## Facts

- John Schmidt worked for Wells Fargo & Company and related entities (collectively, Wells Fargo) after Wells Fargo acquired Castle Pines Capital, LLC, which Schmidt had co-founded.
- Schmidt and Wells Fargo entered a written employment agreement providing that Schmidt would remain employed as managing partner of Castle Pines for a five-year period (2011–2016).
- Near the end of that term, Schmidt moved into a new Wells Fargo role as head of the Supply Chain Finance Group.
- Schmidt had invested nearly $4.5 million in Wells Fargo-managed hedge funds (or similar Wells Fargo-sponsored investment vehicles).
- Federal law would bar bank employees, as of July 21, 2017, from holding certain investments sponsored by their employer.
- Schmidt alleged that Wells Fargo representatives told him he would have several months into 2017 to redeem his investments to come into compliance.
- On December 8, 2016, Wells Fargo informed Schmidt that it was accelerating the compliance deadline to December 31, 2016.
- Schmidt also alleged Wells Fargo told him it could not tell him how much he would need to redeem to remain employed and compliant.
- Schmidt resigned from Wells Fargo to avoid redeeming his investments under the shortened timeline and to keep his full investment position.
- Schmidt sued Wells Fargo in federal district court asserting promissory estoppel and seeking damages that included lost salary and benefits he claimed he would have earned for the remainder of a five-year employment term.
- The complaint did not allege that Schmidt would have redeemed his investments by the July 21, 2017 statutory date (or otherwise divested) in order to stay employed at Wells Fargo.

## Issues

1. Whether Schmidt plausibly pleaded a promissory-estoppel claim under Colorado law, particularly the element of reasonable and detrimental reliance, based on alleged assurances that he would have additional time in 2017 to redeem his investments.
2. Whether Schmidt plausibly pleaded non-speculative damages (including lost salary and benefits) tied to the alleged promise where he did not allege he would have redeemed his investments and remained employed.

## Decision

- The court granted Wells Fargo’s Rule 12(b)(6) motion to dismiss for failure to state a claim.
- Assuming for purposes of the motion that Schmidt sufficiently alleged a promise and that reliance was foreseeable, the court held Schmidt did not plausibly allege detrimental reliance because he did not allege facts showing he would have divested and remained at Wells Fargo if given more time.
- Because the complaint did not connect the alleged promise to a concrete change in Schmidt’s conduct that caused his claimed losses, the promissory-estoppel claim failed under federal pleading standards.
- The court dismissed the claim seeking lost compensation tied to continued employment because the alleged injury depended on speculation about what Schmidt would have done absent the accelerated deadline.

## Legal Principles

- Under Colorado law, promissory estoppel requires: (1) a promise, (2) that the promisor should reasonably expect the promise to induce action or forbearance, (3) reasonable and detrimental action or forbearance in reliance on the promise, and (4) enforcement of the promise is necessary to prevent injustice.
- Detrimental reliance requires factual allegations showing the plaintiff changed position because of the promise and suffered a loss as a result; conclusory statements about reliance are not enough.
- Under Twombly/Iqbal pleading standards, a complaint must allege enough nonconclusory facts to make entitlement to relief plausible; courts need not accept legal conclusions framed as factual allegations.
- A plaintiff seeking lost compensation based on continued employment must plausibly plead that the alleged promise caused the loss (for example, that the plaintiff would have taken steps to remain employed if the promise had been kept), rather than pleading a chain of events that omits what the plaintiff would have done.

## Conclusion

The court dismissed Schmidt’s promissory-estoppel claim because, even accepting that Wells Fargo promised him additional time in 2017 to redeem bank-sponsored investments, the complaint did not plead facts showing Schmidt would have redeemed the investments and stayed employed if Wells Fargo had not accelerated the deadline, making reliance and resulting damages implausible.


Schmidt v. Wells Fargo & Co., 2018 WL 11000692 (2018)