Bank of America 2011 Annual Report Download - page 223

Bank of America 2011 221
Plaintiffs seek unspecified damages and injunctive relief based
on their assertion that interchange would be lower or eliminated
absent the alleged conduct. On January 8, 2008, the court granted
defendants’ motion to dismiss all claims for pre-2004 damages.
Motions to dismiss the remainder of the complaint and plaintiffs’
motion for class certification are pending. In February 2011, the
parties cross-moved for summary judgment.
In addition, plaintiffs filed supplemental complaints against
certain defendants, including the Corporation, relating to initial
public offerings (the IPOs) of MasterCard and Visa. Plaintiffs allege
that the IPOs violated Section 7 of the Clayton Act and Section 1
of the Sherman Act. Plaintiffs also assert that the MasterCard IPO
was a fraudulent conveyance. Plaintiffs seek unspecified damages
and to undo the IPOs. Motions to dismiss both supplemental
complaints, as well as summary judgment motions challenging
both supplemental complaints, remain pending.
The Corporation and certain affiliates have entered into loss-
sharing agreements with Visa, Mastercard and other financial
institutions in connection with certain antitrust litigation, including
Interchange. Collectively, the loss-sharing agreements require the
Corporation and/or certain affiliates to pay 11.6 percent of the
monetary portion of any comprehensive Interchange settlement.
In the event of an adverse judgment, the agreements require the
Corporation and/or certain affiliates to pay 12.8 percent of any
damages associated with Visa-related claims (Visa-related
damages), 9.1 percent of any damages associated with
MasterCard-related claims, and 11.6 percent of any damages
associated with internetwork claims (internetwork damages) or
not associated specifically with Visa or MasterCard-related claims
(unassigned damages).
Pursuant to Visa’s publicly-disclosed Retrospective
Responsibility Plan (the RRP), Visa placed certain proceeds from
its IPO into an escrow fund (the Escrow). Under the RRP, funds in
the Escrow may be accessed by Visa and its members, including
Bank of America, to pay monetary damages in Interchange, with
the Corporation’s payments from the Escrow capped at 12.81
percent of the funds that Visa places therein. Subject to that cap,
the Corporation may use Escrow funds to cover 73.9 percent of
its monetary payment towards a comprehensive Interchange
settlement, 100 percent of its payment for any Visa-related
damages and 73.9 percent of its payment for any internetwork
and unassigned damages.
Two actions, Watson v. Bank of America Corp., filed on March
28, 2011 in the Supreme Court of British Columbia, Canada, and
Bancroft-Snell v. Visa Canada Corp., filed on May 16, 2011 in Ontario
Superior Court, were filed by purported nationwide classes of
merchants that accept Visa and/or MasterCard credit cards in
Canada. The actions name as defendants Visa, MasterCard, and
a number of other banks and bank holding companies, including
the Corporation. Plaintiffs allege that defendants conspired to fix
the merchant discount fees that merchants pay to acquiring banks
on credit card transactions. Plaintiffs also allege that defendants
conspired to impose certain rules relating to merchant acceptance
of credit cards at the point of sale. The actions assert claims under
section 45 of the Competition Act and other common law claims,
and seek unspecified damages and injunctive relief based on their
assertion that merchant discount fees would be lower absent the
challenged conduct. These actions are not covered by the RRP or
loss-sharing agreements previously entered into in connection with
certain antitrust litigation, including Interchange.
Merrill Lynch Acquisition-related Matters
Since January 2009, the Corporation and certain of its current and
former officers and directors, among others, have been named as
defendants in a variety of actions filed in state and federal courts
relating to the Corporation’s acquisition of Merrill Lynch (the
Acquisition). These Acquisition-related cases consist of securities
actions, derivative actions and actions under ERISA. The claims
in these actions generally concern: (i) the Acquisition; (ii) the
financial condition and 2008 fourth-quarter losses experienced by
the Corporation and Merrill Lynch; (iii) due diligence conducted in
connection with the Acquisition; (iv) the Acquisition agreements’
terms regarding Merrill Lynch’s ability to pay bonuses to Merrill
Lynch employees up to $5.8 billion; (v) the Corporation’s
discussions with government officials in December 2008 regarding
the Corporation’s consideration of invoking the material adverse
change clause in the Acquisition agreement and the possibility of
obtaining government assistance in completing the Acquisition;
and/or (vi) alleged material misrepresentations and/or material
omissions in the proxy statement and related materials for the
Acquisition.
Securities Actions
Plaintiffs in In re Bank of America Securities, Derivative and
Employment Retirement Income Security Act (ERISA) Litigation
(Securities Plaintiffs), a putative class action filed in the U.S.
District Court for the Southern District of New York, represent all:
(i) purchasers of the Corporation’s common and preferred
securities between September 15, 2008 and January 21, 2009
and its January 2011 options; (ii) holders of the Corporation’s
common stock as of October 10, 2008; and (iii) purchasers of the
Corporation’s common stock issued in the offering that occurred
on or about October 7, 2008. During the purported class period,
the Corporation had between 4,560,112,687 and 5,017,579,321
common shares outstanding and the price of those shares
declined from $33.74 on September 12, 2008 to $6.68 on January
21, 2009. Securities Plaintiffs claim violations of Sections 10(b),
14(a) and 20(a) of the Securities Exchange Act of 1934, and SEC
rules promulgated thereunder. Securities Plaintiffs’ amended
complaint also alleges violations of Sections 11, 12(a)(2) and 15
of the Securities Act of 1933 related to the offering of the
Corporation’s common stock that occurred on or about October 7,
2008, and names BAS and MLPF&S, among others, as defendants
on certain claims. The Corporation and its co-defendants filed
motions to dismiss, which the court granted in part in August 2010
by dismissing certain of the Securities Plaintiffs’ claims under
Section 10(b) of the Securities Exchange Act of 1934. Securities
Plaintiffs filed a second amended complaint which repleaded some
of the dismissed claims as well as added claims under Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf
of holders of certain debt, preferred securities and option
securities. In July 2011, the court granted in part defendants’
motion to dismiss the second amended complaint. As a result of
the court’s July 2011 ruling, the Securities Plaintiffs were (in
addition to the claims sustained in the court’s August 2010 ruling)
permitted to pursue a claim under Section 10(b) asserting that
defendants should have made additional disclosures in connection
with the Acquisition about the financial condition and 2008 fourth-
quarter losses experienced by Merrill Lynch. Securities Plaintiffs
seek unspecified monetary damages, legal costs and attorneys’
fees. On February 6, 2012, the court granted Securities Plaintiffs’