PNC Bank 2006 Annual Report Download - page 23

N.A., as well as more than 50 other financial institutions,
vendors, and other companies, claiming that the defendants
are infringing, and inducing or contributing to the
infringement of, the plaintiff’s patents, which allegedly
involve check imaging, storage and transfer. The plaintiff
seeks unspecified damages and interest and trebling of both,
attorneys’ fees and other expenses, and injunctive relief
against the alleged infringement. We are not in a position to
assess the likely outcome of this matter, including our
exposure, if any. We believe that we have defenses to the
claims against us in this lawsuit and intend to defend it
vigorously. In January 2007, the district court entered an order
staying the claims asserted against PNC under two of the four
patents allegedly infringed by PNC, pending reexamination of
these patents by the United States Patent and Trademark
Office. The lawsuit will proceed with respect to the other two
patents. Further, the stay may be lifted once the Patent and
Trademark Office completes its reexamination.
In August 2006, a lawsuit was filed in the United States
District Court for the Eastern District of Texas by Ronald A.
Katz Technology Licensing L. P. (“RAKTL”) against PNC,
PNC Bank, N.A., and other defendants. In September 2006,
this lawsuit was divided into separate actions, and amended
complaints were then filed, one of which was against PNC and
PNC Bank, N.A. This lawsuit is one of many related RAKTL
patent infringement actions pending in various federal district
courts against a large number of defendants. Each of the
actions involves a single family of related patents that RAKTL
refers to as the “interactive call processing patents.” The
amended complaint alleged that PNC and PNC Bank, N.A. are
infringing, and inducing or contributing to the infringement
of, certain of the plaintiff’s patents. In January 2007, the court
dismissed the lawsuit against PNC following a settlement
under which PNC and its affiliates received a non-exclusive
license covering patents held by RAKTL. As part of the
settlement, we agreed to pay a licensing fee to RAKTL. The
amount of the fee is not material to PNC.
In its Form 10-Q for the quarter ended March 31, 2005, Riggs
disclosed a number of pending lawsuits. All material lawsuits
have been finally resolved, except one where a settlement
agreement has been reached, subject to final documentation.
The pending settlement is not material to PNC.
As a result of the acquisition of Riggs, PNC is now
responsible for Riggs’ obligations to provide indemnification
to its directors, officers, and, in some cases, employees and
agents against certain liabilities incurred as a result of their
service on behalf of or at the request of Riggs. PNC is also
now responsible for Riggs’ obligations to advance on behalf
of covered individuals costs incurred in connection with
certain claims or proceedings, subject to written undertakings
to repay all amounts so advanced if it is ultimately determined
that the individual is not entitled to indemnification. Since the
acquisition, we have advanced such costs on behalf of covered
individuals from Riggs and expect to continue to do so in the
future at least with respect to lawsuits and other legal matters
identified in Riggs’ first quarter 2005 Form 10-Q.
There are several pending judicial or administrative
proceedings or other matters arising out of the three 2001
PAGIC transactions. These pending proceedings or other
matters are described below. Among the requirements of a
June 2003 Deferred Prosecution Agreement that one of our
subsidiaries entered into relating to the PAGIC transactions
was the establishment of a Restitution Fund through our $90
million contribution. The Restitution Fund will be available to
satisfy claims, including for the settlement of the pending
securities litigation referred to below. Louis W. Fryman,
chairman of Fox Rothschild LLP in Philadelphia,
Pennsylvania, is administering the Restitution Fund.
In December 2004 and January and March 2005, we entered
into settlement agreements relating to certain of the lawsuits
and other claims arising out of the PAGIC transactions. These
settlements are described below, following a description of
each of these pending proceedings and other matters.
The several putative class action complaints filed during 2002
in the United States District Court for the Western District of
Pennsylvania arising out of the PAGIC transactions were
consolidated in a consolidated class action complaint brought
on behalf of purchasers of our common stock between July 19,
2001 and July 18, 2002 (the “Class Period”). The consolidated
class action complaint names PNC, our Chairman and Chief
Executive Officer, our former Chief Financial Officer, our
Controller, and our independent auditors for 2001 as
defendants and seeks unquantified damages, interest,
attorneys’ fees and other expenses. The consolidated class
action complaint alleges violations of federal securities laws
related to disclosures regarding the PAGIC transactions and
related matters.
In August 2002, the United States Department of Labor began
a formal investigation of the Administrative Committee of our
Incentive Savings Plan (“Plan”) in connection with the
Administrative Committee’s conduct relating to our common
stock held by the Plan. Both the Administrative Committee
and PNC have cooperated fully with the investigation. In June
2003, the Administrative Committee retained Independent
Fiduciary Services, Inc. (“IFS”) to serve as an independent
fiduciary charged with the exclusive authority and
responsibility to act on behalf of the Plan in connection with
the pending securities class action litigation referred to above
and to evaluate any legal rights the Plan might have against
any parties relating to the PAGIC transactions. This authority
includes representing the Plan’s interests in connection with
the Restitution Fund set up under the Deferred Prosecution
Agreement. The Department of Labor has communicated with
IFS in connection with the engagement.
We received a letter in June 2003 on behalf of an alleged
shareholder demanding that we take appropriate legal action
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