PNC Bank 2013 Annual Report Download - page 225

O VERDRAFT L ITIGATION
Beginning in October 2009, PNC Bank, National City Bank
and RBC Bank (USA) have been named in lawsuits brought as
class actions relating to the manner in which they charged
overdraft fees on ATM and debit transactions to customers
and related matters. Several of these lawsuits have been
settled. The following is a description of the remaining
pending lawsuits.
Status of MDL Cases. Two pending lawsuits naming RBC
Bank (USA), along with similar lawsuits pending against
numerous other banks, have been consolidated for pre-trial
proceedings in the United States District Court for the
Southern District of Florida (the “MDL Court”) under the
caption In re Checking Account Overdraft Litigation (MDL
No. 2036, Case No. 1:09-MD-02036-JLK ). A consolidated
amended complaint was filed in December 2010 that
consolidated all of the claims in these MDL Court cases. The
first case against RBC Bank (USA) pending in the MDL Court
(Dasher v. RBC Bank (10-cv-22190-JLK)) was filed in July
2010 in the United States District Court for the Southern
District of Florida. The other case against RBC Bank (USA)
(Avery v. RBC Bank (Case No. 10-cv-329)) was originally
filed in North Carolina state court in July 2010 and was
removed to the United States District Court for the Eastern
District of North Carolina before being transferred to the
MDL Court. An amended complaint was filed in Avery in
August 2010.
The cases now pending in the MDL Court seek to certify
multi-state classes of customers for the common law claims
described below (covering all states in which RBC Bank
(USA) had retail branch operations during the class periods),
and subclasses of RBC Bank (USA) customers with accounts
in North Carolina branches, with each subclass being asserted
for purposes of claims under those states’ consumer protection
statutes. No class periods are stated in any of the complaints,
other than for the applicable statutes of limitations, which vary
by state and claim.
The customer agreements with the RBC Bank (USA) plaintiffs
contain arbitration provisions. RBC Bank (USA)’s original
motion in Dasher to compel arbitration under these provisions
was denied by the MDL Court. This denial was appealed to
the United States Court of Appeals for the Eleventh Circuit.
While this appeal was pending, the United States Supreme
Court issued its decision in AT&T Mobility v. Concepcion,
following which the court of appeals vacated the MDL
Court’s denial of the arbitration motion and remanded to the
MDL Court for further consideration in light of the
Concepcion decision. RBC Bank (USA)’s motion to compel
arbitration, now covering both Dasher and Avery, was denied
in January 2013. We appealed the denial of the motion to the
United States Court of Appeals for the Eleventh Circuit,
which, in February 2014, affirmed the order of the district
court denying arbitration.
Status of Non-MDL Case. In December 2010, an additional
lawsuit (Henry v. PNC Bank, National Association (No. GD-
10-022974)) was filed in the Court of Common Pleas of
Allegheny County, Pennsylvania 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. In
November 2013, the parties agreed to a dismissal of this
lawsuit.
Nature of Claims. 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 asserted claims for unconscionability; unjust
enrichment; and violation of the consumer protection statute
of North Carolina. In the Dasher complaint,the plaintiffs also
assert claims for a breach of the covenant of good faith and
fair dealing and for conversion. In the Henry case, the
remaining claims were for breach of contract and the duty of
good faith and fair dealing and for violation of Pennsylvania’s
consumer protection statute. 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.
F
ULTON F INANCIAL
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
The PNC Financial Services Group, Inc. – Form 10-K 207