SunTrust 2011 Annual Report Download - page 206
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Please find page 206 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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Krinsk v. SunTrust Bank
This is a lender liability action in which the borrower claims that the Company has taken actions in violation of her home equity
line of credit agreement and in violation of the Truth in Lending Act (“TILA”). Plaintiff filed this action in March 2009 in the
U.S. District Court for the Middle District of Florida as a putative class action. The Court dismissed portions of Plaintiff’s first
complaint, and she subsequently filed an amended complaint asserting breach of contract, breach of implied covenant of good
faith and fair dealing, and violation of TILA. Plaintiff has filed a motion seeking to certify a class of all Florida borrowers. The
Company filed its answer to the complaint, has opposed class certification, and has filed a motion to compel arbitration. The Court
denied the motion to compel arbitration and this decision was appealed to the Eleventh Circuit Court of Appeals. The Eleventh
Circuit reversed the District Court's ruling that SunTrust had waived its right to compel arbitration and remanded the case back
to the District Court to decide the merits of SunTrust's motion to compel arbitration. In January 2012, the District Court granted
SunTrust's motion to compel arbitration in this matter.
SunTrust Securities Class Action Litigation
Beginning in May 2009, the Company, STRH, SunTrust Capital IX, officers and directors of the Company, and others were named
in three putative class actions arising out of the offer and sale of approximately $690 million of SunTrust Capital IX 7.875% Trust
Preferred Securities (“TRUPs”) of SunTrust Banks, Inc. The complaints alleged, among other things, that the relevant registration
statement and accompanying prospectus misrepresented or omitted material facts regarding the Company’s allowance for loan
and lease loss reserves, the Company’s capital position, and its internal risk controls. Plaintiffs seek to recover alleged losses in
connection with their investment in the TRUPs or to rescind their purchases of the TRUPs. These cases were consolidated under
the caption Belmont Holdings Corp., et al., v. SunTrust Banks, Inc., et al., in the U.S. District Court for the Northern District of
Georgia, Atlanta Division, and on November 30, 2009, a consolidated amended complaint was filed. On January 29, 2010,
Defendants filed a motion to dismiss the consolidated amended complaint. This motion was granted, with leave to amend, on
September 10, 2010. On October 8, 2010, the lead plaintiff filed an amended complaint in an attempt to address the pleading
deficiencies identified in the Court’s dismissal decision. The Company filed a motion to dismiss the amended complaint on
March 21, 2011. The District Court denied the motion to dismiss as to Plaintiff's claims that the Company misrepresented the
adequacy of its loan loss reserves for 2007 but dismissed all other claims against the Company and limited discovery in the initial
stages of the case to the question of SunTrust's subjective belief as to the adequacy of those reserves at the time of the offering.
SunTrust subsequently filed a motion for reconsideration of this decision and a motion to stay discovery pending resolution of
that motion. The Court granted the motion to stay and the parties are awaiting a decision on the motion for reconsideration.
SunTrust Shareholder Derivative Litigation
On September 9, 2011, the Company and several current and former executives and members of the Board were named in a
shareholder derivative action filed in the Superior Court of Fulton County, Georgia, Sharon Benfield v. James M. Wells, III. et al.,
and on December 19, 2011, the Company and several current and former executives and members of the Board were named as
defendants in a separate shareholder derivative action filed in the U.S. District Court for the Northern District of Georgia, Edward
Mannato v. James M. Wells, III, et al. The plaintiffs in both of these lawsuits purport to bring their claims on behalf of and for the
benefit of the Company. Generally, these lawsuits are substantially overlapping and make very broad allegations of mis-management
of, and mis-representations about, the Company's exposure to loan losses and the residential real estate market leading up to and
during the recent real estate and credit market crises. In both cases, the plaintiffs assert causes of action for breach of fiduciary
duty, waste of corporate assets, and unjust enrichment. The Mannato lawsuit arises out of a shareholder demand made of SunTrust
in March 2008 that was the subject of an investigation conducted at the direction of a committee of independent members of the
Company's Board. This committee concluded that no wrongdoing had occurred and that the interests of the Company's shareholders
would not be served by pursuing the claims alleged in the plaintiff's demand. The Benfield lawsuit arises out of a shareholder
demand made of SunTrust in February 2011 that is the subject of an ongoing investigation conducted at the direction of the same
Board committee. The Company has filed a motion to stay this case pending the outcome of this investigation.
Colonial BancGroup Securities Litigation
Beginning in July 2009, STRH, certain other underwriters, The Colonial BancGroup, Inc. (“Colonial BancGroup”) and certain
officers and directors of Colonial BancGroup were named as defendants in a putative class action filed in the U.S. District Court
for the Middle District of Alabama, Northern District entitled In re Colonial BancGroup, Inc. Securities Litigation. The complaint
was brought by purchasers of certain debt and equity securities of Colonial BancGroup and seeks unspecified damages. Plaintiffs
allege violations of Sections 11 and 12 of the Securities Act of 1933 due to allegedly false and misleading disclosures in the relevant
registration statement and prospectus relating to Colonial BancGroup’s goodwill impairment, mortgage underwriting standards,
and credit quality. On August 28, 2009, The Colonial BancGroup filed for bankruptcy. The Defendants’ motion to dismiss was
denied in May 2010, but the Court subsequently has ordered Plaintiffs to file an amended complaint. This amended complaint has
been filed and the defendants have filed a motion to dismiss.