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Item 3. Legal Proceedings

2022-02-25 compared with 2021-02-26 · 27 added, 56 removed, 42 unchanged (66% of the section changed)

1 unchanged sentence

Litigation Relating to the Combination

Lewis Baker v.

GCI Liberty, Inc., et al.

On October 23, 2020, a lawsuit was filed by a purported GCI Liberty stockholder in the United States District Court for the District of Delaware under the caption Lewis Baker v.

GCI Liberty, Inc., et al., Case No.

1:20-cv-01425-UNA.

The lawsuit named as defendants GCI Liberty, the members of the GCI Liberty board of directors, Liberty Broadband and certain subsidiaries of Liberty Broadband.

The lawsuit asserted claims under Section 14(a) of the Exchange Act and Rule 14a-9 under the Exchange Act, as well as Section 20(a) of the Exchange Act.

The lawsuit alleged that the defendants caused a registration statement that omitted material information to be filed in connection with the Combination, which allegedly rendered the registration statement false and misleading.

The lawsuit further alleged that the members of the GCI Liberty board of directors and Liberty Broadband acted as controlling persons of GCI Liberty and had knowledge of the allegedly false and misleading statements contained in the registration statement.

The lawsuit sought an injunction barring the Combination, rescission of the Combination in the event it had been consummated, an order directing the GCI Liberty board of directors to disseminate a registration statement that did not contain any allegedly untrue statements or omit material facts, a declaration that defendants violated the Exchange Act, costs and attorneys’ fees, and other relief.

Liberty Broadband believes this lawsuit was without merit.

On October 29, 2020, the plaintiff voluntarily dismissed the lawsuit with prejudice.

Hollywood Firefighters’ Pension Fund, et al.

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Malone, the Chairman of the board of directors of Liberty Broadband and, prior to the Combination, GCI Liberty, in their purported capacities as controlling stockholders and directors of GCI Liberty, and the other directors of GCI Liberty, breached their fiduciary duties by approving the Combination.

The lawsuit further alleged that the Combination violated Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) and that the Joint Proxy Statement/Prospectus that was filed in connection with the Combination misstated and omitted material information.

The complaint also alleged that various prior and current relationships among members of the GCI Liberty special committee, Mr.

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The complaint sought certification of a class action, declarations that Messrs.

Maffei and Malone and the other directors of GCI Liberty breached their fiduciary duties and that the Combination violates Section 203 of the DGCL, an injunction barring the stockholder vote and the Combination, and the recovery of damages and other relief.

On October 15, 2020, the plaintiffs filed a motion for expedited proceedings.

On October 27, 2020, after a hearing, the Court granted the motion.

On November 6, 2020, the Court entered an order setting a hearing on the plaintiffs’ motion for preliminary injunction for December 7, 2020.

On November 21, 2020, the plaintiffs and defendants filed a stipulation and proposed order (the “Agreed Stipulation and Order”) describing an agreement reached among them, including plaintiffs’ agreement to dismiss their claim that the Combination violates Section 203 of the DGCL as moot and to withdraw their motion for preliminary injunction in return for certain agreements by Mr.

Malone and Mr.

Maffei described in our Current Report on Form 8-K filed on November 24, 2020.

The Court granted the Agreed Stipulation and Order and canceled the hearing on Plaintiffs’ motion for preliminary injunction.

On December 23, 2020, the plaintiffs filed a Second Amended Complaint.

The Second Amended Complaint does not include claims against GCI Liberty or Ms.

Sue Ann Hamilton, a former member of the GCI Liberty special committee.

The Second Amended Complaint also does not assert Plaintiffs’ prior claims regarding violations of Section 203 of the DGCL or seek an injunction barring the stockholder vote or the Combination.

The Second Amended Complaint includes a new count of breach of fiduciary duty against Mr.

Maffei and Malone and the other directors of GCI Liberty breached their fiduciary duties and the recovery of damages and other relief.

On December 23, 2020, the plaintiffs filed a Second Amended Complaint, which, among other things, included a new count of breach of fiduciary duty against Mr.

Maffei and Mr.

Gregg Engles, the other former member of the GCI Liberty special committee, for purportedly failing to inform the GCI board of former and current social and professional relationships between Mr.

Engles and Mr.

Anthony Magro, an employee of Evercore, financial advisor to the GCI Liberty special committee.

The Second Amended Complaint also contains new allegations that the price of GCI Liberty was depressed as a result of statements and omissions by Mr.

Gregg Engles, the other former member of the GCI Liberty special committee, and new allegations that the price of GCI Liberty was depressed as a result of statements and omissions by Mr.

Maffei in November of 2019.

The parties are conducting discovery.

Trial in the matter is scheduled for November 2021.

Liberty Broadband believes this lawsuit is without merit.

During the first quarter of 2021, the parties were conducting discovery with the trial scheduled for November 2021.

We believed the lawsuit was without merit.

During March 2021 and in advance of the expenditure of significant time and costs to conduct the depositions proposed to have been taken in this action, the parties began negotiations with the class of plaintiffs for a potential settlement of this action.

On May 5, 2021, the plaintiffs (on behalf of themselves and other members of a proposed settlement class) and defendants entered into an agreement in principle to settle the litigation pursuant to which the parties agreed that the plaintiffs will dismiss their claims with prejudice, with customary releases, in return for a settlement payment of $110 million to be paid by Merger LLC (as successor-by-merger to GCI Liberty, Inc.) and/or insurers for the defendants and for GCI Liberty.

On June 17, 2021, the parties filed a Stipulation and Agreement of Settlement, Compromise, and Release.

On June 30, 2021, the Court preliminarily certified, solely for purposes of effectuating the proposed settlement, the action as a non-opt out class action on behalf of a settlement class consisting of all holders of GCI Liberty Series A common stock as of December 18, 2020.

The Court set a settlement hearing for October 5, 2021, to determine whether to permanently certify the class, whether the proposed settlement is fair, reasonable, and adequate to the settlement class, and whether to enter a judgment dismissing the action with prejudice, among other things.

On October 18, 2021, subsequent to that hearing, the Court issued a final order permanently certifying the Class and approving the settlement.

The Court also awarded Plaintiffs’ Counsel $22 million in attorneys’ fees, which shall be paid out of the settlement fund.

Plaintiffs also requested that the Court issue an additional fee award, which Defendant opposed, not to be paid out of the settlement fund, in connection with a certain claim that was mooted earlier in the case (a “mootness fee”).

On November 8, 2021, the Court awarded Plaintiffs’ Counsel a $9 million mootness fee, which Defendant subsequently paid.

Charter and Liberty Broadband - Delaware Litigation

In August 2015, a purported stockholder of Charter filed a lawsuit in the Delaware Court of Chancery (the “Court”), on behalf of a putative class of Charter stockholders, challenging the transactions involving Charter, TWC, A/N, and Liberty Broadband announced by Charter on May 26, 2015.

The lawsuit is captioned Sciabacucchi v.

Liberty Broadband Corp., C.A.

11418-VCG, and names as defendants Liberty Broadband, Charter and the board of directors of Charter.

Plaintiff alleged that the transactions resulted from breaches of fiduciary duty by Charter’s directors and that Liberty Broadband improperly benefited from the challenged transactions at the expense of other Charter stockholders.

The lawsuit has proceeded to the discovery phase.

In August 2015, a purported stockholder of Charter, Matthew Sciabacucchi, filed a lawsuit in the Delaware Court of Chancery on behalf of a putative class of Charter stockholders, challenging the transactions involving Charter, TWC, Advance/Newhouse Partnership, and Liberty Broadband announced by Charter on May 26, 2015.

The lawsuit, which named as defendants Liberty Broadband, Charter and the board of directors of Charter, alleged that the transactions resulted from breaches of fiduciary duty by Charter’s directors and that Liberty Broadband improperly benefited from the challenged transactions at the expense of other Charter stockholders.

Charter and Liberty Broadband deny any liability, believe that they have substantial defenses, and are vigorously defending this lawsuit.

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While Charter is unable to predict the outcome of these investigations, it does not expect that the outcome will have a material effect on its operations, financial condition, or cash flows.

On December 19, 2011, Sprint Communications Company L.P.

(“Sprint”) filed a complaint in the United States.

District Court for the District of Kansas alleging that TWC infringed certain U.S.

patents purportedly relating to VOIP services.

At the trial, the jury returned a verdict of $140 million against TWC and further concluded that TWC had willfully infringed Sprint’s patents.

The court subsequently declined to enhance the damage award as a result of the purported willful infringement and awarded Sprint an additional $10 million, representing pre- and post-judgment interest on the damages award and an additional $1 million in costs.

In November 2019, Charter paid the verdict, interest and costs in full.

Charter continues to pursue indemnity claims from two of its vendors for a portion of the judgment.

Sprint Communications Company L.P.

(“Sprint”) filed a patent suit against Charter and Bright House on December 2, 2017 in the United States District Court for the District of Delaware.

This suit alleges infringement of 9 patents related to Charter’s provision of VoIP services.

Sprint previously sued TWC with respect to eight of these patents and obtained a final judgment of $151 million inclusive of interest and costs, which Charter paid in November 2019.

Charter has also brought a patent suit against Sprint (TC Tech, LLC v.

Sprint) in the United States District Court for the District of Delaware implicating Sprint's LTE technology and a similar suit against T-Mobile USA, Inc.

in the Western District of Texas.

The ultimate outcomes of the pursuit of indemnity against Charter’s vendor and the TC Tech litigation cannot be predicted.

Charter does not expect the outcome of its indemnity claims nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.

Sprint filed a second patent suit against Charter and Bright House on December 2, 2017 in the United States District Court for the District of Delaware.

This suit alleges infringement of 9 patents related to Charter's provision of VoIP services (eight of which were asserted against TWC in the matter described above).

Sprint filed a third patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia.

Sprint) in the United States District Court for the District of Delaware implicating Sprint's LTE technology and a similar suit against T-Mobile in the United States District Court for the Western District of Texas.

Sprint filed a subsequent patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia.

This suit alleges infringement of two patents related to Charter's video on demand services.

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The case is now pending in the United States District Court for the District of Kansas.

While Charter is vigorously defending these suits and is unable to predict the outcome of the Sprint lawsuits, Charter does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.

Charter, T-Mobile and Sprint have tentatively reached a settlement of all of the foregoing suits that would result in a payment of $220 million by Charter to T-Mobile.

Charter can give no assurance that this tentative settlement will be finalized.

Pending finalization of the settlement and in the event the settlement is not finalized, Charter will vigorously defend these Sprint suits and prosecute the suits it has brought against T-Mobile and Sprint.

While Charter is unable to predict the outcome of these lawsuits, it does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.

In addition to the Sprint litigation described above, Charter is a defendant or co-defendant in several additional lawsuits involving alleged infringement of various intellectual property relating to various aspects of its businesses.

4 unchanged sentences

Charter is party to other lawsuits, claims and regulatory inquiries that arise in the ordinary course of conducting its business.

The ultimate outcome of these other legal matters pending against Charter or its subsidiaries cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on our or Charters’ consolidated financial condition, results of operations, or liquidity, such lawsuits could have in the aggregate a material adverse effect on ours or Charter’s consolidated financial condition, results of operations, or liquidity.

The ultimate outcome of these other legal matters pending against Charter or its subsidiaries cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on our or Charter’s consolidated financial condition, results of operations, or liquidity, such lawsuits could have in the aggregate a material adverse effect on ours or Charter’s consolidated financial condition, results of operations, or liquidity.

Whether or not Charter ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure its reputation.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings