 2009 and 2016 to about 3.5 million.8 On October 3, 2017, Wells Fargo's new CEO, Tim Sloan, testified in front of the Senate Banking Committee about this latest disclosure, as well as Wells Fargo's use of forced mandatory arbitration of these disputes.9

B. This Action

On September 16, 2016, in the midst of this public scandal, individuals residing in Utah and many other states filed this action against Wells Fargo. (See ECF No. 2.) Plaintiffs have amended their complaint three times, most recently on June 27, 2017. (ECF Nos. 6, 15, 69.) Plaintiffs pursue several legal theories against Wells Fargo, including violations of Utah law protecting privacy and personal information; the Stored Communications Act, 18 U.S.C. § 2702 ; the Gramm–Leach–Bliley Act, 15 U.S.C. § 6801 ; the Fair Credit Reporting Act, 15 U.S.C. § 1681 ; anti-tying violations, 15 U.S.C. § 1972; the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 – 68 ; electronic mail fraud, 18 U.S.C. § 1037 ; conversion; fraud and misrepresentation; unjust enrichment; intentional/negligent infliction of emotional distress; and declaratory and injunctive relief. (See TAC at 1, 94–136.) Plaintiffs seek class certification; an injunction enjoining Wells Fargo from further misconduct; compensatory, statutory, and punitive damages (in excess of one billion dollars ($1,000,000,000.00)); and costs and attorneys' fees. (See id. at 136–37.)

On November 23, 2016, Wells Fargo moved to compel arbitration as to fifty-eight of the eighty named Plaintiffs and sought to dismiss the Second Amended Complaint. (ECF Nos. 24 & 30.) In light of the motion to compel, the parties stipulated and moved the court to stay the dismissal arguments and any discovery not connected to the issue of arbitration. (ECF Nos. 36 & 37.) After the parties completed briefing on the motion to compel, the court received notice that the Judicial Panel on Multidistrict Litigation ("JPML") would hear argument on whether to create an MDL action from the several cases filed against Wells Fargo related to fraudulent account openings.10 The court stayed the case pending the JPML's decision. (ECF No. 54.)

On April 5, 2017, the JPML determined it would not order centralization due to the nationwide class settlement-in-principle reached by the parties in the first-filed putative class action, Jabbari v. Wells Fargo Bank, N.A. , No. 3:15–cv–2159–VC, 2015 WL 3485066 (N.D. Cal., filed May 13, 2015).11 See In re Wells Fargo Fraudulent Account Opening Litig. , 282 F.Supp.3d 1360, 1384–85, 2017 WL 1283679, at *1 (J.P.M.L. Apr. 5, 2017). Plaintiffs then moved to lift the stay in this case. (ECF No. 55.) On April 13, 2017, the court heard argument from the parties regarding the propriety of lifting the stay in light of the pending Jabbari settlement. (See ECF Nos. 58, 61.) The court ultimately lifted the stay for the limited purpose of hearing argument on the motion to compel. (ECF No. 60.) On June 7, 2017, the court held a hearing on the motion, during which the court granted Plaintiffs' oral motion to amend their complaint. (ECF No. 67.)

Plaintiffs filed their currently operative Third Amended Complaint on June 27, 2017. (ECF No. 69.) In light of the amended pleading, the court denied Wells Fargo's motions to compel and dismiss without prejudice and set a briefing schedule for refiling. (ECF No. 73.) The court also facilitated the parties' efforts to identify information about twenty-one named Plaintiffs whom Wells Fargo had not been able to identify, to determine whether these Plaintiffs were also potentially subject to arbitration agreements. (See ECF Nos. 76–80.)

On September 18, 2017, Wells Fargo renewed its Motion to Compel Arbitration as to sixty-five out of the sixty-seven Plaintiffs remaining in the case. (See ECF No. 88.) The Motion has been fully briefed, (see...

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