The People of the State of California v. Wells Fargo and Company et al

Filing 23

MINUTES OF PLAINTIFF'S MOTION TO REMAND 13 Hearing held before Judge George H. Wu. The Court's Tentative Ruling is circulated and attached hereto. Court hears oral argument. Based on the Tentative, and for reasons stated on the record, Plaintiffs Motion to Remand is GRANTED and the above entitled action is remanded to the Los Angeles County Superior Court (BC580778). Court Reporter: Katie Thibodeaux. (Made JS-6. Case Terminated.) (Mailed 8/14/15) (lom)

REMAND/JS-6
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
,

CIVIL MINUTES - GENERAL

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_ ______

<1·1·. 1·<1

;,~P~i~·~'.l, August 13, 2015
.... ·.
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~CaseNd: '. CV 15-4181-GW(FFMx)

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··. The People of the State of California v. Wells Fargo and Company, et al.

Javier Gonzalez

Katie Thibodeaux

Deputy Clerk

Court Reporter I Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Jeremy Barzon
Jessica B. Brown
Suzanne V. Spillane

E. Martin Estrada
Manuel F. Cachan
Kyle Casazza

PROCEEDINGS:

PLAINTIFF'S MOTION TO REMAND [13]

The Court's Tentative Ruling is circulated and attached hereto. Court hears oral argument. Based on the
Tentative, and for reasons stated on the record, Plaintiffs Motion to Remand is GRANTED and the aboveentitled action is remanded to the Los Angeles County Superior Court (BC580778).

20
Initials of Preparer
CV-90 (06/04)

CIVIL MINUTES - GENERAL

JG

--------Page I of I

The People of the State of Cali{ornia v. Wells Fargo & Co. et al., Case No. CV-15-4181GW(FFM); Tentative Ruling on Plaintiffs Motion to Remand

I. Background
The People of the State of California (the "People" or "Plaintiff') filed this suit against
Wells Fargo & Company and Wells Fargo Bank, National Association ("Wells Fargo Bank")
(collectively, "Wells Fargo" or "Defendants"), alleging unfair competition claims arising from
Wells Fargo's purported unethical and illegal sales tactics. This civil law enforcement action is
brought by the Criminal Branch of the Los Angeles City Attorney's Office on behalf of the
People. See Complaint ("Compl."), Docket No. 1-1, if 2.
Wells Fargo & Company operates the fourth largest bank in the United States and is the
't;

largest bank headquartered in California. Id.

if 3. Wells Fargo Bank, a subsidiary of Wells Fargo

& Company, provides most of the banking products and services that form the basis of the

People's claims. Id.
Wells Fargo, as part of its sales and growth goals, seeks to increase the average number
of products held by its customers from six to eight bank accounts or financial products per
account holder - a goal Wells Fargo terms the "Gr-eight" initiative. Id.

if 4. The products-per-

customer and cross-sell strategies, as well as the goal of eight products per household, are
detailed in Wells Fargo's 2014 Annual Report to the U.S. Securities and Exchange Commission.

Id. if 21-22. The People allege that Wells Fargo's resulting market dominance has been achieved
through unrelenting pressure on its bankers and a strictly enforced quota system for its sales
employees, who engage in allegedly abusive and fraudulent tactics to achieve their mandated
goals. Id.

iii!

5, 23-24. The People allege that daily sales for each branch and employee are

reported four times a day, and employees who fail to meet quotas are often reprimanded and
admonished to "do whatever it takes" to meet their sales quotas. Id.

if 5. The People further

allege that the quotas are often unattainable via traditional means because there aren't enough

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customers that pass through a branch on a daily basis. Id.

if 25.

As a consequence, the People allege, Wells Fargo's branch managers and employees
have engaged in practices known as "gaming," which include opening and manipulating
accounts in deceptive ways, such as omitting signatures or adding additional accounts without

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customer permission. Id.

iii! 5, 28.

The People further allege that certain gaming practices have

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become so pervasive at Wells Fargo that they have been given their own names. Id

if

28.

"Bundling" refers to the practice of incorrectly informing customers that certain products are
available only in packages with other products or accounts, known as a "packed" account, while
in fact each product is available on its own. Id

iii! 7,

29. In many instances employees are

instructed to lie to customers and tell them that each checking account automatically comes with
a savings account, credit card, or other products including life insurance and "ExpressSend" 1
(described as "an online program that allows customers to send money to foreign countries.").

Id

if

29. When customers discover an unauthorized account, they are often informed that the

account or product came with the authorized accounts automatically. Id

if 30.

In the case of

unauthorized credit cards, customers are advised simply to destroy the card they received, but
doing so does not close the credit card account. Id

if 31.

"Pinning" refers to the practice of

having employees personally assign Personal Identification Numbers (often 0000) to customer
ATM cards without customer authorization. Id

iii!

7, 32. In doing so, employees can then

impersonate customers on Wells Fargo's system and enroll those customers in online banking
and online bill pay without consent, oftentimes also inputting false generic email addresses in
order to complete the transaction. Id

if 32.

"Sandbagging" refers· to Wells Fargo employees'

practice of delaying the execution of customer requests to open new accounts until the next sales
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reporting period, after which additional unauthorized accounts are opened as well as the
requested accounts. Id

if 7,

33. The People allege that Wells Fargo engages in other gaming

tactics, including making misrepresentations to encourage customers to open additional accounts,
misrepresenting that additional accounts are fee-free, and targeting "individuals holding Mexican
Matriculada Consular cards because the lack of a social Security Number makes it easier to open
numerous fraudulent accounts." Id.

if 36.

The People allege that Wells Fargo knew or should

have known about its employees opening unauthorized accounts and, despite this knowledge,
Wells Fargo did little, if anything, to stop the "gaming" practices. Id.
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iii! 41-42.

The People allege that Wells Fargo's gaming practices have caused significant harm to
customers, in the form of stress, hardship, and financial losses. Id.

if 6.

Specifically, customers

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have had to pay monthly service fees for unauthorized accounts, customer accounts are placed

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into collection, customers' credit reports are affected, and customers are forced to purchase

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1 Plaintiff refers to that product as "Express Send" (see Comp!. at§ 29), whereas Wells Fargo indicates that the
name is one word, i.e. "ExpressSend." See Declaration of Daniel Ayala at~ 6, Docket No. 17-1. Given that it is the
Defendants' product, the Court will use Wells Fargo's denomination.

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identity theft protection services to prevent further fraudulent activities. Id.

~

38.

The People assert two causes of action against Wells Fargo for violation of California's
Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq. Id.

~~

54-61. First,

they allege that Wells Fargo violated the UCL by engaging in "gaming" practices, including
making misrepresentations, misappropriating customer information, committing fraud, and
accessing and taking private customer information without permission.

Second, the People

allege that Wells Fargo violated the UCL by failing to provide customers with notice of any data
breach or misuse of their customer information. The People ask for injunctive relief preventing
Wells Fargo from engaging in the alleged practices, restitution of interest in any money or
property acquired by means of the alleged unlawful practices, civil penalties, and costs. Id. at
19: 1-6.
The People filed the present suit in Los Angeles Superior Court on May 4, 2015. See
Notice of Removal, Docket No. 1,

~

1. Wells Fargo subsequently removed the case to this court,

contending that the Court has subject matter jurisdiction under the Edge Act and under 28 U.S.C.

§ 1331. See generally id. The People now move to remand the case to state court, arguing that
the Court does not have jurisdiction over this suit. See generally "Plaintiff, the People of the
State of California's ... Motion to Remand" ("Mot."), Docket No. 14.

II. Legal Standard
Federal courts are courts of limited jurisdiction, and the party asserting jurisdiction has
the burden of establishing that jurisdiction exists. Kokkonen v. Guardian Life Ins. Co. ofAmer.,
'<;

511 U.S. 375, 377 (1994); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988).
A defendant may remove to federal court any action over which the court has original jurisdiction. 28 U.S.C. § 1441(a). The Ninth Circuit applies a "strong presumption" against removal
jurisdiction, and strictly construes the removal statute against removal jurisdiction. Gaus v.

Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). It has been observed, however, "that, when the

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Edge Act is invoked as the basis for removal, the federal court should be cautious about remand,

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lest it erroneously deprive defendant of the right to a federal forum." Jana Master Fund, Ltd. v.

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JP Morgan Chase & Co., 490 F.Supp.2d 325, 329 (S.D.N.Y. 2007) (internal quotation marks

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omitted).

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III. Analysis
The Edge Act, 12 U.S.C. §§ 601 et seq., provides federal district courts with original

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jurisdiction over certain suits that involve international banking. It was enacted in 1919 "for the
purpose of supporting U.S. foreign trade, in part by authorizing the establishment of international
banking and financial corporations." Am. Int'/ Grp., Inc. v. Bank of Am. Corp., 712 F.3d 775,
778 (2d Cir. 2013) ("AIG If'). It provides, in pertinent part:
Notwithstanding any other provision of law, all suits of a civil
nature at common law or in equity to which any corporation
organized under the laws of the United States shall be a party,
arising out of transactions involving international or foreign
banking, or banking in a dependency or insular possession of the
United States, or out of other international or foreign financial
operations, either directly or through the agency, ownership, or
control of branches or local institutions in dependencies or insular
possessions of the United States or in foreign countries, shall be
deemed to arise under the laws of the United States, and the district
courts of the United States shall have original jurisdiction of all
such suits; and any defendant in any such suit may, at any time
before the trial thereof, remove such suits from a State court into
the district court of the United States for the proper district by
following the procedure for the removal of causes otherwise
provided by law.
12 U.S.C. § 632. Thus, the Edge Act permits removal to federal court of (1) a civil suit, (2)
where one of the parties is a corporation organized under the laws of the United States, and (3)
the suit arises out of transactions involving international or foreign banking or other international
or foreign financial operations. See Wilson v. Dantas, 746 F.3d 530, 535 (2d Cir. 2014). The
international or foreign banking transactions must be made by the corporation or its agencies.
AIG II, 712 F.3d at 784.
The People's primary argument is that the Edge Act does not apply because their claims
do not arise out of "transactions involving international or foreign banking."2 See generally Mot.
In support of their argument, the People asserts that no foreign party is involved, the Complaint
does not allege any actual foreign "transaction" that was made, the purported foreign transactions
do not form the basis of the People's claims, and finding federal jurisdiction in this case would
conflict with congressional intent. Id at 4:1-12:24. In response, Wells Fargo argues that the
claims do arise out of international banking transactions because they are premised in part on the
opening of ExppressSend accounts that enable consumers to send money abroad, and the
2

The People also contend that, because the Edge Act does not apply, federal question jurisdiction under 28 U.S.C. §
1331 is not present, and accordingly, the case should be remanded. Mot. at 12:25-13:27.

4

restitution claim would involve return of ExpressSend fees. See Defendants' Opposition to
Plaintiffs Motion to Remand ("Opp'n"), Docket No. 17, at 5:21-9:20.
No party contests that the current action is a civil suit at law or in equity that involves a
corporation organized under the laws of the United States. The case is a civil enforcement action
that involves claims for violation of state unfair competition laws. Wells Fargo Bank is a
national bank chartered pursuant to the provisions of the National Bank Act. The issue in
dispute is whether the suit arises out of transactions involving international or foreign banking or
other international or foreign financial operations.
In its Notice of Removal, Wells Fargo identifies two allegations in the Complaint that it
asserts support finding that the case arises out of international banking transactions. First, it
points to paragraph 29 of the Complaint, which involves allegations of "bundling." Notice of
Removal

ii 2.

Specifically, the Complaint alleges that in order to ensure that every checking

account was sold together with multiple other products or accounts, Wells Fargo employees are
"instructed by management to lie to customers by telling them that each checking account
automatically comes with a savings account, credit card, or other product such as life insurance,
and/or 'Express Send' (an online program that allows customers to send money to foreign
countries)."3 Compl.

ii 29.

Wells Fargo contends that because "bundling" involves sale of the

ExpressSend product, and because the Complaint seeks restitution for fees or money Wells Fargo
earned as a result of the alleged illegal practices, the claims necessarily arise out of transactions
involving international or foreign banking. Opp'n at 5:21-7:22. Second, Wells Fargo notes that
the Complaint alleges that Wells Fargo employees opening fraudulent accounts would target
"individuals holding Mexican Matriculada Consular Cards" who do not possess Social Security
numbers. Notice of Removal ii 2. As to the second allegation, the targeting of Mexican consular
cardholders, the Court fails to see the relevance of this fact to determining whether the
Complaint arises out of international or foreign banking transactions.

Simply opening an

account in the name of someone who is a non-citizen or who does not possess a Social Security
number does not necessarily involve a foreign transaction. The allegation involving "bundling"
ExpressSend accounts, however, presents a much closer question.
The Complaint alleges that Wells Fargo employees lied to customers and "bundled"

3

The Court notes that ExpressSend is only mentioned once in the 19-page Complaint and, even then, only as an
example of a "bundled" product. See Comp!. at~ 29.

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products, including ExpressSend, in order to meet sales quotas. The People do not deny that the
ExpressSend product involves sending money to foreign countries. See Compl. at if 29. In and
of itself, the act of making an ExpressSend transfer would likely qualify as a foreign banking
transaction.

However, the Complaint does not allege that Wells Fargo employees caused

customers to use the ExpressSend product; it only asserts that Wells Fargo employees would tell
customers that opening a checking account would "automatically" come with other accounts
and/or enroll customers in other services, including ExpressSend, without their express and
knowing permission. Id. Therefore, the primary question that arises in this case is how "related"
must a foreign banking transaction need to be to the claims at issue in order for the suit to be held
to "arise out of' that transaction or set of transactions.
The People contend that the Complaint does not on its face allege "an actual, or even
tangential, international banking transaction," and the Complaint does not aver that any such
transactions took place. Mot. at 8:24-25. Instead, the People argue, the focus of the claims is on
the alleged misrepresentations made and fraud committed by Wells Fargo employees; any
subsequent ExpressSend transfers that might thereafter have been made are irrelevant to the
People's claims, and are not in fact charged in the Complaint. Id. at 8:25-9:3. The People argue
that because no ExpressSend transfers were alleged in the Complaint, and furthermore because
the claims, as they relate to the practice of bundling, "arise out of' Wells Fargo's alleged
misrepresentations and not out of any subsequent or consequential ExpressSend transfers, the
Edge Act does not apply. Wells Fargo counters that the allegations in the Complaint regarding
ExpressSend are sufficient to establish jurisdiction under the Edge Act because the restitution
sought in the Complaint would necessarily include restitution for any fees or money Wells Fargo
received from ExpressSend transfers. 4 Opp'n at 5:23-9:20.

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Wells Fargo presumes that the Complaint seeks "the restitution of bank fees 'arising out of transactions involving
international or foreign banking' - an international funds transfer service called ExpressSend." See Opp'n at 1: 1214. However, the Complaint does not ask for such specific relief; rather it merely seeks in relevant part: "[p]ursuant
to Business and Professions Code sections 17203 and 17204, Defendants be ordered to restore to all persons in
interest any money or property they acquired by means of the unlawful, unfair, and fraudulent business acts and
practices [alleged] in this Complaint." See 'il 2 of Prayer for Reliefin the Complaint.
As noted above, in regards to the ExpressSend product, the unlawful, unfair and fraudulent business
act/practice consists only of the improper bundling of that product with an authorized banking service such as a
checking account. The Complaint does not allege that any subsequent use of the ExpressSend service would be
unfair or fraudulent. Moreover, the Complaint does not reference any specific bank fees that are generated by the
use of ExpressSend. However, assuming arguendo that such fees are incurred, there is no allegation in the
Complaint that customers are misled as to the existence and/or amount of those bank fees, that such fees are not
normally charged in the banking industry for those type of services, or that Wells Fargo's fees are higher than the

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Here, upon consideration of the specific allegations in the Complaint, the Court
concludes that the inclusion of ExpressSend in the Complaint does not result in the conferral of
federal jurisdiction under the Edge Act to this case. The Court agrees with the People that any
ExpressSend transactions that were made would be irrelevant to determining whether Wells
Fargo is liable under the unfair competition claims asserted in the Complaint. The Complaint
concerns alleged illegal activity such as misrepresentations, fraud, identity theft, and computer
data breaches. In particular, Wells Fargo's liability arises from the establishment of the ExpressSend product without the customer's informed and knowing consent, and not from any use of the
product itself. Indeed, if in fact present at all, liability would arise immediately once the account
is created and prior to any later use of the service. Indeed, liability would have already accrued
even if there were no actual use of the ExpressSend product. The main thrust of the claims do
not concern any subsequent transactions made by consumers from alleged unauthorized
accounts.
Furthermore, the Complaint does not allege that any ExpressSend transactions were made
at all. Although Wells Fargo argues that the fact that the People seek restitution supports the
contention that the claims "arise out of' ExpressSend transactions (but see footnote 4, supra),
this does not mean that any ExpressSend transactions or fees are central or even material to
finding liability in this case. Wells Fargo's argument could be equally applied to a situation
where ExpressSend is not involved but a customer made any sort of international wire transfer
from an add-on account Wells Fargo employees had opened for that customer via the practice of
"bundling." In neither case is the actual transfer relevant to the issue of liability for the People's
unfair competition claims; rather, it is the actions of Wells Fargo employees in making misrepresentations or fraudulently opening new accounts that make up the issues in this suit.

The

"bundling" allegations do not "arise out of' the transfer of money abroad through ExpressSend;
rather, they arise out of the alleged misrepresentations Wells Fargo employees made to
customers in informing them, essentially, that opening a checking account also required opening
normal charges for that service. Thus, the use of ExpressSend by a customer would not by itself appear to give rise
to money or property acquired by means of an unlawful or fraudulent business act or practice. While the Complaint
does aver that in the bundling process, the customer is told that a desired product (such as a checking account) "can
be obtained only with the purchase of additional accounts or products, when, in fact, the desired product is available
on its own," the money acquired improperly in that instance is the additional sum paid for the unwanted product
(such as ExpressSend), which is not a fee arising from an international or foreign banking transaction but, rather, is
simply money charged for the sale of the additional product itself.

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other accounts and/or signing up for other products - one of which was ExpressSend. See

generally Allstate Ins. Co. v. Citimortgage, Inc., Case No. 11-Civ-1927(RJS), 2012 WL 967582
*3 (S.D.N.Y. March 13, 2012) ("the Edge Act does not confer jurisdiction merely because there
was a federally chartered bank involved, there were banking-related activities, and there were
foreign parties .... Instead, courts must carefully examine the nature of the transaction said to
ground § 632 jurisdiction. [citations omitted]").
Although courts are split on how to interpret the "arising out of' language in the Edge
Act, the present case is more analogous to those where no jurisdiction has been found than those
where courts have found the case in question to arise out of international or foreign banking.
There is a paucity of case law in the Ninth Circuit regarding Edge Act jurisdiction in general, and
courts in other jurisdictions - particularly in the Second Circuit - disagree on what degree of
relatedness is necessary in order to find that a suit "arises out of' a foreign banking transactions
or activity. The People, citing to Weiss v. Hager, a Southern District of New York case, argue
that the international connection in this case is merely incidental. See Mot. at 6:25-7: 13; Weiss v.

Hager, Case No. 11 CV 2740 VB, 2011 WL 6425542, at *3-4 (S.D.N.Y. Dec. 19, 2011) (finding
no Edge Act jurisdiction where the foreign banking transactions were "incidental" to the claims
at issue and were not "legally significant"). See also Bank of New York v. Bank of Am., 861 F.
Supp. 225, 233 (S.D.N.Y. 1994) (interpreting the Edge Act to mean that the banking aspect of
the transaction must be "legally significant" and holding that there was no Edge Act jurisdiction
in a breach of contract case that "present[ed] no banking law issues"). Wells Fargo contends
that, in fact, courts in the Southern District of New York commonly hold that "[a] suit satisfies
the jurisdictional requisites of Section 632 if any part of it arises out of transactions involving
international or foreign banking ... even if that involvement is merely incidental" Dexia SA/NV

v. Bear, Stearns & Co., 924 F.Supp.2d 555, 558 (S.D.N.Y. 2013) (citing In re Lloyd's Am. Trust
Fund Litig., 928 F.Supp. 333, 338 (S.D.N.Y. 1996); Am. Int'! Grp., Inc. v. Bank of Am. Corp.,
820 F.Supp.2d 555, 557 (S.D.N.Y. 2011) ("AIG I")) (internal quotation marks omitted).
Although Wells Fargo argues that the "legally significant" requirement adopted in Weiss and

Bank of New York, has been "roundly criticized as inconsistent with the language of the Edge
Act," the cases Wells Fargo cites in support of its argument actually pre-date Weiss (though they
do come after Bank of New York). See Mot. at 12:2-19; In re Lloyd's., 928 F.Supp. at 340-41
(S.D.N.Y.1996); Highland Crusader Offshore Partners, L.P. v. LifeCare Holdings, Inc., 627
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F.Supp.2d 730, 736 (N.D. Tex. 2008). 5 The primary cases Wells Fargo references, Dexia and

AIG I, both involve mortgage-backed securities of which some small number of the underlying
mortgages loans involved offshore properties. This case is more analogous to Weiss, which
involved allegations that defendants had conspired to defraud the plaintiff by convincing him to
invest in a fabricated overseas securities trading program and thereby defrauding plaintiff of his
purported investment money. Weiss, 2011 WL 6425542, at *1-2. The court in Weiss held that,
in contrast to cases where the foreign banking activities were essential to the legal analysis, the
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However, as noted in Ritchie Capital Management, LLC v. JPMorgan Chase & Co., 532 B.R. 461, 468-69
(S.D.N.Y. 2014):
The only point of disagreement among the parties has also divided the courts in this district:
whether the foreign transactions are implicated to such an extent that the case can be said to "arise
out of' those transactions. Plaintiffs contend that for Edge Act jurisdiction to exist the transactions
must be central to the claim. See, e.g., Weiss v. Hager, No. 11 Civ. 2740, 2011 U.S. Dist. LEXIS
150402 2011 WL 6425542, at *3 (S.D.N.Y. Dec. 19, 2011) (Edge Act jurisdiction does not exist
where international banking transactions are "incidental"); Bank of NY. v. Bank of Am., 861 F.
Supp. 225, 233 (S.D.N.Y. 1994). Defendants counter that Edge Act jurisdiction is appropriate "if
any part of' the transactions at issue implicates international or foreign banking. See In re Lloyd's
Am. Trust Fund Litig., 928 F. Supp. 333, 338 (S.D.N.Y. 1996).
Most, if not all, of the cases that the parties reference in their Edge Act arguments predate the
Second Circuit's recent decision in AIG II, 712 F.3d 775 (2013), which controls the disposition
here. In that case, AIG and its subsidiaries brought suit in state court against, among others, Bank
of America Corporation, a federally chartered bank, for fraudulent misrepresentations in underwriting, sponsoring or selling residential mortgage-backed securities. AIG II, 712 F.3d at 778. "A
tiny percentage of the mortgages" were secured by real property in the United States territories of
Guam and Puerto Rico. Id. In the district court, AIG argued that the connection to territorial or
foreign banking was too attenuated because AIG challenged only the residential mortgage-backed
securities and not the underlying mortgage transactions involving territorial properties. Am. Int'/
Grp., Inc. v. Bank ofAm. Corp., 820 F. Supp. 2d 555, 557 (S.D.N.Y. 2011) ("AIG I"). The district
court denied the motion for remand and held that the mere "presence of the territorial mortgages,"
however "incidental" to foreign or territorial banking, allowed it to exercise jurisdiction. Id.
Further, the court concluded that "Edge Act jurisdiction lies even if the foreign or territorial
transactions comprise only a 'small portion' of the challenged transactions." Id. (quoting Pinto v.
Bank One Corp., No. 02 Civ. 8477, 2003 U.S. Dist. LEXIS 9348, 2003 WL 21297300, at *3
(S.D.N.Y. June 4, 2003)). Finally, the district court was "not convinced that the Edge Act requires
a perfect match between the particular entity involved in the territorial transaction and the party
against whom the claim is brought." Id. at 558.
On appeal, the Second Circuit vacated the district court's judgment solely on the final ground. It
held that, for Edge Act jurisdiction to exist, "the suit must arise out of an offshore banking or
financial transaction of [a] federally chartered corporation" that is party to the suit. AIG II, 712
F.3d at 784. The court did not express any disagreement with the lower court's conclusion that the
minimal territorial nexus to offshore transactions was sufficient to confer Edge Act jurisdiction;
the court apparently was not concerned that the territorial nexus was based on a "tiny percentage"
of mortgages at issue, or that that property securing the mortgages that backed the securities, and
not the securities themselves, was "territorial." To the contrary, the court wrote of "the necessary
transaction" to establish Edge Act jurisdiction and the requirement "of an offshore transaction."
Id. at 783-84. (emphases added). In sum, the Second Circuit required the district court to reconsider its Edge Act ruling in only one way - by requiring that the federally chartered bank that is
party to the suit to undertake the necessary international or foreign transactions.

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banking activities in Weiss were not legally significant and were not indispensable to the case.
Id. at *3-4. Just as the plaintiff in Weiss was challenging the fraud and conversion by defendants

rather than the overseas transfers themselves, the People in this case are challenging the
misrepresentations made by Wells Fargo in "bundling" products to sell to customers.

The

connection of the claims at issue to foreign transactions is even more tenuous in the present case
than in Weiss, as in this case the People do not allege that any foreign transfers were made via
illegally opened ExpressSend accounts. In fact, the court in AIG I stated that Weiss was not
necessarily incompatible with its holding. AIG I, 820 F.Supp.2d at 557 ("The cases Plaintiffs
cite, which deal with the presence of a 'banking law issue' and not the relative size of the
foreign/territorial component, are not to the contrary.). Similarly, in Dexia, the court held that
"the process of engaging in the territorial mortgage transactions is sufficiently central to the
plaintiffs' claims to find that the case 'aris[es] out of' those transactions." Dexia, 924 F.Supp.2d
at 558. Thus, a threshold question in Dexia, AIG I, and Weiss was whether the foreign transactions were "sufficiently central" to the claims brought by the plaintiff or whether they were
merely "incidental." In the present case, the Court concludes that the purported transactions are
clearly incidental to the claims; accordingly, the Edge Act does not confer jurisdiction.
Wells Fargo argues that there is no de minimus exception to Edge Act jurisdiction, and
therefore the Edge Act applies even if the ExpressSend transactions were minimal. Opp'n at
14:11-15:12. However, holding that there is Edge Act jurisdiction in cases where only a small
percentage of the total transactions in question are international is different from holding that
there is Edge Act jurisdiction when the foreign transaction is completely incidental to the claims
at issue. In the first instance, even though the foreign transactions represent a small fraction of
the total, the primary claims in the case may directly concern banking activity. In the second
instance, the transactions could involve a large sum of money, but the transactions themselves
might not be "legally significant" - in other words, they are irrelevant to the substance of the
actual claims. See Ritchie Capital Mgmt., L.L.C. v. JPMorgan Chase & Co., 532 B.R. 461, 469
(S.D.N.Y. 2014) (distinguishing Weiss and Bank of New York from In re Lloyd's because the
former two cases were simply contractual disputes or involved no banking law issues whereas
the latter case involved "a wide-ranging challenge to multiple ... operations of a complex of ...
bank accounts" (citing and quoting In re Lloyd's, 928 F.Supp. at 340). Although the Ninth
Circuit has held that the Edge Act "provides a broad grant of jurisdiction," City & Cnty. of San
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Francisco v. Assessment Appeals Bd. for City & Cnty. of San Francisco, No. 1, 122 F .3d 1274,
1276 (9th Cir. 1997), to uniformly resolve questions over what the Second Circuit has termed the
"ambiguous" language of the Edge Act in favor of presumed federal jurisdiction would lead to
absurd results. AIG II, 712 F.3d at 780; see also Sollitt v. KeyCorp, 463 F. App'x 471, 473 (6th
Cir. 2012) (refusing to subscribe to the "inherently limitless view" that the Edge Act confers
jurisdiction if "any part of' the suit "arises out of transactions involving international or foreign
banking" (citing and quoting Pinto v. Bank One Corp., 2003 WL 21297300, at *3 (S.D.N.Y.
June 4, 2003)).
The People also argue that there is no jurisdiction under the Edge Act because no foreign
party is alleged in the Complaint, finding jurisdiction would conflict with Congressional intent,
and the fact that this suit was a parens patriae, or state law enforcement, action brought in the
public interest militates against removal. Mot. at 9:24-10:8, 12:14-15:12. Because the Court
finds that the allegations involving ExpressSend are insufficient to conclude that the suit "arises
out of' international or foreign transactions, it need not address the remainder of the People's
arguments. However, the Court notes as an aside that the Plaintiffs arguments concerning
foreign parties and state law enforcement actions are unavailing. The Edge Act does not require
that a foreign party be alleged in the Complaint; it merely requires that the suit arise out of
foreign banking transactions or activities of a nationally chartered corporation who is a party to
the suit. See 12 U.S.C. § 632; City ofStockton v. Bank ofAm., NA., No. C-08-4060 MMC, 2008
WL 5063877, at *2 n.3 (N.D. Cal. Nov. 21, 2008) ("several courts have found jurisdiction under

§ 632 proper in an action against a domestic entity arising from a transaction involving international or foreign banking, and in which the foreign entity was not named as a party") (citing
cases). Furthermore, the People cite no cases, and the Court can find none, that hold that the
Edge Act does not apply to parens patriae or state law enforcement actions.

IV. Conclusion
The Edge Act does not confer jurisdiction over this suit. Because Wells Fargo's rationale
for removal under 28 U.S.C. § 1331 relies on the jurisdictional grant of the Edge Act, the Court
likewise does not have federal question jurisdiction over this suit. For the reasons stated herein,
the Court would GRANT the motion to remand and remand this case to Los Angeles Superior
Court.

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