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Anderson v. Wells Fargo Bank, N.A.

United States District Court, D. South Dakota, Western Division

September 30, 2019

WELLS FARGO BANK, N.A., Defendant.




         Plaintiffs brought this civil action against defendant Wells Fargo Bank, N.A. (“Wells Fargo”) invoking the court's diversity jurisdiction under 28 U.S.C. § 1332.[1] (Docket 29). Wells Fargo fired each plaintiff in 2011 or 2012, claiming federal law and their criminal histories required their termination. Plaintiffs allege the terminations constitute fraud, deceit, promissory estoppel, fraudulent inducement and fraudulent concealment under state law. Most of them seek punitive damages.

         Five defense motions are now pending before the court. (Dockets 45, 57, 68, 76 & 80). Three concern discovery disputes, one seeks to exclude a plaintiffs' expert, and the last is a motion for summary judgment. For the reasons given below, the court grants summary judgment to Wells Fargo and denies the other pending motions as moot.[2]

         I. Facts

         The following recitation consists of the material facts developed from Wells Fargo's statement of undisputed material facts (Docket 82), plaintiffs' response to those facts (Docket 91), Wells Fargo's reply (Docket 94) and other evidence in the record where indicated. These facts are “viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation omitted).

         At the outset, the court notes two problems with plaintiffs' response to Wells Fargo's statement of undisputed material facts. First, plaintiffs often failed to properly controvert Wells Fargo's facts. See, e.g., Docket 91 at ¶¶ 14, 24 (denying fact but failing to put forth evidence controverting the fact). “A party asserting that a fact . . . is genuinely disputed must support the assertion by citing to particular parts of materials in the record[.]” Fed.R.Civ.P. 56(c)(1)(A). Second, plaintiffs repeatedly objected to Wells Fargo's facts as irrelevant, but failed to explain why they were irrelevant. See, e.g., Docket 91 at ¶¶ 23, 42. A bare relevance objection with no explanation is insufficient to controvert a properly supported fact. The court generally concludes facts subject to improper objections are undisputed. Fed.R.Civ.P. 56(e)(2).

         Wells Fargo is a nationally-chartered bank insured by the Federal Deposit Insurance Corporation (“FDIC”). (Docket 94 at ¶ 1). A federal statute, commonly referred to as Section 19, requires Wells Fargo to investigate an individual's criminal history before hiring them. Id. at ¶ 5; see also 12 U.S.C. § 1829. Wells Fargo may not hire individuals convicted of certain offenses without FDIC consent. 12 U.S.C. § 1829(a)(1). Individuals with disqualifying convictions may apply for FDIC consent, received through a Section 19 waiver, to work at Wells Fargo or other regulated banks. (Docket 94 at ¶ 6).

         Wells Fargo hired each of the ten plaintiffs in 2010 or earlier. Id. at ¶¶ 41, 66, 93, 117, 140, 160, 184, 208, 230 & 254. Wells Fargo performed a “name-based criminal background screening[]” on applicants until March of 2010. Id. at ¶ 18. Most of the plaintiffs' name-based background checks showed no criminal convictions.[3] Id. at ¶¶ 40, 92, 116, 159, 183, 207, 228, 253. A name-based background check is “less robust” and would not show “many older or non-public conviction records[.]” Id. at ¶ 21.

         In 2011 and 2012, Wells Fargo decided to rescreen many employees using a Federal Bureau of Investigation (“FBI”) “comprehensive and inclusive . . . fingerprint-based search[.]” Id. at ¶ 24. Wells Fargo's merger with Wachovia, which screened potential employees using a fingerprint-based search, and a newly-passed federal law requiring fingerprint-based searches for some employees were factors in its decision to rescreen employees. Id. at ¶¶ 14-17. The FBI database was more comprehensive and sophisticated. Id. at ¶ 21. Each plaintiff consented to and participated in the rescreen. Id. at ¶¶ 51-53, 74-76, 100-02, 124-26, 146, 166-67, 194-96, 214-17, 236-38 & 262-64. The rescreens showed each plaintiff had a criminal history, summarized in the chart below.

Figure 1: Plaintiffs' Criminal Histories





Stephanie Anderson

Theft - Minn. Stat. § 609.52


Pretrial diversion; sentenced to 3 years probation; probation continued 2 years; charge dismissed in 2005.

Jeffrey Dallman

Theft - Iowa Code § 714.2


Conviction; sentenced to 5 years prison, suspended, and 2 years probation.

Mao Dary

3rd Degree Burglary - Iowa Code § 713.6A


Deferred judgment, 2 years probation.

Deanna Hobbs

Theft - Mo. Rev. Stat. § 570.030


Conviction, suspended imposition of sentence; 6 months probation; charge dismissed in 2005.

Brian Kruschke

Theft - Minn. Stat. § 609.52


Conviction; sentenced to 10 days jail and 6 months probation.

Chad Engelby

Theft of Motor Vehicle - Minn. Stat. § 609.52


Pretrial diversion; 1 year program; charge dismissed in 1995.

Thomas English

Theft - Mont. Code Ann. § 45-6-301


Deferred judgment, 3 years; charge dismissed in 1999.

Ken Johnson

Theft - Minn. Stat. § 609.52


Conviction; sentenced to 5 years probation, imposition of sentence stayed.

Jade Sand

Theft - Ariz. Rev. Stat. § 13-1802


Conviction; sentenced to 2 years probation; felony reduced to misdemeanor in 1991; judgment of guilt vacated and charges dismissed in 1998.

Moriah Demers

Theft of Motor Vehicle - Minn. Stat. § 609.52


Conviction; sentenced to 365 days with 335 days suspended and 2 years probation.

See Dockets 47-1 at pp. 1-2, 83-20 at p. 6, 83-32 at pp. 1-2. 83-44 at p. 3, 83-58 at p. 3, 83-70 at p. 3, 84-11 at p. 3; 84-25 at p. 5, 84-40 at p. 3, 84-50 at p. 2 & 84-63 at pp. 1-2; see also Docket 94 at ¶¶ 54, 77, 103, 127, 147, 168, 197, 218, 239 & 265.

         Wells Fargo fired each of the plaintiffs after receiving the results of the rescreens. (Docket 94 at ¶¶ 59, 84, 107, 133, 151, 172, 200, 222, 243 & 270). Wells Fargo concluded Section 19 forbade it from continuing to employ plaintiffs. Id. At the time of their terminations, no plaintiff had a Section 19 waiver from the FDIC.[4] Id. at ¶¶ 58, 81-83, 108, 131, 153, 176, 201, 223, 245 & 272.

         II. Legal Standard

         Under Federal Rule of Civil Procedure 56(a), a movant is entitled to summary judgment if the movant can “show that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Once the moving party meets its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing that a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts which might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Id. at 248. “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. at 247-48 (emphasis in original).

         If a dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party, then summary judgment is not appropriate. Id. However, the moving party is entitled to judgment as a matter of law if the nonmoving party failed to “make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In such a case, “there can be ‘no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at 323.

         In determining whether summary judgment should issue, the facts and inferences from those facts must be viewed in the light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587-88. The key inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.

         III. Analysis

         Wells Fargo raises two threshold arguments in favor of summary judgment. First, it argues two recent decisions by the United States Court of Appeals for the Eighth Circuit “command” summary judgment. (Docket 81 at pp. 11-13) (citing Williams et al. v. Wells Fargo Bank, N.A., 901 F.3d 1036 (8th Cir. 2018); Eggers v. Wells Fargo Bank, N.A., 899 F.3d 629 (8th Cir. 2018)). Second, it contends federal law preempts any attempt by plaintiffs to impose state law liability for the terminations, which it asserts were required by Section 19. Id. at pp. 13-17. Plaintiffs resist both arguments, arguing Williams and Eggers are distinguishable and Section 19 did not require the terminations. (Docket 90 at pp. 8-16).

         The court finds Williams and Eggers persuasive but not controlling authority in the circumstances of this case. However, the court agrees with Wells Fargo that Section 19 required it to terminate plaintiffs' employment and concludes Section 19 preempts plaintiffs' state law claims. The court then finds each plaintiff was ineligible for banking employment under Section 19 and holds Wells Fargo was complying with federal law in terminating them. Because plaintiffs cannot maintain their chosen causes of action in the face of contrary federal law, the court need not reach the parties' arguments about the merits of plaintiffs' claims.

         A. Williams & Eggers

         The Eighth Circuit recently rejected two attempts to impose liability on Wells Fargo for Section 19-mandated terminations. In Eggers, the plaintiff alleged Wells Fargo violated the Age Discrimination in Employment Act “by (1) refusing to sponsor Section 19 waivers and by (2) failing to provide job applicants and employees with pre-screening notice of the opportunity to obtain waivers.” 899 F.3d at 632. The plaintiff's theory was “that these two practices created a disparate impact against older workers.” Id. The Eighth Circuit did not decide whether Section 19 barred plaintiff's claim, but concluded her claim could not survive because she “failed to present statistical evidence of any kind that the two challenged policies created a disparate impact among Wells Fargo employees older than 40.” Id. at 635 (emphasis in original).

         In Williams, the plaintiffs alleged “Wells Fargo's policy of summarily terminating or withdrawing offers of employment to any individual with a Section 19 disqualification” constituted race-based employment discrimination. 901 F.3d at 1039. The Eighth Circuit held “summary employment exclusion following a Section 19 disqualification is a business necessity” justifying the racially disparate outcomes created by the terminations. Id. at 1040. The court also rejected the plaintiffs' arguments that Wells Fargo could have provided advance notice of the waiver requirement or helped employees obtain waivers in order to “ameliorate[] the disparate impact.” Id. at 1041.

         In both cases, the Eighth Circuit noted, in dicta, that Section 19 required Wells Fargo to terminate employees with criminal convictions “involving dishonesty or a breach of trust.” Eggers, 899 F.3d at 631 (quoting 12 U.S.C. § 1829(a)(1)(A)); see also Williams, 901 F.3d at 1038. Both decisions also rely on the premise that Wells Fargo acted lawfully in terminating Section 19 disqualified employees. Eggers, 899 F.3d at 635 (“[F]ederal law-not company policy―triggers disqualification from employment.”); Williams, 901 F.3d at 1041 (“[T]he bank's decision to comply with [Section 19's] command is a business necessity[.]”). And in both cases, the Eighth Circuit declined to endorse the plaintiffs' arguments that Wells Fargo should have aided employees in obtaining waivers. Eggers, 899 F.3d at 635; Williams, 901 F.3d at 1041.

         Plaintiffs here are correct that Eggers and Williams do not squarely answer the question presented in this case-whether Section 19 preempts their state law claims. As they note, this is neither a race nor age discrimination case. (Docket 90 at pp. 15-16). But Eggers and Williams make clear the Eighth Circuit recognizes the necessity of terminating Section 19 disqualifying bank employees. This holding fatally undermines plaintiffs' argument that Wells Fargo was not required to terminate their employment. Id. at p. 16 (arguing Section 19 did not “require that [plaintiffs] be terminated.”) (emphasis in original).

         B. Preemption

         “The Supremacy Clause invalidates state laws that interfere with, or are contrary to, federal law.” Qwest Corp. v. Minn. Pub. Utils. Comm'n., 684 F.3d 721, 726 (8th Cir. 2012) (citations and quotations omitted). “Conflict preemption occurs when compliance with both federal and state laws is impossible, and when a state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' ”[5] Keller v. City of Fremont, 719 F.3d 931, 940 (8th Cir. 2013) (quoting Arizona v. United States, 567 U.S. 387, 399 (2012)). “What is a sufficient obstacle is a matter of judgment, to be informed by examining the federal statute as a whole and identifying its purpose and intended effects[.]” Crosby v. Nat'l. Foreign Trade Council, 530 U.S. 363, 373 (2000). “In preemption analysis, courts should assume that the historic police powers of the States are not superseded unless that was the clear and manifest purpose of Congress.” Arizona, 567 U.S. at 400 (internal quotations omitted).

         1. Purpose of Section 19

         Determining whether Section 19 preempts the state law claims plaintiffs bring requires a close examination of the “purpose and intended effects” of the statute, considered “as a ...

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