Discover 2015 Annual Report Download - page 154

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debit card market. A CID is a request for information in the course of a civil investigation and does not constitute the
commencement of legal proceedings. The Division is permitted by statute to issue a CID to anyone whom it believes may
have information relevant to an investigation. The receipt of a CID does not presuppose that there is probable cause to
believe that a violation of the antitrust laws has occurred or that a formal complaint ultimately will be filed. The
Company is cooperating with the Division in connection with the CID.
On August 14, 2012, a purported shareholder, James Groen, filed a shareholder derivative action in the U.S.
District Court for the Northern District of Illinois (Groen v. Nelms et al.) against the Company’s board of directors,
certain current and former officers and directors and the Company as nominal defendant. On August 27, 2012, a
second purported shareholder, the Charter Township of Clinton Police and Fire Retirement System, filed a substantially
identical shareholder derivative action in the same court against the same parties (Charter Township of Clinton Police
and Fire Retirement System v. Nelms et al.). On September 25, 2012, the actions were consolidated, and on February
19, 2013, the plaintiffs filed an amended consolidated complaint. The consolidated complaint asserts claims against the
board of directors and certain current and former officers and directors for alleged breach of fiduciary duty, corporate
waste and unjust enrichment arising out of the Company’s alleged violations of the law in connection with the marketing
and sale of its protection products. The relief sought in the consolidated complaint includes changes to the Company’s
corporate governance procedures; unspecified damages, injunctive relief, restitution and disgorgement from the
individual defendants; and attorneys’ fees. On April 5, 2013, the defendants filed a motion to dismiss the amended
consolidated complaint, and on June 5, 2013, briefing on the motion to dismiss was completed. On March 23, 2015,
the Court granted the defendants’ motion to dismiss the amended consolidated shareholder derivative complaint without
prejudice, while also allowing the plaintiffs until April 10, 2015 to request permission to file a further amended
complaint in order to avoid having the case dismissed with prejudice. On April 6, 2015, the plaintiffs filed a motion
requesting reconsideration by the Court of its order dismissing the complaint. In addition, on April 10, 2015, the
plaintiffs filed a motion requesting permission to file a further amended complaint.
On September 2, 2014, a purported shareholder, Steamfitters Local 449 Pension Fund, filed a shareholder
derivative action in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois (Steamfitters Local 449
Pension Fund, derivatively on behalf of Discover Financial Services v. David W. Nelms, et al.) against the Company’s
board of directors and certain current and former officers and directors of the Company. The complaint asserts claims
for alleged breach of fiduciary duty, corporate waste and unjust enrichment arising out of the Company’s alleged
violations of the law in connection with the marketing and sale of protection products. The relief sought in the
consolidated complaint includes changes to the Company’s corporate governance procedures, unspecified damages,
restitution and disgorgement from the individual defendants, and attorneys’ fees. On September 25, 2014, the court
entered an order staying the case until 30 days after the U.S. District Court for the Northern District of Illinois enters an
order on defendants’ motion to dismiss the amended consolidated complaint in Groen v. Nelms et al. and Charter
Township of Clinton Police and Fire Retirement System v. Nelms et al. (as consolidated, the Groen and Charter
Township cases are now captioned: In re Discover Financial Services Derivative Litigation). The case remains stayed.
On November 21, 2014, a patent infringement lawsuit was filed against the Company by Maxim Integrated
Products, Inc. in the United States District Court for the Western District of Texas (Maxim Integrated Products, Inc. v.
Discover Financial Services). The complaint asserted that the Company has infringed on three patents owned by Maxim.
The Company has resolved this matter with the plaintiff.
On May 26, 2015, the Company entered into a written agreement with the Federal Reserve Bank of Chicago
where the Company agreed to enhance the Company’s enterprise-wide anti-money laundering and related compliance
programs. The agreement does not include civil money penalties. This agreement follows the consent order that Discover
Bank entered into with the FDIC on June 13, 2014 related to Discover Bank’s anti-money laundering and related
compliance programs. In the consent order, Discover Bank agreed to, among other things, enhance its anti-money
laundering and related compliance programs.
On July 9, 2015, a class action lawsuit was filed against the Company in the U.S. District Court for the Northern
District of Illinois (Polly Hansen v. Discover Financial Services and Discover Home Loans, Inc.). The plaintiff alleges that
the Company contacted her, and members of the class she seeks to represent, on their cellular and residential
telephones without their express consent or after consent was revoked in violation of the Telephone Consumer Protection
Act ("TCPA"). Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees,
costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful
violations). The Company will seek to vigorously defend against all claims asserted by the plaintiff.