Bennett v. Sprint Nextel Corp.
Substantial Recovery Achieved for Shareholders After Six Years of Hard-Fought Litigation
On August 12, 2015, the Honorable Eric F. Melgren of the United States District Court for the District of Kansas granted final approval of a $131 million settlement in favor of plaintiffs, resolving claims arising from Sprint Corporation’s ill-fated merger with Nextel Communications in 2005 in Bennett v. Sprint Nextel Corp. The settlement represents a significant recovery for the plaintiff class, achieved after five years of tireless effort by Robbins Geller.
Bennett v. Sprint Nextel Corp. was first filed on March 10, 2009, on behalf of all persons who purchased or otherwise acquired the common stock and certain categories of debt securities of Sprint Nextel Corporation between October 26, 2006 and February 27, 2008. Investors were represented by lead plaintiffs PACE Industry Union-Management Pension Fund, Skandia Life Insurance Company and the West Virginia Investment Management Board. The complaint names Sprint Nextel Corporation, as well as former CEO, President and Chairman Gary D. Forsee, former CFO Paul N. Saleh, and former Senior Vice President and Controller William G. Arendt as defendants.
The complaint alleged that throughout the class period, defendants issued false and misleading statements to investors concerning the success of Sprint’s merger with Nextel Communications. Specifically, plaintiffs claimed the defendants falsely affirmed that Sprint was on track to achieve $14.5 billion in synergies from the merger; that the integration of the two companies and their cellular platforms was progressing as planned; that Sprint had tightened its credit standards, thereby decreasing its reliance on subprime subscribers; and that the goodwill associated with the purchase of Nextel was not impaired. These misrepresentations continued to artificially inflate the price of Sprint’s publicly traded securities until a series of startling disclosures made by the company and then-CEO Dan Hesse in early 2008 revealed the true depth of Sprint’s problems.
On January 18, 2008, in response to the first of the company’s disclosures, Sprint’s stock price plunged 24.8% – the steepest stock price drop Sprint had experienced in a single trading day in nearly three decades. On February 28, 2008, the company announced that it would be recording a non-cash goodwill impairment charge of $29.7 billion. Further evidence of Sprint’s desperate condition continued to emerge over the next several months, causing Sprint’s stock price to plummet 70% from a class period high of $23.25. This rapid deterioration, and the tremendous losses they suffered as a result, left investors stunned.
The $131 million settlement achieved by Robbins Geller and co-lead counsel represents a significant victory on behalf of those investors. Robbins Geller partner Tor Gronborg commented that “this excellent result, after six years of litigation, demonstrates our Firm’s resolve to vindicate the rights of investors.” The settlement was reached after extensive and unusually complicated merits discovery, during which co-lead counsel received, reviewed and analyzed more than 8.7 million pages of documents produced by defendants and third parties and deposed more than 40 fact witnesses nationwide.
At the final approval hearing for the settlement, the Honorable Karen M. Humphreys praised Robbins Geller’s “extraordinary efforts” and “excellent lawyering,” noting that the settlement “really does signal that the best is yet to come for your clients and for your prodigious labor as professionals. . . . I wish more citizens in our country could have an appreciation of what this [settlement] truly represents.”
Bennett v. Sprint Nextel Corp., et al., No. 09-cv-2122-EFM-KMH (D. Kan.).