PNC Bank 2015 Annual Report Download - page 217

The consolidated amended complaint alleges 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.
The plaintiffs assert claims for breach of contract and the
covenant of good faith and fair dealing; unconscionability;
conversion; unjust enrichment; and violation of the consumer
protection statute of North Carolina. 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.
Fulton Financial
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
financial markets in 2007 and 2008, the market for ARCs
became illiquid; that PNC and NatCity knew or should have
known of the increasing threat of the ARC market becoming
illiquid; and that PNC and NatCity did not inform Fulton of
this increasing threat, but allowed Fulton to continue to
purchase ARCs, to Fulton’s detriment. In its complaints,
Fulton alleges that it then held ARCs purchased through PNC
for a price of more than $123 million and purchased through
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 U.S.
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, which are pending.
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 U.S. 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.
We then filed an uncontested motion to stay all proceedings
pending the outcome of another matter then on appeal before
the U.S. 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
The PNC Financial Services Group, Inc. – Form 10-K 199