Morris v. Wells Fargo & Company

Background

Wells Fargo offered mortgage loans with rate locks that held an interest rate for a fixed period. When a loan did not close during that period, a rate-lock extension fee could be charged. The opinion states that the industry generally assigned the fee based on who caused the delay: the borrower paid when the borrower caused the delay, and the bank paid when the bank caused the delay.

Wells Fargo’s policies changed over time. Before May 1, 2006, the Bank provided a free five-business-day extension. Before September 16, 2013, it had no company-wide method for deciding who was primarily responsible for a closing delay. Employees made that decision based on their judgment and experience. From May 1, 2012, through September 15, 2013, Wells Fargo absorbed all rate-lock extension fees. It later adopted a policy requiring employees to assess fees when the borrower caused the delay. A review of 276 loans found that the policy was applied inconsistently.

In 2018, Wells Fargo entered a consent order with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau. The Bank later conducted remediation programs and sent refund letters to borrowers who had paid rate-lock extension fees. The refunds included principal, interest, and an additional amount intended to compensate borrowers for the time they lacked the money.

Morris applied for a rehabilitation mortgage in 2005. The opinion describes several missed closing conditions and extensions. Wells Fargo charged him rate-lock extension fees totaling $4,087.13 and gave lender credits totaling $3,521.13. In November 2021, Wells Fargo refunded him $4,087.13 in principal, $1,410.21 in interest, and $1,307.68 as additional compensation. Morris contended that the refund did not include Wells Fargo’s investment returns.

Morris and other plaintiffs sued Wells Fargo in state court in 2023, and Wells Fargo removed the case to federal court. In an earlier ruling, the court found that the plaintiffs adequately pleaded conversion and quasi-contract claims but dismissed another count. The plaintiffs then sought certification of a nationwide conversion class and a New York unjust-enrichment class.

Class-Certification Analysis

Federal Rule of Civil Procedure 23 requires a proposed class to satisfy four requirements: enough members that separate lawsuits are impractical, common legal or factual questions, claims typical of the class, and adequate representation. For a class seeking damages, the plaintiffs also must show that common questions predominate and that a class action is superior to other methods of resolving the dispute.

The court found that the plaintiffs satisfied the relatively low commonality threshold because questions existed about whether Wells Fargo inequitably retained benefits, profited from the funds, and was required to return those amounts. The court also found that the plaintiffs met the typicality standard.

The court nevertheless found that Morris was not an adequate representative. The proposed classes were limited to people for whom Wells Fargo was responsible for the fee. Wells Fargo submitted loan records indicating that Morris was responsible for delays because he did not complete closing conditions after multiple deadlines. The records also showed that Wells Fargo contacted Morris and absorbed some fees. The plaintiffs did not provide additional documents supporting Morris’s account. The court therefore found, for purposes of certification, that Morris had not shown he was wrongly assessed a fee. Because he had not shown that he belonged to the proposed classes, he could not adequately represent them.

The court independently found that individual issues predominated. The central question was whether Wells Fargo or each borrower was responsible for the delay leading to a particular fee. The relevant information was contained in individual loan files, including loan notes and settlement statements. The notes used nonstandard narratives and did not uniformly record responsibility for delays. The court concluded that determining responsibility required a detailed review of each file, and that no common evidence could answer that question for every class member.

The court also rejected the argument that the proposed expert analysis solved the problem. The expert proposed using computer programs to search loan notes and, potentially, review additional files. But one method could not determine whether a borrower actually paid a rate-lock extension fee and could not reliably distinguish fees Wells Fargo covered for different reasons. The other method had not yet been developed or executed. The court concluded that automating the review would not eliminate the individualized inquiries.

Because common issues did not predominate, and because the plaintiffs had not shown that class treatment was superior without a file-by-file analysis, the court denied class certification. The court also declined to certify an issue class because the proposed issue—whether Wells Fargo improperly retained profits and should return them—was not susceptible to common proof and would not materially advance the case.

Other Motions and Orders

The court terminated as moot Wells Fargo’s motion to exclude the testimony of Christopher Milner because the class-certification decision was the same even if the expert’s reports were considered. The court granted the plaintiffs’ unopposed motion to supplement the record with two documents concerning Wells Fargo’s efforts to identify borrowers who may have been wrongly charged fees. The court denied the plaintiffs’ motions to seal another party’s materials.

The court ordered the plaintiffs to file unredacted versions of the provisionally sealed materials on the public docket within seven days. It also set a case-management conference for September 29, 2026, and directed the parties to file a joint case-management statement by September 22, 2026.