SunTrust 2015 Annual Report Download - page 177

Notes to Consolidated Financial Statements, continued
149
Putative ERISA Class Actions
Company Stock Class Action
Beginning in July 2008, 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 the Company's common stock
as an investment option in the SunTrust Banks, Inc. 401(k) Plan
(the “Plan”). The plaintiffs purport to represent all current and
former Plan participants who held the Company stock in their
Plan accounts from May 2007 to the present and seek to recover
alleged losses these participants supposedly incurred as a result
of their investment in Company stock.
This case was originally filed in the U.S. District Court for
the Southern District of Florida but was transferred to the U.S.
District Court for the Northern District of Georgia, Atlanta
Division, (the “District Court”) in November 2008. On October
26, 2009, an amended complaint was filed. On December 9,
2009, defendants filed a motion to dismiss the amended
complaint. On October 25, 2010, the District Court granted in
part and denied in part defendants' motion to dismiss the
amended complaint.
On April 14, 2011, the U.S. Court of Appeals for the
Eleventh Circuit (“the Circuit Court”) granted defendants and
plaintiffs permission to pursue interlocutory review in separate
appeals. The Circuit Court subsequently stayed these 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 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 employee stock ownership plan
fiduciaries receive no presumption of prudence with respect to
employer stock plans. The Circuit Court remanded the case back
to the District Court for further proceedings in light of
Dudenhoeffer. On June 18, 2015, the Court entered an order
granting in part and denying in part the Company’s motion to
dismiss. The discovery process has begun.
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 purport 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 seek to recover alleged losses these Plan
participants supposedly incurred as a result of their investment
in the STI Classic Mutual Funds. This action is 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. The Company 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. On May
18, 2015, the U.S. Supreme Court decided Tibble and held that
plan fiduciaries have a duty, separate and apart from investment
selection, to monitor and remove imprudent investments.
After Tibble, the cases pending on appeal were remanded to
the District Court.
Intellectual Ventures II v. SunTrust Banks, Inc. and
SunTrust Bank
This action was filed in the U.S. 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.
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