Mosley v. Wells Fargo & Company

Background

The 46 plaintiffs held accounts with Wells Fargo and alleged violations of Regulation E under the Electronic Fund Transfer Act and California’s Unfair Competition Law. They alleged that Wells Fargo assessed overdraft fees on one-time debit-card and automated teller machine transactions without first obtaining affirmative consent through a compliant opt-in disclosure.

The parties agreed that Wells Fargo’s Deposit Account Agreement governed their accounts and claims. The agreement required mandatory individual arbitration of consumer claims under the American Arbitration Association’s Consumer Arbitration Rules and stated that the Federal Arbitration Act governed the arbitration agreement.

In 2022, the plaintiffs and thousands of other people filed individual arbitration demands with the American Arbitration Association. The association later invoiced Wells Fargo for arbitration fees. After Wells Fargo paid a $465,000 invoice after the stated deadline, the association told the 46 California claimants that California Code of Civil Procedure section 1281.98 applied and later administratively closed their arbitration cases. The plaintiffs then filed this lawsuit.

Analysis

The court explained that the Federal Arbitration Act generally governs arbitration agreements involving interstate commerce. On a motion to compel arbitration, the court determines whether a valid arbitration agreement exists and whether that agreement covers the dispute. The parties did not dispute the agreement’s validity or that it covered the claims.

The main dispute was whether California Code of Civil Procedure section 1281.98 governed the arbitration procedures. That section requires a business to pay fees needed to continue an arbitration within a specified period and can result in waiver of the right to compel arbitration if payment is late. The court held that the plaintiffs had not shown a clear agreement to use California’s procedural rules. References in the Account Agreement to state laws concerning arbitration fees and expenses were not specific enough to overcome the usual presumption that the Federal Arbitration Act’s procedural rules applied.

The court therefore held that the American Arbitration Association had not properly closed the plaintiffs’ arbitrations under sections 1281.97 and 1281.98. The court also rejected the plaintiffs’ argument that the association had independently closed the cases under its own rules. The association’s communications repeatedly relied on section 1281.98, and its treatment of other cases showed that it exercised discretion when that California rule did not apply.

Disposition

The court granted Wells Fargo’s motion to compel arbitration and stayed the case pending arbitration of the plaintiffs’ individual claims. It directed the Clerk to administratively close the file. The order expressly stated that administrative closure was not a dismissal or disposition of the action against any party and that any party could initiate further proceedings if necessary. The court did not decide whether Wells Fargo violated Regulation E or California’s Unfair Competition Law.