Sallie Mae 2011 Annual Report Download - page 22

attorneys’ fees, administration costs, expenses, class member benefits, and costs of any kind associated with the
resolution of this matter. We have denied vigorously all claims asserted against us, but agreed to settle to avoid
the burden, expense, risk and uncertainty of continued litigation. The entire settlement amount will be paid by
our insurers and the settlement is subject to us entering into a formal settlement agreement and Court approval.
In Re SLM Corporation ERISA Litigation. A similar case is pending against the Company, certain current
and former officers, retirement plan fiduciaries, and the Board of Directors of the Company, formerly in the
U.S. District Court for the Southern District of New York and now before the U.S. Court of Appeals for the
Second Circuit, alleging breaches of fiduciary duties and prohibited transactions in violation of the Employee
Retirement Income Security Act arising out of alleged false and misleading public statements regarding our
business made during the 401K Class Period and investments in our common stock by plan participants in the
401K Plans. The case was originally filed on May 8, 2008 and the purported class consists of participants in or
beneficiaries of the Sallie Mae 401(K) Retirement Savings Plan and Sallie Mae 401(k) Savings Plan (together,
the “401K Plans”) between January 18, 2007 and “the present” whose accounts included investments in our
common stock (“401K Class Period”). On September 24, 2010, this case was dismissed; however, the Plaintiffs
appealed. The appeal is pending. In addition, the Plaintiffs filed a motion to hold the appeal in abeyance pending
the U.S. Court of Appeals for the Second Circuit’s decision in In re: Citigroup ERISA Litigation and Garren v.
McGraw-Hill Cos., Inc., two cases with related issues of law. On October 11, 2011, the U.S. Court of Appeals for
the Second Circuit held, among other things, that the Citigroup defendants’ decision not to divest the plan of
Citigroup stock or impose restrictions on participants’ investment in that stock was entitled to a “presumption of
prudence” and subject to “abuse of discretion” standard. The Plaintiffs in both those cases are seeking en banc
review. The Plaintiffs/Appellants seek unspecified damages, attorneys’ fees, costs, and equitable and injunctive
relief.
Lending and Collection Litigation and Investigations
U.S. ex rel. Batiste v. SLM Corporation, et al. On July 15, 2009, the U.S. District Court for the District of
Columbia unsealed the qui tam False Claims Act complaint of relator Sheldon Batiste, a former employee of
SLM Financial Corporation, which alleged that we violated the False Claims Act by our “systemic failure to
service loans and abide by forbearance regulations” and our “receipt of U.S. subsidies to which it was not
entitled” through FFELP. On November 4, 2011, the U.S. Court of Appeals for the District of Columbia Circuit
affirmed the U.S. District Court’s previous dismissal of the complaint in the fall of 2010.
Mark A. Arthur et al. v. Sallie Mae, Inc. 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 alleging that we contacted consumers on
their cellular telephones via autodialer without their 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 were seeking statutory damages, damages for willful violations,
attorneys’ fees, costs, and injunctive relief. On October 7, 2011, we entered into an amended settlement
agreement under which the Company agreed to a settlement fund of $24.15 million. We have denied vigorously
all claims asserted against us, but agreed to settle to avoid the burden, expense, risk and uncertainty of continued
litigation. On January 10, 2012, the Court denied, without prejudice, the Motion for Preliminary Approval of the
amended settlement agreement noting, however, that although the proposed settlement satisfies the Court’s
requirement of overall fairness, the Court expressed concern regarding the proposed form of notice and other
forms to be provided in connection with the settlement. On February 9, 2012, the Plaintiffs filed a Renewed
Motion for Preliminary Approval addressing the Court’s concerns.
Rodriguez v. SLM Corporation et al. On December 17, 2007, plaintiffs filed a complaint against us in the
U.S. District Court for the District of Connecticut alleging that we engaged in underwriting practices which,
among other things, resulted in certain applicants for student loans being directed into substandard and expensive
loans on the basis of race. On June 20, 2011, we agreed to settle the case and denied all allegations of
wrongdoing and liability. We entered into the settlement to avoid the burden, expense, risk and uncertainty of
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