Sprint - Nextel 2011 Annual Report Download - page 95

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$65 million will be paid on the earlier of LightSquared's lender's consent or March 15, 2012, and the remaining $9 million will remain subject to the termination and
unwind provisions of the original agreement and will be returned to LightSquared upon termination, less any additional incremental cost or obligations incurred by Sprint
in support of LightSquared. In the event the arrangement is terminated for LightSquared's material breach, non-payment or insolvency, Sprint maintains a second lien on
certain of LightSquared's assets, including spectrum assets.
The $236 million, which has been recorded as a current liability, will be recognized as other operating income, net of the associated costs, in the event of
termination assuming all other uncertainties have been resolved. Alternatively, should Sprint and LightSquared agree to proceed with the hosting arrangement, the $236
million will be recognized as revenue as the hosting services are performed.
Litigation, Claims and Assessments
A number of cases that allege Sprint Communications Company L.P. failed to obtain easements from property owners during the installation of its fiber optic
network in the 1980's have been filed in various courts. Several of these cases sought certification of nationwide classes, and in one case, a nationwide class was certified.
In 2003, a nationwide settlement of these claims was approved by the U.S. District Court for the Northern District of Illinois, but objectors appealed the preliminary
approval order to the Seventh Circuit Court of Appeals, which overturned the settlement and remanded the case to the trial court for further proceedings. We reached an
agreement in principle to settle the claims for an amount not material to our consolidated financial position or results of operations. The Court issued its preliminary
approval of the settlement on July 17, 2008, but on September 10, 2009, the Court announced that it would not approve the settlement. The Court did not decide whether
the settlement was fair or in the best interest of class members, but denied on jurisdictional grounds. As a result, the agreement terminated, and the parties have continued
their efforts to reach a settlement. We have begun to settle some suits on a statewide basis, and have received final court approval of settlements in North Dakota,
Alabama, Idaho and Illinois. We do not expect the resolution of this matter to have a material adverse effect on our consolidated financial position or results of operations.
On January 6, 2011, the U.S. District Court for the District of Kansas denied our motion to dismiss a shareholder lawsuit, Bennett v. Sprint Nextel Corp., that
alleges that the Company and three of our former officers violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by failing adequately to disclose
certain alleged operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly issuing false and misleading statements regarding the write-down of
goodwill. The complaint was originally filed in March 2009 and is brought on behalf of alleged purchasers of company stock from October 26, 2006 to February 27,
2008. Our motion to certify the January 6, 2011 order for an interlocutory (or interim) appeal was denied, and discovery has begun. We believe the complaint is without
merit and intend to defend the matter vigorously. We do not expect the resolution of this matter to have a material adverse effect on our financial position or results of
operations.
Five related shareholder derivative suits were filed against the Company and certain of our present and/or former officers and directors. The first, Murphy v.
F
orsee, was filed in state court in Kansas in April 2009, was removed to federal court, and was stayed by the court pending resolution of the motion to dismiss the Bennett
case. The second, Randolph v. Forsee, was filed in July 2010 in state court in Kansas, was removed to federal court, and was remanded back to state court. The third,
R
oss-Williams v. Bennett, et al., was filed in state court in Kansas on February 1, 2011; the fourth suit, Price v. Forsee, et al., was filed in state court in Kansas on April
15, 2011; and the fifth suit, Hartleib v. Forsee, et. al., was filed in federal court in Kansas on July 14, 2011. These cases are essentially stayed while we proceed with
discovery in the Bennett case. We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of operations.
Various other suits, proceedings and claims, either asserted or unasserted, including purported class actions typical for a large business enterprise, are possible
or pending against us or our subsidiaries. If our interpretation of certain laws or regulations, including those related to various state matters such as sales, use or property
taxes, were found to be mistaken, it could result in payments by us. While it is not possible to determine the
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Note 12. Commitments and Contin
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