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From Banking and Finance Law Daily, January 4, 2019

Invasion of privacy claims against Wells Fargo go forward

By Nicole D. Prysby, J.D.

Although the bulk of the claims fail in a class action lawsuit against Wells Fargo over its alleged use of customer confidential information to open fraudulent accounts in the customers’ names, invasion of privacy claims should go forward, held a federal district court in Utah. The court found that all claims from "Bystander" plaintiffs (those plaintiffs who did not allege any unauthorized accounts were ever opened in their names) fail for lack of Article III standing. That left eight "Wrongful Account" plaintiffs who did allege that the bank opened accounts in their names. The court determined that it had subject matter jurisdiction over their claims, because the plaintiffs brought them under the Stored Communications Act, Fair Credit Reporting Act, Bank Holding Co. Act, and Racketeer Influenced Corrupt Organizations Act. However, the bulk of the Wrongful Account plaintiffs’ claims fail. For example, their Fair Credit Report Act claims fail because Wells Fargo is not a consumer reporting agency and the statute gives consumers no private right of action against those who report credit information to a credit reporting agency; the right of action is limited to claims against a credit reporting agency. But the state law claim for invasion of privacy goes forward. Wells Fargo argued that the claim (based on misappropriation of name) should fail because the plaintiffs did not allege that their names or identities have value beyond those of the general public. But the plaintiffs plausibly alleged that Wells Fargo sought, and benefited from, having its existing customers increase the number of accounts and products they had with Wells Fargo. Therefore, their names and identities had value beyond those of the general public (Mitchell v. Wells Fargo Bank, et al., Dec. 21, 2018, Waddoups, C.).

Background. The case relates to Wells Fargo’s alleged use of customer confidential information to open fraudulent accounts in the customers’ names to meet sales goals. Plaintiffs in other jurisdictions have brought similar class actions and in one instance, the claims have been settled. The opt-out deadline for that case was in February 2018. Therefore, any plaintiffs in the current action who failed to opt-out of the settlement are unable to pursue their claims in this case. Thirty-three individuals involved in the case opted out of the settlement.

No Article III standing for Bystander plaintiffs. The court first addressed whether the remaining 33 plaintiffs have Article III standing. Of the 33, 25 were "Bystander" plaintiffs—plaintiffs who did not allege any unauthorized accounts were ever opened in their names, that their information was ever improperly used or accessed by any Wells Fargo employee, or that they were subject to any improper sales practice. Wells Fargo argued that the claims from the Bystander plaintiffs should be dismissed for failure to allege a concrete and particularized injury, and the court agreed. The Bystander plaintiffs alleged only that they would not have opened Wells Fargo accounts if the Wells Fargo employees who helped them open the accounts had told them about the ongoing fraud. They did not allege any injury from opening the accounts. The court rejected the plaintiffs’ conclusory statements that all plaintiffs had suffered identity theft, because there were no facts relating to the Bystander plaintiffs. Therefore, the claims from the 25 Bystander plaintiffs were dismissed.

Court has statutory jurisdiction for claims by remaining plaintiffs. The remaining claims were brought by the eight plaintiffs who alleged that accounts had been created in their names (Wrongful Account plaintiffs). The court found that it did not have jurisdiction over the claims pursuant to the Class Action Fairness Act (CAFA), because there was no factual basis on which the court could conclude that the class action would involve at least 100 members, as required for jurisdiction under CAFA. Although 967 individuals opted out of the prior settlement, it was unclear how many of those would be Wrongful Account, as opposed to Bystander, plaintiffs. The court also concluded that there are not sufficient pleaded facts to reasonably infer that the amount in controversy will exceed $5,000,000, because the alleged damages are minor and do not come close to $5,000,000.

However, the court concluded that it has federal question jurisdiction, because the plaintiffs brought claims under the Stored Communications Act, 18 U.S.C. §2702(a)(1); the Fair Credit Reporting Act, 15 U.S.C. §1681; the Bank Holding Co. Act, 12 U.S.C. §1972; and the Racketeer Influenced Corrupt Organizations Act, 15 U.S.C. §1972.

Motion to dismiss the claims. The court then considered Wells Fargo’s motion to dismiss all claims. Claims under the Utah Unfair Competition Act (UUCA) fail because the UUCA expressly exempts ‘depository institutions.’ Claims under the Utah Protection of Personal Information Act fail because the statute provides no private right of action. Claims under the Utah Consumer Sales Practices Act fail for lack of allegations regarding a loss.

Stored Communications Act claims fail because the plaintiffs did not allege that Wells Fargo divulged Plaintiffs’ private financial information over "its own messaging system" or that Wells Fargo divulged their private financial information through the "processing of data."

The invasion of privacy claim goes forward. Wells Fargo argued that the claim (based on misappropriation of name) should fail because the plaintiffs did not allege that their names or identities have value beyond those of the general public. But the plaintiffs plausibly alleged that the names and identities of already existing Wells Fargo customers provided a benefit to Wells Fargo that was not the same as Wells Fargo would have received from the general public. In other words, Wells Fargo sought, and benefited from, having its existing customers increase the number of accounts and products they had with Wells Fargo.

The negligence per se claim under the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 (GLBA) fails because there is no private right of action for an alleged violation of the GLBA and there was no evidence that the Utah Supreme Court would hold that a violation of the GLBA is negligence per se (or that it would find any state-law tort duty arising out of a federal statute which lacked a private right of action).

The claim under the FCRA fails because Wells Fargo is not a consumer reporting agency and FCRA gives consumers no private right of action against those who report credit information to a credit reporting agency; the right of action is limited to claims against a credit reporting agency.

The plaintiffs’ claims under the anti-tying provisions of the Bank Holding Company Act, 12 U.S.C. §1972, fail. The plaintiffs did not demonstrate that Wells Fargo conditioned the extension of credit upon a borrower’s obtaining or offering additional credit, property, or services to or from the bank. Wells Fargo never conveyed an intention to withhold credit (or services) unless the customers purchased some other product or service. Opening an account without authorization or consent does not convey an intention to withhold a service. Therefore, there was no condition and no tying arrangement. In addition, the products that the consumers allege were tied are traditional bank products and therefore exempt from §1972.

After dismissing a number of other claims, the court concluded that the Wrongful Account plaintiffs’ remaining claims are Invasion of Privacy, Declaratory Judgment, Fraudulent Nondisclosure, and unjust enrichment.

The case is No. 2:16-cv-00966-CW-DBP.

Attorneys: Zane L. Christensen (Christensen Young & Associates) for Lawrence J. Mitchell. David H. Fry (Munger Tolles & Olson LLP) and Elaina M. Maragakis (Ray Quinney & Nebeker P.C.) for Wells Fargo Bank and Wells Fargo & Co.

Companies: Wells Fargo Bank; Wells Fargo & Co.

MainStory: TopStory BankHolding CyberPrivacyFeed EnforcementActions FairCreditReporting Privacy UtahNews

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