Bank of America 2011 Annual Report Download - page 222

220 Bank of America 2011
Fair Lending Investigation
On December 21, 2011, CFC, Countrywide Home Loans, Inc. (CHL),
and Countrywide Bank (which was merged into BANA effective July
1, 2011) entered into a consent order to resolve an investigation
by the U.S. Department of Justice (DOJ) into legacy lending
practices of Countrywide. The investigation concerned alleged
discriminatory lending practices by Countrywide in the extension
of residential credit and in residential real estate-related
transactions. The investigation and resulting consent order did not
relate to the current lending practices of the Corporation or of its
affiliates. The consent order does not require any injunctive
provisions against the Corporation or BANA concerning its lending
practices. The consent order requires the establishment of a
restitution fund of $335 million to be paid to allegedly aggrieved
borrowers. This amount was fully accrued by the Corporation as
of December 31, 2011. The consent order was entered by the U.S.
District Court for the Central District of California on December
28, 2011.
Fontainebleau Las Vegas Litigation
On June 9, 2009, Fontainebleau Las Vegas, LLC (FBLV), then a
Chapter 11 debtor-in-possession, commenced an adversary
proceeding, entitled Fontainebleau Las Vegas, LLC v. Bank of
America, N.A., Merrill Lynch Capital Corporation, et al. (FBLV action),
against a group of lenders, including BANA and Merrill Lynch Capital
Corporation (MLCC). The action was originally filed in the U.S.
Bankruptcy Court, Southern District of Florida, but is now before
the U.S. District Court for the Southern District of Florida. On April
12, 2010, FBLV’s Chapter 11 case was converted to a Chapter 7
case and a trustee was appointed (the Bankruptcy Trustee). The
complaint alleges, among other things, that defendants breached
an agreement to lend their respective committed amounts under
an $800 million revolving loan facility, of which BANA and MLCC
had each committed $100 million, in connection with the
construction of a resort and casino development. The complaint
seeks damages in excess of $3 billion and a “turnover” order
under Section 542 of the Bankruptcy Code requiring the lenders
to fund their respective commitments. On September 21, 2010,
the court dismissed the breach of contract and turnover claims to
allow the Bankruptcy Trustee, as plaintiff, to pursue an immediate
appeal of the court’s August 2009 decision denying partial
summary judgment of certain of FBLV’s claims. The Bankruptcy
Trustee filed a notice of appeal on October 18, 2010 to the U.S.
Court of Appeals for the Eleventh Circuit.
On June 9, 2009, a related lawsuit, Avenue CLO Fund Ltd., et
al. v. Bank of America, N.A., Merrill Lynch Capital Corporation, et al.
(the Avenue action), was filed in the U.S. District Court for the
District of Nevada by certain project lenders. On September 21,
2009, another related lawsuit, ACP Master, Ltd., et al. v. Bank of
America, N.A., Merrill Lynch Capital Corporation, et al. (the ACP
action), was filed in the U.S. District Court for the Southern District
of New York by the purported successors-in-interest to certain
project lenders. These two actions were subsequently transferred
by the JPML to the U.S. District Court for the Southern District of
Florida for coordinated pretrial proceedings with the FBLV action.
Plaintiffs in the Avenue and ACP actions (the Term Lenders) repeat
FBLV’s allegations that BANA, MLCC and the other defendants
breached their revolving loan facility commitments to FBLV. In
addition, they allege that BANA breached its duties as
disbursement agent under a separate agreement governing the
disbursement of loaned funds to FBLV. The Term Lenders seek
unspecified money damages on their claims. On May 28, 2010,
the district court granted defendants’ motion to dismiss the
revolving loan facility commitment claims, but denied BANA’s
motion to dismiss the disbursement agent claims. On January 13,
2011, the district court granted the Term Lenders’ motion for entry
of a partial final judgment on their revolving loan facility
commitment claims. The Term Lenders filed a notice of appeal
with respect to those claims on January 19, 2011.
On April 19, 2011, the district court dismissed the
disbursement agent claims against BANA in the ACP action after
the Avenue action plaintiffs represented that they had acquired
the claims belonging to the ACP action plaintiffs and would be
pursuing those claims in the Avenue action. On September 27,
2011, the Avenue action parties submitted their respective
motions for summary judgment on the disbursement agent claims.
In re Initial Public Offering Securities Litigation
BAS, Merrill Lynch & Co., MLPF&S, and certain of their subsidiaries,
along with other underwriters, and various issuers and others, were
named as defendants in a number of putative class action lawsuits
that have been consolidated in the U.S. District Court for the
Southern District of New York as In re Initial Public Offering
Securities Litigation. Plaintiffs contend, among other things, that
defendants failed to make certain required disclosures in the
registration statements and prospectuses for applicable offerings
regarding alleged agreements with institutional investors that tied
allocations in certain offerings to the purchase orders by those
investors in the aftermarket. Plaintiffs allege that such agreements
allowed defendants to manipulate the price of the securities sold
in these offerings in violation of Section 11 of the Securities Act
of 1933 and Section 10(b) of the Securities Exchange Act of 1934,
and SEC rules promulgated thereunder. The parties agreed to
settle the matter, for which the court granted final approval. Certain
putative class members filed an appeal in the U.S. Court of Appeals
for the Second Circuit seeking reversal of the final approval. On
August 25, 2011, the district court, on remand from the U.S. Court
of Appeals for the Second Circuit, dismissed the objection by the
last remaining putative class member, concluding that he was not
a class member. On January 9, 2012, that objector dismissed with
prejudice an appeal of the court’s dismissal pursuant to a
settlement agreement. On November 28, 2011, an objector whose
appeals were dismissed by the Second Circuit filed a petition for
a writ of certiorari with the U.S. Supreme Court that was rejected
as procedurally defective. On January 17, 2012, the Supreme
Court advised the objector that the petition was untimely and
should not be resubmitted to the Supreme Court.
Interchange and Related Litigation
A group of merchants have filed a series of putative class actions
and individual actions with regard to interchange fees associated
with Visa and MasterCard payment card transactions. These
actions, which have been consolidated in the U.S. District Court
for the Eastern District of New York under the caption In Re Payment
Card Interchange Fee and Merchant Discount Anti-Trust Litigation
(Interchange), name Visa, MasterCard and several banks and bank
holding companies, including the Corporation, as defendants.
Plaintiffs allege that defendants conspired to fix the level of default
interchange rates, which represent the fee an issuing bank charges
an acquiring bank on every transaction. Plaintiffs also challenge
as unreasonable restraints of trade under Section 1 of the
Sherman Act certain rules of Visa and MasterCard related to
merchant acceptance of payment cards at the point of sale.