Calif. jury issues $3.52M verdict against Wells Fargo over discriminatory lending

Amanda Bronstad
March 24, 2011

A jury has awarded $3.52 million in damages to a class of Los Angeles homeowners who sued Wells Fargo
& Co. for lending discrimination.

Leila Noël

The class members had alleged that Wells Fargo discriminated in its lending practices so that borrowers in predominantly minority neighborhoods were forced to pay more. On March 23, a jury found that race, color, ancestry or national origin was a “motivating reason for Wells Fargo’s conduct,” according to the verdict. “For five years, the bank has been steadfastly denying it did anything wrong. And this jury found that it did,” said Leila Noël, a partner at Cappello & Noël in Santa Barbara, Calif., who represents the plaintiffs in the case. “It’s a huge, huge verdict, and win, not only for our clients but consumers in general. It sends a message to the banks: ‘You can’t do this, you won’t get away with it.’ ”

Noël said jurors were unlikely to be persuaded by the current housing crisis because the case was filed five years ago and specifically involves borrowers in Los Angeles County who obtained loans of more than $150,000 between May 2002 and December 2005. She also said that Los Angeles County, Calif., Superior Court Judge Anthony Mohr, who presided over the trial, specifically told lawyers not to bring up the current
recession during trial.

Wells Fargo’s lead attorney on the case, Thomas Nolan, co-chairman of the West Coast litigation practice and a partner in the Los Angeles office of Skadden, Arps, Slate, Meagher & Flom, did not return a call for comment. Wells Fargo officials did not respond to a request for comment.

In a trial that lasted three months, lawyers for the class put on the stand several branch managers from minority neighborhoods who testified that Wells Fargo had explicitly told them not to use a computer program called “Loan Economics,” which was introduced in 2002 to give loan officers the ability to offer lower pricing through reduced interest rates and points. “It was used in Beverly Hills,” Noël said. “It was not allowed to be used in Compton, in all of South
Central.”

As a result of the verdict, each class member is entitled to $4,000 per loan under California’s Unruh Civil Rights Act. They must have applied for their loans at Wells Fargo branches in specific areas of Los Angeles
County in order to qualify for a portion of the damages.

In rendering its verdict, the jury awarded damages for a class of borrowers for 880 loans. The case had been brought for damages pertaining to about 7,000 loans. Noël said she did not know how the jury came to that figure but that it was probably based on the specific branches that were found to have discriminated against borrowers.

“The class was made up of loans, and loans came out of different branches, so it’s possible they believed at some branches it didn’t have an impact,” she said.

Amanda Bronstad can be contacted at abronstad@alm.com.

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