Wells Fargo Unpaid Overtime Class Action Gets Second Circuit Nod for AAA Arbitration

March 9, 2018

In 2015, former Wells Fargo Advisors, LLC entry-level financial advisors Reagan Tucker, Benjamin Dooley, Marvin Glasgold, Livia Sappington, Ewa Kelly, and Patrick LaBorde filed putative class arbitrations before the Financial Industry Regulatory Authority ("FINRA") and the American Arbitration Association ("AAA") seeking unpaid overtime from Wells Fargo pursuant to the Fair Labor Standards Act ("FLSA") and State wage and hour laws. The Employees' employment contract required arbitration under Missouri law. FINRA rejected the actions citing its rules forbidding class and collective arbitrations. 


With only the class  arbitration action before the AAA remaining, Wells Fargo petitioned the United States District Court for the Southern District of New York ("SDNY") to compel bilateral rather than class arbitration.

The arbitration clause Tucker, Dooley, Glasgold, Kelly, and LaBorde' s contracts provides, in relevant part: 

You are agreeing to arbitrate any dispute, claim or controversy that may arise between you and Wells Fargo Advisors, or a client, or any other person. This means that you are giving up the right to sue Wells Fargo Advisors, its subsidiaries or employees or any client or any other person in court concerning matters related to or arising 6 from your employment. . . . Specifically EXCLUDED from this obligation to arbitrate are any claims for State unemployment insurance . . . . Also any claims that require you to process them under a different administrative procedure pursuant to the terms of an employee benefit plan shall not be subject to arbitration. . . . [Y]ou agree that any controversy or dispute, including but not limited to, claims of wrongful termination, breach of contract, discrimination, harassment, retaliation, infliction of emotional distress, tortuous [sic] interference with business or contract, federal, state or local statute or ordinance and/or other theory, arising between you and Wells Fargo Advisors, shall be submitted for arbitration before the [Financial Industry Regulatory Authority ("FINRA")]. If the FINRA does not accept the controversy, dispute or claim, or any portion thereof, then the non-accepted controversy, dispute or claim shall be submitted for arbitration before the American Arbitration Association [("AAA")] pursuant to its Securities Arbitration Rules, effective May 1, 1993.
The arbitration clause in Sappington's contract provides, in relevant part:

You agree that any action instituted as a result of any controversy arising out of this Agreement, your employment or termination of your employment, shall be brought before the arbitration facility of the [FINRA] to the exclusion of all others, unless the rules and/or the codes of the FINRA provide otherwise. Both you and Wells Fargo Advisors agree that arbitration shall be the parties' exclusive remedy and that the results of such arbitration shall be final and binding upon them. . . . Any controversy relating to your duty to arbitrate hereunder, or to the validity or enforceability of this arbitration clause, or to any defense to arbitration, shall also be arbitrated before the FINRA.

SDNY denied Wells Fargo's petitions, holding that an arbitrator (and not a court) must determine whether the arbitration clauses in the Employees' employment contracts authorize class arbitration. 


Wells Fargo appealed to the United States Court of Appeals for the Second Circuit ("2Cir").

(Opinion, 2Cir; 16-CV-3833 and 16-CV-3854; March 7, 2018) http://brokeandbroker.com/PDF/Sappington2Cir.pdf

In preliminarily addressing the issue on appeal, 2Cir assumed that:

the question whether an arbitration clause authorizes class arbitration is a so-called "question of arbitrability" presumptively for a court, rather than an arbitrator, to decide. Applying Missouri's arbitration and contract law, we conclude that the parties overcame  this presumption by clearly and unmistakably expressing their intent to let an arbitrator decide whether they agreed to authorize class arbitration.  Accordingly, we AFFIRM.

As noted in Footnote 2 of the 2Cir Opinion:

On October 18, 2016, the arbitrator in the Sappington action issued a clause construction award, concluding that class arbitration is available under the Tucker clause, as applicable to Kelly and LaBorde in that action, but not under the Sappington  clause, as applicable to Sappington. Wells Fargo has filed a petition to vacate the award insofar as it concerns the Tucker clause, and the parties consented to the District Court's stay of that petition pending resolution of these appeals. 

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