PNC Bank 2011 Annual Report Download - page 203

billion in mortgage-backed securities in total in transactions
addressed by the complaint, approximately $345 million of
which was allegedly in transactions involving the National
City entities. The complaint alleges misrepresentations and
omissions in connection with the sales of the mortgage-backed
securities in question. In its complaint, the Federal Home
Loan Bank seeks, among other things, rescission, unspecified
damages, interest, and attorneys’ fees. In November 2010, the
defendants removed the case to the United States District
Court for the Northern District of Illinois. In January 2011, the
district court remanded the case to the Circuit Court of Cook
County. The plaintiff amended its complaint in March 2011
and filed a corrected amended complaint in April 2011. The
corrected amended complaint does not identify any additional
transaction for which the plaintiff seeks recovery from PNC
nor does it add any additional substantive allegations. In May
2011, the defendants filed a motion to dismiss the corrected
amended complaint. The court has not yet ruled on this
motion.
Weavering Macro Fixed Income Fund
In July 2010, PNC completed the sale of PNC Global
Investment Servicing (“PNC GIS”) to The Bank of New York
Mellon Corporation (“BNY-Mellon”), pursuant to a stock
purchase agreement dated February 1, 2010. In July 2009, the
liquidators of the Weavering Macro Fixed Income Fund
Limited (“Weavering”) issued a Plenary Summons in the High
Court, Dublin, Ireland, in connection with a European
subsidiary of PNC GIS’s provision of administration services
to Weavering. The Plenary Summons was served on the PNC
GIS subsidiary (GIS Europe) on or about June 30, 2010. In
May 2011, the liquidator served a Notice of Intention to
Proceed and Statement of Claim, which alleges, among other
things, that GIS Europe breached its contractual duties to
Weavering as well as an alleged duty of care to Weavering,
and investors in Weavering, and makes claims of breach of the
administration and accounting services agreement, negligence,
gross negligence, breach of duty, misrepresentation and
negligent misstatement. The statement of claim further alleges
that investors in Weavering lost approximately €282,000,000
and also expended approximately €98,000,000 in brokerage
and exchange commissions, interest, and fees as a result of the
transactions at issue. The statement of claim seeks, among
other things, damages, costs, and interest. In January 2012,
upon application by GIS Europe, the court issued a judgment
ordering a hearing on certain preliminary issues (a “modular
trial”).
In May 2011, BNY-Mellon provided notice to PNC of an
indemnification claim pursuant to the stock purchase
agreement related to this litigation.
365/360 Litigation
PNC Bank and National City Bank have been named as
defendants in three lawsuits seeking to certify classes of
commercial borrowers bringing claims for breach of contract
arising from the use of the 365/360 method of interest
computation in certain commercial promissory notes. The first
of these cases (DK&D Properties, LLC v. National City Bank
(Case no. 08 cv 680078)), was filed in December 2008 against
National City Bank in the Court of Common Pleas of
Cuyahoga County, Ohio. It seeks to certify a class consisting
of certain Ohio commercial borrowers of National City Bank
for these claims. In July 2009, the court denied National City
Bank’s motion to dismiss the complaint. In December 2011,
plaintiff filed a motion for class certification. The court has
not yet ruled on this motion. Also in December 2011, the court
granted National City Bank’s motion to stay the case pending
the decision of the Ohio Supreme Court in JNT Properties,
LLC v. KeyBank National Association (Case No. 11-1392),
which, although neither PNC Bank nor National City Bank are
parties, presents many of the same issues as those in DK&D
Properties.
The second case (Kreisler & Kreisler, LLC v. National City
Bank, et al. (Case no. 4:10-cv-00956)) was filed in the United
States District Court for the Eastern District of Missouri in
May 2010 against National City Bank and also purported to
name “PNC Bank Corp.” as a defendant. It sought to certify a
national class of commercial borrowers for these claims. In
March 2011, the district court granted the defendants’ motion
to dismiss the complaint. In October 2011, the United States
Court of Appeals for the Eighth Circuit affirmed the dismissal
by the district court. In the third case (PNC Bank, National
Association v. St. Louis PET Centers, LLC, et al. (Case no.
10SL-CC01076)), a borrower filed a counterclaim, brought as
a class action, against PNC Bank in the Circuit Court of
County of St. Louis, Missouri in November 2010. The claims
and proposed class set forth in this complaint are similar to
those in Kreisler & Kreisler. In March 2011, the court denied
our motion to dismiss the counterclaim.
Plaintiffs in these cases allege generally that they obtained
fixed or variable rate commercial loans from PNC Bank or
National City Bank pursuant to promissory notes or loan
agreements setting forth annual or per annum interest rates,
that the bank’s use of the 365/360 method of calculation of
interest caused the borrower to pay interest over a calendar
year at a higher rate than the per annum rate stated in the
promissory notes, and that this was a breach of the terms of
the promissory notes. Plaintiffs in each of these cases seek
declaratory and injunctive relief, compensatory damages,
prejudgment interest, and attorneys’ fees.
False Claims Act Lawsuit
PNC Bank has been named as a defendant, along with other
lenders, in a qui tam lawsuit brought in the U.S. District Court
for the Northern District of Georgia by two individuals on
behalf of the United States under the federal False Claims Act
(United States ex rel. Bibby & Donnelly v. Wells Fargo, et al.
(1:06-CV-0547-AT)). The lawsuit was originally filed under
seal, with a second amended complaint filed in June 2011. The
second amended complaint was unsealed by the district court
194 The PNC Financial Services Group, Inc. – Form 10-K