PNC Bank 2011 Annual Report Download - page 202

on behalf of all current citizens of Pennsylvania who are
domiciled in Pennsylvania who had or have a PNC checking
or debit account used primarily for personal, family or
household purposes and who incurred overdraft and related
fees on transactions resulting from the methodology of posting
transactions from December 8, 2004 through August 14, 2010.
We filed preliminary objections seeking dismissal of each of
the claims in this lawsuit in March 2011. In January 2012, the
court ruled on our preliminary objections, dismissing several
claims but overruling our objections with respect to claims for
breach of contract and the duty of good faith and fair dealing
and for violation of Pennsylvania’s consumer protection
statute.
The sixth lawsuit (Trombley, et al. v. National City Bank
(Civil Action No. 10-00232 (JDB)) was brought as a class
action against National City Bank in the United States District
Court for the District of Columbia. In July 2010, the parties
reached a tentative settlement of this lawsuit. The settlement
class included all National City customers who incurred
during the period July 1, 2004 to August 15, 2010 overdraft
fees that had not been reversed or refunded. Several members
of the proposed settlement class, including the named plaintiff
in another lawsuit filed in the MDL Court, filed objections to
approval of this settlement. Following a hearing in July 2011,
the court granted final approval in December 2011. In
granting final approval, the court shortened the ending date for
the class period to June 21, 2010. One of the objectors
appealed the court’s order approving the settlement to the
United States Court of Appeals for the District of Columbia
Circuit. In February 2012, this objector moved to voluntarily
dismiss the appeal, and the court of appeals dismissed it,
thereby making the settlement final. The amount of the
settlement is not material to PNC and has been accrued.
The complaints in each of these lawsuits allege that the banks
engaged in unlawful practices in assessing overdraft fees
arising from electronic point-of-sale and ATM debits. The
principal practice challenged in these lawsuits is the banks’
purportedly common policy of posting debit transactions on a
daily basis from highest amount to lowest amount, thereby
allegedly inflating the number of overdraft fees assessed.
Other practices challenged include the failure to decline to
honor debit card transactions where the account has
insufficient funds to cover the transactions.
In the consolidated amended complaint in the MDL Court, the
plaintiffs assert claims for breach of the covenant of good
faith and fair dealing; unconscionability; conversion, unjust
enrichment; and violation of the consumer protection statutes
of Pennsylvania, Illinois and New Jersey. In the Henry case,
the remaining claims are for breach of contract and the duty of
good faith and fair dealing and for violation of Pennsylvania’s
consumer protection statute. The action against National City
in the District of Columbia added claims under the Ohio and
Michigan consumer protection statutes and the federal
Electronic Funds Transfer Act. In their complaints, the
plaintiffs seek, among other things, restitution of overdraft
fees paid, unspecified actual and punitive damages (with
actual damages, in some cases, trebled under state law),
pre-judgment interest, attorneys’ fees, and declaratory relief
finding the overdraft policies to be unfair and unconscionable.
Fulton Financial
In 2009, Fulton Financial Advisors, N.A. filed lawsuits against
PNC Capital Markets, LLC and NatCity Investments, Inc. in
the Court of Common Pleas of Lancaster County,
Pennsylvania arising out of Fulton’s purchase of auction rate
certificates (ARCs) through PNC and NatCity. Each of the
lawsuits alleges violations of the Pennsylvania Securities Act,
negligent misrepresentation, negligence, breach of fiduciary
duty, common law fraud, and aiding and abetting common law
fraud in connection with the purchase of the ARCs by Fulton.
Specifically, Fulton alleges that, as a result of the decline of
financial markets in 2007 and 2008, the market for ARCs
became illiquid; that PNC and NatCity knew or should have
known of the increasing threat of the ARC market becoming
illiquid; and that PNC and NatCity did not inform Fulton of
this increasing threat, but allowed Fulton to continue to
purchase ARCs, to Fulton’s detriment. In its complaints,
Fulton alleges that it then held ARCs purchased through PNC
for a price of more than $123 million and purchased through
NatCity for a price of more than $175 million. In each
complaint, Fulton seeks, among other things, unspecified
actual and punitive damages, rescission, attorneys’ fees and
interest.
In the case against PNC (Fulton Financial Advisors, N.A. v.
PNC Capital Markets, LLC (CI 09-10838)), PNC filed
preliminary objections to Fulton’s complaint, which were
denied. NatCity removed the case against it to the United
States District Court for the Eastern District of Pennsylvania
(Fulton Financial Advisors, N.A. v. NatCity Investments, Inc.
(No. 5:09-cv-04855)), and in November 2009 filed a motion
to dismiss the complaint. The court has not yet ruled on this
motion.
FHLB
In October 2010, the Federal Home Loan Bank of Chicago
brought a lawsuit in the Circuit Court of Cook County,
Illinois, against numerous financial companies, including The
PNC Financial Services Group, Inc., as successor in interest to
National City Corporation, and PNC Investments LLC, as
successor in interest to NatCity Investments, Inc. (Federal
Home Loan Bank of Chicago v. Bank of America Funding
Corp., et al. (Case No. 10CH45033)). The complaint alleges
that the defendants have liability to the Federal Home Loan
Bank of Chicago in a variety of capacities (in the case of the
National City entities, as underwriters) under Illinois state
securities law and common law in connection with the alleged
purchase of private-label mortgage-backed securities by the
Federal Home Loan Bank. According to the complaint, the
Federal Home Loan Bank purchased approximately $3.3
The PNC Financial Services Group, Inc. – Form 10-K 193