On May 14, 2019, U.S. District Judge Jon S. Tigar of the Northern District of California preliminarily approved a proposed $240 million cash settlement that would resolve shareholder derivative litigation over Wells Fargo’s illicit account creation scandal. The settlement resolves claims against 20 current and former directors and officers, including former CEO John Stumpf and former CEO Timothy Sloan (“Individual Defendants”).
Beginning in September 2016, several derivative actions were filed and then consolidated on December 12, 2016. The Court appointed Lieff Cabraser Heimann & Bernstein and Saxena White as co-lead counsel for Plaintiffs. Plaintiffs then filed a consolidated amended complaint on February 24, 2017 alleging that, “Defendants knew or consciously disregarded that Wells Fargo employees were illicitly creating millions of deposit and credit card accounts for their customers, without these customers’ knowledge or consent.” These unauthorized accounts were created by employees as a result of a high-pressure sales culture at Wells Fargo.
On March 17, 2017, the Court largely denied Wells Fargo and the Individual Defendants’ motion to dismiss for failure to adequately plead demand futility. Each of the Individual Defendants moved again to dismiss the complaint for failure to state a claim. On October 4, 2017, the Court denied in large part the Individual Defendants’ motion to dismiss for failure to state a claim.
The $240 million cash settlement will be paid to Wells Fargo by the bank’s directors and officers liability insurers. According to the Plaintiffs’ counsel, the $240 million cash portion of the settlement is “the largest insurer-funded cash component of any shareholder derivative settlement in history.” In addition, Plaintiffs put an $80 million valuation on the corporate governance reforms and other remedial measures that are being implemented as a result of this litigation. Plaintiffs’ counsel is requesting $68 million in attorney’s fees and costs, which represents 21.25% of the $320 million value of the settlement. The fairness hearing is scheduled for August 1, 2019.
Below is a link to Judge Tigar's Order Granting Preliminary Approval of Derivative Action Settlement.
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About Alex B. Heller
Alex B. Heller's practice is focused on securities litigation. Alex is an associate in the firm's Pennsylvania office.