PNC Bank 2012 Annual Report Download - page 240

litigation against Visa is also subject to the indemnification
obligations described in Note 24 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 October 2011, the
plaintiffs filed a joint consolidated amended class action
complaint covering all of the class action lawsuits pending in
this proceeding. The amended complaint names CBNV,
another bank, and purchasers of loans originated by CBNV
and the other bank (including the Residential Funding
Company, LLC) as defendants. (In May 2012, the Residential
Funding Company, LLC filed for bankruptcy protection under
Chapter 11.) The principal allegations in the amended
complaint are that a group of persons and entities collectively
characterized as the “Shumway/Bapst Organization” referred
prospective second residential mortgage loan borrowers to
CBNV and the other bank, that CBNV and the other bank
charged these borrowers improper title and loan fees at loan
closings, that the disclosures provided to the borrowers at loan
closings were inaccurate, and that CBNV and the other bank
paid some of the loan fees to the Shumway/Bapst
Organization as purported “kickbacks” for the referrals. The
amended complaint asserts claims for violations of the Real
Estate Settlement Procedures Act (RESPA), the Truth in
Lending Act (TILA), as amended by the Home Ownership and
Equity Protection Act (HOEPA), and the Racketeer Influenced
and Corrupt Organizations Act (RICO).
The amended complaint seeks to certify a class of all
borrowers who obtained a second residential non-purchase
money mortgage loan, secured by their principal dwelling,
from either CBNV or the other defendant bank, the terms of
which made the loan subject to HOEPA. The plaintiffs allege
that there are approximately 50,000 members of this class.
They seek, among other things, unspecified damages
(including treble damages under RICO and RESPA),
rescission of loans, declaratory and injunctive relief, interest,
and attorneys’ fees. In November 2011, the defendants filed a
motion to dismiss the amended complaint, which was argued
in October 2012. The court has not yet ruled on this motion.
North Carolina Proceedings. The plaintiffs in Bumpers make
similar allegations to those included in the amended complaint
in the MDL proceedings. Following the remand to North
Carolina state court, the plaintiffs in Bumpers sought to
represent a class of North Carolina borrowers in state court
proceedings in North Carolina. The plaintiffs claim that this
class consists of approximately 650 borrowers. The district
court in Pennsylvania handling the MDL proceedings enjoined
class proceedings in Bumpers in March 2008. In April 2008,
the North Carolina superior court granted the Bumpers
plaintiffs’ motion for summary judgment on their individual
claims and awarded them approximately $11,000 each plus
interest. CBNV appealed the grant of the motion for summary
judgment. In September 2011, the North Carolina Court of
Appeals affirmed in part and reversed in part the granting of
the plaintiffs’ motion for summary judgment. The court
affirmed the judgment on the plaintiffs’ claim that they paid a
loan discount fee but were not provided a loan discount. It
reversed the judgment on the plaintiffs’ claim that they were
overcharged for settlement services and remanded that claim
The PNC Financial Services Group, Inc. – Form 10-K 221