TD Bank 2014 Annual Report Download - page 202

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS200
LITIGATION
In the ordinary course of business, the Bank and its subsidiaries are
involved in various legal and regulatory actions, including class actions
and other litigation or disputes with third parties. Legal provisions
are established when it becomes probable that the Bank will incur an
expense and the amount can be reliably estimated. The Bank may incur
losses in addition to the amounts recorded when the loss is greater
than estimated by management, or for matters when an unfavourable
outcome is reasonably possible. The Bank considers losses to be
reasonably possible when they are neither probable nor remote. The
Bank believes the estimate of the aggregate range of reasonably
possible losses, in excess of provisions, for its legal proceedings where
it is possible to make such an estimate, is from zero to approximately
$239 million as at October 31, 2014. This estimated aggregate range
of reasonably possible losses is based upon currently available informa-
tion for those proceedings in which the Bank is involved, taking into
account the Bank’s best estimate of such losses for those cases which
an estimate can be made. The Bank’s estimate involves significant
judgment, given the varying stages of the proceedings and the existence
of multiple defendants in many of such proceedings whose share of
liability has yet to be determined. The matters underlying the estimated
range will change from time to time, and actual losses may vary
significantly from the current estimate. For certain cases, the Bank
does not believe that an estimate can currently be made as many
of them are in preliminary stages and certain cases have no specific
amount claimed. Consequently, these cases are not included in
the range.
In management’s opinion, based on its current knowledge and after
consultation with counsel, the Bank believes that the ultimate disposi-
tion of these actions, individually or in the aggregate, will not have a
material adverse effect on the consolidated financial condition or the
consolidated cash flows of the Bank. However, there are a number of
uncertainties involved in such proceedings, some of which are beyond
the Bank’s control, including, for example, the risk that the requisite
external approvals of a particular settlement may not be granted. As
such, there is a possibility that the ultimate resolution of those legal or
regulatory actions may be material to the Bank’s consolidated results
of operations for any particular reporting period.
The following is a description of the Bank’s material legal or
regulatory actions.
Rothstein Litigation
TD Bank, N.A. was named as a defendant in multiple lawsuits in state
and federal court in Florida related to an alleged US$1.2 billion Ponzi
scheme perpetrated by, among others, Scott Rothstein, a partner of
the Fort Lauderdale, Florida based law firm, Rothstein, Rosenfeldt and
Adler (RRA).
On July 11, 2013, the United States Bankruptcy Court for the South-
ern District of Florida confirmed a liquidation plan for the RRA bank-
ruptcy estate that includes a litigation bar order in favor of TD Bank,
N.A. (the “Bar Order”). TD Bank, N.A. and/or the Bank are or may be
the subject of other litigation or regulatory proceedings related to the
Rothstein fraud, although further civil litigation may be enjoined by the
Bar Order. The outcome of any such proceedings is difficult to predict
and could result in judgments, settlements, injunctions, or other results
adverse to TD Bank, N.A. or the Bank. Two civil matters are specifically
exempted from the Bar Order.
First, the lawsuit captioned Coquina Investments v. TD Bank, N.A.
et al. was exempted from the bar order. The jury in the Coquina
lawsuit returned a verdict against TD Bank, N.A. on January 18, 2012,
in the amount of US$67 million, comprised of US$32 million of
compensatory damages and US$35 million of punitive damages. On
August 3, 2012, the trial court entered an order sanctioning TD Bank,
N.A. and its former outside counsel, Greenberg Traurig, for alleged
discovery misconduct. The sanctions order established certain facts
relating to TD Bank, N.A.’s knowledge of the Rothstein fraud and the
unreasonableness of TD Bank, N.A.’s monitoring and alert systems,
and ordered TD Bank, N.A. and Greenberg Traurig to pay the costs
incurred by the plaintiff in bringing the sanctions motions. TD Bank,
N.A. appealed the judgment and sanctions order to the United States
Court of Appeals for the Eleventh Circuit. On July 29, 2014, the Court
of Appeals affirmed the judgment and sanctions order, but referred
the case to the trial court to determine whether the amount of
the judgment should be reduced. TD Bank, N.A. is considering its
further options.
Second, the Bar Order did not apply to a motion seeking sanctions
against TD Bank, N.A. filed by the plaintiffs in the matter captioned
Razorback Funding, LLC, et al. v. TD Bank, N.A., et al. The motion for
sanctions was, however, denied on July 25, 2014. Plaintiffs have
appealed the denial of their motion, and that appeal is still pending.
Overdraft Litigation
TD Bank, N.A. was originally named as a defendant in six putative
nationwide class actions challenging the manner in which it calculates
and collects overdraft fees: Dwyer v. TD Bank, N.A. (D. Mass.); Hughes v.
TD Bank, N.A. (D. N.J.); Mascaro v. TD Bank, N.A. (D. D.C.); Mazzadra, et
al. v. TD Bank, N.A. (S.D. Fla.); Kimenker v. TD Bank, N.A. (D. N.J.); and
Mosser v. TD Bank, N.A. (D. Pa.). These actions were transferred to the
United States District Court for the Southern District of Florida and have
now been dismissed or settled. Settlement payments were made to
class members in June 2013, and a second distribution to eligible class
members of residual settlement funds was made in October 2014.
The Court retains jurisdiction over class members and distributions.
On August 21, 2013, TD Bank, N.A. was named as a defendant
in King, et al. v. TD Bank, N.A f/k/a Carolina First Bank (D.S.C.), a
putative nationwide class action filed in federal court in South Carolina
challenging overdraft practices at Carolina First Bank prior to its
merger into TD Bank, N.A. in September 2010, as well as the overdraft
practices at TD Bank, N.A. from August 16, 2010, to the present. This
case has progressed to the discovery stage.
On February 28, 2014, TD Bank, N.A. was named as a defendant in
Padilla, et al. v. TD Bank, N.A. (E.D. Pa.), a putative nationwide class
action filed in federal court in the Eastern District of Pennsylvania
challenging TD Bank, N.A.’s overdraft practices on behalf of certain
individuals who opened a chequing account after August 15, 2010,
or were not included in the prior overdraft class action settlements.
This case is in its preliminary stages.