                   Case: 11-16029          Date Filed: 10/26/2012   Page: 1 of 14

                                                                                    [PUBLISH]


                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                     ________________________

                                            No. 11-16029
                                      ________________________

                               D.C. Docket Nos. 1:09-md-02036-JLK,
                                       1:08-cv-22463-JLK

MELANIE GARCIA,
MARC MARTINEZ,
on behalf of himself and all others similarly situated,
DOLORES GUTIERREZ,
on behalf of herself and all others similarly situated,
CELIA SPEARS-HAYMOND,
as an individual and on behalf of all others similarly situated,
ALEX ZANKICH,

llllllllllllllllllllllllllllllllllllllll                                 Plaintiffs–Appellees,

WILLIAM RUCKER,
individually and on behalf of all others similarly situated,

llllllllllllllllllllllllllllllllllllllll                                              Plaintiff,

                                                 versus

WACHOVIA CORPORATION, et al.,

lllllllllllllllllllllllllllllllllllllll                                             Defendants,

WELLS FARGO BANK, N.A.,
on its own behalf and on behalf of its
predecessor, Wachovia Bank, N.A.,
               Case: 11-16029        Date Filed: 10/26/2012      Page: 2 of 14

                                                                      Defendant–Appellant.

                               ________________________

                      Appeal from the United States District Court
                         for the Southern District of Florida
                             _______________________

                                     (October 26, 2012)

Before BARKETT and PRYOR, Circuit Judges, and BATTEN, ∗ District Judge.

PRYOR, Circuit Judge:

       This appeal presents the question whether Wells Fargo Bank, N.A., for itself

and its predecessor, Wachovia Bank, N.A., waived its right to compel arbitration of

claims brought by its customers as putative class action plaintiffs. The customer

agreements that govern the claims provide that either party may move to compel

arbitration and that all arbitrated claims must be arbitrated on an individual instead

of a classwide basis. The district court twice invited Wells Fargo to move to

compel arbitration, first in November 2009 and again in April 2010, but Wells

Fargo declined those invitations. A year later, Wells Fargo reversed course and

moved to compel arbitration soon after the Supreme Court held in AT&T Mobility

LLC v. Concepcion, __ U.S. __, 131 S. Ct. 1740, 1753 (2011), that the Federal

Arbitration Act, 9 U.S.C. § 1 et seq., preempts state laws that condition the

enforceability of consumer arbitration agreements on the availability of classwide

∗
 Honorable Timothy C. Batten, Sr., United States District Judge for the Northern District of
Georgia, sitting by designation.
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procedures. The district court denied the motion based on waiver. Wells Fargo

argues that it did not waive its right to compel arbitration because it would have

been futile to move to compel arbitration before the Supreme Court decided

Concepcion. But we conclude that Concepcion established no new law. Because

we conclude that it would not have been futile for Wells Fargo to argue that the

Act preempts any state laws that purported to make the classwide arbitration

provisions unenforceable, we affirm the denial of its motion to compel arbitration.

                                I. BACKGROUND

      The plaintiffs in these five separate putative class actions allege that Wells

Fargo and Wachovia Bank unlawfully charged them overdraft fees for their

checking accounts, which are governed by agreements that provide for arbitration

of disputes on an individual basis. The Wells Fargo customer agreement states that

“[e]ither [the customer] or the Bank may require the submission of a dispute to

binding arbitration at any reasonable time notwithstanding that a lawsuit or other

proceeding has been commenced,” but that neither a customer nor the bank may

consolidate disputes or “include in any arbitration any dispute as a representative

or member of a class.” The Wachovia customer agreement states that, if either the

customer or the bank requests, “any dispute or claim concerning [the customer’s]

account or [the customer’s] relationship to [Wachovia] will be decided by binding




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arbitration,” and that the arbitration “will be brought individually and not as part of

a class action.”

      Wells Fargo and Wachovia are not the only banks accused of unlawfully

charging checking account overdraft fees. In June 2009, the Judicial Panel on

Multidistrict Litigation consolidated in the Southern District of Florida the five

putative class actions involved in this appeal with dozens of similar cases filed

against approximately thirty banks. This consolidated litigation has already been

the subject of several appeals in this Court. See, e.g., Barras v. Branch Banking &

Trust Co., 685 F.3d 1269 (11th Cir. 2012); Given v. M&T Bank Corp., 674 F.3d

1252 (11th Cir. 2012); Hough v. Regions Fin. Corp., 672 F.3d 1224 (11th Cir.

2012).

      Wells Fargo acquired Wachovia in January 2009. Wachovia has since

ceased to exist as a separate bank. For that reason, we refer to both banks jointly

as Wells Fargo.

      On November 6, 2009, the district court ordered Wells Fargo to file, by

December 8, 2009, all “merits and non-merits motions directed to” the complaints,

including any motions to compel arbitration. Wells Fargo and several other banks

filed an omnibus motion to dismiss, but Wells Fargo did not move to compel

arbitration of the plaintiffs’ claims. The district court denied the motion to dismiss

in most respects.


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      On April 14, 2010, the district court offered Wells Fargo a second

opportunity to move to compel arbitration by April 19, 2010. Wells Fargo did not

accept this second invitation. Wells Fargo instead responded that it declined to

elect to arbitrate the disputes. Wells Fargo even told the district court that, as to all

of the Wachovia customers involved in this appeal but one, it “did not move for an

order compelling arbitration . . . nor does it intend to seek arbitration of their

claims in the future.”

      For more than a year, the parties prepared their cases for trial. They engaged

in extensive discovery: they served and answered interrogatories, produced

approximately 900,000 pages of discovery documents, and took approximately 20

depositions. The parties also litigated several motions before the district court.

      On April 27, 2011, the Supreme Court held in Concepcion that the Federal

Arbitration Act preempts a California rule of contract law that conditioned the

enforceability of consumer arbitration agreements on the availability of classwide

arbitration. 131 S. Ct. at 1753. The California Supreme Court had held in

Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d

1100 (2005), that most consumer arbitration provisions that waive the right of the

consumer to arbitrate on a classwide basis are unconscionable and unenforceable,

but the Supreme Court ruled that the Act preempts the Discover Bank rule because




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the rule “interfere[d] with fundamental attributes of arbitration and thus create[d] a

scheme inconsistent with the FAA.” Concepcion, 131 S. Ct. at 1748.

      Two days later, on April 29, 2011, Wells Fargo filed a motion to dismiss the

five putative class actions in favor of arbitration or, in the alternative, to stay the

proceedings pending arbitration. Wells Fargo argued that it had not waived its

right to compel arbitration because, before the Supreme Court decided

Concepcion, the state laws governing the customer agreements foreclosed Wells

Fargo from enforcing the agreements to arbitrate on an individual rather than

classwide basis. The customer agreements in this case are governed by the laws of

California, Florida, Georgia, New Jersey, New Mexico, Oregon, Texas, Virginia,

and Washington. Wells Fargo argued that, before the Supreme Court decided

Concepcion, those state laws made arbitration provisions that contained class

action waivers unenforceable, so moving to compel would have been futile.

      After the parties conducted limited arbitration-related discovery, the district

court ruled that Wells Fargo had waived its right to compel arbitration, and it

denied the motion to dismiss or stay the lawsuits in favor of arbitration. The

district court concluded that, before the Supreme Court decided Concepcion, a

motion to compel arbitration would not have been futile for several reasons,

including that Wells Fargo could have argued that the Act preempted state laws

that refused to enforce the arbitration agreements, that Wells Fargo could have


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argued that at least some of the state laws did not prohibit enforcement of the

agreements, and that Wells Fargo could have severed the class action waiver

provision and submitted to class arbitration.

                           II. STANDARD OF REVIEW

       “We review de novo the denial of a motion to compel arbitration.” Hough,

672 F.3d at 1228.

                                 III. DISCUSSION

      We divide our discussion in two parts. First, we explain why Wells Fargo

waived its right to compel arbitration. Second, we explain why it would not have

been futile for Wells Fargo to move to compel arbitration before the Supreme

Court decided Concepcion.

               A. Wells Fargo Waived Its Right To Compel Arbitration.

      “[D]espite the strong policy in favor of arbitration, a party may, by its

conduct, waive its right to arbitration,” S & H Contractors, Inc. v. A.J. Taft Coal

Co., 906 F.2d 1507, 1514 (11th Cir. 1990) (citation omitted), and we apply a two-

part test to determine that issue. “First, we decide if, under the totality of the

circumstances, the party has acted inconsistently with the arbitration right.” Ivax

Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1315–16 (11th Cir. 2002) (internal

quotation marks omitted). A party acts inconsistently with the arbitration right

when the party “substantially invokes the litigation machinery prior to demanding


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arbitration.” S & H Contractors, 906 F.2d at 1514 (internal quotation marks and

alterations omitted). “[S]econd, we look to see whether, by [acting inconsistently

with the arbitration right], that party has in some way prejudiced the other party.”

Ivax Corp., 286 F.3d at 1316 (internal quotation marks omitted). To determine

whether the other party has been prejudiced, “we may consider the length of delay

in demanding arbitration and the expense incurred by that party from participating

in the litigation process.” S & H Contractors, 906 F.2d at 1514.

      Wells Fargo acted inconsistently with the arbitration right in two ways.

First, Wells Fargo failed to move to compel arbitration even though the district

court twice invited it to file motions to compel in November 2009 and April 2010.

Wells Fargo even went so far as to say that it did not intend to seek arbitration in

the future of the claims brought by most of the existing plaintiffs against

Wachovia. Second, Wells Fargo “substantially invoke[d] the litigation machinery

prior to demanding arbitration.” S & H Contractors, 906 F.2d at 1514 (internal

quotation marks and alterations omitted). In S & H Contractors, we concluded that

a party acted inconsistently with the right to arbitration when it waited eight

months to move to compel arbitration, by which time the parties had litigated two

motions and the moving party had taken five depositions. Id. But the pretrial

litigation in this matter was far more substantial: the parties conducted discovery

for more than a year, during which time they conducted more than three times as


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many depositions, served and answered interrogatories, and produced

approximately 900,000 pages of documents.

      If we were to compel arbitration, the plaintiffs would suffer substantial

prejudice for two reasons. First, “[p]rejudice has been found in situations where

the party seeking arbitration allows the opposing party to undergo the types of

litigation expenses that arbitration was designed to alleviate.” Morewitz v. W. of

Eng. Ship Owners Mut. Prot. & Indem. Ass’n (Lux.), 62 F.3d 1356, 1366 (11th

Cir. 1995). There is no doubt that these plaintiffs expended substantial sums of

money in conducting this litigation. Second, “[t]he use of pre-trial discovery

procedures by a party seeking arbitration may sufficiently prejudice the legal

position of an opposing party so as to constitute a waiver of the party’s right to

arbitration.” Stone v. E.F. Hutton & Co., 898 F.2d 1542, 1543 (11th Cir. 1990).

Wells Fargo benefited from conducting discovery of the plaintiffs, a benefit to

which it would not have been entitled during arbitration. See Se. Stud &

Components, Inc. v. Am. Eagle Design Build Studios, LLC, 588 F.3d 963, 969

(8th Cir. 2009).

        B. A Motion to Compel Arbitration Before the Supreme Court Decided

                                Concepcion Was Not Futile.

      Wells Fargo argues that it did not waive its right to arbitration because any

motion to compel arbitration would have been futile before the Supreme Court


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decided Concepcion, but we disagree. To be sure, because “[t]his circuit does not

require a litigant to engage in futile gestures,” a party will not waive its right to

arbitrate by failing to act whenever “any motion to compel would almost certainly

have been futile.” Miller v. Drexel Burnham Lambert, Inc., 791 F.2d 850, 854

(11th Cir. 1986), abrogation on other grounds recognized by Feldspar Trucking

Co. v. Greater Atlanta Shippers Ass’n, 849 F.2d 1389, 1391 n.2 (11th Cir. 1988).

But absent controlling Supreme Court or circuit precedent foreclosing a right to

arbitrate, a motion to compel arbitration will almost never be futile. See id. As the

Eighth Circuit has explained, a party must move to compel arbitration whenever “it

should have been clear to [the party] that the arbitration agreement was at least

arguably enforceable.” Se. Stud, 588 F.3d at 967.

      Wells Fargo argues that the futility doctrine excuses a failure to move to

compel arbitration so long as it appears that the motion would be “unlikely to

succeed,” but our decisions in Benoay v. Prudential-Bache Securities, Inc., 805

F.2d 1437, 1440 (11th Cir. 1986), and Miller, 791 F.2d at 854, illustrate that the

futility exception to waiver is narrower. When those lawsuits were filed, “the law

of this circuit prohibited arbitration of otherwise arbitrable state claims when

arbitrable and nonarbitrable claims were ‘inextricably intertwined.’” Benoay, 805

F.2d at 1440 (quoting Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d

1023, 1026 (11th Cir. 1982)). Because the state and federal claims joined in those


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cases were “based on a common nucleus of operative facts,” the claims fell

squarely under the intertwining doctrine, so the district court would almost

certainly have denied a motion to compel arbitration. Id. (quoting Miller, 791 F.2d

at 854). But in Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238

(1985), the Supreme Court rejected the intertwining doctrine and abrogated our

precedent in Belke. Afterward, the defendants in both Benoay and Miller moved

to compel arbitration of their non-arbitrable state law claims, and the plaintiffs

argued that the defendants had waived their right to compel arbitration. Benoay,

805 F.2d at 1439; Miller, 791 F.2d at 854. We held that the right to arbitrate had

not been waived because, when Belke was the governing law, “any motion to

compel arbitration would almost certainly have been futile. . . . Thus, appellees’

failure to request arbitration prior to the Byrd decision is irrelevant to the issue of

waiver.” Miller, 791 F.2d at 854; see also Benoay, 805 F.2d at 1440. Before Byrd,

when arbitrable state contract claims and non-arbitrable federal securities claims

based on a common set of facts were joined, it was “almost certain[]”—not merely

“unlikely,” as Wells Fargo suggests—that a motion to compel arbitration would

have been denied. See Miller, 791 F.2d at 854. The more lenient “unlikely to

succeed” standard that Wells Fargo proposes would only “encourage litigants to

delay moving to compel arbitration until they could ascertain how the case was

going in federal district court,” In re Mirant Corp., 613 F.3d 584, 590 (5th Cir.


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2010) (internal quotation marks omitted), and would undermine one “of the basic

purposes of arbitration: a fast, inexpensive resolution of claims,” O.R. Sec., Inc. v.

Prof’l Planning Assocs., 857 F.2d 742, 747 (11th Cir. 1988).

      When twice invited to file a motion to compel arbitration, Wells Fargo could

have argued exactly what the Supreme Court held in Concepcion: that the Act

preempts state contract laws that condition the enforceability of consumer

arbitration agreements on the availability of classwide arbitration procedures.

Neither Supreme Court nor our precedents foreclosed that argument. To the

contrary, under existing precedent, “it should have been clear to [Wells Fargo] that

the arbitration agreement was at least arguably enforceable.” Se. Stud, 588 F.3d at

967. The Supreme Court had already held that the Act “preempts a state law that

withdraws the power to enforce arbitration agreements,” Southland Corp. v.

Keating, 465 U.S. 1, 16 n.10, 104 S. Ct. 852, 861 n.10 (1984), and “preclude[s]

States from singling out arbitration provisions for suspect status, requiring instead

that such provisions be placed ‘upon the same footing as other contracts,’”

Doctor’s Assocs. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 1656 (1996)

(quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S. Ct. 2449, 2453

(1974)). The preemption argument was available to Wells Fargo and was not

“almost certain[]” to fail. Miller, 971 F.2d at 854. By failing to make this

argument, Wells Fargo waived its right to compel arbitration.


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      The decision by the Eighth Circuit in Southeastern Stud is instructive. In

that case, the defendant did not initially move to compel arbitration under a

contract clause that gave the defendant the exclusive right to compel arbitration

because governing Arkansas law required mutuality of obligation within an

arbitration agreement. Se. Stud, 588 F.3d at 966. Nearly one year after the lawsuit

was filed in a district court, the same district court held in another decision that the

Federal Arbitration Act preempted the Arkansas state law, and the defendant in

Southeastern Stud moved to compel arbitration. Id. at 966–67. The Eighth Circuit

held that the defendant had waived its right to arbitrate because “it should have

been clear to [the defendant] that the arbitration agreement was at least arguably

enforceable” based on the same preemption argument that prevailed in the other

case. Id. at 967.

      In this case, as in Southeastern Stud, Wells Fargo could have argued, but did

not argue, that the Act preempts state laws that might have made the arbitration

provisions unenforceable. Wells Fargo was not foreclosed from arguing

preemption the way the defendants in Miller and Benoay were foreclosed before

Byrd from arguing against the intertwining doctrine. Concepcion “did not decide

new law or reverse previous case law,” but “merely correctly applied existing

law.” Id. at 968.




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      We need not address the other grounds for waiver addressed by the district

court. Because Wells Fargo could have argued that the Act preempted contrary

state law, we need not consider whether Wells Fargo also could have argued that

the relevant state laws did not preclude enforcement of the classwide arbitration

provisions. And we need not consider whether Wells Fargo could have severed the

class action provision and submitted to class arbitration.

                                IV. CONCLUSION

      We AFFIRM the denial of the motion to dismiss or, in the alternative, to

stay in favor of arbitration.




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