A $22.4 million judgment against Wells Fargo Bank tied to a case over unwanted faxes wasn’t based in reality, according to bankers’ associations.
“That result cannot stand under Arkansas law,” according to a friend-of-the-court brief the Arkansas Bankers Association and the American Bankers Association asked to be filed in Wells Fargo’s appeal of the judgment. In May, the Arkansas Court of Appeals denied the bankers’ request, although Judges Ray Abramson, Kenneth Hixson and Waymond Brown said they would have allowed the bankers to file the brief.
The appeal stems from Wells Fargo’s entanglement in a multimillion-dollar legal strategy involving class-action lawsuits over unwanted faxes.
In the case, class representative M.S. Wholesale Plumbing Inc. of Russellville accused WestFax Inc. of Centennial, Colorado, of relaying more than 42,000 faxes that did not meet the specific opt-out requirements of the decades-old federal Telephone Consumer Protection Act. M.S. Wholesale is represented by attorneys James Streett of the Streett Law Firm in Russellville and Joe P. Leniski Jr. of Branstetter Stranch & Jennings in Nashville, Tennessee. It was the second TCPA case to yield an eight-figure class-action award for M.S. Wholesale and the same lawyers in Pope County Circuit Court.
In 2018, WestFax was hit with a $21.1 million class-action judgment in favor of M.S. Wholesale Plumbing. Shortly after the judgment was entered, Wells Fargo was pulled into the case.
Wells Fargo once held accounts belonging to WestFax. In April 2019, the bank received two writs of garnishments. A bank employee responded to one of the writs by saying WestFax’s account was closed. But Streett said in Pope County Circuit Court filings that the response didn’t answer his questions.
Pope County Circuit Judge Dennis Sutterfield agreed, which led to a hearing in June 2019 to determine the amount of the garnishment. To prepare for the hearing, Streett sent Wells Fargo two questions. The key one asked Wells Fargo to admit that it held $22.4 million — WestFax’s judgment plus interest — when it received the writ of garnishment.
Wells Fargo didn’t respond to the questions. (In court filings, Wells Fargo said it wasn’t properly served with the request for admissions.) But since Wells Fargo did not respond to the question with a denial, the statement that it held $22.4 million of WestFax’s money was accepted as true. That allowed M.S. Wholesale to obtain the judgment from Wells Fargo on behalf of class members.
The bankers said in their brief the judgment shouldn’t stand because it “redistributes $22 million overnight from Wells Fargo to the Plaintiffs based on a fiction,” according to the filing by William Waddell Jr. of the Little Rock law firm Friday Eldredge & Clark.
“It is a staggering judgment against a third-party with no direct liability, and where a statute expressly caps liability to the funds actually held. Interpreting the bank-garnishment statute to bless this result would be unjust.”
The bankers said in the brief that it was “undisputed” that at the time the writ of garnishment was served Wells Fargo didn’t have any WestFax money. WestFax’s accounts at Wells Fargo were closed in January, months before the garnishment writ was served, the brief said.
“Confronted with this information, the circuit court refused to set aside or amend the specific judgment,” the brief said.
The bankers said that allowing the ruling to stand would encourage a new default-judgment practice.
“There will be nothing to lose, and much to gain, by sending a post default request for admission on sky-high damages, and using that as the only evidence at the damages hearing,” the brief said.
Wells Fargo asked the Court of Appeals to reverse the garnishment judgment and dismiss it.
“Due process of law does not permit a $22.4 million penalty or sanction for failing to respond to a discovery request,” attorney Andrew King of the Little Rock office of Kutak Rock LLP said in the appeal filing.
But M.S. Wholesale argued it did what the trial court, the Arkansas Rules of Civil Procedure and the Arkansas Rules of Evidence allowed it to do to determine how much of WestFax’s money Wells Fargo held that could be garnished, according to the filing by attorney Brian Brooks of Greenbrier, who is representing M.S. Wholesale and the class in the appeal.
“Wells Fargo’s belated attempts to side-step the judgment entered against it were rightly rejected by the trial court, and that rejection should be affirmed,” Brooks wrote.
On May 13, the state Court of Appeals granted Wells Fargo’s request for oral arguments, but a court date had not been set as of Wednesday.