Capital One 2015 Annual Report Download - page 237

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
218 Capital One Financial Corporation (COF)
Credit Card Interest Rate Litigation
The Capital One Bank Credit Card Interest Rate Multi-district Litigation matter was created as a result of a June 2010 transfer
order issued by the U.S. Judicial Panel on Multi-district Litigation (“MDL”), which consolidated for pretrial proceedings in the
U.S. District Court for the Northern District of Georgia two pending putative class actions against COBNA-Nancy Mancuso, et
al. v. Capital One Bank (USA), N.A., et al., (E.D. Virginia); and Kevin S. Barker, et al. v. Capital One Bank (USA), N.A., (N.D.
Georgia). A third action, Jennifer L. Kolkowski v. Capital One Bank (USA), N.A., (C.D. California) was subsequently transferred
into the MDL. In August 2010, the plaintiffs in the MDL filed a Consolidated Amended Complaint alleging that COBNA breached
its contractual obligations, and violated the Truth in Lending Act (“TILA”), the California Consumers Legal Remedies Act, the
Unfair Competition Law (“UCL”), the California False Advertising Act, the New Jersey Consumer Fraud Act, and the Kansas
Consumer Protection Act when it raised interest rates on certain credit card accounts. As a result of a settlement in another matter,
the California-based UCL and TILA claims in the MDL are extinguished. The MDL plaintiffs sought statutory damages, restitution,
attorney’s fees and an injunction against future rate increases. In September 2014, the court granted summary judgment for Capital
One, which the Eleventh Circuit Court of Appeals affirmed in November 2015.
Mortgage Repurchase Litigation
In February 2009, GreenPoint was named as a defendant in a lawsuit commenced in the New York County Supreme Court, by
U.S. Bank, N. A., Syncora Guarantee Inc. and CIFG Assurance North America, Inc. (the “U.S. Bank Litigation”). Plaintiffs allege,
among other things, that GreenPoint breached certain representations and warranties in two contracts pursuant to which GreenPoint
sold approximately 30,000 mortgage loans having an aggregate original principal balance of approximately $1.8 billion to a
purchaser that ultimately transferred most of these mortgage loans to a securitization trust. Some of the securities issued by the
trust were insured by Syncora and CIFG. Plaintiffs seek unspecified damages and an order compelling GreenPoint to repurchase
the entire portfolio of 30,000 mortgage loans based on alleged breaches of representations and warranties relating to a limited
sampling of loans in the portfolio, or, alternatively, the repurchase of specific mortgage loans to which the alleged breaches of
representations and warranties relate. In March 2010, the court granted GreenPoint’s motion to dismiss with respect to plaintiffs
Syncora and CIFG and denied the motion with respect to U.S. Bank. GreenPoint subsequently answered the complaint with respect
to U.S. Bank, denying the allegations, and filed a counterclaim against U.S. Bank alleging breach of covenant of good faith and
fair dealing. In February 2012, the court denied plaintiffs’ motion for leave to file an amended complaint and dismissed Syncora
and CIFG from the case. Syncora and CIFG appealed their dismissal to the New York Supreme Court, Appellate Division, First
Department (the “First Department”), which affirmed the dismissal in April 2013. The New York Court of Appeals denied Syncora’s
and CIFG’s motion for leave to appeal the First Department’s decision in February 2014. Therefore, the case is now proceeding
with U.S. Bank as the sole plaintiff. On May 20, 2015, Lehman Brothers Holding, Inc. (“LBHI”) filed an adversary proceeding
in the United States Bankruptcy Court for the Southern District of New York against U.S. Bank, Syncora, and GreenPoint regarding
bankruptcy proofs of claims filed by U.S. Bank and Syncora on the same securitization at issue in the U.S. Bank Litigation.
In May, June, and July 2012, FHFA (acting as conservator for Freddie Mac) filed three summonses with notice in the New York
state court against GreenPoint, on behalf of the trustees for three RMBS trusts backed by loans originated by GreenPoint with an
aggregate original principal balance of $3.4 billion. In January 2013, the plaintiffs filed an amended consolidated complaint in the
name of the three trusts, acting by the respective trustees, alleging breaches of contractual representations and warranties regarding
compliance with GreenPoint underwriting guidelines relating to certain loans (“FHFA Litigation”). Plaintiffs seek specific
performance of the repurchase obligations with respect to the loans for which they have provided notice of alleged breaches as
well as all other allegedly breaching loans, rescissory damages, indemnification, costs and interest.
In July 2013, Lehman XS Trust, Series 2006-4N, by its trustee U.S. Bank, N.A. filed a lawsuit in the Southern District of New
York against GreenPoint alleging breaches of representations and warranties made in certain loan sale agreements, pursuant to
which GreenPoint sold mortgage loans with an original principal balance of $915 million to Lehman Brothers for securitization
and sale to investors. The lawsuit (“LXS Trust Litigation”) seeks specific performance of GreenPoint’s obligation to repurchase
certain allegedly breaching loans, or in the alternative, the repurchase of all loans in the trust, the award of rescissory damages,
costs, fees and interest. In January 2014, the court granted GreenPoint’s motion to dismiss based on the statute of limitations,
ruling that New York’s six-year statute of limitations began running no later than the time of the mortgage securitization. The
plaintiff has appealed the dismissal of the complaint, and the United States Court of Appeals for the Second Circuit heard oral
argument on December 3, 2015.