In re Sprint Corp. Securities Litigation
| Decision Date | 30 September 2002 |
| Docket Number | No. 01-4080-CM.,01-4080-CM. |
| Citation | 232 F.Supp.2d 1193 |
| Parties | In re SPRINT CORPORATION SECURITIES LITIGATION. This Document Relates To: All Actions. |
| Court | U.S. District Court — District of Kansas |
Karen D. Renwick, R. Frederick Walters, Kip D. Richards, Walters, Bender, Strohbehn & Vaughan, P.C., Kansas City, MO, William S. Lerach, Amber L. Eck, Randall J. Baron, Mary K. Blasy, Milberg, Weiss, Bershad, Hynes & Lerach LLP, San Diego, CA, David R. Scott, James E. Miller, Scott & Scott, L.L.C., Colchester, CT, for Plaintiffs.
J. Emmett Logan, Stinson Morrison Hecker LLP, Mark A. Thornhill, Clayton L. Barker, Spencer, Fane, Britt & Browne, R. Lawrence Ward, Russell S. Jones, Jr., Shughart Thomson & Kilroy, Watkins Boulware PC, N. Louise Ellingsworth, Michael D. Pospisil, Daniel R. Young, Bryan Cave LLP, Joseph M. Rebein Shook, Hardy & Bacon L.L.P., Kansas City, MO, Christina M. Tchen, Michele L. Walton, Eric J. Gorman, Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, Paul C. Curnin, Simpson, Thacher & Bartlett, New York City, Catherine C. Whittaker, Shook, Hardy & Bacon L.L.P., Overland Park, KS, M. Patrick McDowell, R. David Kaufman, Brunini, Grantham, Grower & Hewes PLLC, Jackson, MS, for Defendants.
Plaintiffs bring this uncertified class action alleging securities fraud in relation to the failed merger of defendant Sprint Corporation and defendant WorldCom, Inc. The approximately thirty named defendants are aligned, according to company affiliation, into two groups for purposes of representation. The first group ("Sprint defendants") consists of Sprint Corporation ("Sprint"), Sprint directors, and Sprint officers. The second group ("WorldCom defendants") consists of WorldCom, Inc. ("WorldCom") and Bernard J. Ebbers. This matter is before the court on Sprint Defendants' Motion to Dismiss Plaintiffs' Consolidated Complaint (Doc. 94); plaintiffs' Motion to Strike Certain Exhibits and Impertinent Language Contained in Defendants' Motion to Dismiss (Doc. 105), and Sprint Defendants' Motion to Strike the Hakala Affidavit (Doc. 111).
Also before the court are motions for Joinder of Linda Koch Lorimer and Warren L. Batts in the Sprint Defendants' Motion to Dismiss (Doc. 102); Joinder of Defendant Ron Sommer in the Sprint Defendants' Motion to Dismiss (Doc. 116); Joinder of Defendant Michel Bon in the Sprint Defendants' Motion to Dismiss (Doc. 120); and Joinder of Defendant Andrew Sukawaty in the Sprint Defendants' Motion to Dismiss (Doc. 127). Plaintiffs have not opposed these defendants' requests for joinder in Sprint's Motion to Dismiss. Accordingly, the court grants defendants Linda Koch Lorimer, Warren L. Batts, Ron Sommer, Michel Bon, and Andrew Sukawaty's request to join Sprint's Motion to Dismiss (Docs. 102, 116, 120, and 127).
As a preliminary matter, the court notes that the WorldCom defendants also have filed a Motion to Dismiss (Doc. 89). However, the court declines to rule on this motion due to WorldCom's subsequent bankruptcy filing.
WorldCom filed for Chapter 11 bankruptcy on July 21, 2002. As a result, pursuant to § 362(a) of the Bankruptcy Code, this proceeding against WorldCom is automatically stayed. 11 U.S.C. § 362(a). Accordingly, under the law of this circuit, this court may not rule upon WorldCom's pending motion to dismiss, regardless of whether WorldCom would be entitled to judgment in its favor. Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371, 372-73 (10th Cir.1990) ().
With respect to Bernard Ebbers, the court is aware that § 362(a) extends the automatic stay provision of the Bankruptcy Code only to the "debtor." The rule followed in the Tenth Circuit is that the stay provision does not extend to the third party defendants or a debtor's co-defendants. Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir. 1984). However, under § 105(a) of the Bankruptcy Code, courts may extend the protection of the automatic stay to a debtor corporation's officers, directors, and employees during the pendency of a Chapter 11 case. 11 U.S.C. § 105(a) (). The rationale in extending the stay to protect corporate officers, directors, and employees is to prevent those individuals from diverting their energies from the reorganization effort to defending themselves in litigation. In re Arrow Huss, Inc., 51 B.R. 853, 855 (Bkrtcy.D.Utah 1985).
In this case, the court lacks sufficient information to make a determination whether this proceeding should be stayed as to defendant Ebbers. The parties have not briefed the issue, nor has any party requested that this court impose such stay. However, considering the likelihood that this issue will arise in the future, whether before the bankruptcy court or this court, the court declines at this point to rule on defendant Ebbers's motion to dismiss.
II. Background
Sprint is a diversified telecommunications corporation which offers long distance, local, and wireless communication services.1 Sprint's operations are generally divided into two sections: (1) the PCS group, which markets and supplies wireless communication services under the PCS brand name; and (2) the FON group, which is a "catchall" group consisting of all non-PCS business and assets. At the relevant time period, Sprint was the nation's third largest provider of long distance telecommunication services.
At the time pertinent to this lawsuit, WorldCom was the second largest provider of international long distance services to United States based customers and the largest provider of domestically-connected international private voice and data lines.2 In 1998, WorldCom acquired MCI Communications Corporation, the then second largest provider of long distance telecommunication services in the United States. After WorldCom's acquisition, approximately eighty percent of the domestic long distance market was shared by just three providers: AT & T, WorldCom, and Sprint.3 According to plaintiffs' Consolidated Complaint ("Complaint"), by 1998-1999, Sprint and WorldCom were:
• The largest and second largest of a small group of top-tier providers of Internet "backbone" network services in the United States and the world;
• The second and third largest of three providers who collectively dominated long distance telecommunications within the United States, and between the United States and numerous overseas destinations;
• The largest and third largest of three providers who collectively dominated international private line services to business customers;
• Two of three providers who collectively dominated various date network services to large business customers; and
• Two of three providers who collectively dominated custom network telecommunications services to large business customers.
This securities fraud class action has been brought on behalf of all persons and entities who purchased the publicly-traded securities of Sprint between October 4, 1999 and September 19, 2000 (the "Class Period"). In its Memorandum and Order (Doc. 45) dated September 28, 2001, the court appointed six institutional investors as lead plaintiffs. In re Sprint Corp. Sec. Litig., 164 F.Supp.2d 1240 (D.Kan.2001). As noted earlier, this class action has yet to be certified pursuant to Rule 23 of the Federal Rules of Civil Procedure.
In the summer of 1999, Sprint's board of directors began preliminary investigations into a possible merger with another telecommunications entity. (Sprint's Mem. in Support of Mot. to Dismiss, Ex. 1 at 45). The leading candidates were BellSouth Corporation, Deutsche Telekom, and WorldCom. Through the summer, negotiations intensified with WorldCom. Principally involved in the negotiations were Sprint's Chairman and Chief Executive Officer ("CEO"), William T. Esrey, and WorldCom's President and CEO, Bernard J. Ebbers. Eventually, on October 4, 1999, a merger agreement and related documents were executed by Sprint and WorldCom. The following morning, before the opening of the markets, Sprint and WorldCom issued a joint press release formally announcing the merger agreement. Pursuant to the merger agreement, Sprint was to be acquired by WorldCom for approximately $129 billion, with WorldCom being designated the surviving corporation. The combination of the two companies was to be the largest merger in history.
As will be discussed below, the corporations issued a joint proxy statement/prospectus ("Joint Proxy") on March 9, 2000. Thereafter, Sprint and WorldCom held simultaneous special meetings on April 28, 2000, for the purpose of seeking shareholder approval of the proposed merger. At the meetings, shareholders of both corporations approved the merger. However, on June 27, 2000, the Department of Justice ("DOJ") filed an antitrust lawsuit to block the merger. The European Commission ("EC") followed by announcing its formal opposition to the merger the next day. Thereafter, on July 13, 2000, Sprint and WorldCom officially terminated their merger agreement.
Plaintiffs' Complaint principally alleges that the Sprint and WorldCom defendants perpetrated a fraud on the market in an attempt to gain shareholder approval of the merger, despite the fact that the merger was destined from the beginning to fail. More specifically, plaintiffs allege as follows:
During the 1990s, as part of Sprint's long-term stock incentive...
To continue reading
Request your trial
-
Lillard v. Stockton
... ... Equity Analytics Management, Inc., Stockton Capital Management Securities, Inc., Capital Equity Resources Management Company, Inc.; and the Dymas ... C. THE PRIVATE SECURITIES LITIGATION REFORM ACT ... ("PSLRA") ... See In re Sprint Corp. Securities Litigation, 232 F.Supp.2d 1193, 1213 (D.Kan. 2002) ... ...
-
In re Sprint Corp. Erisa Litigation
... ... impending collapse of Sprint that would trigger a duty to override plan terms on investments in Sprint stock; (2) the disclosure claim (Claim II) is premised on a mistake of law insofar as it attempts to attach ERISA fiduciary duties to SEC filings made and disseminated pursuant to the securities laws in a corporate, not ERISA, fiduciary capacity; (3) the disclosure claim also fails to state a claim against Mssrs. Esrey and LeMay for affirmative fiduciary misrepresentations; (4) the imprudent investment and disclosure claims fail against the director defendants for the additional reason ... ...
-
Nat'l Credit Union Admin. Bd. v. RBS Sec., Inc.
... ... RBS SECURITIES, INC. formerly known as Greenwich Capital Markets, Inc., et al., ... was described in In re Lehman Brothers Securities and Erisa Litigation, 800 F.Supp.2d 477, 479 (S.D.N.Y.2011) as follows: In a mortgage ... are: Greenwich Capital Acceptance, Inc.; Financial Asset Securities Corp.; Fremont Mortgage Securities Corp.; Residential Funding Mortgage ... See also, In re Sprint Corp. Securities Litigation, 232 F.Supp.2d 1193, 121516 (D.Kan.2002) ... ...
-
Sec. & Exch. Comm'n v. Kovzan, Case No. 11–2017–JWL.
... 807 F.Supp.2d 1024 SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Stephen M. KOVZAN, Defendant. Case ... state a claim to relief that is plausible on its face, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), ... In its opinion in In re Urethane Antitrust Litigation, 235 F.R.D. 507 (D.Kan.2006) (Lungstrum, J.), this Court noted the three ... See In re Sprint Corp. Sec. Litig., 232 F.Supp.2d 1193, 121516 (D.Kan.2002) (Lungstrum, ... ...