PNC Bank 2010 Annual Report Download - page 183
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Please find page 183 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.leave pending claims against PNC and other original members
of Adelphia loan syndicates and then-affiliated investment
banks. The district court’s ruling was affirmed on appeal. This
lawsuit arose 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 lawsuit alleged violations of federal
banking laws, violations of common law duties, aiding and
abetting such violations, voidable preference payments, and
fraudulent transfers, among other matters. The lawsuit sought
damages (including in some cases punitive or tripled
damages), interest, attorneys’ fees and other expenses, and a
return of the alleged voidable preference and fraudulent
transfer payments, among other remedies.
In September 2010, PNC and all but one other defendant in
this lawsuit reached a complete settlement of all remaining
claims, which received final court approval in November,
2010. We have paid our share of the settlement, which was not
material to PNC.
There is one remaining Adelphia-related lawsuit (W. R. Huff
Asset Management Co., L.L.C. v. Deloitte & Touche, L.L.P., et
al. (03 MD 1529 (LMM), 03-CV-5752 (LMM)) alleging
violations of the federal securities laws in which a PNC
subsidiary is a defendant, brought by holders of debt securities
of Adelphia and consolidated for pretrial purposes in the
United States District Court for the Southern District of New
York. In the complaint, the plaintiff seeks, among other
things, unspecified damages, interest, and attorneys’ fees.
CBNV Mortgage Litigation
Between 2001 and 2003, on behalf of either individual
plaintiffs or proposed classes of plaintiffs, several separate
lawsuits were filed in state and federal courts against
Community Bank of Northern Virginia (CBNV) and other
defendants asserting claims arising from second mortgage
loans made to the plaintiffs. CBNV was merged into one of
Mercantile Bankshares Corporation’s banks before PNC
acquired Mercantile in 2007. The state lawsuits were removed
to federal court and, with the lawsuits that had been filed in
federal court, were consolidated for pre-trial proceedings in a
multidistrict litigation (MDL) proceeding in the United States
District Court for the Western District of Pennsylvania under
the caption In re: Community Bank of Northern Virginia and
Guaranty Bank Second Mortgage Litigation (No. 03-0425
(W.D. Pa.), MDL No. 1674). In January 2008, the
Pennsylvania district court issued an order sending back to the
General Court of Justice, Superior Court Division, for Wake
County, North Carolina the claims of two proposed class
members. This case, which was originally filed in 2001, is
captioned Bumpers, et al. v. Community Bank of Northern
Virginia (01-CVS-011342).
The plaintiffs in the MDL proceedings and in the Bumpers
lawsuit complain of an alleged illegal home equity lending
scheme of the Shumway/Bapst Organization (Shumway). The
plaintiffs allege that Shumway used CBNV and another bank
as “fronts” to make high-interest, high-fee loans that would
otherwise have been prohibited by state usury laws but for the
banks’ status as depository institutions. The plaintiffs further
allege that, in the course of doing so, CBNV misrepresented
the apportionment and distribution of settlement and title fees,
and that these fees included illegal “kickbacks” to Shumway
that did not reflect the value of any settlement services
actually performed. The plaintiffs claim violations of the Real
Estate Settlement Procedures Act (RESPA), the Racketeer
Influenced and Corrupt Organizations Act (RICO), and certain
state laws. In their complaints, the plaintiffs in the lawsuits
that are part of the MDL proceedings in Pennsylvania seek,
among other things, unspecified damages (including tripled
damages under RICO and RESPA), rescission of loans,
interest, and attorneys’ fees. The two plaintiffs in Bumpers
have procured individual judgments totaling approximately
$11,000 each plus interest, and, as described below, they now
seek to assert claims seeking similar damages on behalf of a
class of North Carolina borrowers, which they claim consists
of approximately 650 borrowers.
Status of MDL Proceedings in Pennsylvania. In August 2006,
a proposed settlement agreement covering some of the
plaintiffs and class members (those who have second
mortgages that had been assigned to another defendant,
Residential Finance Corporation (RFC)) was submitted to the
district court for its approval. In August 2008, the district
court gave final approval to the settlement agreement. The
class covered by this settlement and certified by the district
court in its approval of the settlement consisted of
approximately 44,000 borrowers and is referred to as the
Kessler class.
Some objecting members of the Kessler class appealed the
final approval order to the United States Court of Appeals for
the Third Circuit. In September 2010, the court of appeals
vacated the district court’s class certification decision and
approval of the class settlement and remanded the case to the
district court for further proceedings. In their appeal, the
objecting Kessler class members had asserted that CBNV’s
annual percentage rate disclosures violated the Truth in
Lending Act (TILA) and the Home Ownership and Equity
Protection Act (HOEPA), that those claims are very valuable,
and that the settling plaintiffs should have asserted those
claims. The settling plaintiffs advanced a number of reasons
why they had not asserted TILA/HOEPA claims. The court of
appeals decision focused on the district court’s finding that
such claims were time-barred and for that reason not viable.
The court of appeals remanded the case to the district court for
consideration of certain aspects of its decision certifying the
settlement class and approving the settlement. The court of
appeals instructed the district court to consider (a) whether a
sub-class should be created for class members whose
transactions occurred within one year (the limitations period
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