Capital One 2013 Annual Report Download - page 278

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In June 2013, Capital One removed the New Mexico AG case to the U.S. District Court, District of New Mexico.
In response, the New Mexico AG filed an Amended Complaint in federal court, adding a claim for alleged
violations of the Truth in Lending Act. In November 2013, the court granted in part and denied in part Capital
One’s motion to dismiss. The court dismissed the state deceptive practices act claim but allowed the New Mexico
AG to proceed on its claims under the Truth In Lending Act. In a separate order, the court also granted Capital
One’s motion precluding the New Mexico AG from recovery of alleged damages for New Mexico residents who
were class members in a prior class action against Capital One.
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.
Intellectual Ventures Corp., et al.
In June 2013, Intellectual Ventures I, LLC and Intellectual Ventures II, LLC (collectively “IV”) sued Capital One
Financial Corp., Capital One Bank (USA), N.A. and Capital One, N.A. (collectively “Capital One”) for patent
infringement in the United States District Court for the Eastern District of Virginia. In the Complaint, IV alleges
infringement of patents related to various business processes across the Capital One enterprise. IV
simultaneously filed patent infringement actions against numerous other financial institutions on the same and
other patents in several other federal courts. Capital One’s motion to dismiss was denied without prejudice in
August 2013. Capital One filed an answer and counterclaim alleging antitrust violations. In December 2013, the
court dismissed Capital One’s counterclaim and decided the parties’ arguments on claim construction. IV has
agreed to dismiss two patents in suit, and following claim construction, has asked for a stipulation of non-
infringement for one patent with an opportunity to appeal the court’s decision regarding claim construction. As a
result, two patents remain in dispute in the case. Trial is currently scheduled to begin in April 2014.
In January 2014, IV filed a second suit against Capital One for patent infringement in the U.S. District Court for
the District of Maryland. In the complaint, IV again alleges infringement of patents related to various business
practices across the Capital One enterprise.
Derivative Actions
In August 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 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. In September 2012, a second derivative complaint, titled
Barovic v. Fairbank, et al., Case No. 2012 14130, was filed by another putative stockholder on behalf of the
Company also in the Virginia Circuit Court. The Barovic derivative complaint is substantially identical to the
Iron Workers’ Action (collectively “Derivative Actions” filed by the “Derivative Plaintiffs”). The defendants
removed the Derivative Actions to federal court and moved to dismiss the complaints. In June 2013, the court
granted Capital One’s motion to dismiss, finding that the plaintiffs did not adequately allege facts showing that
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