• On September 16, 2011, the U.S. Department of Justice amended its complaint to enjoin the AT&T/T-Mobile merger to include the states of New York, California, Illinois, Pennsylvania, Massachusetts, Washington, and Ohio as additional plaintiffs. United States v. AT&T Inc., No. 11-cv-1560 (D.D.C.).
  • On September 19, 2011, the United Stated District Court for the Northern District of Texas largely denied the motion to dismiss of Verizon Communications, and related entities, against claims that they defrauded investors and creditors via spinoff company Idearc. Plaintiffs allege that, as Verizon’s directories business began failing in 2006, it created Idearc, which then transferred billions of assets to Verizon but retained the debts. Idearc was left insolvent to the tune of $9 billion, resulting in its filing bankruptcy. The creditors allege that Verizon “embarked on the complicated spin-off transaction to ‘reap [a] windfall to the injury of Idearc and Idearc’s creditors by stripping Idearc of cash and burdening Idearc with massive debt.’” The court denied the motion to dismiss claims of fraudulent transfer, breach of fiduciary duty, aiding and abetting, and unlawful dividend claims, stating “These detailed and particularized allegations show that Verizon had a motive and opportunity to commit the alleged actual fraudulent transfers, and they permit the court to draw a reasonable inference of Verizon’s intent.” The court did agree with Verizon, however, that punitive damages are not available for breach of fiduciary claims under Delaware law. U.S. Bank Nat’l Ass’n v. Verizon Commc’ns Inc., No. 3:10-cv-1842 (N.D. Tex.).
  • Also on September 19, Cellular South became the latest party to bring suit to block the AT&T/T-Mobile merger. Cellular South – like the U.S. Department of Justice, several States, and Sprint – alleges that the proposed transaction violates federal antitrust laws, and seeks a court order enjoining the transaction. It highlights the negative consequences that the proposed transaction would have on wireless competition and service outside of the nation’s most profitable metropolitan markets: “While it is true that regional wireless carriers such as Cellular South cannot compete with AT&T or T-Mobile on a nationwide basis, it is also true that Cellular South and other carriers like it provide absolutely essential competition in rural areas – particularly on the basis of price and in the build-out of rural markets.” Cellular South Inc. v. AT&T Inc., No. 11-cv-1690 (D.D.C.).