A securities fraud lawsuit filed against Wells Fargo & Co (WFC.N) by a group of U.S. lawyers resulted in a $1 billion class-action settlement in May. The successful legal teams, comprising attorneys from Cohen Milstein Sellers & Toll and Bernstein Litowitz Berger & Grossmann, led claims against Wells Fargo, alleging that the bank misled shareholders regarding its recovery progress after a series of customer treatment scandals.
The preliminary approval for the all-cash settlement was granted by U.S. District Judge Gregory Woods in Manhattan federal court in May, with a scheduled hearing for September 8th. Pursuant to the agreement's terms, the plaintiffs' lawyers were entitled to seek up to 19% of the settlement amount as legal fees. Recently, the lawyers requested approval for 18% of the settlement and an additional $1.2 million to cover costs and expenses, asserting that the proposed award is both "fair and reasonable."
Since 2018, Wells Fargo has been operating under consent orders from the Federal Reserve and two other financial regulators, requiring improvements in governance and oversight. The bank is also subject to an asset cap imposed by the Fed, limiting its growth and competitive capabilities compared to larger rivals such as JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), and Citigroup Inc (C.N).
Shareholders accused Wells Fargo, the fourth-largest U.S. bank, of exaggerating its compliance with these regulatory orders, leading to a significant decline in the bank's market value by over $54 billion between March 2018 and March 2020 as the deficiencies became evident.
Wells Fargo, headquartered in San Francisco, refuted any wrongdoing and stated in court documents that they chose to settle the lawsuit to alleviate the burden and costs of continued litigation. The plaintiffs' lawyers highlighted the formidable opposition from Wells Fargo's legal representation, including skilled attorneys from firms like Sullivan & Cromwell, Cravath, Swaine & Moore, and Shearman & Sterling.
Despite the challenges posed by the opposition, lead counsel Posner and Browne asserted that they effectively litigated the claims and successfully negotiated with the defendants to secure highly favorable terms for the settlement class. The case, known as In re Wells Fargo & Co Securities Litigation, is before the U.S. District Court, Southern District of New York, with case number 20-04494.
