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The Eleventh Circuit Court of Appeals ruled on Friday that Wells Fargo is stuck litigating overdraft fee class actions because it didn't move to compel arbitration when it had the chance to do so.
While Wells Fargo argued that it was justified in holding its arbitration motion until the Supreme Court decided AT&T Mobility LLC v. Concepcion, the Eleventh Circuit decided that Concepcion wasn't such a big deal in Wells Fargo's case.
It was simply a case of move it or lose it.
The plaintiffs in five separate putative class actions allege that Wells Fargo and Wachovia Bank unlawfully charged them overdraft fees for their checking accounts, which are governed by agreements that provide for arbitration of disputes on an individual basis.
The Wells Fargo customer agreement states that "either [the customer] or the Bank may require the submission of a dispute to binding arbitration at any reasonable time notwithstanding that a lawsuit or other proceeding has been commenced," but that neither a customer nor the bank may consolidate disputes or "include in any arbitration any dispute as a representative or member of a class."
The Wachovia customer agreement states that, if either the customer or the bank requests, "any dispute or claim concerning [the customer's] account or [the customer's] relationship to [Wachovia] will be decided by binding arbitration," and that the arbitration "will be brought individually and not as part of a class action."
The district court twice invited Wells Fargo to move to compel arbitration, but Wells Fargo declined those invitations. A year after the second invitation, Wells Fargo reversed course and moved to compel arbitration two days after the Supreme Court's AT&T Mobility LLC v. Concepcion decision. In Concepcion, the Court held that the Federal Arbitration Act, preempts state laws that condition the enforceability of consumer arbitration agreements on the availability of class-wide procedures.
The district court denied the motion based on waiver.
Wells Fargo, (which now owns Wachovia), argued that it did not waive its right to compel arbitration because it would have been futile to move to compel arbitration before the Supreme Court decided Concepcion. The Eleventh Circuit Court of Appeals disagreed.
The court noted that Wells Fargo acted inconsistently with the arbitration right in two ways. First, it failed to move to compel arbitration even though the district court invited it to do so. Wells Fargo even went so far as to say that it did not intend to seek arbitration in the claims against Wachovia. Second, Wells Fargo "substantially invoked the litigation machinery prior to demanding arbitration" under S&H Contractors, Inc. v. A.J. Taft Coal Co.
The appellate court concluded that Concepcion established no new law, and that it would not have been futile for Wells Fargo to argue that the Federal Arbitration Act preempts any state laws that purported to make the class-wide arbitration provisions unenforceable. Accordingly, the court affirmed denial of the motion to compel arbitration.
Many lawyers think Concepcion was a game-changer. Do you agree with the Eleventh Circuit that Concepcion didn't establish new law?