PNC Bank 2014 Annual Report Download - page 222

As a result of these types of factors, 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, and the aggregate estimated amount
provided above does not include an estimate for every
Disclosed Matter. 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 final
approval of the settlement in December 2013. Several
objectors have appealed the order of approval to the United
States Court of Appeals for the Second Circuit, which appeal
is pending. As a result of the previously funded litigation
escrow (described in Note 22 Commitments and Guarantees),
which will cover substantially all of our share of the Visa
portion of this settlement, we anticipate no material financial
impact from the monetary amount of this settlement.
Numerous merchants, including some large national
merchants, have objected to or requested exclusion (opted out)
from the proposed class settlements, and some of those opting
out have lawsuits pending in federal and state courts against
Visa, MasterCard and, in some instances, one or more of the
other issuing banks (including PNC).
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
litigation against Visa is also subject to the indemnification
obligations described in Note 22 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
204 The PNC Financial Services Group, Inc. – Form 10-K