Huntington National Bank 2012 Annual Report Download - page 194

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Litigation
The nature of Huntington’s business ordinarily results in a certain amount of claims, litigation, investigations, and legal and
administrative cases and proceedings, all of which are considered incidental to the normal conduct of business. When the Company
determines it has meritorious defenses to the claims asserted, it vigorously defends itself. The Company will consider settlement of
cases when, in Management’s judgment, it is in the best interests of both the Company and its shareholders to do so.
On at least a quarterly basis, Huntington assesses its liabilities and contingencies in connection with outstanding legal proceedings
utilizing the latest information available. For matters where it is probable, the Company will incur a loss and the amount can be
reasonably estimated, Huntington establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect
any relevant developments. For matters where a loss is not probable or the amount of the loss cannot be estimated, no accrual is
established.
In certain cases, exposure to loss exists in excess of the accrual to the extent such loss is reasonably possible, but not probable.
Management believes an estimate of the aggregate range of reasonably possible losses, in excess of amounts accrued, for current legal
proceedings is from $0 to approximately $130.0 million at December 31, 2012. For certain other cases, Management cannot
reasonably estimate the possible loss at this time. Any estimate involves significant judgment, given the varying stages of the
proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants in several
of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in many of the
proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, Management’s estimate
will change from time-to-time, and actual losses may be more or less than the current estimate.
While the final outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel,
and available insurance coverage, Management believes that the amount it has already accrued is adequate and any incremental
liability arising from the Company’s legal proceedings will not have a material effect on the Company's consolidated financial
position as a whole. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these
matters, if unfavorable, may be material to the Company’s consolidated financial position in a particular period.
The following is a discussion of certain legal matters and events occurring through the date of this filing:
The Bank is a defendant in three lawsuits, which collectively may be material, arising from its commercial lending, depository,
and equipment leasing relationships with Cyberco Holdings, Inc. (Cyberco), based in Grand Rapids, Michigan. In November 2004, the
Federal Bureau of Investigation and the IRS raided the Cyberco facilities and Cyberco's operations ceased. An equipment leasing
fraud was uncovered, whereby Cyberco sought financing from equipment lessors and financial institutions, including the Bank,
allegedly to purchase computer equipment from Teleservices Group, Inc. (Teleservices). Cyberco created fraudulent documentation to
close the financing transactions while, in fact, no computer equipment was ever purchased or leased from Teleservices which proved
to be a shell corporation.
On June 22, 2007, a complaint in the United States District Court for the Western District of Michigan (District Court) was filed
by El Camino Resources, Ltd, ePlus Group, Inc., and Bank Midwest, N.A., all of whom had lending relationships with Cyberco,
against the Bank, alleging that Cyberco defrauded plaintiffs and converted plaintiffs' property through various means in connection
with the equipment leasing scheme and alleges that the Bank aided and abetted Cyberco in committing the alleged fraud and
conversion. The complaint further alleges that the Bank's actions entitle one of the plaintiffs to recover $1.9 million from the Bank as a
form of unjust enrichment. In addition, plaintiffs claimed direct damages of approximately $32.0 million and additional consequential
damages in excess of $20.0 million. On July 1, 2010, the District Court issued an Opinion and Order adopting in full a federal
magistrate's recommendation for summary judgment in favor of the Bank on all claims except the unjust enrichment claim, and a
partial summary judgment was entered on July 1, 2010. The Bank requested an opportunity to file a motion for summary judgment on
the remaining unjust enrichment claim against it. A motion for reconsideration filed by the plaintiffs regarding the partial summary
judgment was denied. Subsequently, in connection with a pre-motion conference, the District Court, in lieu of allowing the Bank to
file a summary judgment motion, ordered the case to be tried in April 2012, in a one day bench trial, and entered a scheduling order
governing all pretrial conduct. On February 6, 2012, the District Court dismissed the remaining count for unjust enrichment following
a finding by the bankruptcy court that the plaintiff must pursue its rights, if any, with respect to that count in a bankruptcy court. The
plaintiffs filed a notice of appeal on March 2, 2012, appealing the District Court’s judgment against them on the aiding and abetting
and conversion claims. Oral arguments before the Sixth Circuit Court of Appeals were held January 24, 2013.