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Judge OKs $57.5M Sprint stock settlement

  Class Action  -   POSTED: 2007/12/13 22:45

A state judge on Wednesday approved a $57.5 million settlement that ends a class-action lawsuit against Sprint Nextel Corp. over how it combined its wireless and wireline stocks three years ago. Johnson County District Judge Kevin Moriarty gave the settlement preliminary approval in September. On Wednesday, he gave it final approval, saying he felt it was fair and reasonable and the attorneys involved had used "the best practicable notice" to alert affected shareholders.

Moriarty set aside 27.5 percent, or $15.8 million, for plaintiffs' legal fees, as well as an additional $2.2 million for plaintiff expenses.

Sprint Nextel, based in Reston, Va., but with operational headquarters in Overland Park, will pay $10 million of the settlement, with insurers paying the rest. The company has denied any wrongdoing, saying it settled the case to avoid continued legal costs.

Jay Eisenhofer, an attorney representing Dallas-based Carlson Capital LP, one of the lead plaintiffs, said he welcomed the outcome, especially as the case would have been heard in Sprint's hometown.

"The court recognized that Sprint's board did not live up to its fiduciary duties in the way it valued the company's tracking stocks to the detriment of common shareholders," Eisenhofer said.

The case came about after what was then Sprint Corp. decided to combine the two stocks that tracked the fortunes of its wireless and traditional wireline business divisions. Those stocks were divided in 1998 to reflect that the wireless division was just starting to grow and invest in wireless infrastructure while the business overseeing local and long-distance calls generated the bulk of the company's revenue.

By 2004, with most telecommunications companies selling bundles of wireless and land line services, Sprint officials decided to recombine the stocks, exchanging each of the wireless stock shares for half a share of the wireline stock.

Shareholders erupted, with half a dozen filing lawsuits claiming the company had shortchanged the value of the wireless stock and that company officials had manipulated the wireline business to the detriment of the wireless business.

The plaintiffs' attorneys hired experts who estimated the losses to shareholders ranged from $1.3 billion to $3.4 billion.

The settlement covers shareholders whose wireless shares were converted to combined shares on April 23, 2004, or who sold their wireless shares before that date and "were damaged thereby."


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