A federal appeals court has upheld a $107 million judgment against PNC Bank, a unit of PNC Financial Services Group, in a lawsuit over a multistate fraud scheme involving funeral home contracts.
The Eighth Circuit Court of Appeals issued its ruling on Monday, two years after District Judge E. Richard Webber of the Eastern District of Missouri ordered the nine-digit judgment.
PNC was the sole remaining bank defendant in litigation first filed in 2009 that alleged fraud and breach of fiduciary duty by St. Louis-based Allegiant Bancorp in administering seven trusts. Allegiant was purchased in 2003 by National City Corp., which was bought by PNC in 2008.
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“These banks let a Ponzi scheme run through their trust departments and didn’t do anything to protect the trust’s assets,” said Dan Reilly, a partner at the law firm Fennemore Craig, who was the lead plaintiff trial counsel. Because PNC bought Allegiant, it bought the bank's liabilities, he said.
PNC expressed disappointment in the appeals court's ruling but said it is pleased to have the matter finally resolved.
"This ruling ends a long running lawsuit that did not involve any conduct by PNC," the Pittsburgh-based bank said in an emailed response. "The claims were based on events nearly 20 years ago at Allegiant Bank, which was acquired by National City Bank in 2004, four years before National City Bank was acquired by PNC in 2008."
PNC had argued on appeal that the district court improperly calculated compensatory damages; improperly awarded punitive damages; erred in awarding prejudgment interest; and exceeded its authority by awarding attorneys' fees and declining to reduce the award.
Plaintiffs in the lawsuit included 35 state guaranty associations and the National Organization of Life and Health Insurance Guaranty Associations.
