Wells Fargo 2011 Annual Report Download - page 183

Note 15: Legal Actions
Wells Fargo and certain of our subsidiaries are involved in a
number of judicial, regulatory and arbitration proceedings
concerning matters arising from the conduct of our business
activities. These proceedings include actions brought against
Wells Fargo and/or our subsidiaries with respect to corporate
related matters and transactions in which Wells Fargo and/or
our subsidiaries were involved. In addition, Wells Fargo and our
subsidiaries may be requested to provide information or
otherwise cooperate with government authorities in the conduct
of investigations of other persons or industry groups.
Although there can be no assurance as to the ultimate
outcome, Wells Fargo and/or our subsidiaries have generally
denied, or believe we have a meritorious defense and will deny,
liability in all significant litigation pending against us, including
the matters described below, and we intend to defend
vigorously each case, other than matters we describe as having
settled. Reserves are established for legal claims when
payments associated with the claims become probable and the
costs can be reasonably estimated. The actual costs of resolving
legal claims may be substantially higher or lower than the
amounts reserved for those claims.
ILLINOIS ATTORNEY GENERAL LITIGATION On July 31, 2009, the
Attorney General for the State of Illinois filed a civil lawsuit
against Wells Fargo & Company, Wells Fargo Bank, N.A. and
Wells Fargo Financial Illinois, Inc. in the Circuit Court for Cook
County, Illinois. The Illinois Attorney General alleges that the
Wells Fargo defendants engaged in illegal discrimination by
“reverse redlining” and by steering African-American and Latino
customers into high cost, subprime mortgage loans while other
borrowers with similar incomes received lower cost mortgages.
Illinois also alleges that Wells Fargo Financial Illinois, Inc.
misled Illinois customers about the terms of mortgage loans.
Illinois’ complaint against all Wells Fargo defendants is based on
alleged violation of the Illinois Human Rights Act and the
Illinois Fairness in Lending Act. The complaint also alleges that
Wells Fargo Financial Illinois, Inc. violated the Illinois
Consumer Fraud and Deceptive Business Practices Act and the
Illinois Uniform Deceptive Trade Practices Act. Illinois’
complaint seeks an injunction against the defendants’ alleged
violation of these Illinois statutes, restitution to consumers and
civil money penalties. On October 26, 2011, the Illinois Court
issued an order granting, in part, and denying, in part, Wells
Fargo’s motion to dismiss. The Court dismissed Wells Fargo &
Company as a party and dismissed Count III of the complaint,
which alleged violations of the Illinois Fair Lending Act. The
Court denied the remainder of the motion to dismiss.
INTERCHANGE LITIGATION Wells Fargo Bank, N.A., Wells
Fargo & Company, Wachovia Bank, N.A. and Wachovia
Corporation are named as defendants, separately or in
combination, in putative class actions filed on behalf of a
plaintiff class of merchants and in individual actions brought by
individual merchants with regard to the interchange fees
associated with Visa and MasterCard payment card transactions.
These actions have been consolidated in the United States
District Court for the Eastern District of New York. Visa,
MasterCard and several banks and bank holding companies are
named as defendants in various of these actions. The amended
and consolidated complaint asserts claims against defendants
based on alleged violations of federal and state antitrust laws
and seeks damages, as well as injunctive relief. Plaintiff
merchants allege that Visa, MasterCard and payment card
issuing banks unlawfully colluded to set interchange rates.
Plaintiffs also allege that enforcement of certain Visa and
MasterCard rules and alleged tying and bundling of services
offered to merchants are anticompetitive. Wells Fargo and
Wachovia, along with other defendants and entities, are parties
to Loss and Judgment Sharing Agreements, which provide that
they, along with other entities, will share, based on a formula, in
any losses from the Interchange Litigation.
MEDICAL CAPITAL CORPORATION LITIGATION
Wells Fargo
Bank, N.A. served as indenture trustee for debt issued by
affiliates of Medical Capital Corporation, which was placed in
receivership at the request of the Securities and Exchange
Commission (SEC) in August 2009. Since September 2009,
Wells Fargo has been named as a defendant in various class and
mass actions brought by holders of Medical Capital
Corporation’s debt, alleging that Wells Fargo breached
contractual and other legal obligations owed to them and seeking
unspecified damages. The actions have been consolidated in the
United States District Court for the Central District of California.
On July 26, 2011, the District Court certified a class consisting of
holders of notes issued by affiliates of Medical Capital
Corporation and, on October 18, 2011, the Ninth Circuit Court of
Appeals denied a petition seeking to appeal the class certification
order.
MORTGAGE-BACKED CERTIFICATES LITIGATION Several
securities law based putative class actions were consolidated in
the U.S. District Court for the Northern District of California on
July 16, 2009, under the caption In re Wells Fargo Mortgage-
Backed Certificates Litigation. The case asserted claims against
several Wells Fargo mortgage backed securities trusts, Wells
Fargo Bank, N.A. and other affiliated entities, individual
employee defendants, along with various underwriters and
rating agencies. The plaintiffs alleged that the offering
documents contain untrue statements of material fact, or omit to
state material facts necessary to make the registration
statements and accompanying prospectuses not misleading. The
parties agreed to settle the case on May 27, 2011, for
$125 million. Final approval of the settlement was entered on
November 14, 2011. Some class members opted out of the
settlement, with the most significant being the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan
Mortgage Corporation (Freddie Mac) and American
International Group, Inc.
On June 29, 2010, and on July 15, 2010, two complaints, the
first captioned The Charles Schwab Corporation vs. Merrill
Lynch, Pierce, Fenner & Smith, Inc., et al., and the second
captioned The Charles Schwab Corporation v. BNP Paribas
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