Bank of America 2007 Annual Report Download - page 150

price in certain initial public offerings (IPOs). The complaints, which have
been filed by both purchasers and certain issuers in IPOs, seek treble
damages and injunctive relief. On February 24, 2004, the District Court
granted defendants’ motion to dismiss as to the purchasers’ damages
claims. On April 18, 2006, the District Court denied class certification with
respect to the issuers’ damages claims. On September 11, 2007, the
U.S. Court of Appeals for the Second Circuit reversed the order denying
class certification as to the issuers’ damages claims and remanded the
case to the District Court for further class certification proceedings.
Interchange Antitrust Litigation and Visa-Related Litigation
The Corporation and certain of its subsidiaries are defendants in putative
class actions filed on behalf of retail merchants that accept Visa and Mas-
terCard payment cards. Additional defendants include Visa, MasterCard,
and other financial institutions. Plaintiffs’ First Consolidated and Amended
Class Action Complaint alleges that the defendants conspired to fix the
level of interchange and merchant discount fees and that certain other
practices, including various Visa and MasterCard rules, violate federal and
California antitrust laws. Plaintiffs also filed a supplemental complaint
against certain defendants, including the Corporation and certain of its
subsidiaries, alleging federal antitrust claims and a fraudulent conveyance
claim arising out of MasterCard’s 2006 initial public offering. The putative
class plaintiffs seek unspecified treble damages and injunctive relief. The
actions are coordinated for pre-trial proceedings in the U.S. District Court
for the Eastern District of New York with individual actions brought only
against Visa and MasterCard under the caption In Re Payment Card Inter-
change Fee and Merchant Discount Anti-Trust Litigation (Interchange).On
January 8, 2008, the District Court dismissed all claims for pre-2004
damages. A motion to dismiss the supplemental complaint is pending.
The Corporation and certain of its subsidiaries have entered into
agreements that provide for sharing liabilities in connection with antitrust
litigation against Visa (the Visa-Related Litigation), including Discover
Financial Services. v. Visa U.S.A., et al., pending in the U.S. District Court
for the Southern District of New York, which alleges that Visa and others
unlawfully inhibited competition in the payment card industry, and Inter-
change. The agreements also provide for sharing liabilities in connection
with American Express Travel Related Services Company v. Visa USA, et
al., which was settled by Visa in November 2007. Under these agree-
ments, the Corporation’s obligations to Visa are capped at the Corpo-
ration’s membership interest of 12.1% in Visa USA. In November 2007,
Visa Inc. filed a registration statement with the SEC with respect to a
proposed initial public offering (Visa IPO). Subject to market conditions
and other factors, Visa Inc. states that it expects the Visa IPO to occur in
the first quarter of 2008. The Corporation expects that a portion of the
proceeds from the Visa IPO will be used by Visa Inc. to fund liabilities aris-
ing from the Visa-Related Litigation.
Miller
On August 13, 1998, a predecessor of BANA was named as a defendant
in a class action filed in Superior Court of California, County of San
Francisco, entitled Paul J. Miller v. Bank of America, N.A., challenging its
practice of debiting accounts that received, by direct deposit, gov-
ernmental benefits to repay fees incurred in those accounts. The action
alleges, among other claims, fraud, negligent misrepresentation and other
violations of California law. On October 16, 2001, a class was certified
consisting of more than one million California residents who have, had or
will have, at any time after August 13, 1994, a deposit account with BANA
into which payments of public benefits are or have been directly deposited
by the government.
On March 4, 2005, the trial court entered a judgment that purported
to award the class restitution in the amount of $284 million, plus attor-
neys’ fees, and provided that class members whose accounts were
assessed an insufficient funds fee in violation of law suffered substantial
emotional or economic harm and, therefore, are entitled to an additional
$1,000 statutory penalty. The judgment also purported to enjoin BANA,
among other things, from engaging in the account balancing practices at
issue. On November 22, 2005, the California Court of Appeal stayed the
judgment, including the injunction, pending appeal.
On November 20, 2006, the California Court of Appeal reversed the
judgment in its entirety, holding that BANA’s practice did not constitute a
violation of California law. On March 21, 2007, the California Supreme
Court granted plaintiff’s petition to review the Court of Appeal’s decision.
Municipal Derivatives Matters
The Antitrust Division of the U.S. Department of Justice (DOJ), the SEC,
and the IRS are investigating possible anticompetitive bidding practices in
the municipal derivatives industry involving various parties, including
BANA, from the early 1990s to date. The activities at issue in these
industry-wide government investigations concern the bidding process for
municipal derivatives that are offered to states, municipalities and other
issuers of tax-exempt bonds. The Corporation has cooperated, and con-
tinues to cooperate, with the DOJ, the SEC and the IRS. On February 4,
2008, BANA received a Wells notice advising that the SEC staff is consid-
ering recommending that the SEC bring a civil injunctive action and/or an
administrative proceeding “in connection with the bidding of various finan-
cial instruments associated with municipal securities.” BANA intends to
respond to the notice. An SEC action or proceeding could seek a perma-
nent injunction, disgorgement plus prejudgment interest, civil penalties
and other remedial relief.
On January 11, 2007, the Corporation entered into a Corporate Condi-
tional Leniency Letter (the Letter) with DOJ. Under the Letter and subject
to the Corporation’s continuing cooperation, DOJ will not bring any criminal
antitrust prosecution against the Corporation in connection with the mat-
ters that the Corporation reported to DOJ. Civil actions may be filed. Sub-
ject to satisfying DOJ and the court presiding over any civil litigation of the
Corporation’s cooperation, the Corporation is eligible for (i) a limit on
liability to single, rather than treble, damages in certain types of related
civil antitrust actions, and (ii) relief from joint and several antitrust liability
with other civil defendants.
Parmalat Finanziaria S.p.A.
On December 24, 2003, Parmalat Finanziaria S.p.A. was admitted into
insolvency proceedings in Italy, known as “extraordinary administration.”
The Corporation, through certain of its subsidiaries, including BANA, pro-
vided financial services and extended credit to Parmalat and its related
entities. On June 21, 2004, Extraordinary Commissioner Dr. Enrico Bondi
filed with the Italian Ministry of Production Activities a plan of reorganiza-
tion for the restructuring of the companies of the Parmalat group that are
included in the Italian extraordinary administration proceeding.
In July 2004, the Italian Ministry of Production Activities approved the
Extraordinary Commissioner’s restructuring plan, as amended, for the
Parmalat group companies that are included in the Italian extraordinary
administration proceeding. This plan was approved by the voting creditors
and the Court of Parma, Italy in October of 2005.
Litigation and investigations relating to Parmalat are pending in both
Italy and the United States, and the Corporation is responding to inquiries
concerning Parmalat from regulatory and law enforcement authorities in
Italy and the United States.
148 Bank of America 2007