PNC Bank 2008 Annual Report Download - page 148

directors breached their fiduciary duties by, among other
things, causing National City to enter into the proposed
transaction at an allegedly inadequate and unfair price,
engaging in self-dealing and acting with divided loyalties, and
failing to disclose material information to the stockholders.
Some lawsuits allege violations of the federal securities laws.
In the cases naming PNC as a defendant, PNC is alleged to
have aided and abetted the other defendants’ breaches of
fiduciary duties. The various complaints seek, among other
remedies, an accounting, imposition of a constructive trust,
unspecified damages, rescission, costs of suit, and attorneys’
fees.
In addition, the plaintiffs in one of the pending derivative
lawsuits against the National City directors in the Cuyahoga
County Court of Common Pleas and in the pending derivative
lawsuit in federal court in Ohio, each referred to above, have
moved to amend their complaints to add merger-related
claims, including claims that National City’s directors agreed
to sell National City in order to extinguish their own personal
liability in derivative litigation pending against them. PNC is
not named as a defendant in either of these proposed amended
complaints. In December 2008, the Ohio state court denied the
plaintiffs’ motion to lift the stay and to conduct expedited
discovery in support of the proposed amended complaint.
In December 2008, the defendants entered into a
memorandum of understanding with the plaintiffs regarding
the settlement of the Delaware lawsuit, as well as one of the
cases pending in the Cuyahoga County, Ohio, Court of
Common Pleas and the merger-related claims in the derivative
case pending in the Ohio state court. In connection with the
settlement contemplated by the memorandum of
understanding, National City made additional disclosures
related to the proposed merger. Following completion of
confirmatory discovery by counsel to the plaintiffs, the parties
entered into a stipulation of settlement on February 2, 2009.
The stipulation of settlement is subject to customary
conditions, including court approval following notice to
National City’s stockholders. In February 2009, the Court of
Chancery preliminarily approved a class of all persons who
were National City common stockholders during the period
from the close of business on October 23, 2008 through (and
including) December 31, 2008. The Court of Chancery also
preliminarily approved the settlement and has scheduled a
hearing in May 2009 at which the court will consider the
fairness, reasonableness, and adequacy of the settlement. If the
settlement is finally approved by the court, it will resolve and
release all claims in all actions that were or could have been
brought challenging any aspect of the proposed merger, the
merger agreement, and any disclosure made in connection
therewith. In addition, in connection with the settlement, the
parties contemplate that plaintiffs’ counsel will file a petition
in the Court of Chancery for an award of attorneys’ fees and
expenses to be paid by PNC.
Adelphia
Some of our subsidiaries are defendants (or have potential
contractual contribution obligations to other defendants) in
several pending lawsuits brought during late 2002 and 2003
arising out of the bankruptcy of Adelphia Communications
Corporation and its subsidiaries.
One of the lawsuits was brought on Adelphia’s behalf by the
unsecured creditors’ committee and equity committee in
Adelphia’s consolidated bankruptcy proceeding and was
removed to the United States District Court for the Southern
District of New York by order dated February 9, 2006.
Pursuant to Adelphia’s plan of reorganization, this lawsuit will
be prosecuted by a contingent value vehicle, known as the
Adelphia Recovery Trust. In October 2007, the Adelphia
Recovery Trust filed an amended complaint in this lawsuit,
adding defendants and making additional allegations.
In June 2008, the district court granted in part defendants’
motion to dismiss. The court dismissed the principal
bankruptcy law claims that had not previously been dismissed
by the Bankruptcy Court, including claims alleging voidable
preference payments, fraudulent transfers, and equitable
disallowance. The effect of this ruling is to dismiss from this
lawsuit all claims against most of the defendants but leave
pending against PNC and other original members of Adelphia
loan syndicates and then-affiliated investment banks the other
claims. In December 2008, the court granted a motion made
on behalf of a number of defendants to enter final judgment on
the dismissed claims to permit immediate appellate review of
the issues resolved by the district court in June 2008 and by
the bankruptcy court prior to the filing of the amended
complaint. The district court has scheduled the case for trial in
February 2010.
The other lawsuits were brought by holders of debt and equity
securities of Adelphia and have been consolidated for pretrial
purposes in the United States District Court for the Southern
District of New York.
The pending lawsuits arise out of lending and investment
banking activities engaged in by PNC subsidiaries and many
other financial services companies. 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.
Sterling Financial Corporation Matters
In April 2008, we completed the acquisition of Sterling
through the merger of Sterling Financial Corporation into The
PNC Financial Services Group, Inc. As a result, we are now
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