U.S. judge grants class action status to Sprint investor lawsuit
NEW YORK (Reuters) - A lawsuit that accuses Sprint Corp and a former chief executive of the wireless carrier of misleading investors about the financial impact of its 2005 Nextel acquisition will proceed as a class action, a Kansas federal judge has ruled.
The decision, issued on March 27 by U.S. District Judge Eric Melgren in Kansas City and obtained by Reuters on Wednesday, came as Sprint, now 80 percent owned by Japan's SoftBank Corp, eyes a possible merger with T-Mobile US INC even though U.S. regulators appear set against a deal.
Stephanie Vinge Walsh, a spokeswoman for Sprint, said the Overland Park, Kansas-based company is disappointed with the court's decision to certify a class, which is not a ruling on the case's merits.
The plaintiffs accused Sprint and former CEO Gary Forsee of inflating Sprint stock and bond prices between October 2006 and February 2008 by covering up difficulties that arose after the Nextel merger.
They said Sprint trumpeted in press releases, conference calls and regulatory filings how it was receiving billions of dollars in benefits from the merger, when in fact cultural and technological differences were impeding the integration of wireless networks and causing it to lose thousands of customers.
In January 2008, the month after Dan Hesse was named to replace Forsee as CEO, Sprint disclosed that it lost 683,000 customers in three months and its share price fell by 25 percent in a single day, the plaintiffs said. Further disclosures also hurt the stock price, they added.
In certifying a class of stock and bond investors, Melgren concluded that the plaintiffs' claims "are substantially similar, rely upon much of the same evidence, and will require many of the same witnesses.
"A single class action is a preferable and superior method to duplicative litigation by individual parties," he said.
Class certification can make it easier to reach larger settlements at lower cost than if investors sued individually.
Lead plaintiffs are the PACE Industry Union-Management Pension Fund in Tennessee, Sweden's Skandia Life Insurance Co and the West Virginia Investment Management Board.
(Reporting by Marina Lopes; Editing by Paul Simao)
Trending On Reuters
We are living longer but not creating financial plans to keep pace. Advisers give tips on how to make sure you don’t outlive your money. Video