Bank of America 2013 Annual Report Download - page 225

Bank of America 2013 223
that its preliminary conclusions are proved, the Commission has
stated that it intends to impose a fine and require appropriate
remedial measures.
Fontainebleau Las Vegas Litigation
On June 9, 2009, Avenue CLO Fund Ltd., et al. v. Bank of America,
N.A., Merrill Lynch Capital Corporation, et al. was filed in the U.S.
District Court for the District of Nevada by certain Fontainebleau
Las Vegas, LLC (FBLV) project lenders. Plaintiffs alleged that,
among other things, BANA breached its duties as disbursement
agent under the agreement governing the disbursement of loaned
funds to FBLV, then a Chapter 11 debtor-in-possession. Plaintiffs
seek monetary damages of more than $700 million, plus interest.
This action was subsequently transferred by the U.S. Judicial Panel
on Multidistrict Litigation (JPML) to the U.S. District Court for the
Southern District of Florida.
On March 19, 2012, the district court granted BANA’s motion
for summary judgment on all causes of action against it in its
capacity as disbursement agent and denied plaintiffs’ motion for
summary judgment on those claims. On July 26, 2013, the U.S.
Court of Appeals for the Eleventh Circuit affirmed in part and
reversed in part the district court’s dismissal of the disbursement
agent claims against BANA, holding that there were factual
disputes that could not be resolved on a summary judgment
motion, and remanded the case to the district court for further
proceedings.
Dismissal of the other claims was affirmed on a separate
appeal. On December 13, 2013, the JPML remanded the action
to the District of Nevada for trial.
In re Bank of America Securities, Derivative and
Employee Retirement Income Security Act (ERISA)
Litigation
Beginning in January 2009, the Corporation, as well as certain
current and former officers and directors, among others, were
named as defendants in a variety of actions filed in state and
federal courts. The actions generally concern alleged material
misrepresentations and/or omissions with respect to certain
securities filings by the Corporation. The securities filings
contained information with respect to events that took place from
September 2008 through January 2009 contemporaneous with
the Corporation’s acquisition of Merrill Lynch. Certain federal court
actions were consolidated and/or coordinated in the U.S. District
Court for the Southern District of New York under the caption In
re Bank of America Securities, Derivative and Employee Retirement
Income Security Act (ERISA) Litigation.
Securities Actions
Plaintiffs in the consolidated securities class action (the
Consolidated Securities Class Action) asserted claims under
Sections 14(a), 10(b) and 20(a) of the Securities Exchange Act of
1934, and Sections 11, 12(a)(2) and 15 of the Securities Act of
1933 and asserted damages based on the drop in the stock price
upon subsequent disclosures.
On April 5, 2013, the U.S. District Court for the Southern District
of New York granted final approval to the settlement of the
Consolidated Securities Class Action. Certain class members have
appealed the district court’s final approval of the settlement to the
U.S. Court of Appeals for the Second Circuit.
Certain shareholders opted to pursue their claims apart from
the Consolidated Securities Class Action. These individual
plaintiffs asserted substantially the same facts and claims as the
class action plaintiffs. Following settlements in an aggregate
amount that was fully accrued as of December 31, 2013, the court
has dismissed the claims of these plaintiffs with prejudice.
New York Attorney General (NYAG) Action
On February 4, 2010, the NYAG filed a civil complaint in New York
Supreme Court, New York County, entitled People of the State of
New York v. Bank of America, et al. The complaint named as
defendants the Corporation and the Corporation’s former CEO and
CFO, and alleges violations of Sections 352, 352-c(1)(a), 352-c(1)
(c) and 353 of the Martin Act, and Section 63(12) of the New York
Executive Law. The complaint sought an unspecified amount in
disgorgement, penalties, restitution, and damages and other
equitable relief. The NYAG has stated publicly that it has withdrawn
its demand for damages, but continues to pursue other relief under
the Martin Act and New York Executive Law.
Interchange and Related Litigation
In 2005, a group of merchants filed a series of putative class
actions and individual actions directed at interchange fees
associated with Visa and MasterCard payment card transactions.
These actions, which were 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), named 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 challenged
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.
Plaintiffs sought unspecified damages and injunctive relief based
on their assertion that interchange would be lower or eliminated
absent the alleged conduct.
In addition, plaintiffs filed supplemental complaints against
certain defendants, including the Corporation, relating to initial
public offerings (IPOs) of MasterCard and Visa. Plaintiffs alleged
that the IPOs violated Section 7 of the Clayton Act and Section 1
of the Sherman Act. Plaintiffs also asserted that the MasterCard
IPO was a fraudulent conveyance. Plaintiffs sought unspecified
damages and to undo the IPOs.
On October 19, 2012, defendants entered an agreement to
settle the class plaintiffs’ claims. The defendants also separately
agreed to resolve the claims brought by a group of individual
retailers that opted out of the class to pursue independent
litigation. The settlement agreements provide for, among other
things, (i) payments by defendants to the class and individual
plaintiffs totaling approximately $6.6 billion, allocated
proportionately to each defendant based upon various loss-sharing
agreements; (ii) distribution to class merchants of an amount
equal to 10 bps of default interchange across all Visa and
MasterCard credit card transactions for a period of eight
consecutive months, to begin by July 29, 2013, which otherwise
would have been paid to issuers and which effectively reduces
credit interchange for that period of time; and (iii) modifications
to certain Visa and MasterCard rules regarding merchant point of
sale practices.