SunTrust 2011 Annual Report Download - page 205
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Please find page 205 of the 2011 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notes to Consolidated Financial Statements (Continued)
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Overdraft Fee Cases
The Company has been named as a defendant in two putative class actions relating to the imposition of overdraft fees on customer
accounts. The first such case, Buffington et al. v. SunTrust Banks, Inc. et al. was filed in Fulton County Superior Court on May 6,
2009. This action was removed to the U.S. District Court for the Northern District of Georgia, Atlanta Division on June 10, 2009,
and was transferred to the U.S. District Court for the Southern District of Florida for inclusion in Multi-District Litigation Case
No. 2036 on December 1, 2009. Plaintiffs assert claims for breach of contract, conversion, unconscionability, and unjust enrichment
for alleged injuries they suffered as a result of the method of posting order used by the Company, which allegedly resulted in
overdraft fees being assessed to their joint checking account, and purport to bring their action on behalf of a putative class of “all
SunTrust Bank account holders who incurred an overdraft charge despite their account having a sufficient balance of actual funds
to cover all debits that have been submitted to the bank for payment, “as well as” all SunTrust account holders who incurred one
or more overdraft charges based on SunTrust Bank’s reordering of charges.” Plaintiffs seek restitution, damages, expenses of
litigation, attorneys’ fees, and other relief deemed equitable by the Court. The Company filed a Motion to Dismiss and Motion to
Compel Arbitration and both motions were denied. The denial of the motion to compel arbitration was appealed to the Eleventh
Circuit Court of Appeals. The Eleventh Circuit remanded this matter back to the District Court with instructions to the District
Court to review its prior ruling in light of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion. The District Court
has since denied SunTrust's motion to compel arbitration for different reasons and SunTrust is in the process of appealing this
decision to the Eleventh Circuit.
The second of these cases, Bickerstaff v. SunTrust Bank, was filed in the Fulton County State Court on July 12, 2010 and an
amended complaint was filed on August 9, 2010. Plaintiff asserts that all overdraft fees charged to his account which related to
debit card and ATM transactions are actually interest charges and therefore subject to the usury laws of Georgia. Plaintiff has
brought claims for violations of civil and criminal usury laws, conversion, and money had and received, and purports to bring the
action on behalf of all Georgia citizens who have incurred such overdraft fees within the last four years where the overdraft fee
resulted in an interest rate being charged in excess of the usury rate. SunTrust has filed a motion to compel arbitration and that
motion is pending.
SunTrust Mortgage, Inc. v United Guaranty Residential Insurance Company of North Carolina
STM filed a suit in the Eastern District of Virginia in July of 2009 against United Guaranty Residential Insurance Company of
North Carolina (“UGRIC”) seeking payment involving denied mortgage insurance claims regarding second lien mortgages. STM’s
claims are in two counts. Count One involves a common reason for denial of claims by UGRIC for a group of loans. Count Two
involves a group of loans with individualized reasons for the claim denials asserted by UGRIC. The two counts filed by STM
have been bifurcated for trial purposes. UGRIC has counterclaimed for declaratory relief involving interpretation of the insurance
policy involving certain caps on the amount of claims covered, whether ongoing premium obligations exist after any caps are met,
and the potential to accelerate any premiums that may be owed if UGRIC prevails on its counterclaim. UGRIC later disclaimed
its argument for acceleration of premiums. The Court granted STM’s motion for summary judgment as to liability on Count One
and, after a trial on damages, awarded STM $34 million along with $6 million in prejudgment interest on August 19, 2011. Count
Two has been stayed pending final resolution of Count One. On September 13, 2011, the Court added $5 million to the judgment
involving STM's claims for fees on certain issues. On UGRIC’s counterclaim, the Court agreed that UGRIC’s interpretation was
correct regarding STM’s continued obligations to pay premiums in the future after coverage caps are met. However, on August
19, 2011, the Court found for STM on its affirmative defense that UGRIC can no longer enforce the contract due to its prior
breaches, and consequently, denied UGRIC's request for a declaration that it was entitled to continue to collect premiums after
caps are met. UGRIC has filed an appeal of the Court's rulings.
Lehman Brothers Holdings, Inc. Litigation
Beginning in October 2008, STRH, along with other underwriters and individuals, were named as defendants in several individual
and putative class action complaints filed in the U.S. District Court for the Southern District of New York and state and federal
courts in Arkansas, California, Texas and Washington. Plaintiffs allege violations of Sections 11 and 12 of the Securities Act of
1933 for allegedly false and misleading disclosures in connection with various debt and preferred stock offerings of Lehman
Brothers Holdings, Inc. ("Lehman Brothers") and seek unspecified damages. All cases have now been transferred for coordination
to the multi-district litigation captioned In re Lehman Brothers Equity/Debt Securities Litigation pending in the U.S. District Court
for the Southern District of New York. Defendants filed a motion to dismiss all claims asserted in the class action. On July 27,
2011, the District Court granted in part and denied in part the motion to dismiss the class claims against STRH and the other
underwriter defendants. A settlement with the class plaintiffs was approved by the Court on December 15, 2011. The class action
now will go through a notice and opt-out process in which members of the class, including many of the plaintiffs in the pending
individual lawsuits, will have to decide whether to participate in the class settlement or not. In the individual lawsuits for which
the plaintiff decides to opt out of the class settlement, if any, the cases will move forward each on its own schedule. Motions to
dismiss are either pending or will be filed in each of these cases.