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Sprint Nextel Class Action Defense Cases—State Court Approves $57.5 Million Class Action Settlement Resolving Class Action Arising Out Of Recombination Of Its Tracking Stocks In 2004

The Kansas City Star reports that a state court judge granted final approval today to a class action settlement that “resolves a class-action lawsuit against Sprint Nextel Corp. over the recombination of its tracking stocks in 2004.” Johnson County District Judge Kevin Moriarty gave final approval to the settlement, which requires Sprint Nextel pay $57.5 million. The court also awarded class action counsel about $18 million in attorney fees and costs, but ordered further that about $1.6 million of the attorney fees be withheld pending disbursement of the settlement proceeds to the class. The Star explains that the class action alleged “that Sprint management manipulated its FON wireline business at the expense of its PCS wireless venture and undervalued PCS shares when the stocks were recombined in April 2004.” More specifically, “Sprint divided its stock in 1998, with shares trading under the ‘FON’ ticker symbol reflecting its local and long-distance business, and shares trading under ‘PCS’ reflecting its wireless business. At the time, the wireless unit was in start-up mode and the wireline unit was the company’s big cash producer.” According to the class action allegations, “management artificially depressed the value of PCS by having FON lend it money at an unduly high rate, by failing to properly account for $700 million in tax credits when valuing PCS to determine the conversion ratio when the stocks were recombined, and by using defective or dated information when it calculated the ratio.” The class action covers more than 300,000 potential claimants.