The original complaint charges National City and certain of its officers and directors with violations of the Securities Exchange Act of 1934. National City, a financial holding company, provides commercial and retail banking, mortgage financing and servicing, consumer finance, and asset management services in the United States. Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, National City stock traded at artificially inflated prices during the Class Period, trading above $30 per share during much of the Class Period.
In October 2007, National City announced a big decline in earnings due to losses related to its mortgage business but assured the market about the dividend. Then, on January 2, 2008, the Company announced a 49% reduction in its quarterly dividend to $0.21 per share from $0.41 per share. On this news, National City’s stock dropped from $16.46 per share to as low as $15.45 per share, closing at $15.59 per share on January 2, 2008 on volume of over 12.7 million shares.
The true facts, which were known by defendants but concealed from the investing public during the Class Period, were as follows: (a) the subprime mortgages on the Company’s books were a much bigger risk to the Company’s financial position than represented; (b) the Company was failing to adequately reserve for mortgage-related exposure, causing its balance sheet and financial results to be artificially inflated; and (c) defendants had no reasonable basis to make favorable predictions about the Company’s future dividend payments and future financial performance given the problems in the business. As a result of defendants’ false statements and omissions, National City’s stock traded at artificially inflated prices during the Class Period.
On April 4, 2008, the Court granted the motion of Thomas DiNapoli, Comptroller of the State of New York, as Administrative Head of the New York State and Local Retirement Systems and as Trustee of the New York State Common Retirement Fund for appointment as lead plaintifff and approval of selection of lead and liaison counsel. On April 8, 2008, the Court consolidated several actions under In re National City Corporation Securities, Derivative & ERISA Litigation, Master File No: 08 CV 7000. Further, according to the Order, upon the completion of the pretrial phase of this litigation, parties will no longer submit filings under the Master Docket. Rather, the ERISA Cases will file solely in Case No. 08 CV 61, the Derivative Cases will file solely in Case No. 08 CV 163 and the Securities Case will file solely in Case No. 08 CV 209. On June 13, 2008, the plaintiff filed an Amended Class Action Complaint. On September 9, 2008, the defendants filed a motion to dismiss the Amended Class Action Complaint.
According to a letter to the Hon. Solomon Oliver, Jr., filed with the Court on February 28, 2010, this letter is to provide the Court with notice that the parties have reached an agreement in principle to settle the captioned action, following an extensive mediation. On August 24, 2010, the plaintiffs filed a motion for preliminary approval the proposed settlement of the consolidated ERISA cases. The motion was granted on August 27, 2010. The fairness hearing was set for November 30, 2010, and on that day, the ERISA settlement was approved.
According to press release dated August 8, 2011, the New York State Common Retirement Fund has announced a proposed $168 million settlement of its securities fraud class-action lawsuit against National City Corp. alleging misrepresentations to investors. State Comptroller Thomas DiNapoli, trustee of the $146.5 billion fund and lead plaintiff, says the defendants agreed to the settlement but admitted no wrongdoing. PNC Financial Services Group Inc., which bought Cleveland-based National City in 2008, declined to comment. The suit alleges National City misrepresented the quality of its mortgages and home equity loans and the severity of its losses. The settlement is expected to go before U.S. District Judge Solomon Oliver Jr. in the Northern District of Ohio for preliminary approval in the next few weeks, with all class members notified after that.
Summary Notice of Proposed Settlement of National City Corporation Class Action, a hearing will be held on March 19, 2012 at 2:00 p.m., before the Honorable Solomon Oliver, Jr. at the United States District Court for the Northern District of Ohio, 801 W. Superior Avenue, Cleveland, Ohio 44113, to determine whether the proposed settlement (the "Settlement") of the above-captioned action ("Action") for $168,000,000 in cash should be approved by the Court as fair, reasonable and adequate; whether the Order and Final Judgment as provided under the Stipulation and Agreement of Settlement dated November 4, 2011 (the "Stipulation") should be entered, dismissing the Amended Complaint filed in the Action on the merits and with prejudice; whether the release by the Settlement Class of the Released Claims, as set forth in the Stipulation, should be provided to the Released Parties; whether to award Class Counsel attorneys' fees and reimbursement of expenses out of the Settlement Fund (as defined in the Notice of Proposed Settlement of Class Action ("Notice"), which is discussed below); and whether the Plan of Allocation set forth in the Notice should be approved by the Court.