United States District Court, D. Connecticut
IN RE FRONTIER COMMUNICATIONS CORPORATION DERIVATIVE LITIGATION.
RULING AND ORDER ON MOTION TO CONSOLIDATE, MOTION TO
APPOINT LEAD PLAINTIFF AND APPROVE LEAD COUNSEL, AND MOTION
TO DEFER LITIGATION
HONORABLE VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE
Currently
pending before the Court are three motions related to this
shareholder derivative lawsuit.
First,
Cynthia Graham moved to consolidate In re Frontier
Communications Corporation Derivative Litigation, No.
3:17-cv-1792, with two other cases, Williams v.
McCarthy, No. 3:18-cv-00826, and Graham v.
McCarthy, No. 3:18-cv-00844, as well as to appoint
counsel, and to modify the Court's Ruling and Order
appointing lead plaintiff and lead counsel, ECF No. 34.
Graham Br., ECF No. 39.
Second,
Plaintiffs in In re Frontier Communications Corporation
Derivative Litigation, No. 3:17-cv-1792, also moved to
consolidate that case with Williams v. McCarthy, No.
3:18-cv-00826, and Graham v. McCarthy, No.
3:18-cv-00844. Feldbaum Mot. to Consolidate, ECF No. 43.
Third,
nominal Defendant Frontier Communications Corporation
(“Frontier”), Individual Defendants[1], and Plaintiffs
filed a joint motion to defer litigation of the derivative
case until after a ruling on an anticipated motion to dismiss
in a related case, In re Frontier Communications
Corporation Securities Litigation, Lead Case No.
3:17-cv-01617-VAB (the “Direct Securities
Action”).[2] Mot. to Defer Litig., ECF No. 44.
For the
following reasons, the motions to consolidate, ECF Nos. 39,
43, are GRANTED. The motion to modify the
Court's Ruling and Order and to appoint Ms. Graham as
lead plaintiff and Scott Scott Attorneys at Law LLP
(“Scott Scott”) as lead counsel, ECF No. 39, is
GRANTED IN PART AND DENIED IN PART. The
Court will appoint Ms. Graham as co-lead plaintiff with
Irving Feldbaum and Scott Scott Attorneys at Law LLP
(“Scott Scott”) as co-lead counsel with Johnson
Fistel, LLP (“Johnson Fistel”). The motion to
defer litigation is GRANTED.
I.
FACTUAL AND PROCEDURAL BACKGROUND
The
Court assumes familiarity with the factual and procedural
background of this case. See Order on Mot. to
Appoint Lead Pl. and Lead Counsel at 2-5, ECF No. 34.
A.
Factual Allegations
In
February 2015, Frontier allegedly announced a plan to acquire
wireline operations from Verizon Communications, Inc.
(“Verizon”), for $10.54 billion in cash and
assumed debt. Baker Compl. ¶ 3. Frontier allegedly
acquired the wireline in April 2016. Id. ¶ 4.
During
the following year, Frontier allegedly disclosed that it had
lost millions of dollars after the acquisition, in part
because of non-paying accounts acquired as a part of the
Verizon deal. Id. ¶ 5. Daniel McCarthy,
Frontier's Chief Executive Officer (“CEO”),
allegedly claimed that Frontier would clean up and disconnect
those accounts. Id. ¶¶ 6-7. Frontier's
stock dropped. Id. ¶ 7.
Frontier
continued to lose money over the first quarter of 2017.
Id. ¶ 8. Ralph Perley McBride, Frontier's
Chief Financial Officer (“CFO”), explained that
the financial loss was partly due to the company's
efforts to clean up the non-paying accounts. Id.
¶ 9. Frontier's stock dropped again. Id.
¶ 9.
The
Individual Defendants allegedly caused the nominal defendant,
Frontier, to issue false and misleading statements about its
business operations and compliance policies. Id.
¶ 10. As a result, and as a result of the decline in
Frontier's stock market value, the company allegedly has
lost value. Id. ¶ 11. Frontier's Board,
however, allegedly refuses to initiate litigation against the
Individual Defendants for breaches of fiduciary duties, and
Plaintiffs therefore assert this shareholder derivative
lawsuit on its behalf. Id. ¶ 12.
B.
Procedural History
On
February 10, 2018, this Court granted a motion to consolidate
two cases: Baker v. McCarthy, No. 3:17-cv-1792, and
Feldbaum v. Barnes, No. 3:17-cv-1893. ECF No. 19.
Together, those cases became In re Frontier
Communications Corporation Derivative Litigation, No.
3:17-cv-1792.
On
March 22, 2018, the Court granted an unopposed motion to
appoint Celeste Baker and Irving Feldbaum as joint lead
plaintiffs, and to approve their choices of: Johnson Fistel
as lead counsel, Diserio Martin O'Connor & Castigliono
LLP (“Diserio Martin”) as liaison counsel, and
the Law Offices of Nicholas Koluncich III, LLC as additional
counsel for Plaintiffs. Order at 1, ECF No. 34.
On
April 3, 2018, the parties filed a joint motion to extend the
deadline for filing a Rule 26(f) Report until after the
filing of an amended complaint in the Federal Direct
Securities Action. ECF No. 36. In order to have reasonable
time to review the amended complaint in the Direct Securities
Action, the parties requested that the consolidated complaint
in the Derivative Action be filed on or before May 30, 2018,
and the 26(f) Report be filed sixty days after that.
Id. On April 4, 2018, the Court granted the motion.
Order, ECF No. 37 (granting motion for extension of time
“for the filing of a Rule 26(f) report to sixty (60)
days following the filing of a consolidated complaint in the
Federal Securities Action”).
On May
18, 2018, Ms. Graham, the plaintiff in Graham v.
McCarthy, No. 3:18-cv-00844, filed a Notice of Related
Cases. ECF No. 38. On May 24, 2018, she filed a motion to
appoint counsel and modify the March 22, 2018 Ruling and
Order on Motion to Appoint Lead Plaintiff and Approve Lead
Counsel, and a motion to consolidate Graham v.
McCarthy, No. 3:18-cv-00844, In re Frontier
Communications Corporation Derivative Litigation, No.
3:17-cv-1792, and Williams v. McCarthy, No.
3:18-cv-00826. ECF No. 39.
Also on
May 24, 2018, Ms. Baker and Mr. Feldbaum filed a motion to
consolidate In re Frontier Communications Corporation
Derivative Litigation, No. 3:17-cv-1792, with
Williams v. McCarthy, No. 3:18-cv-00826, and
Graham v. McCarthy, No. 3:18-cv-00844. ECF No. 43.
That same day, Ms. Baker, Mr. Feldbaum, Frontier, and the
Individual Defendants filed a joint motion to defer
litigation until after a ruling on an anticipated motion to
dismiss in the Frontier ...