PNC Bank 2011 Annual Report Download - page 200

turn was merged into PNC Bank, N.A.). The cases have been
consolidated for pretrial proceedings in the United States
District Court for the Eastern District of New York under the
caption In re Payment Card Interchange Fee and Merchant-
Discount Antitrust Litigation (Master File
No. 1:05-md-1720-JG-JO). Those cases naming National City
were brought as class actions on behalf of all persons or
business entities who have accepted Visa®or MasterCard®.
The plaintiffs, merchants operating commercial businesses
throughout the US and trade associations, allege, among other
things, that the defendants conspired to fix the prices for
general purpose card network services and otherwise imposed
unreasonable restraints on trade, 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. In their
complaints, the plaintiffs seek, among other things, injunctive
relief, unspecified damages (trebled under the antitrust laws)
and attorneys’ fees. In January 2008, the district court
dismissed the 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. In May
2009, class plaintiffs filed a motion for class certification.
Both of these motions were argued in November 2009. In
February 2011, the defendants filed a motion for summary
judgment, which was argued in November 2011. The court
has not yet ruled on any of these motions.
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 the
litigation against Visa is also subject to the indemnification
obligations described in Note 23 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 responsibilities under the agreements upon
completion of the merger of National City Bank into PNC
Bank, N.A. In March 2011, we entered into a MasterCard
Settlement and Judgment Sharing Agreement with
MasterCard and other financial institution defendants and an
Omnibus Agreement Regarding Interchange Litigation
Sharing and Settlement Sharing with Visa, MasterCard and
other financial institution defendants. If there is a resolution of
all claims against all defendants, the Omnibus Agreement, in
substance, apportions that resolution into a Visa portion and a
MasterCard portion, with the Visa portion being two-thirds
and the MasterCard portion being one-third. This
apportionment only applies in the case of either a global
settlement involving all defendants or an adverse judgment
against the defendants, to the extent that damages either are
related to the merchants’ inter-network conspiracy claims or
are otherwise not attributed to specific MasterCard or Visa
conduct or damages. The MasterCard portion (or any
MasterCard-related liability not subject to the Omnibus
Agreement) will then be apportioned under the MasterCard
Settlement and Judgment Sharing Agreement among
MasterCard and PNC and the other financial institution
defendants that are parties to this agreement. The
responsibility for the Visa portion (or any Visa-related
liability not subject to the Omnibus Agreement) will be
apportioned under the pre-existing indemnification
responsibilities and judgment and loss sharing agreements.
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,
currently under the caption In re: Community Bank of
Northern Virginia Lending Practices 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. These claims are asserted in a case originally filed
in 2001 and captioned Bumpers, et al. v. Community Bank of
Northern Virginia (01-CVS-011342).
MDL Proceedings in Pennsylvania. In August 2006, a proposed
settlement agreement covering some of the class members was
submitted to the district court handling the MDL proceedings
for its approval, which it granted in August 2008. The class
covered by this settlement 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 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. 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. As a result of the
settling plaintiffs’ decision not to continue to pursue the
settlement and instead participate in the joint amended
consolidated class action complaint described below,
however, there will be no proceedings in the district court on
the remand relating to the settlement.
The PNC Financial Services Group, Inc. – Form 10-K 191