Wells Fargo can’t escape $203 Million overdraft judgment

By Marisa Kendall, The Recorder

SAN FRANCISCO — It took two rounds of appeals, but lawyers for Wells Fargo customers succeeded Wednesday in sticking the bank with a $203 million judgment.

The U.S. Court of Appeals for the Ninth Circuit ruled the sum awarded by U.S. District Judge William Alsup is based on “substantial evidence” that Wells Fargo & Co. made misleading statements about its policies for charging overdraft fees.

“The record is replete with examples of Wells Fargo’s false and misleading statements,” Judges M. Margaret McKeown, Sidney Thomas and William Fletcher wrote in a six-page unpublished opinion. “The district court’s calculation of the restitution award was based on factual findings that are not clearly erroneous.”

Lieff Cabraser Heimann & Bernstein partner Michael Sobol, who argued the case for plaintiffs in early October, said Wednesday’s order means more than 1 million California customers are entitled to relief.

“For seven years, Wells Fargo has sought to defend its misrepresentations as to how it imposed overdraft fees on debit card purchases,” he said in a release, “all for the purpose of boosting its bottom line.”

Filed in 2007, Gutierrez v. Wells Fargo alleged that the bank rearranged customer charges, deducting larger purchases first, solely to accrue more overdraft fees.

Finding the business practice violated California law, Alsup ordered $203 million in restitution following a 2010 bench trial. The Ninth Circuit vacated his judgment in 2012, ruling the National Banking Act allows banks to choose the order in which they process overdrafts. However, the panel agreed with Alsup that Wells Fargo misled customers and violated California’s unfair competition law by suggesting charges would be processed chronologically.

The panel invited Alsup to reconsider restitution based solely on the unfair competition claim, and Alsup reinstated the full judgment of $203 million last year.

That brought both sides back before the Ninth Circuit earlier this month.

Representing Wells Fargo, Covington & Burling partner Sonya Winner argued Alsup had failed to correct his error. But the appellate judges disagreed.

“The restitution award was based on Wells Fargo ‘affirmatively misleading the class,’ a state law claim, not on a ‘practice protected by federal preemption,’ ” the judges wrote.

Their decision took issue with Alsup’s characterization that Wells Fargo’s misrepresentations were so “intertwined with other elements of the scheme” that they could not be separated for the purposes of awarding restitution, but deemed the mistake “harmless.”

The appellate judges also vacated an injunction that prohibited the bank from making false or misleading representations relating to the posting order of certain transactions and ordered Alsup to replace it with a narrower prohibition.

Wells Fargo spokeswoman Richele Messick said in an email that the bank is disappointed with the court’s ruling and is considering its options.

IMAGE: Judge M. Margaret McKeown, United States Court of Appeals for the Ninth Circuit Diego M. Radzinschi / National Law Journal

For more on this story go to: http://www.therecorder.com/id=1202675034039/Wells-Fargo-Cant-Escape-203-Million-Overdraft-Judgment#ixzz3HqaRfMbb