filed 13 july 31 p3:44 john warren county clerk dallas ... · - ii - table of authorities page(s)...

CAUSE NO. CC-12-06170-E

NAGENDRA POLU and FRED LORQUET, § IN THE COUNTY COURT Individually and on Behalf of All Others § Similarly Situated, and Derivatively on Behalf § of METROPCS COMMUNICATIONS, INC., § § Plaintiffs, § v. § § DEUTSCHE TELEKOM, et al., § § AT LAW NO. 5 Defendants, § § – and – § § METROPCS COMMUNICATIONS, INC., § a Delaware corporation, § § Nominal Defendant § DALLAS COUNTY, TEXAS

DEFENDANTS’ AMENDED MOTION TO DISMISS

CARTER STAFFORD ARNETT HAMADA

& MOCKLER, PLLC E. Leon Carter State Bar No. 03914300 Sean T. Hamada State Bar No. 24014448 Campbell Centre II 8150 North Central Expressway Suite 1950 Dallas, Texas 75206 Telephone: (214) 550-8188 Of Counsel: WACHTELL, LIPTON, ROSEN & KATZ William D. Savitt Ian Boczko 51 West 52nd Street New York, New York 10019 Telephone: (212) 403-1000 Telephone: 512-474-5201 Telecopier: 512-536-4598

COUNSEL FOR DEFENDANT T-MOBILE US, INC., AS SUCCESSOR TO METROPCS COMMUNICATIONS, INC., AND T-MOBILE USA, INC.

FULBRIGHT & JAWORSKI, L.L.P. Karl G. Dial State Bar No. 05800400 Brett C. Govett State Bar No. 08235900 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Telephone: (214) 855-8000 Facsimile: (214) 855-8200 Email: [email protected] Email: [email protected] COUNSEL FOR DEFENDANTS ROGER D. LINQUIST, W. MICHAEL BARNES, JACK F. CALLAHAN, JR., C. KEVIN LANDRY, ARTHUR C. PATTERSON, AND JAMES N. PERRY, JR.

Filed13 July 31 P3:44John WarrenCounty ClerkDallas County

TABLE OF CONTENTS

Page

-i-

INTRODUCTION AND SUMMARY OF ARGUMENT ............................................................ 1

BACKGROUND FACTS .............................................................................................................. 2

A. The Business Combination At Issue Closed on April 30, 2013 ................ 2

B. The Instant Action ...................................................................................... 2

C. Mandatory Forum Selection Clause in MetroPCS Bylaws and Amended Certificate of Incorporation ...................................................... 3

D. Delaware Action Proceeded While Nothing Occurred in This Case or the Other Texas Case ............................................................................. 4

1. Other Texas Action Stayed by the Court of Appeals Until Motion to Dismiss Based on Forum Selection Clause Is Ruled Upon .................................................................................... 5

2. Delaware Action Moved Forward Significantly ............................ 5

ARGUMENT AND AUTHORITIES ............................................................................................ 6

I. Forum Selection Provision in MetroPCS Bylaws Requires Dismissal .................. 7

A. The Forum Selection Clause Is Valid and Enforceable ............................. 7

B. Mandatory Forum Selection Provision Applies to Plaintiffs’ Claims ........................................................................................................ 7

C. Plaintiffs’ Arguments Do Not Preclude Enforcement of the Forum Selection Provision .................................................................................... 9

1. The Forum Selection Clause Does Not Lack Required Mutuality ...................................................................................... 10

2. The Forum Selection Clause Is Not Illusory ................................ 12

3. The Cases Relied Upon by Plaintiffs Are Distinguishable and Inapposite .............................................................................. 13

D. Interests of Diversified Stockholders as a Whole Show Why Bylaws Mandating One and Only One Forum Should Be Enforced by the Courts ............................................................................................ 15

II. Dismissal Required Under Principles of Comity and Preventing Wasteful Piecemeal Litigation of the Same Dispute in Two States .................................... 16

CONCLUSION AND PRAYER ................................................................................................. 18

- ii -

TABLE OF AUTHORITIES

Page(s) CASES

In re 24R, Inc., 324 S.W.3d 564 (Tex. 2010) ....................................................................................................12

Accelerated Christian Educ. Inc. v. Oracle Corp., 925 S.W.2d 66 (Tex. App.—Dallas 1996, no writ) ...................................................................6

Airgas, Inc. v. Air Prods. & Chems., Inc., 8 A.3d 1182 (Del. 2010) ................................................................................................7, 10, 15

In re AIU Ins. Co., 148 S.W.3d 109 (Tex. 2004) ......................................................................................................6

In re Allion Healthcare Inc. S’holders Litig., No. 5022-CC, 2011 WL 1135016 (Del. Ch. Mar. 29, 2011) ...................................................18

Bartleson v. Winnebago Indus., Inc., No. C02-3008, 2003 WL 22427817 (N.D. Iowa Oct. 24, 2003) .............................................18

Boilermakers Local 154 Ret. Fund v. Chevron Corp., No. 7220-CS (Del. Ch. June 25, 2013) ................................................................1, 7, 13, 14, 15

Budd v. Maxx Int’l, LLC, 339 S.W.3d 915 (Tex. App.—Dallas 2011, no pet.) ..........................................................12, 14

Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) .................................................................................................................12

Coca-Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671 (Tex. 2006) ....................................................................................................17

CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987) .....................................................................................................................9

Daugherty v. Ahn, et al., No. CC-11-06211-C (Dallas County Court at Law No. 1) ........................................1, 7, 13, 15

Deep Water Slender Wells, Ltd. v. Shell Int’l Expl. & Prod., Inc., 234 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) .....................................6

Edgar v. MITE Corp., 457 U.S. 624 (1982) ...................................................................................................................9

- iii -

Galaviz v. Berg, 763 F. Supp. 2d 1170 (N.D. Cal. 2011) ...................................................................................14

Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615 (Tex. 2005) ..............................................................................................17, 18

In re Int’l Profit Assocs., Inc., 274 S.W.3d 672 (Tex. 2008) ......................................................................................7, 8, 10, 15

In re Laibe Corp., 307 S.W.3d 314 (Tex. 2010) (per curiam) .............................................................................7, 8

M/S Bremen v. Zapata Offshore Co., 407 U.S. 1 (1972) .......................................................................................................................8

McDermott, Inc. v. Lewis, 531 A.2d 206 (Del. 1987) ..........................................................................................................9

In re MetroPCS Commc’ns., Inc., 391 S.W.3d 329 (Tex. App.—Dallas 2013, orig. proceeding) ..............................................5, 9

Monasco v. Gilmer Boating & Fishing Club, 339 S.W.3d 828 (Tex. App.—Texarkana 2011, no pet.) ...........................................................7

Phoenix Network Tech. Ltd. v. Neon Sys., Inc., 177 S.W.3d 605 (Tex. App.—Houston [1st Dist.] 2005, no pet.) ..............................................6

In re RAE Sys. Inc. S’holder Litig., C.A. No. 5848-VCS, tr. at 16–17 (Del. Ch. Nov. 10, 2010) ....................................................16

In re Revlon, Inc. S’holders Litig., 990 A.2d 940 (Del. Ch. 2010)......................................................................................10, 13, 14

Rogers v. Guaranty Trust Co. of New York, 288 U.S. 123 (1933) ...................................................................................................................8

Saenz v. Martinez, No. 04-07-00339-CV, 2008 LEXIS 8297 (Tex. App.—San Antonio Nov. 5, 2008, no pet.) ....................................................................................................................................11, 12

Texas Farm Bureau Cotton Ass’n v. Stovall, 113 Tex. 273, 284, 253 S.W. 1101 (1923) ...............................................................................10

In re Topps Co. S'holders Litig., 924 A.2d 951 (Del. Ch. 2007)....................................................................................................9

Vanegas v. Am. Energy Servs., 302 S.W.2d 299 (Tex. 2009) ....................................................................................................12

- iv -

Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245 (Tex. 1988) ....................................................................................................17

RULES AND STATUTES

37 DEL. J. CORP. L. 1, 12 (2012) .................................................................................................15

37 DEL. J. CORP. L. 1, 14 (2012) .................................................................................................15

RESTATEMENT (SECOND) OF CONFLICTS § 302 .....................................................................9

Texas Rule of Evidence 201 ............................................................................................................4

OTHER AUTHORITIES

Edward B. Michelletti and Jenness E. Parker, Multi-Jurisdictional Litigation: Who Caused this Problem, and Can it Be Fixed?, 37 DEL. J. CORP. L. 1, 12 (2012) ...................15

Edward B. Michelletti and Jenness E. Parker, Multi-Jurisdictional Litigation: Who Caused this Problem, and Can it Be Fixed?, 37 DEL. J. CORP. L. 1, 14 (2012) ...................15

http://www.cornerstone.com/delaware-chancery-court-cites-cornerstone-research-on-m-and-a-litigation/ ........................................................................................................................16

Joseph M. McLaughlin, McLaughlin on Class Actions § 5.62 (5th ed. 2008) ..............................17

Mark Lebovitch, Jerry Silk, and Jeremy Friedman, Making Order Out of Chaos: A Proposal To Improve Organization and Coordination in Multi-Jurisdictional Merger-Related Litigation at 3, (Dec. 1, 2011).....................................................................................16

1 AMENDED MOTION TO DISMISS

Individual defendants Roger D. Linquist, W. Michael Barnes, Jack F. Callahan, Jr., C.

Kevin Landry, Arthur C. Patterson, and James N. Perry, Jr. (the “Individual Defendants”),

Defendant T-Mobile USA, Inc. (“T-Mobile”), and Nominal Defendant MetroPCS

Communications Inc. (“MetroPCS”),1 move to dismiss this action based on a mandatory forum

selection provision in MetroPCS’ Bylaws. In support of this motion, the Defendants respectfully

show as follows:

INTRODUCTION AND SUMMARY OF ARGUMENT

Defendants move to dismiss or stay this action based on the mandatory Delaware forum

selection provision in MetroPCS’ Bylaws—which requires that actions, like this one, alleging

derivative claims on behalf of MetroPCS and breach of fiduciary duty claims on behalf of

MetroPCS shareholders be brought only in Delaware, the state where MetroPCS is incorporated

and whose law therefore governs such actions. Both the Delaware Court of Chancery and Dallas

County Court at Law Judge Sally Montgomery have recently found that forum selection clauses

virtually identical to the terms in the MetroPCS Bylaws are valid and enforceable as contracts

between a corporation and its stockholders and directors. See Boilermakers Local 154 Ret.

Fund v. Chevron Corp., No. 7220-CS, slip op. at 4 (Del. Ch. June 25, 2013) (attached as Ex. A.);

Daugherty v. Ahn, et al., No. CC-11-06211-C (attached as Exs. B & C). Both courts require

stockholder claims against directors like those filed by Plaintiffs in this case be filed only in

Delaware. Id.

In this case, Plaintiffs’ claims for breach of fiduciary duty against the Individual

Defendants and their derivative claims fall squarely under the mandatory forum selection clause

1 As used herein, “Defendants” refers to the Individual Defendants, T-Mobile, and MetroPCS. Effective as of April 30, 2013, MetroPCS acquired 100% of the shares of T-Mobile from Deutsche Telekom in exchange for which Deutsche Telekom received approximately 74% of MetroPCS stock. Following this exchange, MetroPCS changed its name to T-Mobile US, Inc.


in both MetroPCS’ Bylaws and Fourth Amended Certificate of Incorporation, both of which

require Plaintiffs’ claims be brought in the Delaware Court of Chancery. (See Ex. E (Art. VII,

Para. 7 of the MetroPCS Bylaws); Ex. Q (Amended Certificate of Incorporation)). As a result,

this action should be dismissed.

BACKGROUND FACTS

A. The Business Combination At Issue Closed on April 30, 2013.

On October 3, 2012, MetroPCS announced a definitive Business Combination Agreement

between MetroPCS, Deutsche Telekom AG (“Deutsche Telekom”) and T-Mobile (the “Business

Combination Agreement”). (See Petition ¶ 31.) On April 10, 2013, T-Mobile and Deutsche

Telekom amended the terms of the Business Combination Agreement to improve their offer to

MetroPCS (the “Revised Transaction”), and on April 14, 2013, the MetroPCS Board

unanimously approved the Revised Transaction. (See Ex. O.)

The amended Business Combination Agreement had as a condition that the MetroPCS

stockholders had to vote to approve certain actions required to close the proposed transaction.

(Ex. L). On April 24, 2013, MetroPCS held a special meeting of its stockholders. At that

meeting, the MetroPCS stockholders overwhelmingly approved the ten proposals necessary for

MetroPCS to complete the Revised Transaction, receiving an average approval of approximately

80% of all shares outstanding and approximately 92% of all votes cast. (See Ex. P.) Based on

the stockholders’ overwhelming approval vote, on April 30, 2013, the Revised Transaction

closed. (Ex. R.)

B. The Instant Action.

Plaintiffs filed this action on October 10, 2012, one week after the initial Business

Combination Agreement was first announced and long before it was amended to improve the

terms into the Revised Transaction. Plaintiffs’ Petition alleges a shareholder derivative claim (as


well as class action claims) for, among other things, purported breach of fiduciary duty against

the directors of MetroPCS (the Individual Defendants) and aiding and abetting such purported

breach against the other Defendants. (Petition ¶¶ 58-91.)

C. Mandatory Forum Selection Clause in MetroPCS Bylaws and Amended Certificate of Incorporation.

Pursuant to the authority granted to the MetroPCS Board in Article V(A) of the

Company’s Third Amended and Restated Certificate of Incorporation (“Third Certificate of

Incorporation”), on March 14, 2011, the MetroPCS Board unanimously adopted MetroPCS’

Fourth Amended and Restated Bylaws (the “Bylaws”) containing a mandatory forum selection

clause. (See Exs. D & E). The Bylaws state in Article VII:

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders. . . .

(See Herald Aff. (Ex. S) & Ex. E, Art. VII, ¶ 7) (emphasis added)

To communicate to the public the amendment of the MetroPCS Bylaws, on March 18,

2011, MetroPCS filed with the SEC a Report on Form 8-K, summarizing the material changes to

the MetroPCS bylaws.2 (Herald Aff. (Ex. S) & Ex. F) MetroPCS also included the Bylaws on

its public website, together with its other corporate governance materials. (Herald Aff. (Ex. S)).

Although MetroPCS’ Third Certificate of Incorporation gave stockholders the right to

revoke or further amend any bylaw adopted by the Board (see Ex. D), no stockholder sought to

revise or repeal the forum selection bylaw at either of the two annual meetings of MetroPCS

2 The 8-K states: “The Amended Bylaws and internal affairs of the Company shall be governed by the laws of the State of Delaware and establishes the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions, including derivative actions and any action asserting a breach of fiduciary duty owed by a director, officer or other employee of the Company to the Company or its stockholders.” (Ex. F.)


stockholders in 2011 and 2012. (Herald Aff. (Ex. S)). The first time the issue of mandatory

forum selection was on the ballot for a vote by MetroPCS stockholders was the special meeting

held on April 24, 2013. (See id. & Ex. P.) At that meeting, in addition to voting to approve the

Revised Transaction with Deutsche Telekom and T-Mobile, over 78% of all shares outstanding

voted to add a mandatory forum selection provision to MetroPCS’ Certificate of Incorporation.

(Ex. P.)3 Based on the stockholder vote, on April 30, 2013, MetroPCS filed its Fourth Amended

and Restated Certificate of Incorporation (the “Amended Certificate of Incorporation”), which

contains a forum selection clause that is identical to the Bylaw initially adopted in 2011. (Exs. E

& Q).

D. Delaware Action Proceeded While Nothing Occurred in This Case or the Other Texas Case.

The Delaware class action—alleging essentially the same claims as Plaintiffs and relating

to the same Business Combination Agreement about which Plaintiffs complain—has advanced

significantly through discovery and depositions during the months while nothing occurred in this

case.

On October 10, 2012, Adam Golovoy filed a putative class and derivative action in

County Court-at-Law No. 1, styled “Golovoy v. MetroPCS Commc’ns, Inc., et al., No. CC-12-

06144-A” (the “County Court No. 1 Action”), alleging that MetroPCS’ directors breached their

fiduciary duties by allegedly failing to obtain sufficient value for the MetroPCS stockholders in

the proposed business combination. (Ex. G). Later that day, Plaintiffs (represented by the same

California law firm as Golovoy) filed a second, virtually identical action in this Court. The next

day, and in the weeks that followed, four more alleged stockholders filed similar putative class

3 Defendants request, in accordance with Texas Rule of Evidence 201, that the Court take judicial notice of the Form 8-K announcing the results of the stockholder meeting to approve the business combination with T-Mobile, which was filed with the Securities and Exchange Commission on April 24, 2013, and confirms the information set forth in this paragraph. (See Ex. P.)


action suits in the Delaware Court of Chancery. (See Ex. I). On November 30, 2012, the

Delaware Court of Chancery ordered that all of the Delaware class actions alleging substantially

the same claims as Plaintiffs be consolidated into a single action styled “MetroPCS

Communications, Inc. Shareholder Litigation, C.A. No. 7938-CS” (the “Delaware Action”).

(See Ex. J.) The consolidated Delaware Action asserts the same claims, related to the same

transaction, as Plaintiffs here. Unlike this action, however, the Delaware Action was

appropriately filed — in Delaware — pursuant to the forum selection provision in the MetroPCS

Bylaws.

1. Other Texas Action Stayed by the Court of Appeals Until Motion to Dismiss Based on Forum Selection Clause Is Ruled Upon.

On November 16, 2012, Judge D’Metria Benson in the County Court No. 1 Action issued

a Temporary Restraining Order, purporting, among other things, to prevent the Transaction from

closing. (Ex. H). Before that order took effect, however, the Dallas Court of Appeals

conditionally granted mandamus and ordered that the County Court No. 1 Action was stayed

until Judge Benson considered and ruled upon a virtually identical Motion to Dismiss or Stay

that was filed in that case. See In re MetroPCS Commc’ns., Inc., 391 S.W.3d 329, 341 (Tex.

App.—Dallas 2013, orig. proceeding). Other than Judge Benson vacating her Temporary

Restraining Order, no other action has occurred in the County Court No. 1 Action. (See Dial

Aff. (Ex. T)).

2. Delaware Action Moved Forward Significantly.

After the Delaware class actions were consolidated and the Delaware Court entered a

protective order, MetroPCS and the Individual Defendants produced over 18,000 pages of

documents in the Delaware Action relating to the transaction at issue. (Id.) The plaintiffs in the

Delaware Action took over 13 hours of depositions, in three different cities, of the Chief


Executive Officer of MetroPCS, the Chairman of the Special Committee of the MetroPCS Board

of Directors (the “Special Committee”), and the corporate representative of the financial advisor

that rendered a fairness opinion to the Special Committee. (Id.) In addition, the plaintiffs in the

Delaware Action have amended their complaint to add more specific allegations, including

allegations related to MetroPCS’ proxy statement. (Id. & Ex. K).

Following discovery in the Delaware Action (Ex. L), the Delaware plaintiffs wrote a

letter to the Court of Chancery stating the plaintiffs no longer believed they had grounds to

enjoin the transaction. (Ex. M). There has been no further action in the Delaware Action, which

remains pending. (See Dial Aff. (Ex. T)).

ARGUMENT AND AUTHORITIES

Dismissal is the appropriate procedural mechanism for enforcement of a forum selection

clause that selects another state as the forum for litigation. Phoenix Network Tech. Ltd. v. Neon

Sys., Inc., 177 S.W.3d 605, 610 (Tex. App.—Houston [1st Dist.] 2005, no pet.); Accelerated

Christian Educ. Inc. v. Oracle Corp., 925 S.W.2d 66, 70 (Tex. App.—Dallas 1996, no writ); see

In re AIU Ins. Co., 148 S.W.3d 109, 121 (Tex. 2004) (granting mandamus to require a trial court

to dismiss the lawsuit based on a valid, enforceable forum selection clause). A case should be

dismissed if the claims fall within the scope of a mandatory forum selection clause. See Deep

Water Slender Wells, Ltd. v. Shell Int’l Expl. & Prod., Inc., 234 S.W.3d 679, 692 (Tex. App.—

Houston [14th Dist.] 2007, pet. denied) (affirming trial court’s dismissal because claims fell

within the scope of enforceable forum selection clause).

Because Plaintiffs’ claims fall within the scope of a valid and enforceable forum selection

clause, this action should be dismissed. The Court also should dismiss or, in the alternative, stay

the action in favor of the Delaware Action under principles of comity in deference to the parallel


actions pending in Delaware, which assert the same breach of fiduciary duty claims on behalf of

the same purported class.

I. Forum Selection Provision in MetroPCS Bylaws Requires Dismissal.

A. The Forum Selection Clause Is Valid and Enforceable.

Under both Texas and Delaware law, duly adopted bylaws constitute an enforceable

contract between the stockholders and the corporation. See Airgas, Inc. v. Air Prods. & Chems.,

Inc., 8 A.3d 1182, 1188 (Del. 2010) (“Corporate charters and bylaws are contracts among a

corporation’s shareholders.”); Boilermakers Local 154 Ret. Fund, No. 7220-CS, slip op. at 4 (Ex.

A hereto); In re Int’l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2008) (same). As such, the

forum selection provision in the MetroPCS Bylaws binds the Board of Directors, MetroPCS, and

MetroPCS stockholders, including Plaintiffs. See Monasco v. Gilmer Boating & Fishing Club,

339 S.W.3d 828, 832 (Tex. App.—Texarkana 2011, no pet.) (association’s bylaws contractually

bound a member of the association).

Both Judge Montgomery and the Delaware Court of Chancery recently ruled that forum

selection provisions in corporate bylaws virtually identical to the MetroPCS Bylaws apply to

breach of fiduciary duty claims brought by stockholders and require the dismissal of cases like

this one. See Boilermakers Local 154 Ret. Fund, No. 7220-CS, slip op. at 4 (Ex. A hereto) (“[A]

forum selection clause adopted by a board with the authority to adopt bylaws is valid and

enforceable under Delaware law to the same extent as other forum selection clauses.”);

Daugherty, No. CC-11-06211-C (Exs. B & C) (dismissing case based on virtually identical

forum selection clause).

B. Mandatory Forum Selection Provision Applies to Plaintiffs’ Claims.

Contractual forum selection clauses are presumed valid and enforceable. In re Laibe

Corp., 307 S.W.3d 314, 316 (Tex. 2010) (per curiam); In re Int’l Profit Assocs., Inc., 274 S.W.3d


672, 675 (Tex. 2008) (per curiam); see also M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 12

(1972) (“The argument that [forum selection] clauses are improper because they tend to ‘oust’ a

court of jurisdiction is hardly more than a vestigial legal fiction”). A party attempting to show

that a forum selection clause should not be enforced bears a heavy burden—a burden that

Plaintiffs cannot meet. In re Int’l Profit, 274 S.W.3d at 675; see also M/S Bremen, 407 U.S. at

10 (holding that a forum selection clause “is prima facie valid and should be enforced unless

enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances”).

By its terms, the forum selection provision in the MetroPCS Bylaws is mandatory and

applies to “any derivative action or proceeding brought on behalf of the Corporation” and to

“any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other

employee of the Corporation to the Corporation or the Corporation’s stockholders.” (See Ex. E,

Article VII, § 7; Ex. Q, Article XII) The provision is presumptively valid and enforceable, and

Plaintiffs cannot meet their heavy burden to overcome the presumption. See In re Laibe Corp.,

307 S.W.3d at 316; In re Int’l Profit, 274 S.W.3d at 675.

Plaintiffs’ action plainly fits within the scope of the Bylaw provision as it includes

shareholder derivative claims and asserts fiduciary duty claims against MetroPCS’ directors and

officers.4 Accordingly, this action is subject to the mandatory Delaware forum selection

provision of the MetroPCS Bylaws and should be dismissed.

In addition, since MetroPCS is a Delaware corporation, this action will be governed by

Delaware law. See Rogers v. Guaranty Trust Co. of New York, 288 U.S. 123, 130 (1933) (“It has

long been settled doctrine that a court – state or federal – sitting in one State will as a general

rule decline to interfere with or control by injunction or otherwise the management of the

4 MetroPCS and the Individual Defendants dispute that Plaintiffs have a valid derivative action. See Plea to the Jurisdiction and Special Exceptions.


internal affairs of a corporation organized under the laws of another state but will leave

controversies as to such matters to the courts of the state of the domicile.”).5 Indeed, Paragraph

39 of Plaintiffs’ Petition admits that Delaware law, not Texas law, will govern.6 Therefore, the

Petition’s “claim arising pursuant to any provision of the Delaware Corporation Law” also is

covered by the forum selection clause, requiring dismissal. (See Ex. E.)

C. Plaintiffs’ Arguments Do Not Preclude Enforcement of the Forum Selection Provision.

Plaintiffs’ counsel in the County Court No. 1 Action did not dispute that the MetroPCS

Bylaws were duly adopted by the MetroPCS Board, that proper notice of the adoption of the

Bylaws was timely provided to all MetroPCS stockholders, or that the stockholders had two

occasions before this action was filed to seek to revoke the forum selection provision without

doing so. (See Herald Aff. (Ex. S)). Instead, Plaintiffs’ counsel contended to the Fifth Court of

Appeals—and likely will make similar assertions in this Court—that there was no “mutual

bargaining power” or “mutuality of obligation” respecting the provision. See In re MetroPCS

Commc’ns., 391 S.W.3d at 334. Plaintiffs’ contentions are wrong as a matter of law and

unsupported by the facts.

5 See also Edgar v. MITE Corp., 457 U.S. 624, 645 (1982) (“The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation's internal affairs—matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders—because otherwise a corporation could be faced with conflicting demands”) ; CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 89 (1987) (“No principle of corporation law and practice is more firmly established than a State's authority to regulate domestic corporations”); McDermott, Inc. v. Lewis, 531 A.2d 206, 215-216 (Del. 1987) (“The internal affairs doctrine requires that the law of the state of incorporation should determine issues relating to internal corporate affairs. . . . A review of cases over the last twenty-six years, however, finds that in all but a few, the law of the state of incorporation was applied without any discussion”); In re Topps Co. S'holders Litig., 924 A.2d 951, 958 (Del. Ch. 2007) (“As the United States Supreme Court, the Delaware Supreme Court, and the New York Court of Appeals all recognize, a state has a compelling interest in ensuring the consistent interpretation and enforcement of its corporation law. . . . The authority of a state to regulate the internal affairs of the corporations it charters is one of the oldest and most firmly established doctrines in American corporation law”); RESTATEMENT (SECOND) OF CONFLICTS § 302. 6 See Paragraph 39 (“The claims are brought under Delaware state law. . . .”).


1. The Forum Selection Clause Does Not Lack Required Mutuality.

Plaintiffs’ contention that the forum selection clause in MetroPCS’ Bylaws lacks

mutuality misconstrues the law with respect to a corporation’s contract with its stockholders.

See Airgas, 8 A.3d at 1188; In re Int’l Profit Assocs., 274 S.W.3d at 675. The contract between

MetroPCS and its stockholders is set forth in the Certificate of Incorporation and Bylaws, and is

valid and enforceable. See Airgas, 8 A.3d at 1188; In re Int’l Profit Assocs., 274 S.W.3d at 675.

The mutuality of a corporation’s contract with its stockholders, as set forth in the corporate

charter and bylaws, has been well-established in both Texas and Delaware since 1923. See

Texas Farm Bureau Cotton Ass’n v. Stovall, 113 Tex. 273, 284, 253 S.W. 1101, 1105 (1923);

Airgas, 8 A.3d at 1188; In re Int’l Profit Assocs., 274 S.W.3d at 675. Potential investors in

MetroPCS stock could choose to purchase stock, and once purchased could choose to hold that

stock—or not—based on the terms of that enforceable contract, consisting of the Certificate of

Incorporation and the Bylaws adopted in accordance with the Certificate’s terms.7

The undisputed record before this Court shows potential investors in MetroPCS stock

have had access to the Company’s publicly filed Third Certificate of Incorporation since before

MetroPCS’ stock first became publicly traded, which (i) authorizes the board of directors to

amend the bylaws and (ii) requires a two-thirds (2/3) vote for stockholders to overturn such

amendments. (Ex. D & S.) Because corporate charters and bylaws are different than traditional

contracts—in that a potential stockholder has the right to not buy the stock—this right to buy

satisfies any requirement of mutuality for the contract between the corporation and its

stockholders. MetroPCS’ stockholders (including Plaintiffs) affirmatively chose to purchase

MetroPCS stock and, in so doing, chose to be bound by the Third Certificate of Incorporation, 7 Indeed, the Delaware Court of Chancery specifically recommended that corporations adopt “charter provisions selecting an exclusive forum for intra-entity disputes” to resolve the issue of multi-venue litigation. In re Revlon, Inc. S’holders Litig., 990 A.2d 940, 960 (Del. Ch. 2010).


which authorized the board of directors to amend the bylaws (subject to the stockholders’ right to

repeal or further amend the bylaws). This conscious determination to purchase stock was a “real

choice” and, as such, distinguishes the contract between MetroPCS and its stockholders from the

contracts in the unconscionability line of cases cited by Plaintiffs’ counsel in the mandamus

response (at 31-32) in the County Court No. 1 Action. See Saenz v. Martinez, No. 04-07-00339-

CV, 2008 LEXIS 8297, at *25-26 (Tex. App.—San Antonio Nov. 5, 2008, no pet.) (for a

contract to be unconscionable, one party must have no “real choice” but to accept the agreement

offered). Additionally, the MetroPCS Bylaws are not only a contract between the stockholders

and MetroPCS, but are also a contract between the stockholders inter se. To permit this action to

proceed in Texas in the face of the forum selection provision in the MetroPCS Bylaws (which is

also now in the MetroPCS Amended Certificate of Incorporation) is a breach that harms all other

MetroPCS stockholders who bought into the company on the basis of, and were willing to live

by, the rules as expressed in the MetroPCS Bylaws.

Moreover, on April 24, 2013, the MetroPCS stockholders overwhelmingly voted to

approve an amendment to the Certificate of Incorporation to add the same forum selection clause

that is contained in the MetroPCS Bylaws to the Amended Certificate of Incorporation, which

was filed with the Delaware Secretary of State on April 30, 2013. (Exs. P & Q.) This

stockholder vote affirms that the MetroPCS stockholders as a whole overwhelmingly desire that

the forum selection clause apply to claims like those asserted by Plaintiffs in this case. (See id.).

In fact, Plaintiffs in this lawsuit had the opportunity to oppose the forum selection

provision proposal at the April 24, 2013 stockholder vote. The proposal clearly appeared on the

agenda and ballot before the meeting began. Indeed, many stockholders actually appeared at the

April 24, 2013 stockholder meeting to express their thoughts regarding the various proposals.


Just like these stockholders, Plaintiffs could have appeared and opposed the forum selection

proposal. Plaintiffs could have also communicated their opposition to other stockholders at the

meeting. But instead, Plaintiffs remained silent; and ultimately, the forum selection proposal

passed by overwhelming numbers, affirming the same forum selection clause that had been in

place for years.

There is, therefore, no lack of mutuality because the stockholders had the ability to

address the forum selection clause in the MetroPCS Bylaws (and have done so by affirming it

and voting to include it in the Amended Certificate of Incorporation). (See Ex. P.); see also

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985) (recognizing that “in the

commercial context” forum selection clauses are enforced if they are “freely negotiated”); Saenz,

No. 04-07-00339-CV, 2008 LEXIS 8297, at *25-26.

2. The Forum Selection Clause Is Not Illusory.

The MetroPCS/stockholder contract likewise is not illusory. A contract will be

invalidated as illusory only when an illusory promise is “all that support[s]” a purported

bilateral contract and that promise does not bind the promisor who retains an option of

discontinuing performance. In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (citing Vanegas v.

Am. Energy Servs., 302 S.W.2d 299, 301-02 (Tex. 2009)) (emphasis added). That is not the case

here.

First, the MetroPCS/stockholders contract is supported by numerous promises contained

throughout the Third Certificate of Incorporation and MetroPCS Bylaws. (See Exs. D & E.)

Second, the forum selection clause is not an illusory promise. The Dallas Court of

Appeals has held that, in the arbitration context, promises to arbitrate claims are not illusory so

long as “the modification or elimination of the clause does not apply retroactively.” Budd v.

Maxx Int’l, LLC, 339 S.W.3d 915, 920 (Tex. App.—Dallas 2011, no pet.) (emphasis added).


The MetroPCS Bylaws meet this requirement. Here, MetroPCS does not try to enforce the

forum selection provision in the MetroPCS Bylaws retroactively; rather, it seeks to apply it to

actions filed after the MetroPCS Bylaws were enacted alleging derivative claims on behalf of

MetroPCS or claims for breach of fiduciary duty against the directors/officers. (See Ex. E.) The

MetroPCS Bylaws were not adopted after this case was filed—but rather long before MetroPCS

began this transaction. (Id.) Thus, the forum selection clause is not illusory and should be

enforced.

3. The Cases Relied Upon by Plaintiffs Are Distinguishable and Inapposite.

Plaintiffs cited a number of cases to the Dallas Court of Appeals in the County Court No.

1 Action and can be expected to rely on these same authorities in their answer here. But the

cases on which plaintiffs rely are fundamentally distinguishable from the situation here, and are

at any rate superseded by Delaware’s recent articulation of guiding law in the Boilermakers case.

None of the cases plaintiffs cite support ignoring the mandatory forum selection provision in the

contract between a corporation and its stockholders—as specifically found by the Delaware

Court of Chancery and Judge Montgomery. See Boilermakers Local 154 Ret. Fund, No. 7220-

CS, slip op. at 4 (Ex. A hereto); Daugherty, No. CC-11-06211-C (Exs. B & C) (dismissing case

based on virtually identical forum selection clause). Plaintiffs’ cases are distinguishable for the

following reasons:

(1) In re Revlon, Inc. S’holders Litig., 990 A.2d 940, 960 (Del. Ch. 2010): Merely

because Vice Chancellor Laster suggested that venue clauses could be in a

corporate charter does not preclude a corporation from having such provisions in

bylaws. Nothing in Revlon precludes the stockholders from authorizing the

directors to include them in the bylaws, which is what happened here. Moreover,

as set out above, since Revlon was decided the chief judge of the Court of


Chancery specifically upheld forum selection bylaws in a decision that cited

Revlon, without finding anything in that case that interfered with the

enforceability of such bylaws. In any case, Chancery’s recent Boilermakers

decisions is the most recent and authoritative expression of governing law on the

question—and it makes clear that the bylaw in this case should be enforced.

(2) Galaviz v. Berg, 763 F. Supp. 2d 1170, 1172 (N.D. Cal. 2011): First, the

Delaware Court in Boilermakers rejected Galaviz as a proper expression of

Delaware law because Galaviz did not involve Delaware Corporate law and failed

“to appreciate the contractual framework established by [Delaware Corporate

law] for Delaware corporations and their stockholders.” No. 7220-CS, slip op. at

34 (Ex. A hereto). Second, the Galaviz opinion did not consider the following

factors that exist here: (a) whether the corporation had a charter provision

expressly authorizing directors to amend the bylaws and allowing its stockholders

the opportunity to repeal or further amend the bylaws; and (b) whether the

stockholders of the corporation had an opportunity before the action arose to

repeal the provision. Third, the Oracle Corporation directors amended the bylaws

after the dispute arose; whereas, the MetroPCS Bylaws were amended more than

a year before the transaction at issue. See 763 F. Supp. 2d at 1171; see also Budd,

339 S.W.3d at 920 (“if the modification or elimination of the clause does not

apply retroactively so as to allow the party to avoid the promise to arbitrate, the

arbitration clause is not illusory”). Thus, because of these material differences

between this action and the Galaviz case, this Court should follow the Delaware

court in Boilermakers as to Delaware law, not the holding in Galaviz.


These cases cannot and do not alter the analysis under Boilermakers, AirGas or In re Int’l Profit

Assocs.

In sum, the MetroPCS/stockholders contract—embodied in Third Certificate of

Incorporation and the MetroPCS Bylaws—is valid and enforceable. See Boilermakers Local 154

Ret. Fund, No. 7220-CS, slip op. at 4-5 (Ex. A hereto); Daugherty, No. CC-11-06211-C (Exs. B

& C); Airgas, 8 A.3d at 1188; In re Int’l Profit Assocs., 274 S.W.3d at 675. Accordingly, the

mandatory forum selection provision contained in the Bylaws should be enforced, and Plaintiffs’

action should be dismissed.

D. Interests of Diversified Stockholders as a Whole Show Why Bylaws Mandating One and Only One Forum Should Be Enforced by the Courts.

By late last year, hundreds of companies had adopted forum selection provisions in their

respective charters and bylaws. As in the present case, many of these forum selection clauses

provide that a Delaware court will be the sole and exclusive forum for any derivative action

brought on behalf of the Corporation asserting a breach of fiduciary duty claim, arising under the

Delaware General Corporation Law, or governed by the internal affairs doctrine. These

provisions help resolve this vexing problem of multi-forum shareholder litigation.8

Class and derivative litigation exist to protect stockholders—and for no other reason. Yet

multi-forum class and derivative litigation are directly opposed to the interests of the very

stockholders whose interests such litigation is supposed to protect. Waste and gamesmanship

have resulted from a system that allows the same claim to be brought on behalf of the same

stockholders in multiple states.9 Efficiency and rationality unquestionably call for a single

8 See, e.g., Edward B. Michelletti and Jenness E. Parker, Multi-Jurisdictional Litigation: Who Caused this Problem, and Can it Be Fixed?, 37 DEL. J. CORP. L. 1, 14 (2012) (“Though defendants have employed many different methods for dealing with this problem, it is readily apparent that there is no perfect solution.”). 9 See Edward B. Michelletti and Jenness E. Parker, Multi-Jurisdictional Litigation: Who Caused this Problem, and Can it Be Fixed?, 37 DEL. J. CORP. L. 1, 12 (2012) (“The net result of the ‘multi-jurisdictional litigation’ tactic is


forum. Further, the fact that the forum mandated by MetroPCS Bylaws (and recently

overwhelmingly approved by the MetroPCS stockholders) is the jurisdiction where the law

governs the matters to be resolved further emphasizes why these provisions are appropriate.

Against all of the costs and risks are weighed absolutely no benefits. The waste to the

public at large from duplicative litigation and prolonged forum fights is obvious. Moreover,

representative litigation over the same issues at the same time in different places hurts investors

broadly; no matter the merits of the underlying claims, investors suffer when their corporations

are forced to waste money on unnecessary copycat suits.10

II. Dismissal Required Under Principles of Comity and Preventing Wasteful Piecemeal Litigation of the Same Dispute in Two States.

In addition to the forum selection provision in the Bylaws, this action should be

dismissed (or alternatively, stayed) in the interests of interstate comity and the reduction of

piecemeal litigation. Four additional class actions, filed in Delaware on behalf of the same

purported class of MetroPCS stockholders, have been consolidated into the Delaware Action.11

Allowing Plaintiffs to pursue this duplicative class action litigation in Texas would undermine

to increase the costs of litigation and elevate the risk of an adverse decision for corporate defendants. This tactical leverage forces defendants to consider settling deal litigation that, but for the risks posed by multi-jurisdictional litigation, defendants might otherwise have moved to dismiss.”); Mark Lebovitch, Jerry Silk, and Jeremy Friedman, Making Order Out of Chaos: A Proposal To Improve Organization and Coordination in Multi-Jurisdictional Merger-Related Litigation at 3, (Dec. 1, 2011), http://www.blbglaw.com/misc_files/MakingOrderoutofChaos (“[P]laintiffs in [non-Delaware] forum [may] refuse to join the settlement [in Delaware] unless they are paid a significant ‘tax,’ disproportionate to any efforts or actual contributions toward the outcome of the case . . . . Whether the end result is a negotiated fee or a contested fee application, Delaware shareholders’ counsel must request a larger fee to pay the necessary ‘taxes’ to plaintiffs in the alternate forum. Thus, defendants often end up paying higher attorneys’ fees than if the case was litigated in a single forum.”). 10 See In re RAE Sys. Inc. S’holder Litig., C.A. No. 5848-VCS, tr. at 16–17 (Del. Ch. Nov. 10, 2010) (“I believe in the value of the representative litigation process for investors,” but “[i]t is not in the interests of diversified investors to have food fights” or to “have litigation in three different places. It doesn’t make any sense. I defy anyone to explain how it’s good for investors. It’s not.”) 11 These types of actions are a routine occurrence after major business combinations are announced, with more than 96 percent of merger announcements now resulting in class action litigation. The Delaware Court of Chancery recently cited this study during a ruling denying relief in one such action. See http://www.cornerstone.com/delaware-chancery-court-cites-cornerstone-research-on-m-and-a-litigation/ (last viewed May 17, 2013).


freedom of contract and violate this state’s strong policy against piecemeal litigation by allowing

multiple class actions to proceed simultaneously on behalf of the same putative class in two

jurisdictions. “‘It has long been the policy of the courts and the legislature of this state to avoid a

multiplicity of lawsuits.” Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 623 (Tex. 2005)

(quoting Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 246 (Tex. 1988)). “[A]bsent

extraordinary justification for potentially competing classes, the pendency of multiple class

actions alleging substantially the same claims on behalf of the same putative class against the

same defendants should be avoided. . . .” Joseph M. McLaughlin, McLaughlin on Class Actions

§ 5.62 (5th ed. 2008). Texas courts should be particularly reluctant to entertain claims arising

under another state’s laws when, as here, the other state offers an available forum. See Coca-

Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671, 686-88 (Tex. 2006) (holding that Texas

courts should not entertain claims under Arkansas, Louisiana and Oklahoma antitrust law

because such claims impact the public policy and economies of those other states, and are

therefore more properly heard in those states’ courts). Allowing this action to proceed in Texas

would lead to duplicative litigation on behalf of the same putative class against the same

defendants over the same transaction.

Further, prosecution of this action in Texas would violate well-settled principles of

judicial economy against forum shopping. Gonzalez, 159 S.W.3d at 622-23 (recognizing Texas’

public policy against multiplicity of lawsuits in ruling that a plaintiff cannot maintain a lawsuit in

a county of improper venue). If allowed to proceed, this action risks multiple MetroPCS

stockholders attempting to shop for a favorable forum by filing multiple class actions on behalf

of the same putative class in multiple jurisdictions, hoping that one of the actions is assigned to a

favorable judicial forum. Such actions waste judicial resources by having multiple courts try the


same case with similar facts. Moreover, defendants in this situation face the risk of inconsistent

rulings—a risk that is particularly acute given that the plaintiffs in both states are complaining

about the same transaction. Courts have long recognized that permitting identical actions to

proceed in different jurisdictions leads to “wasted” judicial and party resources, as well as a

significant risk of inconsistent rulings on identical issues that pose “full faith and credit problems

for all involved.” See In re Allion Healthcare Inc. S’holders Litig., No. 5022-CC, 2011 WL

1135016, at *4 (Del. Ch. Mar. 29, 2011); Bartleson v. Winnebago Indus., Inc., No. C02-3008,

2003 WL 22427817, at *6 (N.D. Iowa Oct. 24, 2003) (observing that allowing “parallel class

action litigation” to proceed in different courts would lead to “unnecessary costs, inefficiency

and inconstancy of proceedings and results; and other problems. . . .”). Texas courts have a

strong policy against permitting duplicative actions to proceed. Gonzalez, 159 S.W.3d at 623.

The Court should therefore dismiss or, in the alternative, stay this action.

CONCLUSION AND PRAYER

This Court should follow recent decisions in both Delaware and Texas. The MetroPCS

Bylaws are a valid and enforceable contract between MetroPCS and its stockholders and

directors. As a result, the forum selection clause in the Bylaws binds Plaintiffs, whose claims are

expressly subject to the mandatory Delaware forum selection provision. Defendants therefore

request that this Court dismiss Plaintiffs’ action because the mandatory forum selection provision

requires that Plaintiffs’ claims be litigated in the Chancery Court of the State of Delaware.

Defendants also request all other relief to which they may be justly entitled.


Respectfully submitted, CARTER STAFFORD ARNETT HAMADA

& MOCKLER, PLLC /s/ E. Leon Carter E. Leon Carter State Bar No. 03914300 Sean T. Hamada State Bar No. 24014448 Campbell Centre II 8150 North Central Expressway Suite 1950 Dallas, Texas 75206 Telephone: (214) 550-8188 Of Counsel: WACHTELL, LIPTON, ROSEN & KATZ William D. Savitt Ian Boczko 51 West 52nd Street New York, New York 10019 Telephone: (212) 403-1000 Telephone: 512-474-5201 Telecopier: 512-536-4598

COUNSEL FOR DEFENDANT T-MOBILE US, INC., AS SUCCESSOR TO METROPCS COMMUNICATIONS, INC., AND T-MOBILE USA, INC.

Respectfully submitted, FULBRIGHT & JAWORSKI, L.L.P. /s/ Karl Dial Karl G. Dial State Bar No. 05800400 Brett C. Govett State Bar No. 08235900 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Telephone: (214) 855-8000 Facsimile: (214) 855-8200 Email: [email protected] Email: [email protected] COUNSEL FOR DEFENDANTS ROGER D. LINQUIST, W. MICHAEL BARNES, JACK F. CALLAHAN, JR., C. KEVIN LANDRY, ARTHUR C. PATTERSON, AND JAMES N. PERRY, JR.


CERTIFICATE OF CONFERENCE

Pursuant to Dallas County Civil Courts Local Rule 2.07, counsel for movant and counsel

for respondent have personally conducted a conference at which there was substantive discussion

of every item presented to the court in this motion and despite best efforts the counsel have not

been able to resolve those matters presented.

Certified to on July 31, 2013, by:

/s/ Karl Dial

NOTICE OF HEARING

The foregoing Amended Motion to Dismiss or Stay is set for hearing on August 9, 2013, at 11:30 a.m.

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Motion has been served on the 31st day of July, 2013, on all counsel of record pursuant to the parties’ agreement to serve documents in this case electronically.

/s/ Karl Dial

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