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.