The Brown Family Trust, et al. v. Wells Fargo Bank, NA, et al.

Case Updates

NCLC joined other trade associations in urging the California Court of Appeals to reject a requirement that banks and securities brokerages provide advance oral notice of an arbitration agreement included as part of a customer’s account agreement. The plaintiffs claimed that defendants’ failure to orally disclose the arbitration provision constituted constructive fraud. NCLC argued that the oral notice rule illegally singles out arbitration clauses in violation of the Federal Arbitration Act and the California Arbitration Act. Further, the rule – unique to California – is preempted by the Exchange Act because it would interfere with the nationwide arbitration system regulated by the SEC. An advance notice rule would discourage arbitration by increasing the cost, complexity and uncertainty of securities arbitration.