By Nicole D. Prysby, J.D.
The Navajo Nation’s claims against Wells Fargo were either precluded by a prior Consumer Financial Protection Bureau Consent Order or the Nation lacked standing to bring the claims, held the U.S. District Court for the District of in New Mexico. The Nation filed suit on its own behalf and as parens patriae on behalf of the Navajo people against Wells Fargo, claiming that the bank engaged in unfair, deceptive, fraudulent, and illegal banking practices that harmed the Nation’s sovereign and quasi-sovereign interests. The practices complained of were the same illegal practices that were the subject of the Consent Order (opening unauthorized accounts, etc.). Privity existed between the CFPB and the Nation because the CFPB adequately represented the Nation’s interests in its role as an enforcer of the Consumer Financial Protection Act for all consumers. Because the CFPB could have raised the claims previously, the CFPA claims were barred by res judicata. The court also dismissed the federal, state, tribal, and common law claims brought by the Nation in its capacity as parens patriae on behalf of the Navajo people. The Nation failed to establish a quasi-sovereign interest to the economic health of the Nation as a whole, as opposed to individual harm, which led to the dismissal of the federal claims. And because the court dismissed the federal claims, it declined to exercise jurisdiction over the remaining state, tribal, and common law claims (Navajo Nation v. Wells Fargo & Co., September 25, 2018, Parker, J.).
Background. The Navajo Nation filed suit on its own behalf and as parens patriae on behalf of the Navajo people against Wells Fargo & Company (WFC) and Wells Fargo Bank, N.A. (WFBNA), claiming Wells Fargo engaged in unfair, deceptive, fraudulent, and illegal banking practices that harmed the Nation’s sovereign and quasi-sovereign interests. The practices complained of were exposed in 2016 when the CFPB announced that Wells Fargo had violated the CFPA by opening unauthorized accounts, submitting unauthorized credit card applications, enrolling customers in unrequested online banking services, and ordering and activating debit cards without customer knowledge or consent. In a consent order with WFNBA, the CFPB ordered the bank to review and report on its practices; develop a plan to correct any deficiencies; and develop and implement a plan to redress harm to its consumers.
The Nation reached out to Wells Fargo after the CFPB disclosures, seeking to determine whether any of the unlawful sales practices had affected Navajo tribal members, given that Wells Fargo is the only brick and mortar national bank serving the Nation’s geographic area. Wells Fargo assured the Nation that the improper actions had not impacted the Navajo community. The Nation later discovered that these representations were false, and that the Navajo community had not only been impacted, but had been specifically targeted.
CFPA claims precluded. WFC argued that the CFPA claims were precluded by the Bureau’s Consent Order, which it asserted was a final judgment. The Consent Order released WFNBA from liability for violations that the Bureau has asserted or might have asserted, based on the practices described. WFC argued that the release precluded other actions brought under the CFPA that are based on the same illegal practices and that other legal actions allowed by the Bureau Consent Order are limited to non-CFPA claims, which the Bureau could not have asserted and to which the release does not apply. The Nation argued that the Consent Order released only the Bureau’s claims and did not bar CFPA claims brought by the Nation, which was not a party to the Consent Order. It addition, it argued that its claims were brought against WFC, not WFBNA, and WFC was not a party to the Consent Order. The court sided with WFC, finding that while the Nation did not bring its CFPA claims against WFBNA, the sales practices of WFBNA are the acts that form the basis for the claims. Because WFC and WFNBA are treated as a single entity in the complaint, WFC’s liability under the CFPA is dependent on the actions of WFBNA and its related corporate status. Therefore, WFC is in privity with WFBNA for res judicata purposes.
The court also held that the Nation’s claims were precluded because they were identical to the ones resolved in the CFPB Consent Order and privity existed between the Nation and the CFPB. Although the Nation’s complaint made references to specific facts as to improper practices at retail branches near the Nation, the CFPA claims were based on the same systemic practice of unfair, abusive, and deceptive acts that was detailed in the CFPB Consent Order. The acts occurred during the same time period, in the same general location at WFBNA’s retail banking facilities, and with the same origin and motivation. Therefore, these practices are part of the same series of connected occurrences and form the same cause of action for preclusion purposes. Privity existed between the CFPB and the Nation because the CFPB adequately represented the Nation’s interests. In its capacity as an enforcer of the CFPA, the Bureau acts as a representative of all consumers, including the Nation and its members. Because the CFPB could have raised the claims previously, the CFPA claims were barred by res judicata.
Claims brought in parens patriae capacity dismissed. In addition to the CFPA claims, the Nation brought federal, state, tribal, and common law claims in its capacity as parens patriae on behalf of the Navajo people. The federal claims included violations of the Equal Credit Opportunity Act (ECOA), the Electronic Funds Transfer Act (EFTA), the Truth in Lending Act (TILA), and (4) the Fair Credit Reporting Act (FCRA). The defendants argued that the statutes did not provide the Nation with a cause of action because the Nation was not in the class of plaintiffs legislatively authorized to sue. The Nation argued that an affirmative grant of statutory standing is not required and that parens patriae suits are permissible when a statute allows for broad civil enforcement. The court held that none of the statutes relied on by the Nation specifically authorized it to sue in the public interest. In addition, the Nation did not demonstrate that it has a quasi-sovereign interest at stake to bring its statutory parens patriae claims. Economic health is a quasi-sovereign interest when the alleged harm impacts the economy as a whole, but the Nation’s claims were based on allegations that WFC harmed individual tribal members by creating unauthorized bank accounts, obtaining unauthorized credit reports, and issuing unauthorized credit cards, debit cards, and PINs. Therefore, it failed to establish standing to bring claims under the ECOA, the EFTA, TILA, and the FCRA. Because the court dismissed the federal claims, it declined to exercise jurisdiction over the remaining state, tribal, and common law claims, as well as the claim for declaratory relief.
The case is No. 17-CV-1219-JAP-SCY.
Attorneys: Ethel B. Branch, Navajo Nation Department of Justice, for Navajo Nation. Andrew G. Schultz (Rodey Dickason Sloan Akin & Robb, P.A.) and David H. Fry (Munger, Tolles & Olson LLP) for Wells Fargo & Co. and Wells Fargo Bank N.A.
Companies: Navajo Nation; Wells Fargo & Co.; Wells Fargo Bank N.A.
MainStory: TopStory BankingOperations CFPB ConsumerCredit CreditDebitGiftCards EnforcementActions FairCreditReporting TruthInLending UDAAP
Interested in submitting an article?
Submit your information to us today!Learn More
Banking and Finance Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.