Wells Fargo has prevailed with its appeal to overturn a lower court’s decision that the firm colluded with the Financial Industry Regulatory Authority's arbitration form, according to news reports.

In January, Judge Belinda Edwards of the Superior Court of Fulton County of the State of Georgia vacated a 2019 arbitration award, ruling that the company and its counsel, Terry Weiss, “manipulated the Finra arbitrator selection process” in a claim filed by investor Brian Leggett accusing the firm and one of its advisors of negligence, failure to supervise, churning and breach of fiduciary duty, among other claims.

According to court documents, the company and Weiss admitted that the industry’s self-regulator provided Weiss with a “subset” of arbitrators in which at least three were removed from the list provided to claimants. Edward wrote that “[p]ermitting one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum.”

On Tuesday, a Georgia appeals court reversed Edwards’ decision, ruling that Finra complied with the arbitration forum rules and that it was within the watchdog’s director’s rights to grant Wells Fargo’s request to remove arbitrators, Barron’s writes.

“Given the text of the [Finra] rule, we cannot find that he exceeded his authority in making that determination,” the appeals court wrote, according to the publication.

Moreover, the appeals court ruled that even if the alleged agreement between Wells and Finra’s arbitration forum existed, Leggett had not “shown that it impacted this arbitration,” according to Barron’s.

A Wells Fargo spokeswoman said the company was happy with the outcome, according to the publication.

“We are pleased with today’s [appeals] court ruling which overturned the court’s erroneous judgment and found in our favor,” the spokeswoman said in a statement. “We were always confident in the merits of our appeal and are pleased that the Georgia Court of Appeals completely validated our position,” the company told Barron’s in a statement.

As a result of the appeal court’s decision, Legget must now cover $83,000 in Well Fargo’s legal fees and arbitration costs that he was ordered to pay in the 2019 award, the publication writes.

Craig Kuglar, a lawyer for Leggett, didn’t respond to Barron’s request for comment.

Weiss referred comment about the appeal to Wells Fargo, according to the publication.

Edwards' ruling made headlines and attracted criticism from the Public Investors Advocate Bar Association, which called for an investigation of the arbitration process, as well as from Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., who in February requested information from Finra about the arbitrator selection in the claim.

Finra initially denied allegations of corruption but in February hired the law firm Lowenstein Sandler to investigate whether its arbitration forum complied with its own rules and policies on arbitrator selection in the Wells Fargo case.

In June, the law firm said that it found no evidence of collusion. Lowenstein had examined over 150,000 documents, emails and telephone records, reviewed the watchdog’s arbitrator database system and conducted 29 interviews.

The law firm also recommended several steps to bolster transparency about the arbitrator selection process, including updating the Dispute Resolution Services manual, mandatory training for DRS personnel, making any changes to the manual publicly available, providing written explanations for denying or approving “causal challenges” and more.

At the time, Finra said in a statement that its audit committee accepted the report’s findings and that it “recognized that there are nonetheless opportunities to improve the policies, procedures and training related to the arbitrator selection process, as the firm recommended.”

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