Harris v. Wachovia Corp.
2011 NCBC 3
N.C. Bus. Ct.2011Background
- Plaintiffs Cameron M. Harris, Dorothy W. Harris, and Gary Harris sued Wachovia, Wells Fargo and multiple officers/agents in 2009 in Mecklenburg County seeking damages for alleged securities fraud and related claims.
- Plaintiffs owned over 900,000 Wachovia shares (now Wells Fargo stock) at the time.
- Defendants include Wachovia, Wells Fargo, and named Individual Defendants Thompson, Truslow, Wurtz, Jenkins, and Steel; Doe Defendants 1-25 are also named.
- The Complaint alleges fraud/fraudulent concealment, negligent misrepresentation, and breach of fiduciary duty related to Wachovia’s financial condition after the Golden West acquisition.
- The case centers on the 2006 Golden West takeover, Pick-A-Pay loan risk, misrepresentations regarding Wachovia’s liquidity and reserves, and private assurances to Plaintiffs.
- Plaintiffs entered into a Forbearance Agreement with Wachovia in 2007-2008, including a Release releasing Wachovia from certain claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the claims are derivative or direct actions by shareholders | Plaintiffs argue exceptions to derivative rule apply | Defendants argue claims are derivative or holder claims are not recognized | Claims are derivative and holder claims not actionable |
| Whether Plaintiffs have shown a special duty by officers to individual shareholders | Plaintiffs rely on personal relationships with Thompson/Jenkins for a special duty | No personal special duty established beyond duty to all shareholders | No special-duty sufficient to permit direct action |
| Whether Plaintiffs’ alleged injuries were separate from other shareholders’ injuries | Injuries were personal and distinct due to misrepresentations to them | Injuries were shared by all Wachovia shareholders | No separate injury; injuries are derivative/same class impact |
| Whether holder claims are recognized under North Carolina law | Plaintiffs seek damages for not selling shares due to misrepresentation | NC law does not recognize holder claims; at best derivative | Holder claims not actionable under NC law |
Key Cases Cited
- Barger v. McCoy Hillard & Parks, 346 N.C. 650 (1997) (derivative action rule; two exceptions for special-duty or separate-injury claims)
- Howell v. Fisher, 49 N.C. App. 488 (1980) (derivative vs direct action; demand requirement considerations)
- Arent Distrib. Servs., Inc. v. Distrib. Servs., 975 F.2d 1370 (8th Cir. 1992) (holder claims generally not actionable; damages typically derivative)
- Crocker v. FDIC, 826 F.2d 347 (5th Cir. 1987) (holder claims—damages paradox and speculative elements; often not recognized)