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Gerbino v. Sprint Nextel Corporation

United States District Court, Tenth Circuit

May 31, 2013

PAUL GERBINO, individually and on behalf of all others similarly situated, Plaintiff,
v.
SPRINT NEXTEL CORPORATION, et al., Defendants. DAVID STEINBERG, on behalf of himself and all others similarly situated, Plaintiff,
v.
SPRINT NEXTEL CORPORATION, et al., Defendants.

MEMORANDUM AND ORDER

CARLOS MURGUIA United States District Judge

These consolidated cases arise out of the proposed sale of a majority interest in Sprint Nextel Corporation (“Sprint”) to SoftBank Corporation (“SoftBank”). On behalf of himself and all shareholders of Sprint common stock, plaintiff Paul Gerbino filed the lead putative class action (“Gerbino”), alleging that members of defendant Sprint’s Board of Directors and affiliated entities of SoftBank breached their fiduciary duties and violated federal securities law in pursuing the proposed merger. Plaintiff David Steinberg filed the second case (“Steinberg”), which was recently consolidated with Gerbino. Also pending is a related consolidated state court action, In re Sprint Nextel Corporation Shareholder Litigation, Consol. Case No. 12CV08366 (the “Consolidated State Action”), which is proceeding in the District Court of Johnson County, Kansas.

Gerbino is before the court on The Starburst Defendants’ Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6) or, Alternatively, to Dismiss or Stay Case Pursuant to the Colorado River Doctrine (Doc. 34) and The Sprint Defendants’ Motion to Dismiss or Stay Plaintiffs Corrected Amended Complaint (Doc. 37). Plaintiff also filed a motion for a preliminary injunction (Doc. 54), requesting that the court enjoin a special stockholder meeting set for June 12, 2013. Briefing on the preliminary injunction motion is delayed pending ruling on the motions to dismiss.

In their motions, defendants seek dismissal for failure to state a claim. Alternatively, they request a stay of the federal proceedings based on the parallel proceedings in Johnson County. The court first addresses whether a stay is appropriate under the Colorado River doctrine. See generally Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

I. Factual Background

The following list provides a brief synopsis of relevant events in the instant case and the Consolidated State Action:

. October 15, 2012: Sprint and SoftBank announced two agreements. Under the first, SoftBank agreed to invest $3.1 billion in Sprint for a convertible bond. Under the second, Sprint would merge with a subsidiary of SoftBank and SoftBank would pay Sprint and its common stockholders about $17 billion.
. October 24 and 25, 2012: Three putative class actions regarding the proposed merger were filed in the District Court of Johnson County, Kansas.
. Between October 29, 2012 and November 1, 2012: Three additional related lawsuits were filed in state court.
. November 14, 2012: Plaintiff Paul Gerbino filed this action in federal court, alleging substantially the same claims as those in the state court actions. Plaintiff asserted that jurisdiction was proper based on diversity of parties.
. November 26, 2012: Judge Thomas Sutherland consolidated the Johnson County District Court actions.
. January 4, 2013: Judge Sutherland denied Sprint’s motion to dismiss in the Consolidated State Action and lifted a stay on discovery. Discovery has been proceeding in the Consolidated State Action since this date.
. February 20, 2013: Plaintiff Paul Gerbino filed an amended complaint in this federal action, asserting the same state law claims as in his original complaint, plus state law disclosure claims. The record denotes that this document was incomplete and is superseded by the amended complaint filed two days later.
. February 22, 2013: Plaintiff Paul Gerbino filed the now-operative amended complaint in this action, adding a federal claim pursuant to Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9. Plaintiff alleges that the Form S-4 Registration Statement filed with the U.S. Securities and Exchange Commission (“SEC”) contains materially misleading information and/or omits material information. Plaintiff asserts federal question jurisdiction based on that additional claim. . March 22, 2013: The plaintiffs in the Consolidated State Action filed a motion for a temporary injunction to enjoin the Sprint shareholder vote.
. March 28, 2013: A Consolidated Amended Class Action Petition was filed in Johnson County District Court, adding claims for materially misleading information and/or material omissions in the Registration Statement.
. March 29, 2013: The plaintiffs in the Consolidated State Action filed a motion for class certification.
. April 19, 2013: In the federal case, Magistrate Judge O’Hara denied plaintiff s motion for expedited discovery and enforced a statutory stay pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4(b)(3)(B). The stay remains in effect to date.
. May 7, 2013: Plaintiff filed a motion for a preliminary injunction in the federal case. Briefing on the motion is delayed until the court issues the ruling contained in this Memorandum and Order.
. May 31, 2013: A hearing is scheduled in the Consolidated State Action on the plaintiffs’ motion for class certification (which is fully briefed) and plaintiffs’ motion to supplement their consolidated amended petition.
. June 7, 2013: A hearing is scheduled in the Consolidated State Action on the plaintiffs’ motion for a temporary ...

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