PNC Bank 2015 Annual Report Download - page 218

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. In March 2015, the
parties stipulated to, and the court ordered, a stay of all
proceedings pending the outcome of a new other matter
currently on appeal before the U.S. Court of Appeals for the
Third Circuit that also involves overlapping issues. In
February 2016, the court of appeals issued a decision
favorable to our position.
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 v. PNC Bank, N.A., et al.
(Case No. 2:14-cv-00230)) was filed in the U.S. District Court
for the Western District of Pennsylvania, subsequently
transferred to the U.S. 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.
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 U.S. 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 U.S. 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 complaints in each of these lawsuits made similar
allegations regarding 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. In May 2014, the Tighe lawsuit was
transferred to the U.S. 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 September 2014, the Lauren lawsuit was
voluntarily dismissed and, as described below, Lauren was
added to the Montoya lawsuit as a plaintiff.
In their 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
violations of Florida and New Jersey statutes pertaining to
deceptive and unfair trade practices. These plaintiffs also
assert claims under the federal TILA and RICO statutes. The
plaintiffs seek a nationwide class on all claims except the state
law statutory claims, for which they seek to certify subclasses
of Florida and New Jersey residents, respectively. The
plaintiffs seek, among other things, damages (including treble
damages), disgorgement of “unjust benefits,” injunctive relief,
interest and attorneys’ fees. PNC filed a motion to dismiss the
complaint in Montoya in May 2014. In August 2014, the court
in Montoya granted in part and denied in part PNC’s motion to
dismiss. Specifically, the court dismissed the breach of
contract, Florida deceptive and unfair trade practices, and
federal TILA and RICO claims, although it allowed the RICO
claims to be re-pled. The remaining claims are state claims for
breach of the covenant of good faith, unjust enrichment, the
New Jersey Consumer Fraud Act, and breach of fiduciary
duty. Thereafter, in September 2014, a third amended
complaint in Montoya was filed adding Lauren as a plaintiff
there. In October 2014, PNC moved to partially dismiss the
third amended complaint. The motion to dismiss sought
dismissal of the re-pleaded RICO claims and plaintiff
Lauren’s state law claims for breach of the covenant of good
faith and fair dealing and breach of fiduciary duty. At the
same time, PNC also moved to strike nationwide class
allegations with respect to the state law claims. Shortly
thereafter, the plaintiffs stipulated to this relief, as a result of
which the plaintiffs’ state law claims are now being brought
solely as statewide class action claims in the three states in
which the plaintiffs reside. In January 2015, the plaintiffs filed
a motion for class certification. In March 2015, the Montoya
court denied PNC’s motion to dismiss, except that it granted
the motion as to the Ohio good faith and fair dealing claim.
In May 2015, the parties reached an agreement to settle
Montoya on a nationwide settlement class basis. The
agreement is subject to, among other things, notice to the class
members and final approval by the court. In connection with
the settlement agreement, the plaintiffs also filed a fourth
amended complaint, which, among other things, adds claims
regarding wind and flood insurance. The proposed settlement
provides for certification of a class of borrowers who were
charged by PNC under a hazard, flood, flood gap or wind only
lender placed insurance policy for residential property during
the period January 1, 2008 through the date of preliminary
approval of the settlement. The overall cost of the settlement
200 The PNC Financial Services Group, Inc. – Form 10-K