Arbitration Provisions Involved in Wells Fargo Bank Case

Dozens of bank customers have brought the first class action lawsuit against Wells Fargo Bank as a result of its fraud and sham accounts fiasco. To be tried in Utah, the case is one to follow, Mitchell et al. v. Wells Fargo Bank et al. In the Mitchell case, Wells Fargo Bank customers have asserted claims against Wells Fargo Bank stemming from the opening of unauthorized customer deposit and credit-card accounts. Outside of the Mitchell case, Wells Fargo Bank has already agreed to pay $185 million in penalties and $5 million to customers for opening these unauthorized accounts. In October 2016, the bank’s chief executive, John Stumpf, retired as a result of the scandal.

Kilgore & Kilgore’s Experience with Arbitration Provisions Might Make a Difference in Your Case

Kilgore & Kilgore lawyers counsel and represent employees, executives, and customers of financial institutions who have arbitration provisions in their agreements, including provisions relating to the FINRA arbitration process. We have litigated the enforceability of arbitration provisions. We have represented numerous executives in arbitration proceedings. If you have a question about arbitration or arbitration provisions in an agreement, click here Contact Kilgore & Kilgore to connect with a lawyer for a consultation.

Bank Attempts to Compel Arbitration Provisions in Account Agreements

Wells Fargo Bank recently filed a motion asking the court in Utah to compel arbitration based on the customers’ purported contracts, which contain arbitration provisions. Granting Wells Fargo Bank’s motion would force each plaintiff to pursue his/her claims individually in a private arbitration. The court now must decide, as a threshold matter, whether these plaintiffs will have their day in court. Under the Federal Arbitration Act (FAA), courts often compel arbitration.

Class Action Lawsuit Temporarily Suspended

In December 2016, the court entered a stipulated order staying, or temporarily suspending, the Mitchell case until the defendants’ pending and anticipated motions to compel arbitration are decided. A stay of the underlying litigation is not uncommon in cases in which a defendant is trying to compel arbitration.

Arbitration Provisions are contained in Typical Account-Opening Documents

When a customer opens a bank or brokerage account, s/he is asked to sign an account-opening document. This document contains in small print the arbitration provisions. Most people do not read or pay any attention to these arbitration provisions. However, they are important and potentially controlling when a dispute arises between the customer and the bank or brokerage firm. Customers should beware of these arbitration provisions because they may be giving up important rights, such as their right to pursue their claims in front of a jury or to participate in a class action lawsuit.

Arbitration Versus Litigation

The Mitchell case is a bit unusual. In Mitchell, Wells Fargo Bank is relying on the arbitration provisions in the customer agreements to cover claims relating to sham banking and credit card accounts that the plaintiffs did not actually open. Click here Arbitration Article Dated September 7, 2016 to read our previous blog that explains the arbitration process and how it differs from a traditional court proceeding in dispute settlements. One big difference is that arbitrations are private and court cases are public.

Typically, arbitration provisions prohibit class action lawsuits in which a large number of plaintiffs file suit to pursue common claims against a common defendant. An individual plaintiff may decide not to pursue his/her claims if the damages are small. However, in a class action lawsuit, the cumulative damages can be significant. Thus, a class action lawsuit can be a powerful weapon for customers who have common claims against a common bank or financial institution. A class action lawsuit can level the playing field between an individual customer and a mammoth bank or financial institution. It can be an important deterrent to wrongdoing.

Wells Fargo Bank, like most other banks and financial institutions, would prefer to send each plaintiff to arbitration. Wells Fargo Bank is hoping that if it prevails on its pending motion to compel arbitration, many of the plaintiffs will fade away and decide not to pursue their claims individually in private arbitrations.

Many People Believe Arbitration is Unfair

Many citizens and some politicians believe that the arbitration process unfairly disadvantages the customer. In arbitration, it is difficult for the public to learn about a defendant’s misconduct because the proceedings are not open to the public. Senators Elizabeth Warren (D-Massachusetts), Sherrod Brown (D-Ohio), and Patrick Leahy (D-Vermont) are some of the leading congressional critics of forced arbitration provisions such as those used by Wells Fargo Bank. In addition, the Consumer Financial Protection Bureau (CFPB) is considering rules that would prohibit banks and other institutions from forcing customers to arbitrate their claims and to waive their rights to participate in class action lawsuits.

Kilgore & Kilgore Attorneys May Help You with an Arbitration or Fraud Claim

Our attorneys have experience with arbitration and fraud claims. We understand arbitration proceedings and have helped clients through them. Click here to review a couple of testimonials received from clients we helped through the arbitration process FINRA Arbitration Client Statements. If you have a FINRA claim or other case that will be decided in arbitration, contact us to see if we can help. We offer a free review of the facts of your case. Click here to get started Contact Us.

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