Financial giant Wells Fargo is the latest company snared in a multimillion-dollar legal strategy honed in Arkansas: filing class-action suits over unwanted faxes.
Now the bank is trying to free itself from a $22.4 million judgment stemming from a lawsuit in Pope County Circuit Court.
Wells Fargo’s connection to the suit is tangential — it once held an account belonging to the defendant — and its alleged liability rests on a lawyer’s claim that its response to a garnishment request was legally faulty.
The bank’s problems began after Pope County Circuit Judge Dennis Sutterfield ruled last year that defendant WestFax Inc. of Centennial, Colorado, had relayed 42,271 faxes that did not meet the opt-out requirements of the federal Telephone Consumer Protection Act.
The ruling came in favor of class representative M.S. Wholesale Plumbing Inc. of Russellville, represented by attorneys James Streett of the Streett Law Firm in Russellville and Joe P. Leniski Jr. of Branstetter Stranch & Jennings of Nashville, Tennessee.
It is the second TCPA case to yield an eight-figure class-action award for M.S. Wholesale and the same lawyers.
The class members received a $21.1 million judgment last year against WestFax.
Wells Fargo has asked Sutterfield to toss the judgment or set a trial to determine its liability. A hearing was set for Aug. 16, the day after Arkansas Business went to press.
Meanwhile, WestFax is watching the case. Last month, it reached a preliminary settlement with the class, agreeing not to contest $37,500 previously taken from one of its bank accounts for the class. Also as part of the deal, WestFax agreed to dismiss the appeal it made to the Arkansas Court of Appeals and not to intervene in the judgment against Wells Fargo Bank of Sioux Falls, South Dakota.
The settlement is conditional and has not yet been approved by Sutterfield.
Another defendant in the class-action case, Western Financial LLC of Orange, California, exited the suit in December 2017, after saying it couldn’t afford to pay even a “modest” class-wide judgment, according to Streett’s court filing. (See Western Financial Was Allowed to Leave Case Early.)
Things Get Messy
Wells Fargo was pulled into the WestFax case in April after receiving two writs of garnishments. A bank employee responded to one of the writs by saying WestFax’s account was closed.
That’s when the case got messy for Wells Fargo.
Streett said in a May 15 letter to Judge Sutterfield that the bank’s response to the garnishment didn’t come from an attorney “and is not only an exercise in the unauthorized practice of law, but also non-compliant with Arkansas garnishment law in virtually every respect.”
Streett asked Sutterfield to issue a judgment against Wells Fargo that voided the garnishment filing.
“Plaintiff apparently convinced the Circuit Court to strike and therefore turn a blind eye to Wells Fargo’s response,” one of the bank’s attorneys, Andrew King of Kutak Rock in Little Rock, said in a court filing.
Sutterfield approved the judgment that Streett requested, paving the way for a June 25 hearing to determine how much Wells Fargo owed.
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 said in court papers that it wasn’t properly served with the request for admissions and didn’t respond to that question. 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 on behalf of class members.
The multimillion-dollar judgment against the bank probably will be dismissed, said Joshua Silverstein, a professor at the Bowen School of Law at the University of Arkansas at Little Rock.
“Parties regularly have default judgments entered against them, meaning they failed to respond,” said Silverstein, who wasn’t familiar with the Wells Fargo case but speaking generally. “But if they respond immediately after the judgment, then generally courts will revoke the judgment.”
Silverstein said an employee responding to a garnishment writ would not be practicing law without authorization. “They’re allowed to make that judgment [informing the court that a bank isn’t holding money for a garnishment subject],” he said. “That’s not the practice of law.”
In addition, the law states that the garnishee is liable only for the amount of money it is holding for the other person.
“That doesn’t mean you can’t be sanctioned and forced to pay more money if you do something improper in responding to the garnishment,” Silverstein said. “As soon as the writ of garnishment is served, that impounds the money and puts a lien on it.”
He said if the recipient transfers the money after being served with the garnishment, then “they’re now on the hook up to the amount of the garnishment.”
Streett declined to comment on the case because it is pending.
Attorney Baxter Drennon of Wright Lindsey Jennings of Little Rock, who represents WestFax, didn’t return calls for comment. Attorneys for Wells Fargo declined to comment.
The roots of the case date to Sept. 15, 2015, when M.S. Wholesale received an unsolicited fax from Western Financial offering business financing.
While the one-page fax listed a phone number for people to call “to be permanently removed from the list,” the fax didn’t contain the exact opt-out language required by the TCPA, a violation that could cost $500 per fax sent.
M.S. Wholesale had received other unsolicited faxes. About two weeks after the fax from Western Financial arrived, M.S. Wholesale received an unsolicited fax from Eugene Kalsky, owner of Gen-Kal Pipe & Steel Corp. of Mount Laurel, New Jersey.
M.S. Wholesale and its attorneys filed a class-action lawsuit in October 2015 against Kalsky and his company in Pope County Circuit Court. That case resulted in a $12.5 million judgment that was approved by Circuit Court Judge Ken Coker Jr. in March 2017.
Four days after M.S. Wholesale and its attorneys filed suit against Kalsky, they filed a suit seeking class-action status against Western Financial and WestFax, which Western Financial had paid $524 to send faxes to more than 42,000 numbers.
“We did not reach out to each one of these fax numbers prior to sending them and ask for permission to send these to them,” Western Financial’s representative, Adam Schiefer, said in a November 2017 depostion, excerpts of which were included in WestFax’s court filings. Schiefer said he bought the fax numbers “from a foreign entity for purposes of trying to find folks who might be interested in our business.”
Streett said in court papers that WestFax “was directly involved in creating and modifying the content” of the one-page advertisement, making it liable under the TCPA for failing to comply with the opt-out language.
WestFax denied the allegations.
Streett agreed to dismiss Western Financial, the company that made the fax solicitation, from the case at the end of 2017, but the claim against WestFax continued.
A hearing on a motion for summary judgment was held on Aug. 28, 2018, in which WestFax argued that a jury should decide the case because of its disputed role in handling the fax.
Later that day, Sutterfield filed a letter saying he was ruling in favor of M.S. Wholesale. The $21.1 million judgment against WestFax was entered on Sept. 4.
WestFax appealed the decision.
As the WestFax appeal was pending, Streett moved forward with efforts to collect the judgment, including the writs of garnishment sent to Wells Fargo and request for documents.
Wells Fargo sent Streett nearly 2,700 pages of WestFax’s account records — first electronically and then on paper after Streett said he couldn’t access the electronic documents.
But Streett was not satisfied with Wells Fargo’s cooperation. During the June 25 hearing this year, he asked Sutterfield for a judgment of $22.4 million against the bank for not properly responding to the garnishment.
“I don’t take this lightly,” Streett said, according to a transcript of the hearing that was included in the case file. “I have gone through as much pains as I can to document notice after notice after notice. They have received it. They keep telling me –.”
“I think that would get their attention, don’t you?” Judge Sutterfield interjected.
“Well, whether it does or not it, it should,” Streett said.
Sutterfield told Streett to prepare an order and that he would sign it.
Wells Fargo received the judgment on July 2 and promptly started efforts to have it thrown out.
At an Aug. 5 proceeding in front of Sutterfield, Jess Askew of Kutak Rock, representing Wells Fargo, said there were a “range of issues” to have the judgment tossed.
“We want this court to have the opportunity to resolve those matters,” he said. “And we will make ourselves available at any time the court can hear us at the court’s pleasure.”
Sutterfield told Askew and Streett that if he made a mistake in the case, “I want a chance to correct it.”
Streett told him that the class attorneys didn’t think Sutterfield got anything wrong.
“Obviously, they have a different opinion,” Streett said of the bank’s attorneys.