Dish Network Wins Shareholder Lawsuit Over LightSquared Bid

Dish Network Wins Shareholder Lawsuit Over LightSquared Bid
By Dish_Network.svg: DISH Network LLCderivative work: Fry1989 eh? 21:45, 2 February 2012 (UTC) (This file was derived from Dish Network.svg:) [Public domain], via Wikimedia Commons

Dish Network won a lawsuit filed by shareholders in connection with its bid to acquire the wireless spectrum assets of LightSquared, the bankrupt wireless broadband network company controlled by Philip Falcone of Harbinger Capital Partners.

According to the Wall Street Journal, Judge Elizabeth Gonzales of Clark County District Court in Las Vegas deferred the lawsuit to the special litigation committee of Dish Network. The decision of the judge means she will approve any future request from the company to dismiss the case.

Dish Network’s special litigation committee already made a decision that the shareholders’ lawsuit company should be dismissed. However, the committee is confronting accusations that it is not independent enough to make fair judgments.

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Shareholders’ allegations against Dish Network

The shareholders of Dish Network led by Jacksonville Police and Fire Pension Fund in Florida filed a lawsuit against the company in 2013. The case was related to the proposal of Dish Network to acquire the wireless spectrum assets of LightSquared for $2.2 billion. The pension fund argued that the bid was too high, and it was intended to benefit its Chairman Charlie Ergen.

Dish Network made the offer while Mr. Ergen was facing allegations that he secretly acquired $1 billion worth of LightSquared debt to control the restructuring of the wireless broadband network company.

Mr. Ergen argued that he invested in LightSquared because he saw an opportunity for himself, and not for Dish Network. He emphasized that LightSquared’s spectrum was valuable from an investment point of view. He explained that even if the spectrum would not fit with Dish, other companies could use it.

Last year, Dish Network raised a serious technical issue, which could impair the utility of LightSquared’s spectrum if not fixed. The company eventually abandoned its offer. Mr. Ergen and the board of directors of Dish Network argued that they acted appropriately on the matter.
The pension fund amended its lawsuit after Dish Network abandoned its proposal, and claimed that the company’s decision hurt shareholders citing the reason that the acquisition should have been beneficial to them.

Dish Network released a statement regarding the ruling of the court on Thursday. According to the company, “We are pleased that the court deferred to the business judgment of an independent committee of our board that prosecution of the litigation was not in the company’s best interests.”

Court ruling sent a troubling signal to investors

The legal counsel of the shareholders, Mark Lebovitch of Bernstein Litowitz Berger & Grossmann LLP, expressed disappointment with the decision of the court. According to him, “A committee of Charlie Ergen’s very close friends conducted a bad faith investigation” to gain profits.

Lebovitch said the ruling sent a troubling signal to the investors of companies based in Nevada, and he is hoping for the Supreme Court in the state to reverse it.

Racketeering case against Dish, Ergen

Aside from the shareholders’ lawsuit, Dish Network and/or Mr. Ergen faced several charges related to LightSqured. Mr. Falcone’s Hrbinger Capital Partners filed a racketeering case against the company and Mr. Ergen.

The hedge fund claimed that it lost money and control of the board of directors of LightSquared after Ergen acquired the debt of the company.

“Ergen and his fellow RICO Enterprise members pursued their abusive scheme through wire, mail and bankruptcy fraud, abuse of process, tortious interference with contract, and obstruction of justice,” according to the complaint of the hedge fund.

A judge in Colorado dismissed the case in April, but it can be refiled in a different venue.

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