Wells Fargo-related defendants recently filed a motion to compel a 70-plus-year-old
woman who suffers from cognitive decline to
arbitrate privately (rather than in a public courtroom) the financial
elder-abuse claims she has filed against the wirehouse defendants. The
move illustrates a continuing trend of big firms maneuvering to keep
litigation out of public arenas and in control of industry forums such
as
Finra arbitration.
With their motion, the Wells Fargo defendants counter allegations that the woman,
Karen Thompson,
made in her federal lawsuit. Specifically, Thompson alleges in her
lawsuit that the Wells Fargo defendants, as many as 100 employees, and
her own advisor,
Russell Wixon (with whom she had maintained a
30-year-long client relationship and who is a Wells Fargo managing
partner) all engaged in financial elder abuse.
Thompson, whose
lawsuit was transferred in November from state to federal court in
California, alleges that because of her age and disability she was
vulnerable to scammers who had her wire what ultimately amounted to her
entire life savings — about $660,000 — from her Wells Fargo accounts to
Costa Rica.
Wixon, other Wells Fargo employees, the bank, and the
advisory firm allowed that fraud to take place — despite Wells Fargo’s
marketing claims that its advisors are “intimately acquainted” with
their clients’ financial goals and concerns, according to Thompson’s
lawsuit.
In their motion, however, the Wells Fargo defendants
allege that when Thompson instructed her bank to wire money to the Costa
Rican recipient, she was repeatedly asked about “the purposes and bona
fides of the transactions.” In response, Thompson provided “detailed,
fact-specific assurances that the transactions were for legitimate
purposes, including paying college tuition for her nephew and for
non-FDA approved pancreatic cancer treatments for her sister-in-law,
whom she identified by name,” the Wells Fargo defendants’ motion states.
Thompson filed a report to the
Contra Costa County Sheriff’s Department
stating “she had no intention of using the money for those purposes;
rather, she says, fraudsters conned her into believing she was helping
to build a school for needy children, and persuaded her to try to
mislead Wells Fargo to avoid arousing its suspicions,” according to the
Wells Fargo defendants’ motion.
Thompson “now seeks to recover her
losses from Wells Fargo on the theory that it should have refused to
follow her own instructions about what to do with her own money,” the
motion states. Therefore, her claims “are simply not viable,” the motion
states.
Without ruling on her claims’ viability, however, the
court should send them to arbitration where they belong, based on
agreements Thompson signed to attempt to first resolve such disputes
privately, the motion states. The Wells Fargo defendants ask the court
not only to compel Thompson to arbitrate, but also to halt the federal
litigation until the outcome of that private proceeding.
Wirehouses and other large financial firms
often try to keep conflicts out of public courts and in arbitration — whether the plaintiff be a client or even the defendant’s own employee.
And
in the past decade, federal court rulings have made it more likely all
plaintiffs may be compelled to arbitrate. Since 2010, the
U.S. Supreme Court
has decided no fewer than 13 opinions that interpreted the Federal
Arbitration Act, according to a paper entitled “Arbitration Nation,”
published in 2018 and written by
David Horton and
Andrea Cann Chandrasekher, both
University of California at Davis School of Law
professors. The Supreme Court justices have consistently ruled that the
FAA trumps state efforts to regulate arbitration and lets companies
extricate themselves from class action litigation with arbitration
waivers, according to their paper.
Linda Friedman, a law partner in Chicago’s
Stowell & Friedman,
says arbitrations where “there are no rules and no exposure” are
inherently disheartening for plaintiffs — even when they win. “Federal
court is no panacea,” for plaintiffs either, but it’s better than
arbitration overall, Friedman
told FA-IQ previously.
In
her lawsuit, Thompson alleges that the Wells Fargo defendants permitted
the Costa Rican-based scammers to succeed, even though Thompson had
never engaged in similar transactions in the 10 years of doing business
with
Wells Fargo Advisors, 20 years with Wells Fargo bank, and 30 years with Wixon.
She
alleges that two years ago, in November 2016, she suddenly and
uncharacteristically began to withdraw large sums — between $29,000 and
$108,000 — from her retirement accounts and send them to her Wells Fargo
checking accounts. She would then go into the bank’s branch offices and
request to transfer those sums by wire to Costa Rica, according to her
lawsuit. Thompson repeated that pattern 12 times, according to her
lawsuit.
In
her prior 20 years of banking with Wells Fargo, she had “never engaged
in a single transaction in which she was sending any money, let alone
huge sums, to a third party in a foreign country,” her lawsuit states.
Those
withdrawals and wire transfers “each constituted a profound change in
her banking pattern,” her lawsuit states. “Yet despite all these
hallmarks of financial elder abuse, [Wells Fargo] defendants did nothing
to stop it — nothing. Instead, defendants just continued to proactively
take money out of her accounts and knowingly assist the blatant
financial elder abuse of their long-time customer until all of her life
savings was gone,” Thompson’s lawsuit states.
A Wells Fargo spokesperson declined to comment on the litigation.
Lawyers from the Los Angeles-based law firm
Munger, Tolles & Olson, which represents the Wells Fargo defendants, did not respond to a request for comment.
Thompson’s lawyer at San Francisco-based firm
Stebner and Associates also did not respond to a request for comment.
