PNC Bank 2009 Annual Report Download - page 160

N OTE 24 L EGAL P ROCEEDINGS
National City Matters
In December 2008, we completed the acquisition of National
City through the merger of National City into The PNC
Financial Services Group, Inc. As a result, we are now
responsible for litigation and other claims pending against
National City and its subsidiaries at that time. We are also
responsible for litigation and other claims arising out of the
conduct of the business of National City and its subsidiaries
before the acquisition that have been or will be in the future
brought against us.
The lawsuits and other matters described below arise from
National City’s business prior to the merger. We may be
responsible for indemnifying individual defendants in these
lawsuits and other matters.
See also “National City Acquisition-Related Litigation” below
for information regarding litigation filed against PNC and
National City relating to the merger and “Regulatory and
Governmental Inquiries” for information regarding regulatory
matters with respect to National City.
Visa. Beginning in June 2005, a series of antitrust lawsuits were
filed against Visa®, MasterCard®, and several major financial
institutions, including cases naming National City (since
merged into PNC) and its subsidiary, National City Bank of
Kentucky, since merged into National City Bank. The cases
have been consolidated for pretrial proceedings in the United
States District Court for the Eastern District of New York.
Those cases naming National City were brought as class actions
on behalf of all persons or business entities who have accepted
Visa®or Master Card®. The plaintiffs, merchants operating
commercial businesses throughout the US and trade
associations, allege that the defendants conspired to fix the
prices for general purpose card network services, resulting in
the payment of inflated interchange fees, in violation of the
antitrust laws. In January 2009, the plaintiffs filed amended and
supplemental complaints adding, among other things,
allegations that the restructuring of Visa and MasterCard, each
of which included an initial public offering, violated the
antitrust laws. The plaintiffs seek injunctive relief, actual and
treble damages and attorneys’ fees. On January 8, 2008, the
district court dismissed plaintiffs’ claims for damages incurred
prior to January 1, 2004. In April 2009, the defendants filed a
motion to dismiss the amended and supplemental complaints.
National City and National City Bank entered into judgment
and loss sharing agreements with Visa and certain other banks
with respect to all of the above referenced litigation. All of this
litigation against Visa is also subject to the indemnification
obligations described in Note 25 Commitments and Guarantees.
PNC Bank, N.A. is not named a defendant in any of the Visa or
MasterCard related antitrust litigation nor was it initially a party
to the judgment or loss sharing agreements, but it has been
subject to these indemnification obligations and became
responsible for National City Bank’s position in the litigation
and under the agreements upon completion of the merger of
National City Bank into PNC Bank, N.A.
Merrill Lynch. In December 2006, National City Bank completed
the sale of its First Franklin nonprime mortgage origination and
servicing platform to Merrill Lynch Bank & Trust Co., FSB. By
letters dated April 10, 2008 and June 16, 2008, Merrill Lynch
notified National City Bank of its indemnification claim pursuant
to the purchase agreement. Merrill Lynch alleged that National
City Bank breached certain representations or warranties
contained in the purchase agreement related to Merrill Lynch’s
alleged repurchases of mortgage loans originated by First
Franklin prior to its sale to Merrill Lynch as well as mortgage
loans as to which it faced repurchase demands. Merrill Lynch
also asserted that National City Bank was responsible for
indemnifying Merrill Lynch for certain settled or pending
lawsuits against First Franklin. In December 2009, we settled all
outstanding breach of representation and warranty and
indemnification claims by Merrill Lynch. The amount of the
settlement is not material to PNC.
ERISA Cases. Commencing in January 2008, a series of
substantially similar lawsuits were brought against National
City, the Administrative Committee of the National City
Savings and Investment Plan (the Plan), National City Bank
(as trustee), and some of National City’s officers and
directors. These cases have been consolidated in the United
States District Court for the Northern District of Ohio, and the
plaintiffs have filed a consolidated amended complaint. The
consolidated action was brought as a class action on behalf of
all participants in or beneficiaries of the Plan at any time
between September 5, 2006 and the present and whose Plan
accounts included investments in National City common
stock, as well as all participants in or beneficiaries of the Plan
and whose accounts were invested in Allegiant Funds from
March 25, 2002 to the present. The consolidated complaint
alleges breaches of fiduciary duty under the Employee
Retirement Income Security Act of 1974 (ERISA) relating to,
among other things, National City stock being offered as an
investment alternative in the Plan, conflicts of interest, and
monitoring and disclosure obligations. The consolidated
complaint also alleges that the Administrative Committee
defendants breached their fiduciary duties under ERISA,
engaged in prohibited transactions by authorizing or causing
the Plan to invest in Allegiant Funds, and violated ERISA
duties of loyalty by virtue of National City’s receipt of
financial benefits in the forms of fees paid to Allegiant Asset
Management Company for managing the mutual funds. The
complaint seeks equitable relief (including a declaration that
defendants breached their ERISA fiduciary duties, an order
compelling the defendants to make good any losses to the Plan
caused by their actions, the imposition of a constructive trust
on any profits earned by the defendants from their actions and
restitution), unspecified money damages and attorneys’ fees
and costs. A motion to dismiss the amended consolidated
complaint is pending. In February 2010, the parties reached a
tentative settlement, which is subject to, among other things,
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