Bank of America 2015 Annual Report Download - page 202

200 Bank of America 2015
European Commission - Credit Default Swaps Antitrust
Investigation
On July 1, 2013, the European Commission (Commission)
announced that it had addressed a Statement of Objections (SO)
to the Corporation, BANA and Banc of America Securities LLC
(together, the Bank of America Entities), a number of other financial
institutions, Markit Group Limited, and the International Swaps
and Derivatives Association (together, the Parties). The SO set
forth the Commission’s preliminary conclusion that the Parties
infringed European Union competition law by participating in
alleged collusion to prevent exchange trading of CDS and futures.
According to the SO, the conduct of the Bank of America Entities
took place between August 2007 and April 2009. On December
4, 2015, the Commission announced that it was closing its
investigation against the Bank of America Entities and the other
financial institutions involved in the investigation.
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
BHCs, including the Corporation, as defendants. Plaintiffs allege
that defendants conspired to fix the level of default interchange
rates and that certain rules of Visa and MasterCard related to
merchant acceptance of payment cards at the point of sale were
unreasonable restraints of trade. Plaintiffs sought unspecified
damages and injunctive relief. On October 19, 2012, defendants
settled the matter.
The settlement provided 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 basis
points (bps) of default interchange across all Visa and MasterCard
credit card transactions for a period of eight consecutive months,
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.
The court granted final approval of the class settlement
agreement on December 13, 2013. Several class members
appealed to the U.S. Court of Appeals for the Second Circuit and
the court held oral argument on September 28, 2015.
On July 28, 2015, certain objectors to the class settlement
filed motions asking the district court to vacate or set aside its
final judgment approving the settlement, or in the alternative, to
grant further discovery, in light of communications between one
of MasterCard’s former lawyers and one of the lawyers for the
class plaintiffs. The defendants and the class plaintiffs filed
responses to the motions on August 18, 2015 and the objectors
filed replies on September 2, 2015. The court has not set oral
argument.
Following approval of the class settlement agreement, a
number of class members opted out of the settlement. As a result
of various loss-sharing agreements from the main Interchange
litigation, the Corporation remains liable for any settlement or
judgment in opt-out suits where it is not named as a defendant.
The Corporation has pending one opt-out suit, as well as an action
brought by cardholders. All of the opt-out suits filed to date have
been consolidated in the U.S. District Court for the Eastern District
of New York. On July 18, 2014, the court denied defendants’ motion
to dismiss opt-out complaints filed by merchants, and on November
26, 2014, the court granted defendants’ motion to dismiss the
Sherman Act claim in the cardholder complaint. In the cardholder
action, the parties have moved for reconsideration of the court’s
November 26, 2014 decision dismissing the Sherman Act claim,
and have also appealed the decision to the U.S. Court of Appeals
for the Second Circuit.
LIBOR, Other Reference Rate and Foreign Exchange
(FX) Inquiries and Litigation
Government authorities in the Americas, Europe and the Asia
Pacific region continue to conduct investigations and make
inquiries of a significant number of FX market participants,
including the Corporation, regarding FX market participants’
conduct and systems and controls. Government authorities in
these regions also continue to conduct investigations concerning
submissions made by panel banks in connection with the setting
of LIBOR and other reference rates. The Corporation is responding
to and cooperating with these investigations.
In addition, the Corporation, BANA and certain Merrill Lynch
affiliates have been named as defendants along with most of the
other LIBOR panel banks in a series of individual and putative
class actions relating to defendants’ U.S. Dollar LIBOR
contributions. All cases naming the Corporation and its affiliates
relating to U.S. Dollar LIBOR have been or are in the process of
being consolidated for pre-trial purposes in the U.S. District Court
for the Southern District of New York by the Judicial Panel on
Multidistrict Litigation. The Corporation expects that any future
U.S. Dollar LIBOR cases naming it or its affiliates will similarly be
consolidated for pre-trial purposes. Plaintiffs allege that they held
or transacted in U.S. Dollar LIBOR-based financial instruments and
sustained losses as a result of collusion or manipulation by
defendants regarding the setting of U.S. Dollar LIBOR. Plaintiffs
assert a variety of claims, including antitrust, Commodity Exchange
Act (CEA), Racketeer Influenced and Corrupt Organizations (RICO),
common law fraud, and breach of contract claims, and seek
compensatory, treble and punitive damages, and injunctive relief.
In a series of rulings, the court dismissed antitrust, RICO and
certain state law claims, and substantially limited the scope of
CEA and various other claims. As to the Corporation and BANA,
the court also dismissed manipulation claims based on alleged
trader conduct. Some claims against the Corporation, BANA and
certain Merrill Lynch affiliates remain pending, however, and the
court is continuing to consider motions regarding them. Certain
plaintiffs are also pursuing an appeal in the Second Circuit of the
dismissal of their antitrust claims.
In addition, in a consolidated amended complaint filed on
March 31, 2014, the Corporation and BANA were named as
defendants along with other FX market participants in a putative
class action filed in the U.S. District Court for the Southern District
of New York on behalf of plaintiffs and a putative class who
allegedly transacted in FX and are domiciled in the U.S. or
transacted in FX in the U.S. The complaint alleges that class
members sustained losses as a result of the defendants’ alleged
conspiracy to manipulate the WM/Reuters Closing Spot Rates.
Plaintiffs assert a single claim for violations of Sections 1 and 3