Huntington National Bank 2012 Annual Report Download - page 195

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The Bank is also involved with the Chapter 7 bankruptcy proceedings of both Cyberco, filed on December 9, 2004, and
Teleservices, filed on January 21, 2005. The Cyberco bankruptcy trustee commenced an adversary proceeding against the Bank on
December 8, 2006, seeking over $70.0 million he alleges was transferred to the Bank. The Bank responded with a motion to dismiss
and all but the preference claims were dismissed on January 29, 2008. The Cyberco bankruptcy trustee alleges preferential transfers in
the amount of approximately $1.2 million. The Bankruptcy Court ordered the case to be tried in July 2012, and entered a pretrial order
governing all pretrial conduct. The Bank has filed a motion for summary judgment based on the Cyberco trustee seeking recovery in
connection with the same alleged transfers as the Teleservices trustee in the case described below. The Bankruptcy Court granted the
motion in principal part and the parties stipulated to a full dismissal which was entered on June 19, 2012.
The Teleservices bankruptcy trustee filed an adversary proceeding against the Bank on January 19, 2007, seeking to avoid and
recover alleged transfers that occurred in two ways: (1) checks made payable to the Bank to be applied to Cyberco's indebtedness to
the Bank, and (2) deposits into Cyberco's bank accounts with the Bank. A trial was held as to only the Bank’s defenses. Subsequently,
the trustee filed a summary judgment motion on her affirmative case, alleging the fraudulent transfers to the Bank totaled
approximately $73.0 million and seeking judgment in that amount (which includes the $1.2 million alleged to be preferential transfers
by the Cyberco bankruptcy trustee). On March 17, 2011, the Bankruptcy Court issued an Opinion determining the alleged transfers
made to the Bank were not received in good faith from the time period of April 30, 2004, through November 2004, and that the Bank
had failed to show a lack of knowledge of the avoidability of the alleged transfers from September 2003, through April 30, 2004. The
trustee then filed an amended motion for summary judgment on her affirmative case and a hearing was held on July 1, 2011.
On March 30, 2012, the Bankruptcy Court issued an Opinion on the trustee’s motion determining the Bank was the initial
transferee of the checks made payable to it and was a subsequent transferee of all deposits into Cyberco’s accounts. The Bankruptcy
Court ruled Cyberco’s deposits were themselves transfers to the Bank under the Bankruptcy Code, and the Bank was liable for both
the checks and the deposits, totaling approximately $73.0 million. The Bankruptcy Court ruled the Bank may be entitled to a credit of
approximately $4.0 million for the Cyberco trustee’s recoveries in preference actions filed against third parties that received payments
from Cyberco within 90 days preceding Cyberco’s bankruptcy. Lastly, the Bankruptcy Court ruled that it will award prejudgment
interest to the Teleservices trustee at a rate to be determined. A trial was held on these remaining issues on April 30, 2012, and the
Court gave a bench opinion on July 23, 2012. In that opinion, the Court denied the Bank the $4.0 million credit, but ruled
approximately $0.9 million in deposits were either double-counted or were outside the timeframe in which the Teleservices trustee can
recover. Therefore, the Bankruptcy Court’s recommended award will be reduced by this $0.9 million. Further, the Bankruptcy Court
ruled the interest rate specified in the federal statute governing post-judgment interest, which is based on treasury bill rates, will be the
rate of interest for determining prejudgment interest. The rulings of the Bankruptcy Court in its March 2011 and March 2012
opinions, as well as its July 23, 2012, bench opinion, will not be reduced to judgment by the Bankruptcy Court. Rather, the
Bankruptcy Court has delivered a report and recommendation to the District Court for the Western District of Michigan,
recommending a judgment be entered in the principal amount of $71.8 million, plus interest through July 27, 2012, in the amount of
$8.8 million. The District Court will conduct a de novo review of the fact findings and legal conclusions in the Bankruptcy Court’s
opinions.
In the pending bankruptcy cases of Cyberco and Teleservices, the Bank moved to substantively consolidate the two bankruptcy
estates, principally on the ground that Teleservices was the alter ego and a mere instrumentality of Cyberco at all times. On July 2,
2010, the Bankruptcy Court issued an Opinion denying the Bank's motions for substantive consolidation of the two bankruptcy
estates. The Bank has appealed this ruling and the appeal is pending.
On January 17, 2012, the Company was named a defendant in a putative class action filed on behalf of all 88 counties in Ohio
against MERSCORP, Inc. and numerous other financial institutions that participate in the mortgage electronic registration system
(MERS). The complaint alleges that recording of mortgages and assignments thereof is mandatory under Ohio law and seeks a
declaratory judgment that the defendants are required to record every mortgage and assignment on real property located in Ohio and
pay the attendant statutory recording fees. The complaint also seeks damages, attorneys' fees and costs. Although Huntington has not
been named as a defendant in the other cases, similar litigation has been initiated against MERSCORP, Inc. and other financial
institutions in other jurisdictions throughout the country.
Commitments Under Capital and Operating Lease Obligations
At December 31, 2012, Huntington and its subsidiaries were obligated under noncancelable leases for land, buildings, and
equipment. Many of these leases contain renewal options and certain leases provide options to purchase the leased property during or
at the expiration of the lease period at specified prices. Some leases contain escalation clauses calling for rentals to be adjusted for
increased real estate taxes and other operating expenses or proportionately adjusted for increases in the consumer or other price
indices.