Wells Fargo 2009 Annual Report Download - page 147

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the North Carolina action and modified the injunction to
allow the Defendants to attempt to assert claims in a Federal
Court action in New York, the dismissal of which has been
affirmed by the Second Circuit. The Wachovia entities’
appeal was denied by the North Carolina Court of Appeals
on December 22, 2009, and the matter is back before the
Superior Court. Plaintiffs in the dismissed Federal Court
action have filed an additional case in the New York State
Supreme Court for the County of Manhattan seeking to
recover from Wachovia on various theories of liability.
On April 28, 2008, holders of Le-Nature’s Senior
Subordinated Notes, an offering which was underwritten
by Wachovia Capital Markets in June 2003, sued alleging
various fraud claims. This case, captioned California Public
Employees Retirement System, et al. v. Wachovia Capital
Markets, LLC is pending in the U.S. District Court for the
Western District of Pennsylvania. On April 3, 2009, after
a number of procedural motions in various courts, the case
was remanded to the Superior Court of the State of California
for the County of Los Angeles. On January 14, 2010, the case
was dismissed with plaintiffs granted the right to replead.
On August 1, 2009, the trustee under the indenture for
Le-Nature’s Senior Subordinated Notes also filed claims
against Wachovia Capital Markets seeking recovery for
the bondholders under a variety of theories.
On October 30, 2008, the liquidation trust created in Le-
Nature’s bankruptcy filed suit against a number of individuals
and entities, including Wachovia Capital Markets, LLC,
and Wachovia Bank, N.A., in the U.S. District Court for the
Western District of Pennsylvania, asserting a variety of claims
on behalf of the estate. On March 2, 2009, the Wachovia
defendants moved to dismiss the case filed by the liquidation
trust. On September 16, 2009, the Court dismissed a cause of
action for breach of fiduciary duty but denied the remainder
of Wachovia’s motion to dismiss.
MERGER RELATED LITIGATION On October 4, 2008, Citigroup,
Inc. (Citigroup) purported to commence an action in the
Supreme Court of the State of New York for the County of
Manhattan, captioned Citigroup, Inc. v. Wachovia Corp., et al.,
naming as defendants Wachovia Corporation (Wachovia),
Wells Fargo & Company (Wells Fargo), and the directors
of both companies. The complaint alleged that Wachovia
breached an exclusivity agreement with Citigroup, which
by its terms was to expire on October 6, 2008, by entering
into negotiations and an eventual acquisition agreement
with Wells Fargo, and that Wells Fargo and the individual
defendants had tortiously interfered with the same contract.
On October 4, 2008, Wachovia filed a complaint in the
U.S. District Court for the Southern District of New York, cap-
tioned Wachovia Corp. v. Citigroup, Inc. On October 14, 2008,
Wells Fargo filed a related complaint in the U.S. District Court
for the Southern District of New York, captioned Wells Fargo
v. Citigroup, Inc. Both complaints seek declaratory and injunc-
tive relief, stating that the Wells Fargo merger agreement is
valid, proper, and not prohibited by the exclusivity agreement.
On March 20, 2009, the U.S. District Court for the Southern
District of New York remanded the Citigroup, Inc. v. Wachovia
Corp., et al. case to the Supreme Court of the State of New
York for the County of Manhattan, but retained jurisdiction
over the Wachovia v. Citigroup and Wells Fargo v. Citigroup
cases. On July 13, 2009, the U.S. District Court for the
Southern District of New York issued an Opinion and Order
denying Citigroup’s motion for partial judgment on the plead-
ings in the Wachovia Corp. v. Citigroup, Inc. case. The Court
held that the Exclusivity Agreement, entered into between
Citigroup and Wachovia on September 29, 2008, and which
formed the basis for a substantial portion of the allegations of
Citigroup’s complaint against Wachovia and Wells Fargo, was
void as against public policy by enactment of Section 126(c)
of the Emergency Economic Stabilization Act on October 3,
2008. These cases are currently in discovery in both courts.
MUNICIPAL DERIVATIVES BID PRACTICES INVESTIGATION The
Department of Justice (DOJ) and the SEC, beginning in
November 2006, have been requesting information from a
number of financial institutions, including Wachovia Bank,
N.A.’s municipal derivatives group, generally with regard to
competitive bid practices in the municipal derivative markets.
In connection with these inquiries, Wachovia Bank, N.A.
has received subpoenas from both the DOJ and SEC as well
as requests from the OCC and several states seeking docu-
ments and information. The DOJ and the SEC have advised
Wachovia Bank, N.A. that they believe certain of its employ-
ees engaged in improper conduct in conjunction with certain
competitively bid transactions and, in November 2007, the
DOJ notified two Wachovia Bank, N.A. employees, both of
whom have since been terminated, that they are regarded as
targets of the DOJ’s investigation. Wachovia Bank, N.A. has
been cooperating and continues to fully cooperate with the
government investigations.
Wachovia Bank, N.A., along with a number of other banks
and financial services companies, has also been named as a
defendant in a number of substantially identical purported
class actions, filed in various state and federal courts by vari-
ous municipalities alleging they have been damaged by the
activity which is the subject of the governmental investiga-
tions. On April 30, 2009, the Court granted a motion filed by
Wachovia Bank, N.A. and certain other defendants to dismiss
the Consolidated Class Action Complaint and dismissed all
claims against Wachovia Bank, N.A., with leave to replead.
A Second Consolidated Amended Complaint was filed on
June 18, 2009, and a motion to dismiss this complaint has
been filed and briefed. A number of putative class and indi-
vidual actions have been brought in California, including
five non-class complaints which were amended with new
allegations and the addition of Wells Fargo & Company as
a defendant. All of the cases are being coordinated in the
Southern District of New York.
PAYMENT PROCESSING CENTER On February 17, 2006, the U.S.
Attorney’s Office for the Eastern District of Pennsylvania filed
a civil fraud complaint against a former Wachovia Bank, N.A.
customer, Payment Processing Center (PPC). PPC was a third
party payment processor for telemarketing and catalogue
companies. On April 24, 2008, Wachovia Bank, N.A. and the