Wells Fargo has filed a petition with the Ninth Circuit Court of Appeals, seeking to overturn the class certification granted to investors claiming the bank’s alleged “sham” hiring practices caused a significant drop in its stock price. The bank is contesting the investors’ proposed damages methodology, arguing that it fails to meet the legal standards set forth by the U.S. Supreme Court in Comcast Corp. v. Behrend (2013).
The class certification was granted by U.S. District Judge Trina L. Thompson last month, with the court deeming the plaintiffs’ “out-of-pocket” methodology, incorporating an “event study,” as sufficient. However, Wells Fargo contends that this approach is insufficient, as the plaintiffs’ expert, Dr. Joseph Mason, provided vague references to an unspecified methodology and failed to offer any concrete evidence or opinions related to the case.
Wells Fargo’s petition asserts that the Comcast ruling requires plaintiffs to submit “evidentiary proof” that damages can be measured on a classwide basis. The bank further highlights that Dr. Mason’s statements lacked clarity and did not establish a reliable damages model. Despite these concerns, Judge Thompson ruled that the class could be certified, asserting that the Comcast decision did not pose a barrier to class certification in securities cases.
The investors claim that Wells Fargo conducted fake job interviews to meet diversity quotas, alleging that the bank’s stock price was inflated as a result. They argue that when the truth of these hiring practices came to light, Wells Fargo lost $17 billion in market capitalization. However, the bank maintains that the downturn in its stock price was caused by other factors, such as rising interest rates.
Wells Fargo now asks the Ninth Circuit to address an important legal question: What must plaintiffs in securities litigation demonstrate regarding damages methodology post-Comcast in order to secure class certification? The company contends that the district court’s decision to grant class certification without adequate proof of a valid damages model is “manifestly erroneous.”
The certified class includes individuals and entities that acquired Wells Fargo stock between February 24, 2021, and June 9, 2022. SEB Investment Management AB and West Palm Beach Firefighters’ Pension Fund are appointed as class representatives, with Kessler Topaz Meltzer & Check LLP serving as class counsel.
The case is currently scheduled for a case management conference in July, with mediation set for late May.
