Capital One 2011 Annual Report Download - page 270

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
Checking Account Overdraft Litigation
In May 2010, Capital One Financial Corporation and COBNA were named as defendants in a putative class
action named Steen v. Capital One Financial Corporation, et al., filed in the U.S. District Court for the Eastern
District of Louisiana. Plaintiff challenges our practices relating to fees for overdraft and non-sufficient funds fees
on consumer checking accounts. Plaintiff alleges that our methodology for posting transactions to customer
accounts is designed to maximize the generation of overdraft fees, supporting claims for breach of contract,
breach of the covenant of good faith and fair dealing, unconscionability, conversion, unjust enrichment and
violations of state unfair trade practices laws. Plaintiff seeks a range of remedies, including restitution,
disgorgement, injunctive relief, punitive damages and attorneys’ fees. In May 2010, the case was transferred to
the Southern District of Florida for coordinated pre-trial proceedings as part of a multi-district litigation (MDL)
involving numerous defendant banks, In re Checking Account Overdraft Litigation. In January 2011, plaintiffs
filed a second amended complaint against CONA in the MDL court. In February 2011, CONA filed a motion to
dismiss the second amended complaint. On March 21, 2011, the MDL court granted the motion to dismiss claims
of breach of the covenant of good faith and fair dealing under Texas law, but denied the motion to dismiss in all
other respects. On April 18, 2011, CONA moved for reconsideration of those portions of the court’s ruling
denying its motion to dismiss, and on June 7, 2011, CONA moved for certification of an interlocutory appeal.
The MDL court denied the motion to reconsider on June 23, 2011, and denied the motion for interlocutory appeal
on July 13, 2011. The parties are now engaged in discovery.
Patent Litigation
On February 23, 2011, Capital One Financial Corporation, Capital One, N.A., and Capital One Bank (USA),
N.A. (collectively, “Capital One”), were named as defendants, along with several other banks, in a patent
infringement lawsuit filed by DataTreasury Corporation (“DataTreasury”) in the United States District Court for
the Eastern District of Texas. DataTreasury alleges that Capital One and the other banks willfully infringed
certain patents relating to remote image capture with centralized processing and storage. Capital One was served
with the complaint on April 5, 2011, and filed an answer on May 26, 2011. On August 30, 2011, Capital One
joined other defendants in filing a Motion to Transfer Venue from the U.S. District Court for the Eastern District
of Texas, Tyler Division to the Southern District of Texas, Houston Division. That motion is currently pending.
FHLB Securities Litigation
On April 20, 2011, the Federal Home Loan Bank of Boston (the “FHLB of Boston”) filed suit against dozens of
mortgage industry participants in Massachusetts Superior Court, alleging, among other things, violations of
Massachusetts state securities laws in the sale and marketing of certain residential mortgage-backed securities
(the “FHLB of Boston Litigation”). Capital One Financial Corporation and Capital One, National Association are
named in the complaint as alleged successors in interest to Chevy Chase Bank, which allegedly marketed some
of the mortgage-backed securities at issue in the litigation. The FHLB of Boston seeks rescission, unspecified
damages, attorneys’ fees, and other unspecified relief. The case was removed to the United States District Court
for the District of Massachusetts in May 2011, and plaintiff subsequently filed a motion to remand the matter to
state court.
Tax Matters
On September 21, 2009, the U.S. Tax Court issued a decision in the case Capital One Financial Corporation and
Subsidiaries v. Commissioner covering tax years 1995-1999, with both parties prevailing on certain issues. On
July 6, 2010, we filed a motion to appeal certain issues upon which the IRS prevailed. The IRS chose not to
appeal the issues upon which we prevailed resulting in a final resolution of those issues favorable to us. On
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