Capital One 2012 Annual Report Download - page 283

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 was denied by the trial court on
January 30, 2012. All of the defendants sought an appeal of the venue issue, which was denied on August 10, 2012,
by the United States Court of Appeals for the Federal Circuit. In August 2012, the parties entered into court-ordered
mediation that resulted in a non-material settlement of the dispute. On August 30, 2012, a settlement release, and
license agreement was executed, and the court entered a final order, dismissing the action with prejudice.
Hawaii, Mississippi, and Missouri State Attorney General Payment Protection Matters
On April 12, 2012, the Attorney General of Hawaii filed a lawsuit in First Circuit Court in Hawaii against Capital
One Bank (USA) N.A., and Capital One Services, LLC. The case is one of several similar lawsuits filed by the
Attorney General of Hawaii against various banks challenging the marketing and sale of payment protection and
credit monitoring products. On June 28, 2012, the Attorney General of Mississippi filed substantially similar
suits against Capital One and several other banks. The state attorney general complaints allege that Capital One
enrolls customers in such programs without their consent and that Capital One enrolls customers in such
programs even in circumstances in which the customer is not eligible to receive benefits for the product in
question. Both suits allege violations of its state Unfair and Deceptive Practices Act and unjust enrichment. The
remedies sought in the lawsuits include an injunction prohibiting the Company from engaging in the alleged
violations, restitution for all persons allegedly injured by the complained of practices, civil penalties and costs.
On May 18, 2012, Capital One removed the Hawaii AG case to U.S. District Court, District of Hawaii. On
November 30, 2012, the court denied the Hawaii AG’s motion to remand. On August 10, 2012 Capital One
removed the Mississippi AG case to U.S. District Court, Southern District of Mississippi. The parties are
currently briefing the Mississippi AG’s motion to remand. Relatedly, Capital One has provided information to
the Attorney General of Missouri as part of an industry-wide informal inquiry initiated in August, 2011, relating
to the marketing of payment protection products.
Derivative Actions
On August 17, 2012, a derivative action, titled Iron Workers Mid-South Pension Fund v. Fairbank, et al., Case
No. 2012 14130 (“Iron Workers Action”), was filed by a putative stockholder on behalf of the Company in
Virginia Circuit Court of Fairfax County (hereafter “Virginia Circuit Court”) against certain current and former
directors and officers of the Company, alleging breach of the fiduciary duty of loyalty, gross mismanagement,
corporate waste, and unjust enrichment. The complaint’s allegations stem from the Company’s entering into
consent orders with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau
regarding vendor sales practices of payment protection and credit monitoring products. Plaintiff shareholder
generally alleges that the alleged failure of the Company’s officers and directors to oversee certain practices
between 2010 and early 2012 caused harm to the Company, which is named as a “nominal defendant.” The
action includes claims for, among other things, damages in favor of the Company, certain corporate actions to
purportedly improve the Company’s corporate governance and internal procedures, and an award of costs and
expenses to the putative plaintiff stockholder, including attorneys’ fees. On September 19, 2012, a second
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