After securing a similar victory for Bank of America/Merrill Lynch, Munger, Tolles & Olson attorneys successfully defended a so-called “forced patronage” putative class action against Wells Fargo obtaining dismissal of the entire action on federal conflict preemption grounds.
California Labor Code section 450 forbids from employers from requiring or coercing employees to use the employer's services as customers. The plaintiffs here alleged that Wells Fargo violated this statute by restricting the external securities trading of its employees and mandating that they maintain their self-directed securities accounts with the company. Munger Tolles argued that federal securities law gives employers the discretion to determine the practices and policies under which their employees can trade securities in order to monitor their activities and prevent insider trading, and that the state statute was in conflict with this general discretion and thus preempted.
U.S. District Judge Samuel Conti of the Northern District of California agreed with Munger Tolles and dismissed the case Wells Fargo with prejudice on July 22. In June 2011, Judge U.S. District George Wu of the Central District of California issued a similar dismissal in the Merrill Lynch matter.
Wells Fargo said in a statement that it is “pleased with the dismissal ruling and grateful to the court for its thorough analysis and recognition that the external trading restrictions at issue are in place to help the company meet its regulatory obligations and protect customers and the market generally,” according to a report in Law360.
Terry E. Sanchez and Malcolm A. Heinicke handled the matters along with Robert L. Dell Angelo and Shoshana E. Bannett.