Wells Fargo achieved a significant victory on Thursday in decade-old litigation over allegedly unlawful overdraft fees when the Eleventh Circuit held that Wells Fargo had not waived its right to compel arbitration as to the unnamed plaintiffs in the recently certified classes.

In Gutierrez v. Wells Fargo Bank, NA, No. 16-16820 (11th Cir., May 10, 2018), the Eleventh Circuit vacated the district court’s order denying Wells Fargo’s motion to compel arbitration of the unnamed plaintiffs’ claims and remanded for further proceedings. In the vacated order, the district court held that Wells Fargo waived its right to compel arbitration by acting “inconsistently with its arbitration rights during its pre-certification litigation efforts” and that the plaintiffs would suffer “significant prejudice” if Wells Fargo were allowed to invoke arbitration after nearly 10 years of litigation.

Disagreeing with the district court, the Eleventh Circuit held that “it cannot be said that Wells Fargo’s failure to seek arbitration with the unnamed class members prior to class certification manifested inconsistency with its arbitration rights, considering that it would have been impossible in practice to compel arbitration against speculative plaintiffs and jurisdictionally impossible for the District Court to rule on those motions before the class was certified.”

The Eleventh Circuit also found it significant that Wells Fargo provided “fair notice at a relatively early stage of litigation” that it wished to preserve its right to compel arbitration as to unnamed plaintiffs in the event the classes were certified.

Notably, before the classes were certified, the Eleventh Circuit affirmed an order holding that Wells Fargo waived its right to compel arbitration as to the named plaintiffs.

At the outset of the litigation, Wells Fargo elected not to compel arbitration of the named plaintiffs’ claims, later explaining that it believed the arbitration agreement’s prohibition on class-wide arbitration would be unenforceable under applicable state law. Two years later, the Supreme Court held in AT&T Mobility LLC v. Concepcion that state laws purporting to void prohibitions on class arbitration are preempted by the Federal Arbitration Act, prompting Wells Fargo to reconsider whether to seek arbitration.

Although Wells Fargo moved to compel arbitration immediately after the Supreme Court issued its opinion in Concepcion, the Eleventh Circuit held it had already waived its right to compel arbitration as to the named plaintiffs. The Eleventh Circuit’s ruling on Thursday largely negates the practical effect of this earlier holding.