SunTrust 2014 Annual Report Download - page 179

Notes to Consolidated Financial Statements, continued
156
appeals pending decision of a separate appeal involving The
Home Depot in which substantially similar issues are presented.
On May 8, 2012, the Circuit Court decided this appeal in favor
of The Home Depot. On March 5, 2013, the Circuit Court issued
an order remanding the case to the District Court for further
proceedings in light of its decision in The Home Depot case. On
September 26, 2013, the District Court granted the defendants'
motion to dismiss plaintiffs' claims. Plaintiffs have filed an
appeal of this decision in the Circuit Court. Subsequent to the
filing of this appeal, the U.S. Supreme Court decided Fifth Third
Bancorp v. Dudenhoeffer, which held that ESOP fiduciaries
receive no presumption of prudence with respect to employer
stock plans. The Eleventh Circuit has remanded the case back to
the District Court for further proceedings in light of
Dudenhoeffer.
Mutual Funds Class Actions
On March 11, 2011, the Company and certain officers, directors,
and employees of the Company were named in a putative class
action alleging that they breached their fiduciary duties under
ERISA by offering certain STI Classic Mutual Funds as
investment options in the Plan. The plaintiffs purports to
represent all current and former Plan participants who held the
STI Classic Mutual Funds in their Plan accounts from April 2002
through December 2010 and seeks to recover alleged losses these
Plan participants supposedly incurred as a result of their
investment in the STI Classic Mutual Funds. This action was
pending in the U.S. District Court for the Northern District of
Georgia, Atlanta Division (the “District Court”). On June 6,
2011, plaintiffs filed an amended complaint, and, on June 20,
2011, defendants filed a motion to dismiss the amended
complaint. On March 12, 2012, the Court granted in part and
denied in part the motion to dismiss. The Company filed a
subsequent motion to dismiss the remainder of the case on the
ground that the Court lacked subject matter jurisdiction over the
remaining claims. On October 30, 2012, the Court dismissed all
claims in this action. Immediately thereafter, plaintiffs' counsel
initiated a substantially similar lawsuit against the Company
naming two new plaintiffs and also filed an appeal of the
dismissal with the U.S. Court of Appeals for the Eleventh Circuit.
SunTrust filed a motion to dismiss in the new action and this
motion was granted. On February 26, 2014, the U.S. Court of
Appeals for the Eleventh Circuit upheld the District Court's
dismissal. On March 18, 2014, the plaintiffs' counsel filed a
motion for reconsideration with the Eleventh Circuit. On August
26, 2014, plaintiffs in the original action filed a Motion for
Consolidation of Appeals requesting that the Court consider this
appeal jointly with the appeal in the second action. This motion
was granted on October 9, 2014 and plaintiffs filed their
consolidated appeal on December 16, 2014.
On June 27, 2014, the Company and certain current and
former officers, directors, and employees of the Company were
named in another putative class action alleging breach of
fiduciary duties associated with the inclusion of STI Classic
Mutual Funds as investment options in the Plan. This case,
Brown, et al. v. SunTrust Banks, Inc., et al., was filed in the U.S.
District Court for the District of Columbia. On September 3,
2014, the U.S. District Court for the District of Columbia issued
an order transferring the case to the U.S. District Court for the
Northern District of Georgia. On November 12, 2014, the Court
granted plaintiffs’ motion to stay this case until the U.S. Supreme
Court issues a decision in Tibble v. Eidson International.
Intellectual Ventures II v. SunTrust Banks, Inc. and
SunTrust Bank
This action was filed in the United States District Court for the
Northern District of Georgia on July 24, 2013. Plaintiff alleges
that SunTrust violates one or more of several patents held by
plaintiff in connection with SunTrust’s provision of online
banking services and other systems and services. Plaintiff seeks
damages for alleged patent infringement of an unspecified
amount, as well as attorney’s fees and expenses. The matter was
stayed on October 7, 2014 pending inter partes review of a
number of the claims asserted against SunTrust.
Consent Order with the Federal Reserve
On April 13, 2011, SunTrust, SunTrust Bank, and STM entered
into a Consent Order with the FRB in which SunTrust, SunTrust
Bank, and STM agreed to strengthen oversight of, and improve
risk management, internal audit, and compliance programs
concerning the residential mortgage loan servicing, loss
mitigation, and foreclosure activities of STM. SunTrust
continues its engagement with the FRB and to demonstrate
compliance with its commitments under the Consent Order.
As expected, on July 25, 2014, the FRB imposed a $160
million civil money penalty as a result of the FRB’s review of
the Company’s residential mortgage loan servicing and
foreclosure processing practices that preceded the Consent
Order. The Company expects to satisfy the entirety of this
assessed penalty by providing consumer relief and certain cash
payments as contemplated by the settlement with the U.S. and
the States Attorneys' General regarding certain mortgage
servicing claims, which is discussed below at “United States
Mortgage Servicing Settlement and HUD Investigation of
Origination Practices (FHA).” The Company's financial
statements at December 31, 2014 continue to reflect the
Company's costs associated with this penalty.
United States Mortgage Servicing Settlement and HUD
Investigation of Origination Practices (FHA)
In the second quarter of 2014, STM and the U.S., through the
DOJ, HUD, and Attorneys General for several states reached a
final settlement agreement related to the National Mortgage
Servicing Settlement and HUD's investigation of STM's FHA
origination practices. SunTrust filed the settlement agreement as
Exhibit 10.3 to the 10-Q for the quarterly period ended June 30,
2014. The settlement agreement became effective on September
30, 2014 when the court entered the Consent Judgment. Pursuant
to the settlements, STM made $468 million in cash payments
and committed to provide $500 million of consumer relief by
the fourth quarter of 2017 and to implement certain mortgage
servicing standards. The financial statements at December 31,
2014 reflect the estimated cost of the anticipated requirements
of fulfilling these commitments. Even with the settlements, the
Company faces the risk of being unable to meet certain consumer
relief commitments, which could result in increased costs to
resolve this matter. The Company does not expect the consumer
relief efforts or implementation of certain servicing standards