Sprint - Nextel 2014 Annual Report Download - page 183

Table of Contents
Index to Consolidated Financial Statements
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(CONTINUED)
F-100
agreements with subscribers and is contrary to the Company's advertising and marketing claims. Plaintiffs also
allege that subscribers do not review the Terms of Service prior to subscribing, and when subscribers cancel service
due to network management, we charge an ETF or restocking fee that they claim is unconscionable under the
circumstances. In March 2011, a purported class action was filed against Clearwire in the U.S. District Court for
the Eastern District of California. The case, Newton v. Clearwire, Inc. [sic], alleges Clearwire's network
management and advertising practices constitute breach of contract, unjust enrichment, unfair competition under
California's Business and Professions Code Sections 17200 et seq., and violation of California's Consumers' Legal
Remedies Act. Plaintiff contends Clearwire's advertisements of “no speed cap” and “unlimited data” are false and
misleading. Plaintiff alleges Clearwire has breached its contracts with customers by not delivering the Internet
service as advertised. Plaintiff also claims slow data speeds are due to Clearwire's network management practices.
The parties collectively settled these three lawsuits, and the settlement is in the process of administration. We have
accrued an estimated amount we anticipate to pay for the settlement in Other current liabilities. The amount accrued
is considered immaterial to the financial statements.
In August 2012, Richard Wuest filed a purported class action against Clearwire in the California Superior
Court, San Francisco County. Plaintiff alleges that Clearwire violated California's Invasion of Privacy Act, Penal
Code 630, notably §632.7, which prohibits the recording of communications made from a cellular or cordless
telephone without the consent of all parties to the communication. Plaintiff seeks class certification, statutory
damages, injunctive relief, costs, attorney fees, and pre- and post- judgment interest. We removed the matter to
federal court. On November 2, 2012, we filed an answer to the complaint. On May 31, 2013, Plaintiff filed a First
Amended Complaint adding two Clearwire call vendors to the lawsuit. We filed an answer on July 15, 2013, and
discovery has begun. Class certification briefing is scheduled for the spring of 2014. The litigation is in the early
stages, its outcome is unknown and an estimate of any potential loss cannot be made at this time.
On September 6, 2012, the Washington State Attorney General's Office served on Clearwire Corporation a
Civil Investigative Demand pursuant to RCW 19.86.110. The demand seeks information and documents in
furtherance of the Attorney General Office's investigation of possible unfair trade practices, failure to properly
disclose contractual terms, and misleading advertising. On October 22, 2012, we responded to the demand. The
outcome of any investigation is unknown and an estimate of any potential loss cannot be made at this time.
In April 2013, Kenneth Lindsay, a former employee and others, filed a purported collective class action
lawsuit in U.S. District Court for the District of Minnesota, against Clear Wireless LLC and Workforce Logic LLC.
Plaintiffs allege claims individually and on behalf of a purported nationwide collective class under the Fair Labor
Standards Act, which we refer to as the FSLA, from April 9, 2010 to present. The lawsuit alleges that defendants
violated the FLSA, notably sections 201 and 207 and relevant regulations, regarding failure to pay minimum wage,
failure to pay for hours worked during breaks or work performed "off the clock" before, during and after scheduled
work shifts, overtime, improper deductions, and improper withholding of wages, commissions and bonuses.
Plaintiffs seek back wages, unpaid wages, overtime, liquidated damages, attorney fees and costs. We filed an answer
to the complaint on April 30, 2013. In January, 2014, the magistrate judge granted plaintiffs’ motion for conditional
class certification, and we have filed our objections to that ruling with the district judge. The litigation is in the early
stages, its outcome is unknown and an estimate of any potential loss cannot be made at this time.
Shareholder Actions
On April 26, 2013, stockholders ACP Master, Ltd., Aurelius Capital Master, Ltd., and Aurelius Opportunities
Fund II, LLC, filed suit in the Delaware Court of Chancery against the Company, its directors, Sprint and Sprint
HoldCo., which we refer to as the ACP Action. On December 20, 2013, those entities filed an amended complaint,
naming as defendants Sprint Corporation, Sprint Communications, Inc., the former directors of the Company,
Starburst I, Inc., and SoftBank Corp. The amended ACP Action alleges that the directors of the Company breached
their fiduciary duties in connection with the Sprint-Clearwire transaction (the “Merger”), that Sprint breached duties
owed to the plaintiff stockholders by virtue of its status as a “controlling” stockholder, and that the other entities