Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Mitchell v. Wells Fargo Bank

United States District Court, D. Utah, Central Division

November 29, 2017

LAWRENCE J. MITCHELL, et al., Plaintiffs,
WELLS FARGO BANK, et al., Defendants.

          Magistrate Judge, Dustin B. Pead



         Sixty-seven plaintiffs[1] 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 (N.D. Cal., filed May 13, 2015).[11] See In re Wells Fargo Fraudulent Account Opening Litig., ___ F.Supp.3d ___, 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 ECF Nos. 103, 109), and the court heard argument on October 31, 2017, (ECF Nos. 111, 112). This order follows.


         The FAA was enacted in 1925, and reenacted and codified in 1947. E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 288 (2002). Its core substantive provisions have not been amended since. See id.; 9 U.S.C. § 2-4.

         Section 2 of the FAA provides that arbitration agreements “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. This provision balances the “liberal federal policy favoring arbitration” with the “fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (first quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); then quoting Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010)). The Act places arbitration agreements “on equal footing with other contracts, ” Waffle House, 534 U.S. at 293, and courts enforce them on their terms and according to the parties' intentions, First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947 (1995), unless invalidated by “generally applicable contract defenses, such as fraud, duress, or unconscionability, ” Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996).

         The Supreme Court has consistently emphasized that “arbitration is simply a matter of contract between the parties; it is a way to resolve those disputes--but only those disputes--that the parties have agreed to submit to arbitration.” First Options, 514 U.S. at 943. “[A]rbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration.” AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986) (citing Gateway Coal Co. v. Mine Workers, 414 U.S. 368, 374 (1974)). Thus, “[a]rbitration under the FAA is a matter of consent, not coercion.” Waffle House, 534 U.S. at 294 (quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)).

         A party may petition a court to compel another party to arbitrate under the terms of their agreement if the court is “satisfied that the making of the agreement for arbitration . . . is not in issue.” 9 U.S.C. § 4. But “[i]f the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof.” Id. As the Tenth Circuit has acknowledged, “before the Act's heavy hand in favor of arbitration swings into play, the parties themselves must agree to have their disputes arbitrated, ” for “even under the FAA it remains a ‘fundamental principle' that ‘arbitration is a matter of contract, ' not something to be foisted on the parties at all costs.” Howard, 748 F.3d at 977 (quoting Concepcion, 563 U.S. at 339); see Commc'n Workers of Am v. Avaya, Inc., 693 F.3d 1295, 1300 (10th Cir. 2012) (“Because arbitration is a creature of contract, a party cannot be forced to arbitrate any issue he has not agreed to submit to arbitration.”).

         Wells Fargo, as the party seeking to compel arbitration, has the burden to show that arbitration agreements exist and apply to these Plaintiffs. See Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012). The court affords the Plaintiffs, as the party resisting arbitration, “the benefit of all reasonable doubts and inferences that may arise.” Id. (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)). If the court finds material factual disputes preclude it from determining the arbitration question as a matter of law, the court must proceed to a summary trial to resolve those disputes of fact. Howard, 748 F.3d at 978.


         Wells Fargo seeks to compel to arbitration Plaintiffs who initially interacted or engaged with Wells Fargo in varied circumstances. In order to understand which contracts may be relevant, the court has broken the Plaintiffs into sub-groups by the account type or service allegedly opened and quotes the relevant language in the agreements associated with these accounts or services. Because Plaintiffs opened consumer accounts going back to 1982, and up through 2016, the court has laid out the changes to Wells Fargo's contract language from 2003 (the earliest agreement provided) through 2016.

         A. Consumer accounts

         Fifty Plaintiffs appear to have opened consumer accounts or services with Wells Fargo between 1982 and 2016 (“consumer account Plaintiffs”).[12] These accounts include checking and savings accounts (including “out-of-store” or “off-site” accounts), “consumer time accounts, ” credit cards, a “Cash on Demand” account, an IRA account, online banking services, and mortgage loans.

         Between at least 2003 and 2016, consumers who opened a checking and/or savings account with Wells Fargo signed a Consumer Account Application, which states, in small type directly above the signature line or the bottom of the page immediately before:

I have received a copy of the applicable account agreement and privacy brochure and agree to be bound by them . . . . I also agree to the terms of the dispute resolution program described in the account agreement Service Agreement and Product Guide. Under this program our disputes will be decided before one or more neutral persons in an arbitration proceeding and not by a jury trial or a trial before a judge.

(ECF No. 99, Exs. 4-A & 25-A (2007); see Exs. 29-A & 56-A (2003) (includes substantially the same language, and the last two lines are bolded), 33-A (2016) (includes substantially the same language, but also notes that the applicable account agreement and privacy brochure “may be amended from time to time, ” and the first and third lines are bolded).)[13]

         Wells Fargo represents that the “applicable account agreement” mentioned in the application is the Consumer Account Agreement (CAA) that each consumer receives when opening a new account or service. Wells Fargo submitted the declaration of Karen Nelson, a Vice President of Wells Fargo and Operational Risk Consultant, attesting to Wells Fargo's recording-keeping policies and common business practices around account openings, conversions, and other transactions. (See Nelson Decl. ¶¶ 1, 4-5, ECF No. 90.) As to the CAAs, Ms. Nelson avers:

According to the Bank's standard operating procedure, the Consumer Account Agreement was included as a part of a package called the ‘New Account Kit' that was physically handed to the customer, or mailed to him or her, when the account is opened. The customer is also provided a document titled Consumer Account Addenda that reflects any changes since the packaging of the New Account Kit. The operative Consumer Account Agreement is available upon request at any banking location and, since 1999, has been available on Wells Fargo's website, located at

(Id. ¶ 7.) Wells Fargo notes that the CAAs have been amended from time to time, but contends that the dispute resolution provisions within the CAAs have “remained materially unchanged.” (Mot. at ¶ 151; see Nelson Decl., Exs. 1-A to 1-N (CAAs from 2003 to 2016).) After reviewing the CAAs, however, the court finds that Wells Fargo has noticeably broadened the dispute resolution language over this time. Thus, the court first presents the language starting in 2003, which noticeably changed in 2011, and changed again in 2016.

         In April 1, 2003, the first section of the CAA was entitled “Terms for All Consumer Deposit Accounts.” This introductory section stated, in relevant part:

Together, these terms and conditions form a binding contract and make up the entire agreement between you and us regarding your deposit account (“Agreement”), and supercede [sic] all prior agreements governing your account. . . .
Please note: The Agreement contains the terms of the dispute resolution program to be followed in the event of a dispute between you and the bank (see below). Please read them carefully. Under this program, at the request of you or the bank, disputes must be resolved by an arbitration proceeding before a neutral arbitrator. If arbitration is requested, you do not have the right to a jury or court trial to resolve the dispute. . . .
Except where otherwise expressly noted, this Agreement governs only your consumer deposit accounts and deposit services; it does not govern, for example credit accounts or credit-related services.

(Nelson Decl., Ex. 1-A, pp. 4-5 (bold in original).) The dispute resolution section followed this initial section and provided, in relevant part:

Non-Judicial Resolution of Disputes . . . [I]f you and the bank are not able to resolve the differences informally, you agree, by opening or maintaining a deposit account with the bank or by accepting a service from us described in this Agreement, such as our Safe Deposit Box service, that any dispute between you and the bank, regardless of when it arose, shall be resolved using the following procedures.
You understand and agree that you and the bank are each waiving the right to a jury trial or a trial before a judge in a public court.
Disputes A dispute is any unresolved disagreement between you and the bank relating in any way to accounts or services described in this Agreement . . . . It includes any claim that arises out of, or is related to, these accounts, services or related agreements. It includes claims based on broken promises or contracts, torts (injuries caused by negligent or intentional conduct) or other wrongful actions. It also includes statutory, common law and equitable claims. A dispute also includes any disagreement about the meaning of this Arbitration Agreement, and whether a disagreement is a “dispute” subject to binding arbitration as provided for in this Arbitration Agreement.

(Id. at 5-6 (bold in original).) The October 2004 through October 2011 CAAs contained substantially the same language, with stylistic updates in 2008. (See Id. Exs. 1-B, p. 8-9 (2004); 1-F, p. 4 (2008; simplified layout).)[14] The 2004 CAA removed the language in the prior version stating that the agreement only governed the consumer's deposit accounts and services, rather than credit accounts or services.

         The CAA effective October 15, 2011 appears to have both simplified and broadened the definition of “disputes” in the dispute resolution section:

Binding arbitration
If you have a dispute with the Bank, and you are not able to resolve the dispute informally, you and the Bank agree that upon demand by either you or the Bank, the dispute will be resolved through the arbitration process as set forth in this part. A “dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to services, accounts or matters; . . . . It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law, and equitable claims.
“Disputes” include disagreements about the meaning, application or enforceability of this arbitration agreement. . . . YOU AGREE THAT YOU AND THE BANK ARE WAIVING THE RIGHT TO A JURY TRIAL OR TRIAL BEFORE A JUDGE IN A PUBLIC COURT.

(Id. Ex. 1-I, p. 4 (emphasis in original).) Further down the page, in the section entitled “Arbitration procedure; severability, ” the 2011 CAA states, in relevant part: “The parties agree that in this relationship: . . . (2) The arbitrator shall decide any dispute regarding the enforceability of this arbitration agreement; . . . .” (Id.) This dispute resolution section remained unchanged until the July 15, 2015 update.

         The July 2015 and April 2016 CAAs reflect the most simplified dispute resolution section yet. First, as in prior CAAs, an introductory section presents generally applicable terms and definitions for “your account and any services.” (Id. Ex. 1-N, p. 2.) The next section, entitled “Resolving disputes through arbitration, ” states:

Arbitration Agreement between you and Wells Fargo
If you have a dispute, we hope to resolve it as quickly and easily as possible. First, discuss your dispute with a banker. If your banker is unable to resolve your dispute, you agree that either Wells Fargo or you can initiate arbitration as described in this section.
Definition: . . . A “dispute” is any unresolved disagreement between Wells Fargo and you. A “dispute” may also include a disagreement about this Arbitration Agreement's meaning, application or enforcement.
Wells Fargo and you each agrees [sic] to waive the right to a jury trial or a trial in front of a judge in a public court.

(Id. Exs. 1-M & 1-N, p. 3.) Further down the page the agreement has a bullet pointed section entitled “What rules apply to arbitration?” that states: “If this Arbitration Agreement is in dispute, the arbitrator will decide whether it is enforceable.” (Id.)

         Every CAA from 2003 to 2016 contains a waiver of class action arbitration; mandated non-disclosure of arbitration proceedings; a provision shifting the costs and expenses associated with compelling arbitration to the party resisting it; and a statement that the arbitration proceedings will be governed by the American Arbitration Association (AAA) rules, to the extent they do not conflict with the terms of the Arbitration Agreement. (See Id. Exs. 1-A, pp. 5-7 (2003); 1-N, pp. 3-4 (2016).) The 2016 CAA also states: “If a service we offer has a separate agreement, and there is a conflict between the terms of the Agreement and the separate agreement, the separate agreement will apply.” (Id. Ex. 1-N, p. 5.)

         Although Wells Fargo connects each consumer account to the relevant CAA in effect at that time (i.e., a checking account opened before November 1, 2007 would have been subject to the October 2006 CAA), Wells Fargo ultimately contends that the operative CAA for this analysis is the April 2016 CAA (assuming all consumer account Plaintiffs have authorized accounts that remain open in 2016). Wells Fargo bases this conclusion on other provisions in the CAAs. The CAAs each contain a (unilateral) modification clause, stating that Wells Fargo “can change the Agreement by adding new terms or conditions, or by modifying or deleting existing ones” at any time and with no strict requirement of notice, [15] and a merger clause, stating that the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.