Court limits Wells Fargo liability in wealth advisor harassment case

A California appeals court ruled that Wells Fargo is not on the hook for a colleague's alleged misconduct just because that colleague supervised other people. 

The Second District Court of Appeal affirmed summary judgment for Wells Fargo Bank, N.A. on October 5 in a Fair Employment and Housing Act (FEHA) case brought by a wealth advisor in the bank's private bank division - a unit serving clients with assets in the millions. 

The advisor sued in February 2023, alleging that an investment strategist at the firm sexually harassed and assaulted her during a January 2020 business trip to Bakersfield. According to the court's account of the record, the advisor described herself as having "blacked out" at a group dinner and recalled that the strategist "barged in" to her hotel room afterward. She asserted she was too intoxicated to consent, possibly because she had been drugged. The strategist maintained the encounter was consensual and that the advisor invited him. 

The strategist was one of the firm's top performers - ranking in the top three in sales among more than 200 investment strategists nationally - and held titles of senior vice president and later managing director. But it was undisputed that Wells Fargo never designated him as a supervisor. He had no authority to hire, fire, approve expenses, or approve time off. He and the support staff who assisted him reported to the same manager. 

The advisor conceded the strategist was not her supervisor. She argued strict liability should apply to any employee who supervises anyone, regardless of the relationship with the plaintiff. 

The court disagreed. Under FEHA, employers are strictly liable for harassment by the plaintiff's supervisor but face only a negligence standard - liable if they knew or should have known and failed to act - for harassment by coworkers. The court held that when the alleged harasser supervises other employees but not the plaintiff, the two are effectively coworkers. Strict liability does not attach. 

The court also noted Wells Fargo's response to the complaint. After the advisor reported the alleged assault to the bank's ethics hotline in November 2020, Wells Fargo flagged the case for expedited investigation within eight days, placed the strategist on paid leave, and assigned an internal investigator who produced a 28-page report over 10 months. The report concluded the allegations were "unsubstantiated." The bank issued the strategist a "final notice" warning that future policy violations could lead to immediate termination. 

The advisor also raised negligence and ratification theories of liability, but the court found she forfeited both on appeal. 

The decision is certified for publication. For wealth firms and financial institutions that use team-based structures - where specialists collaborate without direct reporting lines to one another - the ruling draws a practical boundary on when the strict liability standard kicks in.