PNC Bank 2014 Annual Report Download - page 225

NatCity for a price of more than $175 million. In each
complaint, Fulton seeks, among other things, unspecified
actual and punitive damages, rescission, attorneys’ fees and
interest.
In the case against PNC (Fulton Financial Advisors, N.A. v.
PNC Capital Markets, LLC (CI 09-10838)), PNC filed
preliminary objections to Fulton’s complaint, which were
denied. NatCity removed the case against it to the United States
District Court for the Eastern District of Pennsylvania ( Fulton
Financial Advisors, N.A. v. NatCity Investments, Inc.(No.5:09-
cv-04855)), and in November 2009 filed a motion to dismiss the
complaint. In October 2013, the court granted the motion to
dismiss with respect to claims under the Pennsylvania Securities
Act and for negligent misrepresentation, common law fraud,
and aiding and abetting common law fraud and denied the
motion with respect to claims for negligence and breach of
fiduciary duty. Fulton filed an amended complaint in December
2013, reasserting its negligence and breach of fiduciary duty
claims and adding a new claim under the Pennsylvania
Securities Act. Fulton and NatCity filed motions for summary
judgment in February 2015.
Weavering Macro Fixed Income Fund
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 the provision of administration services to Weavering by
a European subsidiary of PNC Global Investment Servicing
(“PNC GIS”), then a subsidiary of PNC. The Plenary
Summons was served on the PNC GIS subsidiary (“GIS
Europe”) on or about June 30, 2010.
In July 2010, PNC completed the sale of PNC GIS to The
Bank of New York Mellon Corporation (“BNY Mellon”),
pursuant to a stock purchase agreement dated February 1,
2010. In May 2011, BNY Mellon provided notice to PNC of
an indemnification claim pursuant to the stock purchase
agreement related to this litigation. PNC’s responsibility for
this litigation was subject to the terms and limitations included
in the indemnification provisions of the stock purchase
agreement.
In November 2014, the parties reached a settlement of this
litigation. The settlement is conditioned on court approval in
the Cayman Islands, where Weavering was organized. The
Cayman Islands court approved the settlement in February
2015. The amount of the settlement is not material to PNC.
In its Notice of Intention to Proceed and Statement of Claim,
which the liquidator served in May 2011, the liquidator
alleged, 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 made
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 alleged that investors in Weavering lost
approximately €282,000,000 and that, in addition, 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 sought, among other things,
damages, costs, and interest. In January 2014, in response to a
motion made by GIS Europe, the court entered a consent order
adjourning the motion and staying the plaintiff’s claims until
the plaintiff complies in full with its discovery
obligations. The plaintiff was required to complete its
production by early July 2014, but, in that month, the court
extended the deadline for doing so until December 2014.
Captive Mortgage Reinsurance Litigation
In December 2011, a lawsuit (White, et al. v. The PNC
Financial Services Group, Inc., et al. (Civil Action No. 11-
7928)) was filed against PNC (as successor in interest to
National City Corporation and several of its subsidiaries) and
several mortgage insurance companies in the United States
District Court for the Eastern District of Pennsylvania. This
lawsuit, which was brought as a class action, alleges that
National City structured its program of reinsurance of private
mortgage insurance in such a way as to avoid a true transfer of
risk from the mortgage insurers to National City’s captive
reinsurer. The plaintiffs allege that the payments from the
mortgage insurers to the captive reinsurer constitute
kickbacks, referral payments, or unearned fee splits prohibited
under the Real Estate Settlement Procedures Act (RESPA), as
well as common law unjust enrichment. The plaintiffs claim,
among other things, that from the beginning of 2004 until the
end of 2010 National City’s captive reinsurer collected from
the mortgage insurance company defendants at least $219
million as its share of borrowers’ private mortgage insurance
premiums and that its share of paid claims during this period
was approximately $12 million. The plaintiffs seek to certify a
nationwide class of all persons who obtained residential
mortgage loans originated, funded or originated through
correspondent lending by National City or any of its
subsidiaries or affiliates between January 1, 2004 and the
present and, in connection with these mortgage loans,
purchased private mortgage insurance and whose residential
mortgage loans were included within National City’s captive
mortgage reinsurance arrangements. Plaintiffs seek, among
other things, statutory damages under RESPA (which include
treble damages), restitution of reinsurance premiums
collected, disgorgement of profits, and attorneys’ fees. In
August 2012, the district court directed the plaintiffs to file an
amended complaint, which the plaintiffs filed in September
2012. In November 2012, we filed a motion to dismiss the
amended complaint. The court dismissed, without prejudice,
the amended complaint in June 2013 on statute of limitations
grounds. A second amended complaint, in response to the
court’s dismissal order, was filed in July 2013. We filed a
motion to dismiss the second amended complaint, also in July
2013. In August 2014, the court denied the motion to dismiss.
The PNC Financial Services Group, Inc. – Form 10-K 207