“To swipe or not to swipe” is the burning question for most small businesses that was at the heart of the Patti’s settlement. This small Pennsylvania restaurant sued Wells Fargo, alleging that the bank added illegal fees to its business customers’ monthly statements, like a processing fee, statement billing fee, and/or a non-validation payment card industry (PCI) compliance fee.
These hidden, undisclosed fees encouraged merchants to accept card payments for small transactions. If Mike bought an order of falafel balls, Patti’s spent so much money on swipe fees that it basically gave away the appetizer for free.
So, in 2017, Patti’s Pitas was the lead plaintiff in a class action lawsuit against Wells Fargo. The bank agreed to settle this lawsuit for $40 million. Payment processing customers between 2011 and 2021, when the judge approved the settlement, were eligible for a share of the settlement. Fixed pricing plan customers received the lion’s share of the money.
Class Action Requirements
Federal judges consider three basic factors during class action certification hearings: numerosity, uniformity, and advocacy.
The federal rules state that the class must be so large that the courts cannot handle the claims on a piecemeal basis. The complexity of the case comes into play here. Payment system claims are much more complex than other kinds of consumer fraud claims, like a mislabeling claim. Therefore, the class might be smaller in these situations.
Furthermore, all class members must have basically the same claims. There’s some flexibility here. The Patti’s Pita/Wells Fargo lawsuit had three different categories of plaintiffs, depending on their swipe deals with Wells Fargo. But they all had basically the same claims regarding hidden fees and fraud.
Finally, the named plaintiff’s lawyers must effectively speak for all other class members. This class action requirement might be the hardest one to meet. It goes against everything a lawyer is trained to do. Lawyers advocate for their clients, not for third parties who might be affected by a settlement. So, only a special kind of lawyer can handle a class action lawsuit.
As A Merchant, Should I Opt In or Opt Out?
In this action, Group 1 merchants who had a fixed pricing plan for all ten years of the settlement period most likely paid a lot of money in illegal fees. These merchants could opt out of a class action and pursue an independent lawsuit against Wells Fargo.
The potential reward is great, but the risks are even greater. Wells Fargo’s lawyers could probably use a procedural motion to prevent a lawsuit from seeing the light of day. Even if the judge let the matter proceed, an obscure clause like “some other fees may apply” was probably buried deep within the fine print.
For everyone else, the opt in/opt out issue is much more definitive. The additional recovery probably wouldn’t be enough to cover legal fees, to say nothing of the stress that comes with filing a big lawsuit.
Written by
Bret Thurman
