Sprint - Nextel 2014 Annual Report Download - page 122

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-39
Note 12. Commitments and Contingencies
Litigation, Claims and Assessments
In March 2009, a stockholder brought suit, Bennett v. Sprint Nextel Corp., in the U.S. District Court for the
District of Kansas, alleging that Sprint Communications and three of its former officers violated Section 10(b) of the
Exchange Act 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
plaintiff sought class action status for purchasers of Sprint Communications common stock from October 26, 2006 to
February 27, 2008. On January 6, 2011, the Court denied the motion to dismiss. Subsequently, our motion to certify the
January 6, 2011 order for an interlocutory appeal was denied. On March 27, 2014, the court certified a class including
bondholders as well as stockholders. On April 11, 2014, we filed a petition to appeal that certification order to the Tenth
Circuit Court of Appeals. The petition was denied on May 23, 2014. After mediation, the parties have reached an agreement
in principle to settle the matter, and the settlement amount is expected to be substantially paid by the Company's insurers. The
district court granted preliminary approval of the proposed settlement on April 10, 2015 and a final approval hearing has been
scheduled for August 5, 2015. We do not expect the resolution of this matter to have a material adverse effect on our financial
position or results of operations.
In addition, five related stockholder derivative suits were filed against Sprint Communications and certain of its
present and/or former officers and directors. The first, Murphy v. Forsee, was filed in state court in Kansas on April 8, 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 on July 15, 2010 in state court in Kansas, was removed to federal court, and was
remanded back to state court; the third, Ross-Williams v. Bennett, et al., was filed in state court in Kansas on February 1,
2011; the fourth, Price v. Forsee, et al., was filed in state court in Kansas on April 15, 2011; and the fifth, Hartleib v. Forsee,
et. al., was filed in federal court in Kansas on July 14, 2011. These cases are essentially stayed while the Bennett case is being
resolved. 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 Communications 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. Sprint
Communications moved to dismiss the complaint on June 14, 2012. On July 1, 2013, the court entered an order denying the
motion to dismiss in large part, although it did dismiss certain counts or parts of certain counts. Sprint Communications has
appealed that order and the intermediate appellate court affirmed the order of the trial court. Our petition for leave to bring an
interlocutory appeal to the highest court in New York was granted and briefing of that appeal was completed in January 2015.
We believe the complaint is without merit and intend to continue to defend this 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.
Eight related stockholder derivative suits have been filed against Sprint Communications and certain of its current
and former officers and directors. Each suit alleges generally that the individual defendants breached their fiduciary duties to
Sprint Communications and its stockholders 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,
was dismissed by a federal court. Two suits were filed in state court in Johnson County, Kansas and one of those suits was
dismissed as premature; and five suits are pending in federal court in Kansas. The remaining Kansas suits have been stayed.
We do not expect the resolution of these matters to have a material adverse effect on our financial position or results of
operations.
Sprint Communications, Inc. is also a defendant in a complaint filed by stockholders of Clearwire Corporation
asserting claims for breach of fiduciary duty by Sprint Communications, and related claims and otherwise challenging the
Clearwire Acquisition. ACP Master, LTD, et al. v. Sprint Nextel Corp., et al., was filed April 26, 2013, in Chancery Court in
Delaware. Our motion to dismiss the suit was denied, and discover has begun. Plaintiffs in the ACP Master, LTD suit have
also filed suit requesting an appraisal of the fair value of their Clearwire stock, and discovery is proceeding in that case.
Sprint Communications intends to defend the ACP Master, LTD case vigorously. We do not expect the resolution of these
matters to have a material adverse effect on our financial position or results of operations.