Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Purple Mountain Trust v. Wells Fargo & Co.

United States District Court, N.D. California

January 10, 2020

PURPLE MOUNTAIN TRUST, Plaintiff,
v.
WELLS FARGO & COMPANY, et al., Defendants.

Page 1096

[Copyrighted Material Omitted]

Page 1097

[Copyrighted Material Omitted]

Page 1098

[Copyrighted Material Omitted]

Page 1099

          Austin P. Brane, Kevin Shen Sciarani, Lucas F. Olts, Robbins Geller Rudman Dowd LLP, San Diego, CA, Dennis J. Herman, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Jeremy Alan Lieberman, Pomerantz LLP, Peretz Bronstein, Bronstein Gewirtz & Grossman, LLC, New York, NY, for Plaintiff.

          Sverker K. Hogberg, Brendan P. Cullen, Sverker Kristoffer Hogberg, Sullivan & Cromwell LLP, Palo Alto, CA, Christopher Michael Viapiano, Sullivan and Cromwell LLP, Washington, DC, for Defendant Wells Fargo & Company.

          Adam F. Shearer, Josh Alan Cohen, Nanci L. Clarence, Clarence Dyer & Cohen LLP, San Francisco, CA, for Defendant Timothy J. Sloan.

          Ismail Jomo Ramsey, Katharine Ann Kates, Miles F. Ehrlich, Ramsey & Ehrlich LLP, Berkeley, CA, for Defendant John Richard Shrewsberry.

          Jordan Eth, Anna Erickson White, Morrison & Foerster LLP, San Francisco, CA, for Defendant Stephen Sanger.

          James N. Kramer, Walter F. Brown, Orrick Herrington & Sutcliffe LLP, San Francisco, CA, Stephanie Albrecht, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, Lauren B. Seaton, Orrick Herrington and Sutcliffe, Irvine, CA, for Defendant Mary Mack.

         ORDER RE MOTION TO DISMISS

         Re: Dkt. No. 55

         JAMES DONATO, United States District Judge.

         This is a securities class action against Wells Fargo & Company, its former CEO, Timothy J. Sloan, other officers, and the former chairman of its board of directors, Stephen Sanger. Lead plaintiff Construction Laborers Pension Trust for Southern California brought suit on behalf of persons who purchased or otherwise acquired Wells Fargo common stock between November 3, 2016, and August 3, 2017, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and Securities and Exchange Commission Rule 10b-5. Dkt. No. 46 ¶¶ 2, 16. The gravamen of the consolidated amended complaint is that Wells Fargo made 67 statements during the class period that were false or misleading because they did not disclose known problems with its collateral protection insurance ("CPI") and guaranteed auto protection ("GAP") practices for auto loan customers.

         Wells Fargo moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 55. All the individual defendants have joined Wells Fargo's motion. Dkt. Nos. 56, 59, 60, 61. Sanger also filed a short brief regarding the alleged falsity of his statements and lack of scienter. Dkt. No. 59 at 1-3. Defendants say the amended complaint should be dismissed for two main reasons: 1) Wells Fargo had no obligation to disclose its improper auto insurance policies when discussing its ongoing sales practices, or "fake accounts," problem; and 2) statements about the company's commitment to transparency and restoring trust in the wake of that problem are not actionable. After an initial set of briefing and oral argument, the Court called for plaintiff to file a chart summarizing its allegations on a statement-by-statement basis and for defendants to file an accordingly reorganized supplemental brief. Dkt. No. 66; see Dkt. Nos. 71-1, 72. This is the Court's standard practice in securities cases.

         Before reaching the merits of the motion, a constructive comment on the amended complaint is warranted. It is counterproductive, and potentially self-defeating, to feature 67 statements as grounds for relief, particularly when many of the alleged misstatements were duplicative or run-of-the-mill boilerplate. The

Page 1100

chart summarizing the allegations on a statement-by-statement basis magnified this problem and imposed an enormous amount of additional and largely unnecessary work on the Court and defendants. On this occasion, the Court undertook the herculean effort needed to sort through the mass of allegations, but that will not be the course of action going forward. Depending on developments in response to this order, plaintiff may be required to identify its top five allegations, and proceed on that basis. Judicial economy and efficiency, as well as reasonable constraints on litigation costs, demand no less.

         Defendants' arguments warrant dismissal of most of plaintiff's claims, but Wells Fargo and Sloan's failure to disclose the auto insurance problems — specifically, the CPI issue — when explicitly asked about the lay-of-the-land outside of sales practices is actionable. The heightened pleading requirements under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 ("PSLRA") are met. Defendants' motion to dismiss is granted in part and denied in part, and plaintiff is granted leave to amend.

         BACKGROUND

         As alleged in the consolidated complaint, prior to September 2016, some auto loan customers with Wells Fargo were improperly enrolled in, and forced to pay for, collateral protection insurance they did not need. Dkt. No. 46 ¶¶ 3,10. CPI protects a lender's collateral, the car, if the borrower does not obtain auto insurance. CPI is unnecessary if a borrower has obtained insurance, or when the loan has been paid off. See id. ¶ 3. Wells Fargo was aware of issues with its CPI practices by July 2016, senior executives were briefed by September 2016, and the practice was terminated later that month. Id. ¶¶ 4, 8, 10. The company also reported the problem to the Office of the Comptroller of the Currency ("OCC"), during the summer of 2016. Id. ¶ 5.

         There was no public disclosure of Wells Fargo's CPI issue until a July 2017 New York Times article. Id. ¶ 9. In a press release issued the same day and in its second quarter filing with the SEC a week later, the company acknowledged that it had been aware of problems with its CPI program for approximately a year. Id. ΒΆΒΆ ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.