Sprint - Nextel 2012 Annual Report Download - page 152

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
On April 19, 2012, the New York Attorney General filed a complaint alleging that Sprint has fraudulently failed to collect and pay more than
$100 million in New York sales taxes on receipts from its sale of wireless telephone services since July 2005. The complaint seeks recovery of triple
damages as well as penalties and interest. We moved to dismiss the complaint on June 14, 2012; that motion is fully briefed and we are awaiting a
decision by the court. We believe the complaint is without merit and intend to defend this matter vigorously. On July 23, 2012, the SEC issued a formal
order of investigation relating to the Company's sales tax collection. The Company is cooperating with the staff of the SEC in connection with the
investigation. The Company cannot predict the outcome of, or the time
- frame for, the conclusion of the SEC investigation. We do not expect the
resolution of these matters to have a material adverse effect on our financial position or results of operations.
In addition, seven related shareholder derivative suits were filed against the Company and certain of its current and former officers and
directors. Each suit alleges generally that the individual defendants breached their fiduciary duties to the Company and its shareholders by allegedly
permitting, and failing to disclose, the actions alleged in the suit filed by the New York Attorney General. One suit, filed by the Louisiana Municipal
Police Employees Retirement System, is pending in federal court in New York; one suit is pending in state court in Johnson County, Kansas; and five
suits are pending in federal court in Kansas. The six Kansas suits have been stayed by agreement among the parties. The defendants filed a motion to
dismiss the New York suit on September 19, 2012, and the motion is fully briefed; we are awaiting a ruling by the court. We do not expect the resolution
of these matters to have a material adverse effect on our financial position or results of operations.
In addition, the Company has received several complaints purporting to assert claims on behalf of Sprint shareholders, alleging that
members of the board of directors breached their fiduciary duties in agreeing to the SoftBank Merger, and otherwise challenging that transaction.
There are five cases pending in state court in Johnson County, Kansas: UFCW Local 23 and Employers Pension Fund, et al. v. Bennett, et al
., filed
on October 25, 2012; Iron Workers Mid - South Pension Fund, et al. v. Hesse, et al., filed on October 25, 2012; City of Dearborn Heights Act 345 Police
and Fire Retirement System v. Sprint Nextel Corp.
, et al., filed on October 12, 2012; Testani, et al. v. Sprint Nextel Corp., et al., filed on November 1,
2012; and Patten, et al. v. Sprint Nextel Corp., et al., filed on November 1, 2012. There is one case filed in federal court in the District of Kansas,
entitled Gerbino, et al. v. Sprint Nextel Corp., et al., filed on November 15, 2012. The Company intends to defend these cases vigorously, and,
because these cases are still in the preliminary stages, has not yet determined what effect the lawsuits will have, if any, on its financial position, results
of operations, or cash flows.
The Company is also a defendant in several complaints filed by shareholders of Clearwire Corporation, asserting claims for breach of fiduciary
duty by Sprint, and related claims and otherwise challenging the Clearwire Acquisition. There are four suits pending in Chancery Court in
Delaware: Crest Financial Limited v. Sprint Nextel Corp., et al. , filed on December 12, 2012; Katsman v. Prusch, et al ., filed December 20, 2012;
Feigeles, et al. v. Clearwire Corp., et al. , filed December 28, 2012; and Litwin, et al. v. Sprint Nextel Corp., et al., filed January 2, 2013. There is one
case filed in state court in King County, Washington, in which Sprint is a party, and that case and two other cases in which Sprint is not a party have
been stayed in favor of the Delaware proceedings: Rowe, et al. v. Clearwire Corp., et al., filed December 31, 2012. The Company intends to defend
these cases vigorously, and, because these cases are still in the preliminary stages, has not yet determined what effect the lawsuits will have, if any, on
its financial position, results of operations, or cash flows.
Sprint is currently involved in numerous court actions alleging that Sprint is infringing various patents. Most of these cases effectively
seek only monetary damages. A small number of these cases are brought by companies that sell products and seek injunctive relief as well. These
cases have progressed to various degrees and a small number may go to trial if they are not otherwise resolved. Adverse resolution of these cases
could require us to pay significant damages, cease certain activities, or cease selling the relevant products and services. In many circumstances, we
would be indemnified for monetary losses that we incur with respect to the actions of our suppliers or service providers. We do not expect the
resolution of these cases to have a material adverse effect on our financial position or results of operations.
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