The supposedly blockbuster $2.6 billion Wells Fargo class action lawsuit does not look legally compelling and it is doubtful that a one-lawyer law firm can successfully handle such a huge case.
Polonsky v. Wells Fargo Bank & Co. was filed by Los Angeles based Jonathon J. Delshad of the Law Offices of Jonathon Delshad, PC in the California Superior Court, Los Angeles County on behalf of 2 ex-employees. It seeks class action status to represent up to 5,300 former employees allegedly fired by Wells Fargo for opening accounts without the individual account owner’s permission.
Such a huge class action lawsuit is usually handled on a contingency basis by a law firm that has financial deep pockets and broad legal resources. But Delshad’s one-horse-firm’s website lists his most important prior cases as 1) 32 Year Bus Driver sues Los Angeles Metro (MTA); 2) Employee files retaliation claim against The Painted Nail; 3) Employee alleges retaliation for reporting employer to social services; and 4) EstrellaTV Anchorwoman files sexual harassment in the workplace.
The Polonsky California lawsuit is on behalf of two former low-level Wells Fargo employees who were fired or demoted because they refused to break the law in order to meet new account sales quotas, according to Bloomberg.
Despite sparse details in the suit on how low-level bankers were illegally pushed through incentives to create at least 10 new accounts a day, a number of U.S. Senators last week demanded the resignation of Wells Chief Executive Officer John Stumpf.
Senior bankers are alleged to have “coached” branch tellers and others secretly to open fee-generating accounts. Because the quotas were so high, branch employees are alleged to have resorted to using false customer contact information like NoName@WellsFargo.com, so they could keep their jobs, according to the complaint.
Employees were allegedly rewarded with promotions for using tactics including “sandbagging” — opening fake accounts the day after a customer instructed the bank not to; “pinning” — assigning personal identification numbers without customer authorization; and “bundling” — lying to customers about the limited availability of certain products in packages.
The lawsuit claims that despite Stumpf’s role in orchestrating the allegedly dishonest practices, 5,300 Wells employees were fired when they were caught opening bogus accounts without client approval.
The biggest problem with the Polonsky suit is that it simply repackages customer fraud allegations from a complaint filed by the Los Angeles City Attorney’s Office last year. That action was settled without Wells Fargo admitting any guilt.
Bloomberg says the Polonsky suit tries to spin the L.A. Attorney’s allegations to contend that the real victims of Wells’ Fargo’s evil business practices are employees demoted or terminated for not meeting sales targets.
Yves Smith at the Naked Capitalism blog argues that the plaintiffs in Polonsky repeatedly make overly broad assertions that will not be hard for Wells Fargo to knock down in court. She is particularly unimpressed by the following statement from the suit: “It is also illegal to engage in Securities Fraud by boosting the stock price as a result of conduct which one knows to be fraudulent, such as the scam perpetuated by Wells Fargo above.”
Smith, who worked on Wall Street for Goldman Sachs and McKinsey & Co., comments, “That’s not a legal argument. That’s a hand wave.” She adds that the filing also provides information that contradicts its unduly confident positions, such as “Employees who did not ‘game’ were surely denoted or fired,” and “Because it was impossible to consistently meet a quota without ‘gaming’…”.
For the latter to be true statement, “every single customer-facing employee who kept a job at Wells [must have] cheated.” Smith believes that even if Wells Fargo had herculean sales targets, there must have been some employees that actually met them legitimately.
CNN reported last week that whistleblowers said they were fired as a result of complaining. But both ex-employees admitted that Wells had a documented paper trail to justify the firings, because the ex-employees were often late to work.
For the Polonsky lawsuit to move to the discovery phase, it will have to move past a major national law firm’s motion for summary judgement, where the bank will argue that there isn’t enough with which the court to bother. If Polonsky overcomes that hurdle, the plaintiffs will still need to win class certification.
Otherwise, Polonsky is just a wrongful termination suit by 2 ex-workers.