PNC Bank 2014 Annual Report Download - page 226

We then filed an uncontested motion to stay all proceedings
pending the outcome of another matter currently on appeal
before the United States Court of Appeals for the Third
Circuit that involves overlapping issues. In September 2014,
the district court granted the stay. In October 2014, the court
of appeals decided that other matter, holding that the RESPA
claims in that case were barred by the statute of limitations.
We then filed a motion for reconsideration of the denial of our
motion to dismiss in light of the court of appeals’ decision. In
January 2015, the district court denied our motion.
Residential Mortgage-Backed Securities
Indemnification Demands
We have received indemnification demands from several
entities sponsoring residential mortgage-backed securities and
their affiliates where purchasers of the securities have brought
litigation against the sponsors and other parties involved in the
securitization transactions. National City Mortgage had sold
whole loans to the sponsors or their affiliates that were
allegedly included in certain of these securitization
transactions. According to the indemnification demands, the
plaintiffs’ claims in these lawsuits are based on alleged
misstatements and omissions in the offering documents for
these transactions. The indemnification demands assert that
agreements governing the sale of these loans or the
securitization transactions to which National City Mortgage
was a party require us to indemnify the sponsors and their
affiliates for losses suffered in connection with these lawsuits.
The parties have settled several of these cases. There has not
been any determination that the parties seeking
indemnification have any liability to the plaintiffs in the other
lawsuits and the amount, if any for which we are responsible
in the settled cases has not been determined.
Lender Placed Insurance Litigation
In June 2013, a lawsuit (Lauren vs. PNC Bank, N.A., et
al.(Case No. 2:14-cv-00230)) was filed in the United States
District Court for the Western District of Pennsylvania,
subsequently transferred to the United States District Court for
the Southern District of Ohio, against PNC Bank and
American Security Insurance Company (“ASIC”), a provider
of property and casualty insurance to PNC for certain
residential mortgages. This lawsuit, which was brought as a
class action, alleges, with respect to PNC Bank, that it
breached alleged contractual (including the implied covenant
of good faith and fair dealing) and fiduciary duties to
residential mortgage borrowers, and, as to Ohio borrowers,
violated the Ohio Consumer Sales Practice Act, all in
connection with the administration of PNC Bank’s program
for placement of insurance for borrowers who fail to obtain
hazard insurance coverages required by the terms of their
mortgages. The plaintiff alleges, among other things, that
defendants placed insurance in unnecessary and excessive
amounts and that PNC Bank improperly profited from these
arrangements, principally as a result of the payment of
commissions to PNC Bank and of reinsurance arrangements
between PNC and the insurance provider. The plaintiff
originally sought to certify a nationwide class and an Ohio
sub-class of all persons who, during applicable periods, have
or had a residential mortgage loan or line of credit with PNC
Bank, and had hazard insurance placed upon the property by
PNC Bank. The plaintiff seeks, among other things, damages,
restitution or disgorgement of profits improperly obtained,
injunctive relief, interest, and attorneys’ fees. In October
2013, the court ruled on our motion to dismiss the complaint,
granting our motion with respect to the Ohio Consumer Sales
Practice Act claim and otherwise denying the motion. We
filed a motion seeking reconsideration of the denial as to the
fiduciary duty claim, which motion was denied in November
2013. In January 2014, the court granted ASIC’s motion to
dismiss the nationwide class action allegations with respect to
the state common law claim of unjust enrichment pending
against ASIC. Later in January 2014, PNC Bank filed a
similar motion to dismiss the nationwide class action
allegations, on the same grounds as asserted in ASIC’s motion
to dismiss, with respect to the state common law claims of
breach of contract, breach of the implied covenant of good
faith and fair dealing, and breach of fiduciary duty pending
against PNC Bank. The plaintiff thereafter agreed to withdraw
those allegations. In February 2014, the court entered an order
dismissing the plaintiff’s nationwide class action allegations
with regard to all remaining claims against PNC, thereby
leaving an Ohio-only class sought by plaintiff as to those
claims. Also in February 2014, the court on its own motion
transferred the matter to the United States District Court for
the Southern District of Ohio, and the plaintiff moved to
amend her complaint to, among other things, assert a
nationwide RICO claim on behalf of the class. In May 2014,
the court granted the plaintiff’s motion to amend her
complaint, with the understanding that defendants may pursue
their arguments against the viability of this claim by way of a
motion to dismiss. In June 2014, the defendants moved to
dismiss the amended complaint. The motion is pending.
In February and March 2014, two additional class action
lawsuits were filed. One of them (Montoya, et al. v. PNC
Bank, N.A., et al., Case No. 1:14-cv-20474-JEM) was filed in
the United States District Court for the Southern District of
Florida against PNC Bank, ASIC and its parent, Assurant, Inc.
The other case (Tighe v. PNC Bank, N.A., et al., Case No. 14-
CV-2017) was filed in the United States District Court for the
Southern District of New York against these same parties as
well as Alpine Indemnity Limited, a reinsurance subsidiary of
PNC. The allegations of these complaints are similar to those
found in the Lauren complaint. In May 2014, the Tighe
lawsuit was transferred to the United States District Court for
the Southern District of Ohio. In June 2014, the Tighe plaintiff
filed a notice of voluntary dismissal without prejudice, thereby
terminating that action.
In the complaint, the plaintiffs in Montoya assert breach of
contract by PNC, breach of its duty of good faith and fair
dealing, unjust enrichment, breach of a fiduciary duty, and
208 The PNC Financial Services Group, Inc. – Form 10-K