Wells Fargo Books and Records Litigation

Massachusetts Laborers’ Pension Fund, et al. v. Wells Fargo & Co., et al., C.A. No. 12997-VCG (Del. Ch.)

Berman Tabacco was co-lead counsel representing plaintiffs Massachusetts Laborers’ Pension Fund and Employees’ Retirement System of the City of Providence in Massachusetts Laborers’ Pension Fund v. Wells Fargo & Co, C.A. No. 12997-VCG (Del. Ch. Ct.) (the “Books and Records Action”).  The purpose of this action, which was brought pursuant to 8 Del. C. Sec. 220, was to compel Wells Fargo & Co. to produce certain of its books and records in order to evaluate whether to bring a derivative suit against certain of Wells Fargo’s officers and directors for alleged breaches of their fiduciary duties in connection with the bank’s opening of millions of financial accounts on behalf of customers without their permission or knowledge which resulted in $185 million in fines (the improper sales practices “ISP “claims) as well as other misconduct concerning overcharges and certain fees (the Collateral Protection Insurance (“CPI”) claims).  The alleged breaches of fiduciary duties include the board’s failure to police the company’s unrealistic sales quotas and incentive programs that rewarded illegal behavior.

Using those documents, certain plaintiffs filed a derivative action in the Delaware Court of Chancery (Connecticut Laborers’ Pension & Annuity Funds v. Stumpf, C.A. No. 2017-0380-SG (Del. Ch.) (the “Connecticut Laborers’ Action”).  The Connecticut Laborers’ Action included claims related to both the ISP claims and the CPI claims.

Plaintiffs agreed to stay the Connecticut Laborers’ Action in deference to the more advanced ISP claims in In re Wells Fargo & Co. Shareholder Derivative Litigation, No. 3:16-cv-05541-JST (N.D. Cal.) (the “Federal Action”).  The Federal Action subsequently settled for more than $240 million for Wells Fargo as well as significant corporate governance reforms to resolve both claims.  On April 7, 2020, Judge Tigar in the United States District Court for the Northern District of California granted final approval to the settlement.

Meanwhile, despite the stay of the Connecticut Laborers’ Action, CPI claims remained pending in the San Francisco Superior Court in In re Wells Fargo & Co. Auto Insurance Derivative Litigation, No. CGC-17-561118 (San Francisco Superior Court) (the “CPI Shareholder Derivative Action”).  Those claims were settled by plaintiffs in that action, which would have also resolved all claims in the Delaware CPI Shareholder Derivative Action.  Berman Tabacco was instrumental in engaging defendants in further settlement negotiations and succeeded in obtaining significant additional corporate governance changes that became part of the ultimate settlement that secured additional benefits for the class.  These improvements to the settlement include (i) requirements for annual corporate governance evaluations presentations to the Wells Fargo Bank, N.A. Board of Directors; (ii) corrections to gaps in Board-level reporting and oversight of corporate ethics; (iii) provisions that expand the definition of corporate ethics to include fair dealing, good faith and suitability; and (iv) reemphasis of the importance of corporate ethics in employee incentive compensation.  In addition, the above settlement required the contemporaneous resolution of derivative actions challenging Wells Fargo’s alleged improper sales practices.  The court approved the settlement on January 15, 2020

Case Information

  • Settlement Amount:
    $240,000,000 plus significant corporate governance reforms valued at $100 million