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In re Frontier Communications, Corp. Stockholders Litigation

United States District Court, D. Connecticut

March 8, 2019

In re FRONTIER COMMUNICATIONS, CORP. STOCKHOLDERS LITIGATION

          RULING AND ORDER ON MOTIONS TO DISMISS

          VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE

         On April 30, 2018, Arkansas Teacher Retirement System (“ATRS”) and Carlos Lagomarsino (“Mr. Lagomarsino” or, in conjunction with ATRS, “Lead Plaintiffs”), filed an amended class action Complaint (“Am. Class Compl.”) on behalf of shareholders who “purchased or otherwise acquired the publicly traded common stock of Frontier Communications Corporation (“Frontier”) between February 6, 2015 and February 28, 2018, inclusive (“Class Period”); and/or (ii) purchased or otherwise acquired Frontier common stock or Mandatory Convertible Preferred Stock (collectively, “Frontier Securities”) either in or traceable to the Company's offerings of common and preferred stock conducted on or about June 2, 2015 and June 8, 2015.” Consol. Class Action Compl. for Violations of the Federal Securities Laws (“Am. Class Compl.”), ECF No. 134 ¶ 1.[1]

         Lead Plaintiffs are suing numerous Defendants, described below, for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C. §§ 77k, 77l(a)(2), and 77(o); Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a); and Rule 10b-5 of The Securities and Exchange Commission (“SEC”), 17 C.F.R. § 240.10b-5. Am. Class Compl. ¶¶ 1, 12.

         Defendants have moved to dismiss the case, arguing that Plaintiffs have failed to: (1) state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6); (2) satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), and 15 U.S.C. §§ 77k, 77l(a)(2), 77o, 78t(a), 78u-4(b)(1)(A-B), 78u-4(b)(2)(A), 78u-4(b)(4); or (3) file this lawsuit within the statute of limitations period imposed by 15 U.S.C. § 77m and 28 U.S.C. § 1658(b)(1). Notice of Defs. Mot. to Dismiss the Consol. Class Action Compl., ECF No. 143, 146; Mem. of Law in Support of Defs. Mot. to Dismiss the Consol. Class Action Compl. (“Def. Mem. of Law”), ECF No. 144.

         For the reasons set forth below, the Court now GRANTS Defendants' motions to dismiss, ECF Nos. 143, 146.

         To the extent that the deficiencies in this ruling can be addressed, Plaintiffs may file a motion for leave to amend the Amended Class Action Complaint, along with a proposed amended pleading, by May 10, 2019.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         This lawsuit focuses on Frontier's planned acquisition of Verizon's California, Texas, and Florida wireline operations (“CTF Acquisition”) and related efforts to raise capital in 2015- 16. See e.g., Am. Class Compl. ¶ 2; Def. Mem. of Law at 2.[2]

         1. The Defendants

         Plaintiffs have sued three groups of Defendants: (1) the Frontier Defendants, (2) Additional Securities Act Defendants, and (3) the Underwriter Defendants.

         a. The Frontier Defendants

         Plaintiffs allege violations of Section 10(b) of the Exchange Act, SEC Rule 10b-5, and Section 11 of the Securities Act, against Frontier, a Delaware corporation based in Connecticut, Am. Class Compl. ¶ 18, and violations of Section 10(b) of the Exchange Act, SEC Rule 10b-5, and 20(a) of the Exchange Act against five corporate officers (together with Frontier, “the Frontier Defendants”):

• Mary Agnes Wilderotter (“Ms. Wilderotter”), who allegedly served as Frontier's Chief Executive Officer (“CEO”) from November 2004 to April 2015, and as a member of the Company's Board of Directors “at all relevant times until April 2016, ” id. ¶ 19, and as the Company's Executive Chairman from April 2015 to April 2016, id.;
• Daniel J. McCarthy (“Mr. McCarthy”), who allegedly served as Frontier's Executive Vice President (“EVP”) and Chief Operating Officer (“COO”) from January 2006 to April 2012, as Frontier's President and COO from April 2012 to April 2015, as Frontier's President and CEO from April 3, 2015 to the present, and as a member of Frontier's Board of Directors during all relevant times, id. ¶ 20;
• John M. Jureller (“Mr. Jureller”), who allegedly served as the company's EVP and Chief Financial Officer (“CFO”) from January 2013 to November 4, 2016, id. ¶ 21;
• Ralph Perley McBride (“Mr. McBride”), who allegedly served as Frontier's CFO from November 4, 2016 through the end of the class period, id. ¶ 22; and
• John Gianukakis (“Mr. Gianukakis”), who allegedly served as Frontier's Vice President and Treasurer from May 27, 2014 to April 2017, id. ¶ 23.

         Mr. Jureller, Mr. McCarthy, and Ms. Wilderotter allegedly filed false statements with the SEC. ¶¶ 293-296.

         b. Additional Securities Act Defendants

         Eleven additional individual Defendants allegedly violated Sections 11 and 15 of the Securities Act:

• Donald W. Daniels (“Mr. Daniels”), who allegedly served as Frontier's Executive Chairman from April 2015 to April 2016, id. ¶ 295;
• Leroy T. Barnes, Jr. (“Mr. Barnes”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 296;
• Peter C.B. Bynoe (“Mr. Bynoe”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 297;
• Diana S. Ferguson (“Ms. Ferguson”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 298;
• Edward Fraioli (“Mr. Fraioli”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 299;
• Pamela D.A. Reeve (“Ms. Reeve”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 300;
• Virginia Ruesterholz (“Ms. Ruesterholz”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 301;
• Howard L. Schrott (“Mr. Schrott”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 302;
• Larraine D. Segil (“Ms. Segil”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 303;
• Mark Shapiro (“Mr. Shapiro”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 304; and
• Myron A. Wick, III (“Mr. Wick”), who allegedly served as a member of Frontier's Board of Directors at all relevant times, id. ¶ 305.

         c. The Underwriter Defendants

         Ten underwriter Defendants also allegedly violated Sections 11 and 12(a)(2)of the Securities Act:

• J.P. Morgan Securities LLC (“J.P. Morgan”), allegedly a Delaware limited liability company (LLC) with headquarters in New York, New York. J.P. Morgan was allegedly paid at least $37, 500, 000 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 310;
• Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill”), allegedly a Delaware corporation with a principal place of business in New York, New York. Merrill was allegedly paid at least $9, 187, 500 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 311;
• Citigroup Global Markets Inc. (“Citigroup”), allegedly a New York corporation with a principal place of business in New York, New York. Citigroup was allegedly paid at least $9, 187, 500 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 312;
• Credit Suisse Securities USA LLC (“Credit Suisse”), allegedly a Delaware LLC with headquarters in New York, New York. Credit Suisse was allegedly paid at least $3, 525, 000 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 313;
• Barclays Capital Inc. (“Barclays”), allegedly a Connecticut corporation with headquarters in New York, New York. Barclays was allegedly paid at least $3, 525, 000 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 314;
• Morgan Stanley & Co. LLC (“Morgan Stanley”), allegedly a Delaware LLC with headquarters in New York, New York. Morgan Stanley was allegedly paid at least $3, 525, 000 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 315;
• Mizuho Securities USA LLC (“Mizuho”), allegedly a Delaware corporation with headquarters in New York, New York. Mizuho was allegedly paid at least $3, 525, 000 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 316;
• Deutsche Bank Securities Inc. (“Deutsche Bank”), allegedly a Delaware corporation with headquarters in New York, New York. Deutsche Bank was allegedly paid at least $3, 187, 500 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 317;
• Goldman Sachs & Co. LLC (“Goldman Sachs”), allegedly a New York LLC with headquarters in New York, New York. Goldman Sachs was allegedly paid at least $918, 750 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 318; and
• UBS Securities LLC (“UBS”), allegedly a Delaware corporation with headquarters in New York, New York. UBS was allegedly paid at least $918, 750 for services in connection with the Offerings described below, plus additional fees in connection with its purchases of overallotment Frontier stock, id. ¶ 319.

         2. Relevant Events Leading up to the CTF Acquisition Announcement

         In July 2010, Frontier “embarked on what was then [allegedly] the Company's largest purchase to Dated: the 2010 Verizon Acquisition. The . . . Acquisition tripled Frontier's size by adding nearly five million wireline customers across fourteen states.” Am. Class Compl. ¶ 32. In one of the acquired states, West Virginia, Frontier allegedly departed from the “industry-standard ‘lease back' method” of gradually merging the acquired and acquiring company's equipment, systems, and accounts, id. ¶¶ 29, 33, to a faster “flash cut” method in which the “acquired company's assets turn over to the acquirer in one immediate transfer at the close of the acquisition . . . without any phase-in periods.” Id. ¶¶ 30, 33. Following the acquisition, Frontier Defendants allegedly “quickly labeled the West Virginia Flash Cut a triumph.” Id. ¶ 34. Allegedly, Frontier's West Virginia flash cut was not a triumph. See, e.g., id. ¶ 63. While the Frontier Defendants maintained that the flash cut was a success, id. ¶ 34, they nonetheless described the process as complex, or “the corporate equivalent of brain surgery . . . . ” Id. ¶ 28.

         On December 17, 2013, Frontier allegedly announced its next flash cut project: “all of AT&T's wireline business and [] statewide fiber optics network in Connecticut[.]” Id. ¶ 35. The Connecticut acquisition allegedly “brought Frontier to denser suburban and even light urban markets for the first time in the Company's history.” Id. ¶ 3. Ms. Wilderotter allegedly claimed, “We are very confident in our ability to integrate this property successfully and efficiently on this rapid schedule just as we did the flash cut of West Virginia back in 2010.” Id. ¶ 35. Nevertheless, on the day of the announcement, a Morningstar analyst allegedly wrote that Frontier was still having challenges integrating its past acquisitions. Id. ¶ 263. The analyst allegedly characterized the performance bonuses awarded to Ms. Wilderotter, Mr. McCarthy, and Mr. Jureller as “premature.” Id.

         On October 14, 2014, Frontier customers in West Virginia filed a putative class action complaint alleging that Frontier's Internet service was much slower than promised. Id. ¶ 63; Sheridan v. Citizens Telecomm. Co. of W.Va., No. 14-cv-115 (W.Va. Cir. Ct., Lincoln Cnty. 2014); rev'd, Citizens Telecomm. Co. of W.Va. v. Sheridan, 239 W.Va. 67, 71, 799 S.E.2d 144, 154 (2017) (“For the foregoing reasons, we reverse the November 30, 2015 order of the Circuit Court of Lincoln County [denying the motion to compel arbitration] and remand with instructions to enter an order compelling arbitration on an individual basis.”).

         Eleven days later, on October 25, 2014, the Connecticut flash cut allegedly occurred. Id. ¶ 38. Within two days, Frontier's East Region President allegedly claimed that “the overwhelming majority of customers, approximately 99 percent, experienced a seamless transition from AT&Ts service to Frontier.” Id. ¶ 38. That statement allegedly was not true. ¶ 68. Additionally, in the month following the flash cut, Connecticut's Public Utilities Regulatory Authority (“PURA”) allegedly “received more complaints about Frontier . . . than it had received over the prior year for all other cable providers in the state combined.” Id. ¶ 68.

         On November 14, 2014, Connecticut's Attorney General and Department of Consumer Protection allegedly “filed a request that PURA convene a meeting at which the public could confront Frontier's officials and provide testimony regarding their complaints.” Id. That meeting was allegedly held on December 22, 2014. Id. “At that meeting, Frontier executives [allegedly] appeared before Connecticut's disgruntled customers and, as the New Haven Register [allegedly] described, outlined ‘the most glaring misjudgments' that plagued the Connecticut Acquisition: (1) Frontier's training only ‘70 of a possible 322 AT&T customer service employees . . . on the new company's systems'; (2) ‘[u]nderestimating the volume of customer complaints Frontier would receive by 12 percent'; and (3) ‘[p]roblems with loss of video-on-demand services and associated licensing agreements.'” Id.

         Nevertheless, on December 8, 2014, Mr. Jureller, then Frontier's CFO, allegedly claimed that “probably 99%-plus of our [Connecticut] customers had a great experience.” Id. ¶ 38. Three days later, Ms. Wilderotter, then Frontier's CEO, allegedly “announced that Frontier's board had voted to increase its dividend, ‘reflect[ing] the Board's confidence in Frontier's business and financial strength and our solid execution performance in integrating the Connecticut acquisition.'” Id.

         3. Announcement of and Fundraising for the CTF Acquisition

         On February 5, 2015, Frontier allegedly announced the plan to acquire the California, Texas, and Florida wireline operations of Verizon Communications, Inc. Id. ¶¶ 2, 97; Def. Mem. of Law at 2. That day, Frontier held a press call for investors and filed a Form 8-K with the SEC, “in which Frontier [allegedly] stated that it ‘estimated OpEx [Operating Expenses] and CapEx [Capital Expenditures] integration cost of approximately $450 million in 2015/2016' for the CTF Acquisition.” Am. Class Compl. ¶ 190.[3]

         During the press call, Mr. McCarthy, then Frontier's COO, allegedly stated that the $450 million would cover “total integration costs . . . . [including] both operating expense and capital expense, ” id. ¶ 191; CEO Wilderotter allegedly added that Frontier had a “proven track record of achieving and exceeding acquisition cost savings . . . . [while] creat[ing] a smooth transition for customers with no disruption to service, ” id. ¶ 173. On February 5, 2015, Frontier's common stock price allegedly closed at $115.50. Id. ¶ 242.

         The class period for this case begins on February 6, 2015. Id. ¶ 1. Less than three weeks later, on February 25, 2015, Frontier allegedly disclosed continuing service issues and cost overruns of ten percent on the Connecticut flash cut in a Form 10-K filing with the SEC. Id. ¶ 71.[4]

         On March 3, 2015, Frontier allegedly announced the resignation of Ms. Wilderotter as the company's CEO. Id. ¶ 19. That same day, Frontier's CFO, Mr. Jureller, allegedly spoke at a Morgan Stanley Technology, Media & Telecommunication Conference. Id. ¶ 49. The analyst interviewing Mr. Jureller allegedly expressed surprise that the company was undertaking the CTF Acquisition so soon after the Connecticut flash cut; Mr. Jureller allegedly replied: “[W]e're the only ones that have successfully done carve-outs . . . and it's no easy feat to do. These are hard things to do [and] Connecticut . . . exceeded our expectations.” Id. ¶¶ 49, 174, 256.

         Several days later, on March 9, 2015, Mr. Jureller allegedly delivered a similar presentation at the Deutsche Bank Media, Internet and Telecommunication conference, stating: “. . . having done this before . . . . We have the playbook written. It is a lift. We've got three separate states that we're going to flash cut at one time, so knowing the value of the flash cut and executing on that is going to be really important.” Id. ¶ 175. On March 11, 2015, Mr. Jureller allegedly used the “playbooks” metaphor again at a Goldman Sachs Leveraged Finance Conference. Id. ¶ 176.

         On April 28, 2015, Frontier and Verizon allegedly filed the proposed flash cut with the Federal Communications Commission, claiming that: “Existing retail and wholesale customers will continue to receive substantially the same services.” Id. ¶ 50.

         On May 15, 2015, Mr. McCarthy, now Frontier's CEO, allegedly told conference[5]attendees that the CTF Acquisition would “expand Frontier's business into ‘fairly urban properties in Tampa and Dallas Fort-Worth and in Southern California[]' [and that t]hese areas . . . ‘typically are more competitive than the more rural markets' Frontier had historically served, further compounding the demand for Frontier to deliver technical sophistication-sophistication that it never before had to deliver.” Id. ¶ 47.

         On May 28, 2015, Mr. McCarthy “appeared at the Sanford C. Bernstein Strategic Decisions Conference where he stated that Frontier had the ability to ‘do heart and lung transplants in a weekend,' and that ‘we've become comfortable at doing' integrations like the CTF Acquisition.” Id. ¶ 177.

         In contrast to these public statements, a number of Frontier employees allegedly had reservations about the company's ability to execute the CTF flash cut.[6] “[A] former senior technical analyst with Frontier . . . . [felt] that the Company operated with ‘very little coherent thought' and unlike anything else he had seen in his/her career. As an example, FE-9 noted that the Company did not even begin to create an operative organizational chart until approximately October 2015.” Id. ¶ 81. A senior IT professional “described the existence, and senior management's awareness, of a ‘Gap Analysis' prepared for the CTF Acquisition that revealed hundreds of gaps in functionality between Frontier and Verizon's systems.” Id. ¶ 251. A senior technical analyst for Commercial Business Technical Support and Frontier's former ITSM Managing Engineer[7] alleged that Frontier “violated industry practice by maintaining multiple, separate databases and systems to track and manage customers acquired in past transactions, ” id. ¶ 77, and “described Frontier's systems as ‘nightmarish,' ‘absolutely trash,' and ‘untechnological[, ]'” id. ¶ 182. A former National Operations Support Manager who allegedly transitioned from Verizon as part of the CTF Acquisition described Frontier's technology as “‘decades' behind Verizon's-even accounting for the fact that Verizon had stopped performing system enhancements on its CTF assets for the year prior to the CTF Flash Cut.” Id. ¶ 85.

         These and other Frontier employees allegedly predicted that the CTF flash cut would not go well. See, e.g., id. ¶¶ 86-93. Some employees alleged that “Defendants knew the CTF Acquisition could not succeed because the Company had no understanding of the network it was acquiring from Verizon.” Id. ¶ 94. The former ITSM Managing Engineer claims:

those working on the CTF Flash Cut had explicitly warned Frontier management that the CTF Flash Cut would fail because Frontier had failed to fully map Verizon's network in advance of the cutover . . . . Frontier had no way of knowing what the network actually looked like and was making decisions about the flash cut largely by guessing . . . . [T]he failure to complete a network map was so dire that [I and my coworkers] had sent memoranda to, and had meetings with, Frontier management to recommend that the Company wait another four months before the CTF Flash Cut, but management ignored these entreaties.”

Id. ¶ 94.

         On June 2, 2015, Frontier announced two offerings that would “finance a portion of the cash consideration payable in connection with Frontier's previously announced [CTF Acquisition].” Id. ¶ 288. The stock offerings would allegedly include: “1) an offering of 17, 500, 000 shares of Mandatory Convertible Preferred Stock, Series A, for $1.75 billion; and 2) an offering of 150, 000, 000 shares of common stock, for $750 million.” Id. On June 8, 2015, Frontier allegedly offered the Preferred Stock at $100.00 per share. Id. ¶ 242.

         On June 10, 2015, Frontier allegedly announced that it “was closing the Offering[s], having raised a total of $2.5 billion from public investors[. Thereafter, ] Underwriter Defendants [allegedly had] ¶ 30-day overallotment option to purchase from Frontier up to an additional 15, 000, 000 shares of common stock and up to an additional 1, 750, 000 shares of Preferred Stock, in each case at the same prior public offering price per share.” Id. ¶ 289.

         “On or about June 19, 2015, the Underwriter Defendants [allegedly] exercised the overallotment option, and closed the overallotment sale on or about June 24, 2015, generating additional proceeds of $75 million from sales of common stock, as well as an additional $175 million from sales of Preferred Stock. In all, during June 2015, Frontier [allegedly] obtained a total of $2.75 billion through the Offerings[.]” Id. Frontier's largest flash cut allegedly occurred roughly nine months later. Id. ¶¶ 95, 97.

         4. Events Following the Closing of the 2015 Offering

         In the months between the closing of its offering and the CTF flash cut, Frontier's corporate officers continued to claim that the CTF flash cut would be a success. On September 16, 2015, Mr. Jureller, the CFO, allegedly assured attendees at the Goldman Sachs Communacopia Conference that Verizon would “continue to maximize value” in the CTF accounts until the day of the flash cut, when Frontier would acquire the accounts. Id. ¶ 148.

         He also told attendees: “We are spending a substantial amount of money, mostly in advance of the cut over. We've said out there that we will probably spend about $450 million or so on our integration efforts with most of that being before that day one cut over in really getting everything aligned from a capital perspective, from an operating and systems perspective, to have a strong experience coming out of the gate.” Id. ¶ 196.

         On October 5, 2015, Frontier allegedly submitted the proposed flash cut to the Public Utilities Commission of the State of California, allegedly claiming that the company “had a ‘proven ability to successfully transition customers to its network, as demonstrated by the [2010 Verizon Acquisition],' and emphasiz[ing] that customers ‘should not experience any disruption in service' as a result of the CTF Acquisition, including but not limited to disruption to all-important 911 service, [because Frontier would] ‘train[] current Verizon employees on Frontier's systems to ensure a seamless transition for customers.'” Id. ¶ 50.

         In December 2015, Frontier allegedly reached a $160 million settlement with the West Virginia Attorney General for the 2010 flash cut. Id. ¶¶ 63, 262. The settlement was allegedly “the largest independently-negotiated consumer protection settlement in the state's history, and occurred after state regulators had received thousands of complaints from consumers that caused serious doubt that Frontier's ‘seasoned integration team' had ever actually ‘successfully integrat[ed]' the state.” Id. ¶ 63. On February 29, 2016, Mr. McCarthy, the CEO, told an audience of conference attendees that flash cuts are “a heavy lift” and that Frontier was probably the only player in the industry really who goes for a flash cut.” Id. ¶ 30.

         Also, on February 29, 2016, Mr. Gianukakis, then Frontier's Vice-President and Treasurer, spoke positively about the upcoming CTF Acquisition at the Morgan Stanley Technology, Media & Telecommunications Conference:

[E]verything is going quite well, so we're ready to conclude the transaction on April 1. . . . I think the thing is we've done these flash-cuts in a number of instances before. Back in 2010, we had done a flash-cut on one of the states and then we did Connecticut in 2014 as a flash-cut, and so now we're going forth with our next flash-cut . . . . [T]hese are systems that we know very well. We have a set of playbooks and checklist and work product that we've done in the past. And of course, in any one of these flash-cuts integrations, you learn. And we certainly have learned in our prior transactions and we've gotten better. We've become more refined, we develop our own expertise on how to implement these transactions. They're quite complex. These are not simple transactions to integrate. . . .

Id. ¶ 55.

         On April 1, 2016, the CTF Acquisition and flash cut allegedly occurred. Id. ¶ 97. Six days later, on April 7, 2016, Connecticut's Stamford Advocate allegedly published an article on problems with the CTF flash cut, stating: “Frontier was little better positioned to absorb a far-flung broadband network in 2016 than it was in 2014 in taking on AT&T's operations in Connecticut, when it was hit with some of the same complaints that bedeviled it this past week.” Id. ¶ 55.

         In the weeks and months after the flash cut, Frontier management and employees allegedly knew that the “CTF Flash Cut was . . . a colossal disaster, ” id. ¶ 102, but many of the Frontier Defendants allegedly kept touting its success, see, e.g., id. ¶¶ 100-01, 109. Then, “[o]n May 4, 2016, Mike Gatto, the chair of the California State Assembly's Utilities & Commerce Committee (“CAUCC”), demanded that the “alarming” “problems . . . be resolved swiftly, ” noting that “[c]ities are unable to live stream council meetings and residents are at risk because of the inability to dial 911 in an emergency. My committee will hold hearings on the impact on our constituents and the appropriate government response if these problems persist.” A few days later, the CAUCC allegedly announced that it would hold formal hearings concerning Frontier on May 18, 2016.” Id. ¶ 110.

         On November 1, 2016, Frontier allegedly informed investors, after the close of the market, that the CTF integration had cost “66% more than Defendants' estimate of $450 million in integration costs for 2015/16 . . . .” Id. ¶ 139. That announcement allegedly caused the price of Frontier shares to fall 13.7% from $58.95 on November 1, 2016 to $50.85 on November 2, 2016--a loss [allegedly amounting to] $630 million in shareholder value.” Id. ¶ 139.

         On February 27, 2018, Frontier allegedly issued a press release, after the close of the market, “announcing its fourth quarter and full year 2017 results . . . nearly two years after Defendants had first declared the CTF Acquisition a ‘success.'” Id. ¶ 164. Allegedly due to that press release and Frontier's challenges with the CTF acquisition, id. ¶¶ 164-66, Frontier's stock price allegedly fell 10.9% the next day. Id. ¶¶ 166, 242.

         On May 2, 2017, Frontier allegedly announced, after the close of the market, a revenue decline of $53 million from the previous quarter, in part due to “cleanup of CTF nonpaying accounts.” Id. ¶ 243. Simultaneously, Frontier allegedly announced that it was cutting its dividend by 62%. Id. Allegedly due to that announcement, Frontier's stock price allegedly fell 16.6% the next day. Id.

         On October 31, 2017, Frontier allegedly announced, after the close of the market, that it would miss earnings before interest, tax, depreciation and amortization (“EBITDA”) guidance for 2017. Id. Allegedly due to that announcement, Frontier's stock price fell 26.8% the next day. Id.

         On February 27, 2018, Frontier allegedly announced, after the close of the market, that: “(1) the total cost of integrating the CTF Acquisition was $962 million, with $59 million in 2017 alone, (2) churn had increased nearly 10% since 2016, and (3) Frontier was canceling its dividend completely.” Id.

         On February 28, 2018, the close of this case's class period, id. ¶ 1, Frontier's common stock allegedly fell 23.9% to $7.03, id. ¶¶ 242-43, and Frontier's Preferred Stock allegedly closed at $12.67, id. at ¶ 242.

         B. Procedural Background

         On September 26, 2017, Chris Bray filed a class action Complaint for violation of the federal securities laws on behalf of himself and all others similarly situated. Class Action Compl. for Violations of Fed. Securities Laws, ECF No. 1. On November 27, 2017, John DuBois, a separate Plaintiff, filed a motion to consolidate related actions, appoint lead Plaintiff, and approve lead plaintiff's selection of counsel. Mot. of John DuBois to (1) Consol. Related Actions; (2) Approve Lead Pl., and (3). Approve Lead Pl. Counsel, ECF No. 23. Thereafter, ten additional Plaintiffs moved to ...


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