PNC Bank 2007 Annual Report Download - page 114

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 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 Patent Office has since
indicated that all of the claims are allowable. In September
2007, the parties agreed to stay the other two patents-in-suit
pending reexamination of those patents. The entire case is
presently stayed. Data Treasury has moved to lift the stay.
CBNV Mortgage Litigation
Between 2001 and 2003, on behalf of either individual
plaintiffs or a putative class of plaintiffs, several separate
actions were filed in state and federal court against
Community Bank of Northern Virginia (“CBNV”) and other
defendants challenging the validity of second mortgage loans
the defendants made to the plaintiffs. CBNV was merged into
one of Mercantile’s banks. These cases were either filed in, or
removed to, the United States District Court for the Western
District of Pennsylvania.
In July 2003, the court conditionally certified a class for
settlement purposes, and preliminarily approved a settlement of
the various actions. Thereafter, certain plaintiffs who had
initially opted out of the proposed settlement and other
objectors challenged the validity of the settlement in the district
court. The district court approved the settlement and these “opt
out” plaintiffs and other objectors appealed to the United States
Court of Appeals for the Third Circuit. In August 2005, the
court of appeals reversed the district court’s approval of the
settlement and remanded the case to the district court with
instructions to consider and address certain specific issues when
re-evaluating the settlement. In August 2006, the settling parties
submitted a modified settlement agreement to the district court
for its approval. In January 2008, the district court conditionally
certified a class for settlement purposes, preliminarily approved
the proposed modified settlement agreement and directed that
the settlement agreement be submitted to the class members for
their consideration. This settlement remains subject to final
court approval. Some of the objecting plaintiffs are seeking
permission to appeal the district court’s decision certifying the
class for settlement purposes and preliminarily approving the
settlement. These same plaintiffs also filed a motion to stay the
district court proceedings pending a decision on their appeal
request. The district court denied the stay request, and there is a
similar stay motion pending in the appeals court.
In January 2008, the district court also issued an order sending
back to state court in North Carolina the claims of certain
plaintiffs seeking to represent a class of North Carolina
borrowers.
In addition to these lawsuits, several individuals have filed
actions on behalf of themselves or a putative class of plaintiffs
alleging claims involving CBNV’s second mortgage loans.
These actions also were filed in, or transferred for coordinated
or consolidated pre-trial proceedings to, the United States
District Court for the Western District of Pennsylvania.
The plaintiffs in these lawsuits seek unquantified monetary
damages, interest, attorneys’ fees and other expenses, and a
refund of all origination fees and fees paid for title services.
BAE Derivative Litigation
In September 2007, a derivative lawsuit was filed on behalf of
BAE Systems plc by a holder of its American Depositary
Receipts against current and former directors and officers of
BAE, Prince Bandar bin Sultan, PNC (as successor to Riggs
National Corporation and Riggs Bank, N.A.), Joseph L.
Allbritton, Robert L. Allbritton, and Barbara Allbritton. The
complaint alleges that BAE directors and officers breached
their fiduciary duties by making or permitting to be made
improper or illegal bribes, kickbacks and other payments with
respect to a military contract obtained in the mid-1980s from
the Saudi Arabian Ministry of Defense, and that Prince Bandar
was the primary recipient or beneficiary of these payments.
The complaint also alleges that Riggs, together with the
Allbrittons (as former directors, officers and controlling
persons of Riggs), acted as the primary intermediaries through
which the payments were laundered and actively concealed,
and aided and abetted the BAE defendants’ breaches of
fiduciary duties. As it relates to PNC, plaintiff is seeking
unquantified monetary damages (including punitive damages),
an accounting, interest, attorneys’ fees and other expenses. We
believe that we have defenses to the claims against us in this
lawsuit and intend to defend it vigorously. We have filed a
motion seeking dismissal of the claims against us. As a result
of our acquisition of Riggs, PNC may be responsible for
indemnifying the Allbrittons in connection with this lawsuit.
Regulatory and Governmental Inquiries
In connection with an audit of the services provided by
Mercantile Safe Deposit & Trust Company (now PNC Bank)
as trustee of the AFL-CIO Building Investment Trust, a
collective trust fund that invests pension plan assets in
commercial real estate assets, the United States Department of
Labor has identified the possibility that Mercantile collected
unauthorized fees in violation of ERISA. If it is ultimately
determined that these fees were collected in violation of the
law, we could be subject to requirements to return the fees to
the Building Investment Trust, with interest, and could also be
subject to penalties and taxes.
As a result of the regulated nature of our business and that of a
number of our subsidiaries, particularly in the banking and
securities areas, we and our subsidiaries are the subject of
investigations and other forms of regulatory inquiry, often as
part of industry-wide regulatory reviews of specified
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