PNC Bank 2012 Annual Report Download - page 239

ranges of possible losses, as of December 31, 2012, we
estimate that it is reasonably possible that we could incur
losses in an aggregate amount of up to approximately $450
million. The estimates included in this amount are based on
our analysis of currently available information and are subject
to significant judgment and a variety of assumptions and
uncertainties. As new information is obtained we may change
our estimates. Due to the inherent subjectivity of the
assessments and unpredictability of outcomes of legal
proceedings, any amounts accrued or included in this
aggregate amount may not represent the ultimate loss to us
from the legal proceedings in question. Thus, our exposure
and ultimate losses may be higher, and possibly significantly
so, than the amounts accrued or this aggregate amount.
The aggregate estimated amount provided above does not
include an estimate for every Disclosed Matter, as we are
unable, at this time, to estimate the losses that it is reasonably
possible that we could incur or ranges of such losses with
respect to some of the matters disclosed for one or more of the
following reasons. In our experience, legal proceedings are
inherently unpredictable. In many legal proceedings, various
factors exacerbate this inherent unpredictability, including,
among others, one or more of the following: the proceeding is
in its early stages; the damages sought are unspecified,
unsupported or uncertain; it is unclear whether a case brought
as a class action will be allowed to proceed on that basis or, if
permitted to proceed as a class action, how the class will be
defined; the plaintiff is seeking relief other than or in addition
to compensatory damages; the matter presents meaningful
legal uncertainties, including novel issues of law; we have not
engaged in meaningful settlement discussions; discovery has
not started or is not complete; there are significant facts in
dispute; and there are a large number of parties named as
defendants (including where it is uncertain how damages or
liability, if any, will be shared among multiple defendants).
Generally, the less progress that has been made in the
proceedings or the broader the range of potential results, the
harder it is for us to estimate losses or ranges of losses that it
is reasonably possible we could incur. Therefore, as the
estimated aggregate amount disclosed above does not include
all of the Disclosed Matters, the amount disclosed above does
not represent our maximum reasonably possible loss exposure
for all of the Disclosed Matters. The estimated aggregate
amount also does not reflect any of our exposure to matters
not so disclosed, as discussed below under “Other.”
We include in some of the descriptions of individual
Disclosed Matters certain quantitative information related to
the plaintiff’s claim against us as alleged in the plaintiff’s
pleadings or other public filings or otherwise publicly
available information. While information of this type may
provide insight into the potential magnitude of a matter, it
does not necessarily represent our estimate of reasonably
possible loss or our judgment as to any currently appropriate
accrual.
Some of our exposure in Disclosed Matters may be offset by
applicable insurance coverage. We do not consider the
possible availability of insurance coverage in determining the
amounts of any accruals (although we record the amount of
related insurance recoveries that are deemed probable up to
the amount of the accrual) or in determining any estimates of
possible losses or ranges of possible losses.
Interchange Litigation
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 which in
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 Master Card®. The plaintiffs,
merchants operating commercial businesses throughout the
U.S. 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 July 2012, the parties entered into a memorandum of
understanding with the class plaintiffs and an agreement in
principle with certain individual plaintiffs with respect to a
settlement of these cases, under which the defendants will
collectively pay approximately $6.6 billion to the class and
individual settling plaintiffs and have agreed to changes in the
terms applicable to their respective card networks (including
an eight-month reduction in default credit interchange rates).
The parties entered into a definitive agreement with respect to
this settlement in October 2012. The court granted preliminary
approval of this settlement in November 2012. The settlement
remains subject to, among other things, final court approval.
As a result of the previously funded litigation escrow
(described in Note 24 Commitments and Guarantees), which
will cover substantially all of our share of the Visa portion, we
anticipate no material financial impact from the monetary
amount of this settlement.
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
220 The PNC Financial Services Group, Inc. – Form 10-K