Law News – In a class action lawsuit, a legal firm representing thousands of alleged Wells Fargo clients who believe they were deceived about the bank’s policy on overdraft fees asserts that the American Arbitration Association has let Wells Fargo (WFC.N) to start a new tab in order to avoid responsibility.
The plaintiffs’ attorneys at McCune Law Group filed a new lawsuit, opens new tab, in federal court in San Francisco last week. The lawsuit claims that Wells Fargo has taken advantage of the mass arbitration protocols that AAA recently adopted, opens new tab, in order to win the dismissal of thousands of arbitration claims that stem from allegedly improper overdraft fees.
Although the McCune firm blamed the arbitration forum for giving in to Wells Fargo’s demand that its clients provide information about their accounts, including evidence that they paid overdraft fees and were enrolled in the overdraft protection program, before they could move forward with individual cases, AAA is not named as a defendant in the new lawsuit.
A “AAA process arbitrator,” appointed in accordance with the new rules of the AAA regarding mass arbitration—a procedure in which dozens, hundreds, or even thousands of claimants submit essentially identical arbitration demands—entered the order compelling the claimants to furnish such information.
It is common knowledge that companies inundated with demands for arbitration on a large scale frequently contend that plaintiff attorneys are improperly attempting to use initial arbitration fees, which can reach tens of millions of dollars when thousands of customers or employees seek arbitration, as a means of obtaining unjustified settlements.
A so-called process arbitrator may be assigned to decide on case-wide administrative matters, such as claimant filing requirements and initial arbitration fees in individual cases, in accordance with the mass arbitration procedures that AAA established in August of last year. In order to ensure that businesses are not compelled to pay thousands of dollars for case initiation costs when cases are clearly flawed, the process arbitrator can act as a type of gatekeeper for defendants.
However, the McCune company said in the current class action that the AAA’s revised regulations essentially provide businesses like Wells Fargo the best of both worlds: Businesses can use mandatory arbitration clauses to prevent consumers from organizing to file a collective lawsuit, but they can also ask a AAA process arbitrator to impose class-wide requirements to eliminate cases if they receive a large number of demands from consumers wishing to use their right to individual arbitration.
The class action claims that “Wells Fargo can operate at whim because of the kind of toggle switch created by the cooperation between AAA and Wells Fargo.” In the case, it was asserted that the bank and the arbitration forum may “flip the switch” and impose class-wide rules to remove claims deemed worthless as soon as arbitration demands were “inconvenient, expensive, or difficult.”
The McCune company said that as a result, thousands of its clients have been unfairly excluded from arbitration and are left with no option except to file lawsuits.
The McCune business was only able to furnish the necessary information regarding 432 of its 3,900 clients, according to a court filing by Wells Fargo’s attorneys at McGuireWoods. The firm did not disclose the number of its clients whose arbitration claims were denied. Wells Fargo reports that AAA has denied the other 3,500 clients’ requests for arbitration, albeit without prejudice.
Based on mathematical calculations, it seems that the McCune business neglected to furnish AAA with necessary details on over 90% of the clients it has requested arbitration for.
An inquiry about the case was not answered by AAA. Commenting was rejected by Wells Fargo. My question went unanswered by attorneys at the McCune firm, including partner Richard McCune.
The current action is noteworthy because it publicly challenges the AAA’s attempt to address opponents of mass arbitration who complain about having to pay hundreds of dollars in costs for demands that are obviously ridiculous. However, I should caution you that the McCune complaint leaves out a good deal of background information, such as an appeal of the previous McCune case’s ruling and a prior McCune case contesting the AAA’s selection of a process arbitration in the Wells Fargo overdraft charge issue.
Last year, the McCune firm filed a lawsuit in San Diego to enjoin the AAA proceeding, mocking Wells Fargo for relying on a classwide device after prohibiting customers from suing as a class. This came after the arbitrator for the AAA process first issued an order outlining the information McCune’s clients had to supply before they could move forward with their individual arbitration cases.
U.S. District Judge Dana Sabraw rejected and opened a new tab for the McCune firm’s request for an injunction in May 2023, ruling that the arbitrator would be responsible for threshold issues under the terms of the Wells Fargo arbitration agreement, among other things. Wells Fargo’s move to compel arbitration was approved by Sabraw, allowing it to proceed before the process arbiter.
The McCune company filed an appeal of the ruling, claiming that it was unlawful to interfere with its clients’ contractual rights by having a process arbitrator establish rules for the whole class of claims for individual claimants.
The McGuireWoods law company representing Wells Fargo replied, opening a new tab, stating that the bank had meticulously adhered to AAA regulations and had paid the process arbitrator, whose appointment was authorized by the McCune firm, about $500,000 in costs. The bank said that the process arbiter just established minimum requirements that each individual claimant had to fulfill, without initiating a class action. Furthermore, according to Wells Fargo, obtaining the information that claimants were required to provide should be simple because it is all contained on their bank records.
The 9th Circuit stated last month that it did not need to hear oral argument in the case and would make its decision based solely on the briefs after Wells Fargo filed a supplemental statement that revealed new information and stated that the process arbitrator had rejected roughly 3,500 McCune arbitration cases for omitting essential information.
A few days later, the McCune firm filed the new class action in San Francisco. As I have stated, neither the 9th Circuit appeal nor the firm’s prior San Diego litigation are cited in the complaint.
