Class Action Lawsuit Against Wells Fargo Seeking $2.6 Billion for Wrongful Terminations Unlikely to Go Very Far

I hate to be a nayayer when individuals seek redress for wrongdoing. And while it ought to be possible to make a case on behalf of employees who were fired by Wells for refusing to meet or failing to meet unrealistic sales targets, the lawsuit filed in California state court last Friday, Polonsky v. Wells Fargo Bank & Co., does not appear to be that case.

The lawsuit is on behalf o two former Wells employees, and seeks class action status for other Wells employees who were fired or demoted for failing to meet sales quotas because they would not break the law.

I’ve embedded the filing at the end of this post. Here’s a recap from Bloomberg:

The lawsuit offers details of how low-level bankers were allegedly pushed to create at least 10 new accounts a day in a sales initiative that has blown up into a scandal and prompted U.S. lawmakers to call for Chief Executive Officer John Stumpf’s resignation. Bankers were “coached” to secretly open fee-generating accounts and often resorted to using false customer contact information like NoName@WellsFargo.com on accounts so they couldn’t be traced back, according to the complaint.

The bank, according to the Los Angeles suit, rewarded employees with promotions for using tactics including “sandbagging” — opening fake accounts the day after a customer instructed the bank not to; “pinning” — assigning personal identification numbers without customer authorization; and “bundling” — lying to customers about limited availability of certain products in packages.

While Wells Fargo fired 5,300 employees that it blamed for opening accounts without client approval, the bankers who sued Thursday said the dishonest practices were orchestrated by Stumpf.

Aargh. It would help if the reporters who write up these cases were up on the state of play, or would even search their own archives.

This lawsuit has simply repackaged allegations from the Los Angeles City Attorney’s complaint last year. The “details” that this Bloomberg story cites are not new, as a story by Bloomberg’s own Matt Levine demonstrates.

The novel element is that this suit takes these allegations (which have never been proven to be true, recall that this case was settled without any admissions being made by Wells Fargo) and uses them to contend that the real victims were the employees that were terminated or demoted by Wells for not meeting sales targets.

While that claim may seem obvious, it needs to be carefully argued and supported to hold up in court. This filing doesn’t come close to having Big Building Law Firm fit and finish. It repeatedly makes overly broad assertions that will not be hard for Wells Fargo to knock down. And that’s not surprising. The lawsuit is by a solo practitioner who specializes in employment law. Now there have been one-horse firm employment lawyers who are feared in Corporate America and go to war successfully on behalf of terminated senior employees and labor unions. But in general, employment law is a backwater, and this filing is on a par with the few cases I’ve read on behalf of low-level workers. Statements like this do not inspire confidence:

It is also illegal to engage in Securities Fraud by boosting the stock price as a result of conduct which one knows to be fraudulent, such as the scam perpetuated by Wells Fargo above.

That’s not a legal argument. That’s a handwave.

Similarly, the filing provided information that contradicts its unduly confident positions, such as “Employees who did not ‘game’ were surely denoted or fired” and “Because it was impossible to consistently meet a quota without “gaming”…” Really? That is tantamount to saying that every single customer facing employee who kept a job at Wells cheated. Even with Wells Fargo’s nutty targets, there were almost certainly some that met them if nothing else by being in operations where the customer mix was more favorable to selling more “solutions”. The case includes a quote from its 2014 Annual Report that customers in the wealth management area had over 10 products on average. That makes sense because they might have a brokerage account, invest in a Wells Fargo index fund (Wells is a leader in running equity index funds), have dividends and interest payments swept into a money market fund, etc. So the employees in that part of the bank may not have been harassed as much as branch staffers because their entire area regularly exceeded Wells Fargo’s targets, plus those customers might have had personal account reps, and high net worth individuals like dealing with the same individual over time.

Another issue is that a CNN reported last week that whistleblowers said they were fired as a result of complaining, and the bank had procedures in place to create a paper trail that they were defenestrated for something else, usually being late. But one can imagine that managers took note of the bank’s desire to have tidy records to justify firings, and they’d similarly work up a case file on employees who beefed about their targets informally. In other words, if this case actually got anywhere, one of Wells Fargo’s first steps might be to present an analysis of personnel records as to why customer-facing employees were demoted or fired, and show that they consisted overwhelmingly of performance deficiencies like rudeness to co-workers, showing up to work drunk, frequent errors in documents, etc. The onus would be on the plaintiffs to show otherwise.

But that’s even assuming this case moves forward to discovery. It will have to surmount two major hurdles. Wells Fargo will file a motion for summary judgment, basically saying there isn’t enough here for the court to bother. Assuming it passes summary judgment, it also needed to get a class certification. Otherwise, it’s just a wrongful termination suit on behalf of two ex workers.

I’d very much like to get a reading from the attorneys in the commentariat, but this case falls well short of the caliber of other class action filings I’ve read. The facts and causes of action for the lead plaintiff are typically argued in some detail, and then there is an explicit discussion as to why the other co-plaintiffs have similar enough cases for them to be treated as a class. Even though as a matter of form, this case has a section titled, “Class Action Allegations,” it take the position that it’s obvious that there’s a bunch of employees who were wrongly terminated and therefore of course they constitute a class (“The claims of the Named Plaintiffs are typical of those of every other member of the Plaintiff Class.”). That’s unlikely to be a winning approach.

And final causes for pause: the small firm class action attorney I know (and these are ones with successful track records) seek to team up with major class action firms before taking on major targets. That’s critical because it takes very deep pockets to fund the expenses on a high stakes class action suit. The fact that this attorney appears to have no class action experience means he probably does not know what he does not know. For instance, selection of lead plaintiff and choice of venue are key strategic choices in these cases. My guess, by contrast, is that these two former Wells Fargo employees came to this attorney (who does appear to have a good reputation for routine employment cases) and he or they wanted to make a much more comprehensive case against Wells Fargo.

The one bit of good news if this case does not get class certification, it won’t prevent better formulations of this type of action from being filed. And there’s so much sordid information coming out about Wells Fargo that it’s going to continue to be a litigation magnet.

Polonsky-v.-Wells-Fargo-Bank-Co.-BC634475-California-Superior-Court-Los-Angeles-County
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18 comments

  1. Richard Davet

    It would be interesting to scan the horizon for past wrongful termination suits. Such information would reveal a lot about the allegations being put forward. Even if there were a small number of suits it would be telltale.

    Aggressive sales tactics are not to be damned, however sometimes they evolve into crafty subordinates cheating the model to meet the numbers. Often such conduct could be overlooked by management as a result of their own zeal in meeting their own numbers. Thus the corruption of the whole model. Absent smoking guns, this most likely could be the scenario.

    Just my thoughts as a business person.

  2. Richard Davet

    The “willful blindness” of management could be proved by looking at the mirror side of the errant conduct. eg rewarding the cheaters when the honest people refuse.An audit of the “successful people’s conduct could also be very telltale.

    Sorry but missed edit deadline for first comment.

  3. ScottW

    I would be shocked if every employee who was terminated did not sign a Settlement Agreement and Release of All Claims. The terminated employees were probably paid a couple of weeks of severance and given a neutral recommendation on the way out the door. Signing a Settlement and Release of all Claims would raise a huge barrier.

    One possible avenue of attacking the release would be claiming fraud in the inducement, but that would be fact specific and not amenable to a class action lawsuit, absent some smoking gun email or testimony establishing systemic fraud in drafting and executing the releases. There is also the issue that most of the former employees probably don’t want their names attached to this fraud as it will make future employment that much harder to secure.

  4. squirrel

    Not an attorney but I have to wonder if this isn’t some sort of placeholder or even, for folks of a particular turn of mind, a straw man who once destroyed by the courts will then become the basis of an argument that there was no real criminal act but rather just sharp business dealings.

  5. apber

    The banking cabal has taken great pains over the years to ensure favorable rulings from all aspects of the judicial system, whether prosecutors, judges, or even the DOJ. Is it because of bribery, threats, or extortion? Or could it be that in this era of no Rule of Law the 1% is untouchable? The fact of the matter is that no major bank executives, at least since the S&L crimes of the 80s, has gotten prison time despite significant and egregious crimes perpetrated against depositors, investors, and homeowners by the very institutions they control or manage.

    No class action suit by 99%-ers against major banks will ever succeed. The deck is already stacked.

  6. Richard Davet

    Step one in all this is determining what the actual crime is.

    Bernie Madoff started out portrayed as a skilled investor. His business Model evolved to a point at the end when he admitted that he had not purchased a stock in thirteen years. The model he was selling was not as offered and sold. It is all that simple. Selling something that does not perform as sold advertised is in fact the crime. A prosecutor would call it a ” theft by deception scheme”.

    The GSE Business Model (FNMA) that hijacked the mortgage industry is the same thing times a million. The Model was advertised and sold to congress based on the representations and warranties inherent in the seller/servicer agreement which was supposed to protect all. Congress bet the US Treasury on the Model based on the very strict Guidelines (which by the way read much like the Ten Commandments that any critic would have difficulty challenging). Problem…………NO ONE was auditing for compliance with those very strict Guidelines and hence the implosion. The only significant audit of compliance we have seen have been lawsuits that have traded trillions of dollars of liabilities for pennies on the dollars (even though sometimes billions). A business Model that is “fatally flawed” and does not work as advertised and sold.

    At Wells Fargo their Cross-selling Model is the little sister to the Model they follow on their mortgage business.

    Congress CONTINUES to fuel the mortgage Model with the guarantee of their MBSs which in turn fuels the fraud in the theft by deception scheme…. The GSE Business Model….the mother of all fraudulent theft by deception schemes. Write your Congress people to pull the plug on the guarantee (perhaps Elizabeth Warren will help us) and next week we will all be better off.

  7. RepubAnon

    If the attorneys filing this case haven’t read “A Civil Action“, they should.

    My guess is that they wanted to beat the big boys, file their case first, and then bring in a large class action firm in exchange for a percentage of the fee.

    1. Yves Smith Post author

      Agreed, but as indicated, small class action insiders actually consult with the big boys before filing the cases, mainly in hope that they’ll join early, but with a secondary objective that they kick the tires and can flush out any issues with the case they may have missed. I should have stated that more clearly, that that was probably their hope (getting a financial backer and manpower support via a big class action firm) but this case doesn’t look remotely well enough argued to get a class cert. And a one-horse shop versus Wells on any meaty matter (and even getting to a first hearing is work) is a big fight

  8. crittermom

    Yves, I agree with you. They probably don’t stand a chance.

    Others are upset, as well, & demanding clawback of executives pay.
    Of course, that won’t help those harmed, such as the fired employees or those who were victims of the banks’ fraud.
    http://www.denverpost.com/2016/09/25/union-affiliated-pension-groups-demand-change-wells-fargo/

    Statements like this make my blood boil:
    “And analysts including Goldman Sachs Group Inc.’s Richard Ramsden have said the financial damage to consumers was probably limited…”

    Oh. Illegal, yet so small there’s nothing to see. ‘Move along now.’

    “probably limited”
    That sounds as vague as some of the language used in the lawsuit by two WF employees, hoping to become a class-action.
    Of course, the bank can ‘get away’ with such language.

    So the TBTF, TBTJ banks are now Too Big To Prosecute, as well?

    Oh, wait……they have been all along.

    I found this request interesting:
    http://stopforeclosurefraud.com/2016/09/21/judge-on-wells-fargos-bogus-account-class-action-has-ties-to-boa/

    I still want to see the nation made aware that WF probably wasn’t the only bank doing such dirty deeds.
    http://www.marketwatch.com/story/thousands-of-complaints-suggest-account-issues-not-limited-to-wells-fargo-2016-09-12
    Just like Countrywide was only the tip of the iceberg in mortgage fraud?

    Regarding ‘probably limited’, I wonder how many folks know that their car insurance rates are based on their credit? Those fake accounts may have hurt some folks credit, as I believe you previously pointed out.
    Despite my clean driving record and my only vehicle turning 30 yrs old, my rates increased after my (illegal) foreclosure. I was paying less ten years ago, for more coverage.

    I can’t qualify for another mtg now and owner carried loans are around three times banks rates, at 10-11%.
    The financial damage can go on for years for victims, in various forms.

  9. fred leigh

    I worked for Wells Fargo for 15 years and there were many, many months and quarters that I did not make quota and thus did not get a bonus because I followed scrupulous actions and took care of my customers. Therefore, I should have been a bonus for doing things the way they should have been done

    1. Yves Smith Post author

      I agree you might have a claim against Wells, but your story (and any like that that Wells can prove) is actually fatal to this case. The case argues that people who did not break the rules were demoted or fired. You were not demoted or fired, but you didn’t get bonuses.

    2. Ann Peterson

      My Mother worked for Wells Fargo for 27 years. She exceeded
      her goals always but was harassed because she would not take
      existing account monies from “big” clients and open new accounts that were not FDIC Insured and high risk. They joked and called them “dumb” accounts because customers did not know the risks and were never told. The banker (my mom) refused to do this and still exceeded her goals but in different account areas. She continued to be harrassed and was forced out forfeiting her higher retirement. Had she been able to stay three more years or her 30 year vesting, she would’ve received her well deserved retirement. She is still alive today but on a very
      low fixed income all because she would not mislead her customers or sell them something that was falsely advertised.

  10. Ex WFB employee

    I am a former Wells Fargo Bank employee who was never promoted because I refuse to do what it took to meet my goals. I was a lead teller for 4 years trained many tellers who went on to be other things within the bank because they sold bogus or unnecessary products to clients. Many of the tellers that went on to do other things I went head to head in interviews but was told I wasn’t qualified (because my numbers didn’t meet protocol). My final straw was when a teller that I trained (who had no prior banking experience) and I applied for a job as a service manager they chose the other less experienced person over me. The person they hired would come to me asking me how to do this that and the other. I refused to train a person whom I would have to report to a lead teller. I am wondering how and IF I should look into this class action lawsuit. I missed out of wages and opportunities because of the bogus sales ethics.

  11. Yolanda Jackson

    Ok wells fargo let me help you out on fake accounts.
    1. Your looking in the wrong place start with the dam credit bureau. If you notice all the fake accounts have 1 thing in common. The same dam credit bureau. Or at least 80% do. Follow that lead.

    2. I reported this back in 2002 I think, somewhere around that time. And when I was up north. There was in account in AZ/ TX. But then after a few months to a year it disappeared off of your credit report.. Strange very strange.

    3. Then on top of screwing your loyal customers wells fargo charge them with fake insurance they don’t need..like flood insurance.

    4. Sadly it targets the minority community or as we like to say poor folks. Which is the back bone of this great USA

    5. The scam is called B&S (bait and Switch) check the chi town area. Basically. Consumers will see an inquiry on their credit report from wells Fargo. What I believe wells fargo was doing is monitoring consumers credit to see. Which sucker they can open an account on…people flag wells fargo on your credit report as a possible scam so you can be notify.

    Now the switch.. The wells fargo open the account, report it in just enough time so the agent can get his/her bonus or percentage. Then they must remember to go back and delet the account from your credit file… Actually it’s. Brilliant

    Why? Because the credit bureau are so lackadaisical when it comes to big companies they look the other way.. Trust me someone at eqifax already new about the scam ;)

    6. Yes! I had accounts open. I reported it in 2002 the agent 😅. Whose laughing. Now

    Oh! Wait til the scam about..refinancing or we will give you cash to leave your house or to help you move..😱

    I am disappointed in wells fargo. They represented the American Dream. Now they have become a nightmares. How Dare wells fargo treat their loyal customer like poop.

    Oh yeah folks…your bank info stays on file only 7 years.. If your house is paid for or sold to another lender good luck getting wells fargo to make good on past screw ups..they will claim they can’t. Find no info on you lol.

    Also look at all the scams wells fargo have been in….or look in class action. I never got a chance to get my moola back from the class action miss the filing date…butbe ware.. Shit is about to hit the fan….but big banks will surive because there is another scam to be sold..

    Love you all…block wells fargo on you credit report for now just fyi…very disappointed

  12. Sandra

    How do you join lawsuit? This happened to my 86 yr old mother. Phone calls, letters…no one could show me where she signed for a credit card. Ceres, California

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