Shahriar Jabbari and Kaylee Heffelfinger opened bank accounts at Wells Fargo. Wells Fargo, according to their complaint, then opened other accounts in their names that they had not asked for, and moved money out of the real accounts to pay the fees the fake ones generated.
They sued. Wells Fargo moved to compel arbitration — and the instrument it used was the arbitration clause in the account agreements the plaintiffs had actually signed.
That is the inversion worth sitting with. The bank’s defense to the claim that it had fabricated the customers’ consent was the customers’ consent. Not consent to the accounts at issue; consent to a different set of accounts, in a document signed years earlier, containing language broad enough — the bank argued, and the court agreed it was at least arguable — to swallow a dispute about accounts nobody had agreed to open.
It worked. On September 23, 2015, Judge Vince Chhabria granted the motions and dismissed the complaint. Jabbari v. Wells Fargo & Co., No. 3:15-cv-02159-VC (N.D. Cal.), ECF No. 69.
How a clause about your accounts reaches accounts that are not yours
The order turns on two moves, and both are worth understanding because both are ordinary. Neither was a trick.
Move one: the customer had already agreed that the arbitrator, not a judge, would decide what is arbitrable. Jabbari’s provision sent to an arbitrator “any disagreement about . . . whether a disagreement is a ‘dispute’ subject to binding arbitration.” Heffelfinger’s said an arbitrator would decide “disagreements about the . . . application . . . of this arbitration agreement.” The court’s conclusion was flat:
These provisions clearly assign arbitrability determinations to the arbitrator.
And it found nothing pulling the other way: “Nor do the plaintiffs’ agreements with Wells Fargo contain other language that would create doubt about whether the parties intended to delegate the arbitrability determination.”
Move two: the clause language was wide enough that the bank’s position was not absurd. Jabbari’s clause covered “any unresolved disagreement between or among you and the Bank . . . includ[ing] any dispute relating in any way to your Accounts and Services . . . .” Heffelfinger’s reached “any unresolved disagreement between you and the Bank . . . includ[ing] any disagreement relating in any way to services, accounts or matters . . . .”
At the time, a federal court applying a delegation clause could still perform one narrow sanity check: if the defendant’s argument that the dispute fell inside the clause was “wholly groundless,” the court could keep the arbitrability question for itself. Judge Chhabria ran that check and Wells Fargo passed it:
The misuse of information and funds associated with their accounts may “relate” to the legitimate accounts, so Wells Fargo’s assertion of arbitrability is not wholly groundless.
The closest the plaintiffs came was Heffelfinger’s timeline. Two accounts were opened in her name in January 2012, weeks before she opened legitimate accounts in March 2012 — so her claims about those accounts “may have arisen before she had any voluntary involvement with Wells Fargo. If so, it’s difficult to imagine that this aspect of the dispute would be subject to the arbitration provision.” The court still sent it: counsel for Wells Fargo suggested at argument that its employees may have generated the January accounts after Heffelfinger first walked into the branch and handed over her information, and that possibility was enough. “In other words, Wells Fargo’s argument that this aspect of the dispute is arbitrable is not wholly groundless.”
The sanity check no longer exists
Read that order today and the most important thing about it is a doctrine that has since been abolished.
In Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019), a unanimous Supreme Court held, through Justice Kavanaugh:
We conclude that the “wholly groundless” exception is inconsistent with the text of the Act and with our precedent.
And it left no residue:
When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue.
Judge Chhabria’s review was already minimal — a check for colorability, not correctness. A court presented with the same clause today could not perform even that. Where a delegation provision is valid and the dispute is covered by the contract, the question of whether a claim about a fabricated account belongs in arbitration is itself a question for the arbitrator.
Utah: same bank, same clauses, a very different road
A parallel class action in Utah shows where the pressure point actually is.
Mitchell v. Wells Fargo Bank, N.A., No. 2:16-cv-00966-CW (D. Utah), was filed September 16, 2016. Wells Fargo again moved to compel arbitration, again relying on the account agreements. On November 29, 2017, Judge Clark Waddoups did not grant the motion and did not deny it. He issued a “Memorandum Decision and Order Reserving Ruling on Defendants’ Motion to Compel Arbitration Pending a Summary Trial,” ECF No. 114 — and set the arbitration question for trial.
The reason is textual, and it sits in the Federal Arbitration Act itself. Section 4 provides:
If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.
9 U.S.C. § 4. The Utah plaintiffs had put the making of the agreements in issue — whether particular plaintiffs ever formed an arbitration agreement at all, and whether they ever formed the separate agreement to delegate arbitrability. The court framed the burden the way the Tenth Circuit does: “Wells Fargo, as the party seeking to compel arbitration, has the burden to show that arbitration agreements exist and apply to these Plaintiffs.” And it recorded the doctrinal consequence of a formation fight — the general presumption in favor of arbitration “disappears when the parties dispute the existence of a valid arbitration agreement,” quoting Dumais v. American Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002).
Its conclusion listed what the trial would decide:
The court will resolve material issues of fact regarding the existence of certain arbitration agreements, the parties’ intent to delegate questions of arbitrability and the potential unconscionability of doing so in these circumstances, and the possibility that Wells Fargo intentionally waived its right to arbitrate through its CEO’s statements under oath to Congress that it is no longer pursuing arbitration in these cases.
There was no summary trial. On December 26, 2017, Wells Fargo withdrew its motion to compel arbitration. ECF No. 131.
Two cases, one bank, one set of form clauses, opposite trajectories — and the variable was not the clause. The Jabbari plaintiffs did not deny that their real account agreements existed; they were fighting about how far a concededly valid clause reached. The Mitchell plaintiffs attacked formation itself. Scope questions go to the arbitrator when the contract says so. Existence questions do not.
What the record says about scale, and what Congress did about it
The regulatory numbers are not in dispute. On September 8, 2016, the Consumer Financial Protection Bureau fined Wells Fargo Bank, N.A. “$100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts,” In re Wells Fargo Bank, N.A., No. 2016-CFPB-0015. The Bureau’s action page states that “[a]ccording to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers,” and describes an additional “$35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.”
Jabbari settled after the appeal. Class counsel’s motion for preliminary approval, filed April 20, 2017, describes a “$142 million non-reversionary Class Action Settlement” covering people for whom Wells Fargo opened an account, enrolled a product, or submitted an application without consent between May 1, 2002 and April 20, 2017. Judge Chhabria granted preliminary approval on July 8, 2017.
The same motion contains the most candid sentence in the file. Explaining why settlement beat litigation, class counsel wrote that Wells Fargo’s contracts contain broad arbitration clauses with “an equally broad delegation provision, plus a bar to classwide arbitration,” and that “[t]he arbitration clause—and particularly its delegation provision—may very well have ended up barring classwide relief.”
And the federal rule that would have addressed this was killed before it took effect. The CFPB’s 2017 arbitration rule would have barred class-action waivers in consumer financial contracts. Congress disapproved it under the Congressional Review Act:
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Bureau of Consumer Financial Protection relating to “Arbitration Agreements” (82 Fed. Reg. 33210 (July 19, 2017)), and such rule shall have no force or effect.
Pub. L. No. 115-74, 131 Stat. 1243 (approved Nov. 1, 2017). Nothing federal has replaced it. What remains is the contract in front of you and your state’s arbitration act — which, for a Minnesotan, means what the state can and cannot resist under the FAA.
Where a Minnesotan’s version of this fight gets decided
Wells Fargo is not a Minnesota bank and is not headquartered here. The Minnesota connection is corporate lineage and it is precise: on October 14, 1998, the Federal Reserve Board announced its approval of “the proposal of Norwest Corporation, Minneapolis, Minnesota, to acquire Wells Fargo & Company, San Francisco, California . . . .” The merged company took the Wells Fargo name. The SEC registrant that files as WELLS FARGO & COMPANY/MN (CIK 0000072971) is the same registrant that filed as NORWEST CORP until October 1998. That is a fact about a merger, not a basis for jurisdiction.
The reason a Minnesotan should care is not the letterhead. It is that the same “relating in any way to” architecture sits in deposit agreements signed across Minnesota, and if a Minnesota consumer brings this fight in a Minnesota court, it is Minnesota’s arbitration act that supplies the procedure.
Three provisions of Minn. Stat. ch. 572B matter immediately.
Section 572B.06(b) states a default that points away from the Jabbari result:
The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate, except in the case of a grievance arising under a collective bargaining agreement when an arbitrator shall decide.
Section 572B.07(a) supplies the procedure, and its language is worth comparing to 9 U.S.C. § 4 word for word. If the party resisting arbitration opposes the motion, “the court shall proceed summarily to decide the issue,” and “[i]f the court finds that there is no enforceable agreement, it may not order the parties to arbitrate.” Where the FAA sends a contested question of formation to a trial — with a jury available on demand — Minnesota’s statute has the court decide it summarily. That is not a small difference, and it is one reason a Minnesota consumer’s leverage in this posture is not the same as a federal plaintiff’s.
Section 572B.28(a)(1) makes the ruling reviewable right away. An appeal may be taken from “an order denying a motion to compel arbitration.” The consumer who loses the motion, notably, does not get the same immediate route.
None of that resolves the hard question, which is whether a valid clause in an account you opened can reach claims about an account you never opened. Minnesota has a supreme court decision drawing the line between contracts that are void and contracts that are merely voidable, and a concurrence in that same case warning about jury-trial waivers in adhesion contracts. We take that question up directly in Minnesota arbitration and the account you never opened.
The observation
The Jabbari order is not a scandal. It is an ordinary application of two ordinary rules — parties may delegate arbitrability, and broad clauses are read broadly — to facts those rules were never designed for. The doctrine performed exactly as written. The problem is the design.
A consent-based system has one structural blind spot: it cannot easily process a claim that the consent was manufactured, because the instrument it consults to answer that question is the consent document. Schein then removed the last judicial check on the answer. And Congress removed the one regulatory fix that had been enacted.
That leaves the reading of the clause, done early and done carefully, as most of the case. For anyone whose credit report shows an account they never opened, the practical steps come first — see our guide for identity-theft victims and, if the error will not come off, what to do when a credit report error won’t get fixed. But the arbitration clause in the account you did open is the thing to read before anything is filed. For the longer arc of how a 1925 merchants’ statute became a consumer regime, see our piece on the FAA and the courthouse door is narrowing.
Madgett Law, LLC represents Minnesota consumers in credit reporting, debt collection, and unauthorized-account disputes, including the threshold fight over whether a claim belongs in court at all. If a bank has invoked an arbitration clause against you, send us a message or call 612-470-6529.
Sources: Order Granting Defendants’ Motions to Compel Arbitration, Jabbari v. Wells Fargo & Co., No. 3:15-cv-02159-VC (N.D. Cal. Sept. 23, 2015), ECF No. 69 (delegation language; “clearly assign arbitrability determinations to the arbitrator”; absence of contrary language; the Jabbari and Heffelfinger clause text; “not wholly groundless”; the Heffelfinger January 2012 / March 2012 timeline; dismissal), retrieved from the RECAP archive of the docket. Docket, Jabbari v. Wells Fargo & Co., No. 3:15-cv-02159 (N.D. Cal.) (Consolidated Amended Complaint filed July 30, 2015; notice of appeal filed Oct. 20, 2015, docketed as 9th Cir. No. 15-17099; Joint Notice of Settlement filed Mar. 28, 2017; order granting preliminary approval, July 8, 2017). Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement, id., ECF No. 101 (filed Apr. 20, 2017), at 2 and 3 (“$142 million non-reversionary Class Action Settlement”; the delegation provision “may very well have ended up barring classwide relief”; class period May 1, 2002 to April 20, 2017) — a party’s filing, not a court holding. Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019) (Kavanaugh, J., for a unanimous Court) (abolishing the “wholly groundless” exception; “a court possesses no power to decide the arbitrability issue”), opinion text from the Cornell Legal Information Institute. Memorandum Decision and Order Reserving Ruling on Defendants’ Motion to Compel Arbitration Pending a Summary Trial, Mitchell v. Wells Fargo Bank, N.A., No. 2:16-cv-00966-CW (D. Utah Nov. 29, 2017), ECF No. 114, at 2, 8, 21, and 50 (burden on the party seeking to compel, at 8; presumption “disappears” where existence is disputed, quoting Dumais v. American Golf Corp., 299 F.3d 1216, 1220 (10th Cir. 2002), at 21; the issues reserved for summary trial, at 50), from the U.S. Government Publishing Office’s United States Courts Opinions collection; and Memorandum Decision and Order Granting Defendants’ 12(b)(1) Motion and Granting, in Part, Defendants’ 12(b)(6) Motion, Mitchell, ECF No. 164 (D. Utah Dec. 21, 2018), at 2 n.2 (complaint filed Sept. 16, 2016; Wells Fargo withdrew its motion to compel arbitration on Dec. 26, 2017, ECF No. 131), from the U.S. Government Publishing Office’s United States Courts Opinions collection. 9 U.S.C. § 4 (summary trial where “the making of the arbitration agreement . . . be in issue”), Cornell Legal Information Institute. Consumer Financial Protection Bureau, enforcement action page, In re Wells Fargo Bank, N.A., No. 2016-CFPB-0015 (initial filing date Sept. 8, 2016) ($100 million CFPB penalty; “more than two million” possibly unauthorized accounts per the bank’s own analysis; $35 million OCC and $50 million Los Angeles). Pub. L. No. 115-74, 131 Stat. 1243 (H.J. Res. 111, approved Nov. 1, 2017) (disapproving the CFPB arbitration rule, 82 Fed. Reg. 33210 (July 19, 2017)), text from govinfo. Federal Reserve Board press release, Oct. 14, 1998 (approval of Norwest Corporation’s proposal to acquire Wells Fargo & Company). U.S. Securities and Exchange Commission EDGAR submissions data, CIK 0000072971 (current name “WELLS FARGO & COMPANY/MN”; former name “NORWEST CORP” through October 1998; state of incorporation Delaware; principal offices in San Francisco). Minn. Stat. § 572B.06, subsection (b) (court decides existence and scope); § 572B.07, subsection (a) (court “shall proceed summarily to decide the issue”; no order to arbitrate absent an enforceable agreement); and § 572B.28, subsection (a)(1) (appeal from an order denying a motion to compel arbitration) — Minnesota Office of the Revisor of Statutes.
This article is general legal information about Minnesota and federal law, not legal advice, and reading it does not create an attorney–client relationship. It describes decisions in cases involving other parties and other contracts; nothing here predicts how any court would rule on any particular arbitration clause or set of facts. No outcome is promised or implied.