Sallie Mae 2010 Annual Report Download - page 186

16. Commitments, Contingencies and Guarantees (Continued)
derivatives under ASC 815 as they do not meet the definition of a derivative due to the lack of a fixed and
determinable purchase amount. At December 31, 2010, there were $364 million of originated loans (FFELP
and Private Education Loans) in the pipeline that we are committed to purchase.
On January 31, 2008, a putative class action lawsuit was filed against us and certain officers in the United
States District Court for the Southern District of New York. This case and other actions arising out of the same
circumstances and alleged acts have been consolidated and are now identified as In Re SLM Corporation
Securities Litigation. The case purports to be brought on behalf of those who acquired our common stock
between January 18, 2007 and January 23, 2008 (the “Securities Class Period”). The complaint alleges that the
Company and certain officers violated federal securities laws by issuing a series of materially false and
misleading statements and that the statements had the effect of artificially inflating the market price for our
securities. The complaint alleges that Defendants caused our results for year-end 2006 and for the first quarter of
2007 to be materially misstated because we failed to adequately provide for loan losses, which overstated our
net income, and that we failed to adequately disclose allegedly known trends and uncertainties with respect to
our non-traditional loan portfolio. On September 24, 2010, the court denied our motion to dismiss Mr. Albert
Lord and the Company. but dismissed Mr. C.E. Andrews as a defendant in the action. The matter is now in the
discovery phase. Lead Plaintiff seeks unspecified compensatory damages, attorneys’ fees, costs, and equitable
and injunctive relief. At this time we do not believe it is possible to estimate a range of exposure.
On February 2, 2010, a putative class action suit was filed by a borrower in U.S. District Court for the
Western District of Washington (Mark A. Arthur et al. v. SLM Corporation). The suit complains that we
allegedly contacted “tens of thousands” of consumers on their cellular telephones via autodialer without their
prior express consent in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq.
(“TCPA”). Each violation under the TCPA provides for $500 in statutory damages ($1,500 if a willful
violation is shown). Plaintiffs seek statutory damages, damages for willful violations, attorneys’ fees, costs,
and injunctive relief. On April 5, 2010, Plaintiffs filed a First Amended Class Action Complaint changing the
defendant from SLM Corporation to Sallie Mae, Inc. The parties in this matter have reached a tentative
settlement which is subject to court approval and other conditions. On September 14, 2010, the United States
District Court for the Western District of Washington agreed to Plaintiff’s Motion for Preliminary Approval of
Settlement Agreement. We have vigorously denied all claims asserted against us, but agreed to the settlement
to avoid the burden and expense of continued litigation. If the settlement receives final approval from the
Court, settlement awards will be made to eligible class members on a claims-made basis from a settlement
fund of $19.5 million, and class members may opt out of certain calls to their cellular telephones. On
January 21, 2011, and February 7, 2011, the Company filed submissions with the Court to advise that
approximately 1.76 million individuals had been omitted from the original notice list for a total of
approximately 6.6 million class members. In response, Class Counsel asked the Company to contribute
additional unspecified amounts to the settlement fund. On February 10, 2011, the Court granted a Consented
Motion to Stay Implementation of Settlement and Certain Deadlines. The Court ordered Class Counsel to file
a status report on March 18, 2011. On February 10, 2011, Judith Harper filed a Motion to Intervene as Party
Plaintiff, which the court terminated on February 11, 2011 based upon the court’s February 10, 2011 Stay. On
February 9, 2011, Ms. Harper filed a similar Class Action Complaint regarding the TCPA against Arrow
Financial Services, LLC, in the U.S. District Court for the Northern District of Illinois (the “Harper case”).
On February 22, 2011, Arrow Financial Services, LLC filed a Motion to Stay Proceedings in the Harper case.
That Motion is pending. We recorded $19.5 million of contingency expense in 2010 related to this matter.
In U.S. ex rel. Oberg v. Nelnet, et al., the United States District Court for the Eastern District of Virginia
entered a Stipulation of Dismissal on October 25, 2010. The Company was voluntarily dismissed from the
case. Southwest Student Services Corporation vigorously denied all claims asserted against it, but agreed to a
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)