Investors’ Claims Against Wells Fargo Cleared to Move Forward

Law360: Wells Fargo Can’t Shake Derivative Claims in Lifetrade Suits

Wells Fargo escaped foreign law claims but must face derivative claims in five related suits brought by offshore investors accusing it of aiding Lifetrade Fund BV officers in squandering hundreds of millions of dollars, a New York federal judge ruled Monday.

Lifetrade mutual fund investors based in Japan, Argentina and Korea say they lost $685 million on high-risk life insurance investments in part because of Wells Fargo, which issued a massive loan to Lifetrade and later negotiated a deal that gave the bank control over Lifetrade’s entire life insurance policy portfolio, wiping out the plaintiffs’ investments.

U.S. District Judge J. Paul Oetken dismissed the bulk of the investors’ allegations last year. [However,] Wells Fargo had moved for judgment on the remaining derivative claims, contending that under the in pari delicto doctrine, the investors cannot bring claims against the bank on behalf of Lifetrade when the behavior of its officers is imputed to the fund, making both parties the alleged wrongdoers.

But Judge Oetken…noted that a previous bid by the bank to dismiss derivative claims under the in pari delicto doctrine was denied, and that the current request was essentially a failed reconsideration bid.

“In this case, the Wells Fargo Defendants’ motion for judgment on the pleadings cites no new law and adduces no new evidence that would require a different outcome,” the judge said. “Accordingly, the Court declines the Wells Fargo Defendants’ request for a second bite at the apple.”

The investors are represented by Steven Phillips, Diane Paolicelli, Victoria Phillips, Melissa Stewart, Yitzchak Fogel and Marc C. Gorrie of Phillips & Paolicelli LLP and Charles S. Siegel, Taryn Ourso and Michael Armitage of Waters Kraus Paul & Siegel.

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