PNC Bank 2015 Annual Report Download - page 215

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 U.S.
Court of Appeals for the Second Circuit, which appeal was
argued in September 2015 and remains pending. In addition,
in July 2015 several objectors filed a motion with the district
court to vacate the court’s judgment, including the approval of
the settlement, based on alleged misconduct by one of the
counsel for MasterCard and one of the counsel for plaintiffs.
This motion remains pending. As a result of the previously
funded litigation escrow (described in Note 21 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. Visa has reached settlements,
some of which remain subject to conditions, with some of
these opting out merchants. Visa has reported that these
settlements covered, as of November 2015, approximately
48% of the Visa-branded card sales volume of the merchants
that opted out. These settlements have been or will be paid
from the Visa litigation escrow account.
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 21 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. The Omnibus
Agreement, in substance, apportions resolution of the claims
in this litigation 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), a PNC Bank
predecessor, and other defendants asserting claims arising
from second mortgage loans made to the plaintiffs. 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 U.S. District Court for the Western District
of Pennsylvania 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, which have subsequently been dismissed.
In October 2011, the plaintiffs in the MDL proceeding 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 Residential Funding Company, LLC (RFC)) as
defendants. (In December 2013, the Chapter 11 bankruptcy
proceeding involving RFC was completed with the company
being liquidated and claims against the company being
The PNC Financial Services Group, Inc. – Form 10-K 197