Sprint - Nextel 2015 Annual Report Download - page 124

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 were essentially stayed while
the Bennettcase was pending, and we have reached an agreement in principle to settle the matters, by agreeing to some governance provisions and by paying
plaintiffs' attorneys fees in an immaterial amount. The hearing to approve the settlement has been set for May 26, 2016.
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 also seeks recovery of
triple damages under the False Claims Act 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 appealed that order and the intermediate appellate court affirmed the order of the trial court. On October 20, 2015, the Court of Appeals of New
York affirmed the decision of the appellate court that the tax statute requires us to collect and remit the disputed taxes. Our petition for certiorari to the U.S.
Supreme Court on grounds of federal preemption is pending. We have accrued $180 million during the year ended March 31, 2016 associated with this matter. We
will continue to defend this matter vigorously and 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 pending resolution of the Attorney General's suit.
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, discovery is substantially complete, and our motion for
summary judgment is pending. Plaintiffs in the ACPMaster,LTDsuit have also filed suit requesting an appraisal of the fair value of their Clearwire stock.
Discovery in that case was consolidated with the breach of fiduciary duty case and is substantially complete. Trial is scheduled to begin in October 2016. Sprint
Communications intends to defend the ACPMaster,LTDcases vigorously. We do not expect the resolution of these matters to have a material adverse effect on
our financial position or results of operations.
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.
In October 2013, the FCC Enforcement Bureau began to issue notices of apparent liability (NALs) to other Lifeline providers, imposing fines for
intracarrier duplicate accounts identified by the government during its audit function. Those audits also identified a small percentage of potentially duplicative
intracarrier accounts related to our Assurance Wireless business. No NAL has yet been issued with respect to Sprint and we do not know if one will be issued.
Further, we are not able to reasonably estimate the amount of any claim for penalties that might be asserted. However, based on the information currently available,
if a claim is asserted by the FCC, Sprint does not believe that any amount ultimately paid would be material to the Company’s results of operations or financial
position.
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