A federal judge in California dismissed a class-action lawsuit brought against Wells Fargo by its shareholders. The plaintiffs claimed they had been defrauded when they bought Wells Fargo stock from Jan 1, 2012, through Aug 3, 2016. They sued the bank for misleading its shareholders about its deteriorating loan performance — and because it halted dividend payments during that same period. The investors in question were demanding a payout of $1 billion. The judge felt there was no evidence that anyone else had purchased stock during those three years and therefore dismissed the case with prejudice.
Wells Fargo Has Been Dealing with a $185 Million Fake Account Scandal
The bank has been fighting against a class-action lawsuit, which alleges that the company’s staff opened millions of fake accounts in customers’ names without their consent or knowledge.
Wells Fargo has admitted that it created millions of fake accounts but claims it did not intend to do so. On Friday, the bank announced that it would be dismissing the case filed by a dozen customers who claimed they were victims of fraud by Wells Fargo employees.
The reason? The judge decided that because these customers signed up for online banking services, they consented to have their information shared with Wells Fargo’s internal fraud department.
Judge Said Wells Fargo Customers Would Have to Take Their Case to Arbitration
In a decision that could have wide-ranging implications for other companies, U.S. District Judge William Alsup on Tuesday dismissed a class-action lawsuit against Wells Fargo, alleging that the bank used illegal sales practices to boost its financial results.
The ruling means that customers harmed by Wells Fargo’s alleged practices will not be able to pursue their claims in court. Instead, they will have to take their case to arbitration — a process that is less costly than going through the courts and which many consumers are unaware even exists.
Even though the legal battle is far from over, this dismissal is good news for Wells Fargo. It means the judge agrees with Wells Fargo’s argument that the court does not have jurisdiction to hear its claims because Wells Fargo has fallen short of the minimum number of defendants required. But even if Wells Fargo is ultimately successful, it will have to re-file its lawsuit–and in some ways, its strategy going forward may have to change.