PNC Bank 2007 Annual Report Download - page 18

other companies and individuals have been named as
defendants in one or more of these lawsuits. Collectively, with
respect to some or all of the defendants, the lawsuits allege
federal law claims (including violations of federal securities
and banking laws), violations of common law duties, aiding
and abetting such violations, voidable preference payments,
and fraudulent transfers, among other matters. The lawsuits
seek monetary damages (including in some cases punitive or
treble damages), interest, attorneys’ fees and other expenses,
and a return of the alleged voidable preference and fraudulent
transfer payments, among other remedies.
We believe that we have defenses to the claims against us in
these lawsuits, as well as potential claims against third parties,
and intend to defend the remaining lawsuits vigorously. These
lawsuits involve complex issues of law and fact, presenting
complicated relationships among the many financial and other
participants in the events giving rise to these lawsuits, and have
not progressed to the point where we can predict the outcome of
the non-settled lawsuits. It is not possible to determine what the
likely aggregate recoveries on the part of the plaintiffs in these
remaining matters might be or the portion of any such
recoveries for which we would ultimately be responsible, but
the final consequences to PNC could be material.
Data Treasury
In March 2006, a first amended complaint was filed in the
United States District Court for the Eastern District of Texas
by Data Treasury Corporation against PNC and PNC Bank,
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
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