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Law360 (September 18, 2020, 4:27 PM EDT ) Houston-based general contractor DNM urged a Texas federal court not to dismiss its putative class action accusing Wells Fargo of giving preferential treatment to bigger borrowers for Paycheck Protection Program loans, arguing its arbitration agreement with the bank doesn't extend to its fraud claims in the case.
DNM Contracting Inc. asked the court Thursday not to side with Wells Fargo Bank NA's late August bid to send the lawsuit to arbitration, arguing that the PPP issues don't relate to its company account and related services.
"Plaintiff's claims are completely independent of the business application, and the arbitration clause, which could be maintained without reference to the contract, and do not arise from the contractual relationship between plaintiff and Wells Fargo," DNM said in its filing.
The contractor argues that Wells Fargo shafted many of its small-business customers earlier this year by prioritizing larger, more lucrative borrowers over smaller ones when processing applications for the coronavirus relief loan program. Wells Fargo removed DNM's suit against it from state to federal court in May, and on Aug. 28 asked to dismiss the case and compel arbitration.
The bank told U.S. District Judge Alfred H. Bennett that DNM shouldn't be allowed to proceed with the case because of the arbitration provision it agreed to as part of a 2015 business account application it signed with the bank.
"All of plaintiff's claims should be dismissed because plaintiff made a binding contractual commitment to arbitrate any dispute 'arising out of or relating in any way to' its Wells Fargo account or services," the bank said in the motion. "The dispute here is entirely about plaintiff's application to Wells Fargo for a loan that it could obtain only as a Wells Fargo business checking account customer."
Wells Fargo argued that DNM also failed to point to a concrete injury that would demonstrate standing, noting the business didn't allege it has been altogether shut out from getting funding through the loan program, which had more than $130 billion in lending capacity left over when it stopped taking new applications in early August.
The bank further contended that no legal mandate to process PPP loan applications on a first-come, first-served basis has been shown to exist the way DNM claimed, nor did DNM even plausibly allege that Wells Fargo had indeed prioritized larger PPP loan applications over smaller ones.
On the contrary, statistics released by the government show Wells Fargo's average PPP loan amount of $54,501 was the second smallest of the top 15 biggest lenders in the program and half of the programwide average loan amount, the bank said.
On Thursday, DNM said that Wells Fargo only began to quickly process applications after it filed the present lawsuit in an attempt to make up for damages.
"At a minimum, it is obvious from the facts and law presented herein that Wells Fargo was not going to follow the PPP regulations and pay on a 'first-come, first-served basis' until after the plaintiff brought this action and called into light Wells Fargo's wrongful actions," DNM said.
The contractor said that enforcing arbitration to its PPP claims would stretch the dispute resolution clause beyond the scope of what was intended to cover any and all disputes between itself and the bank, as well as issues unrelated to the use of its account and banking services.
DNM said its claims here are separate from its 2015 agreement with Wells Fargo.
"In the context of arbitration clauses like the one at issue here," DNM said, "Texas courts have made clear that if the facts alleged in support of a claim stand alone, the claim is completely independent of the contract, and the claim could be maintained without reference to the contract, the claim is not subject to arbitration."
Counsel for DNM and Wells Fargo did not immediately respond to requests for comment.
DNM is represented by Alfonso Kennard Jr. of Kennard Law PC.
Wells Fargo is represented by Brendan Cullen and Christopher Viapianoof of Sullivan & Cromwell LLP and Charles B. Hampton of McGuireWoods LLP.
The case is DNM Contracting Inc. v. Wells Fargo Bank NA, case number 4:20-cv-01790, in the U.S. District Court for the Southern District of Texas.
--Additional reporting by Jon Hill. Editing by Rebecca Flanagan.
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