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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(Amendment No. 12)
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
ITT CORPORATION
(Name of Subject Company)
ITT CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, no par value
(including the associated Series A Participating Cumulative
Preferred Stock Purchase Rights)
(Title of Class of Securities)
450912 10 0
(CUSIP Number of Class of Securities)
RICHARD S. WARD, Esq.
Executive Vice President,
General Counsel and Corporate Secretary
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
(212) 258-1000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
PHILIP A. GELSTON, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
(212) 474-1000
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<PAGE>
INTRODUCTION
The Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") originally filed on February 12, 1997, by ITT
Corporation, a Nevada corporation (the "Company"), relates to an offer
by HLT Corporation, a Delaware corporation ("HLT") and a wholly owned
subsidiary of Hilton Hotels Corporation, a Delaware corporation
("Hilton"), to purchase 61,145,475 shares of the common stock, no par
value (including the associated Series A Participating Cumulative
Preferred Stock Purchase Rights), of the Company. All capitalized
terms used herein without definition have the respective meanings set
forth in the Schedule 14D-9.
Item 8. Additional Information to be Furnished.
The response to Item 8 is hereby amended by adding the
following:
On April 24, 1997, Hilton filed a Brief of
Plaintiffs-Appellants Hilton Hotels Corporation and HLT Corporation
("Plantiffs' Brief") with the United States Court of Appeals for the
Ninth Circuit (the "Ninth Circuit") on appeal from the April 21, 1997,
order of the Honorable Philip M. Pro denying the Hilton Annual Meeting
Motion, pursuant to which Hilton sought to require the Company to hold
its annual meeting in May 1997. On May 27, 1997, the Company filed a
Brief of Defendant-Appellee ITT Corporation with the Ninth Circuit in
response to Plaintiffs' Brief ("Defendant's Brief"). A copy of
Defendant's Brief is filed as Exhibit 56 hereto and is incorporated
herein by reference.
Item 9. Exhibits.
The response to Item 9 is hereby amended by adding the
following new exhibit:
56. Brief of Defendant-Appellee ITT Corporation
dated May 27, 1997.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is
true, complete and correct.
ITT CORPORATION
By /s/ RICHARD S. WARD
---------------------------------
Name: Richard S. Ward
Title: Executive Vice President,
General Counsel and
Corporate Secretary
Dated as of May 28, 1997
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
(56) Brief of Defendant-Appellee ITT
Corporation dated May 27, 1997.......
EXHIBIT 99.56
No. 97-15702
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
- ---------------------------------------
HILTON HOTELS CORPORATION and
HLT CORPORATION,
Plaintiffs-Appellants,
-against-
ITT CORPORATION,
Defendant-Appellee.
- ---------------------------------------
Appeal from United States District Court
for the District of Nevada
BRIEF OF DEFENDANT-APPELLEE ITT CORPORATION
Case No. CV-97-00095-PMP (RLH)
SANFORD KINGSLEY THOMAS F. KUMMER RORY O. MILLSON
LeBOEUF, LAMB, VON S. HEINZ SANDRA C. GOLDSTEIN
GREENE & MacRAE, LLP KUMMER KAEMPFER CRAVATH, SWAINE & MOORE
One Embarcadero Center BONNER & RENSHAW 825 Eighth Avenue
Fourth Floor 3800 Howard Hughes New York, NY 10019
San Francisco, CA 94111 Parkway, Seventh Floor (212) 474-1000
(415) 951-1100 Las Vegas, NV 89109
(702) 792-7000
Attorneys for Defendant Appellee
ITT CORPORATION
<PAGE>
CORPORATE DISCLOSURE STATEMENT
In accordance with Federal Rule of Appellate
Procedure 26.1, Defendant/Appellee ITT Corporation ("ITT")
states it has no parent corporation. ITT also states that ITT
Educational Services, Inc. is its only subsidiary (except
wholly-owned subsidiaries) or affiliate that has issued shares
to the public.
<PAGE>
TABLE OF CONTENTS
Page
APPELLEE'S COUNTER-STATEMENT OF ISSUES..................... 1
STATEMENT OF JURISDICTION ................................. 2
STATEMENT OF THE CASE...................................... 3
SUMMARY OF ARGUMENT........................................ 4
STATEMENT OF FACTS......................................... 6
A. Hilton's Tender Offer and ITT's
Response.......................................... 6
B. The Applicable Nevada Law and ITT's
By-Laws........................................... 7
C. ITT's 1997 Annual Meeting......................... 11
D. The Understanding of Corporate
America........................................... 13
ARGUMENT................................................... 16
I. THE DISTRICT COURT'S DECISION SHOULD BE
REVIEWED UNDER THE ABUSE OF DISCRETION
STANDARD.............................................. 16
II. HILTON CANNOT SHOW THAT THE DISTRICT COURT
ABUSED ITS DISCRETION OR COMMITTED AN ERROR
OF LAW IN HOLDING THAT NEITHER NEVADA LAW
NOR THE BY-LAWS REQUIRE ITT TO HAVE A MAY
MEETING............................................... 17
III. HILTON CANNOT SHOW THAT THE DISTRICT COURT
ABUSED ITS DISCRETION OR COMMITTED AN ERROR
OF LAW IN HOLDING THAT THE ITT BOARD DID NOT
BREACH ITS FIDUCIARY DUTY............................. 24
IV. HILTON CANNOT SHOW THAT THE DISTRICT COURT
ABUSED ITS DISCRETION OR COMMITTED AN ERROR
OF LAW IN HOLDING THAT HILTON FAILED TO SHOW
IRREPARABLE HARM...................................... 31
CONCLUSION................................................. 35
<PAGE>
STATEMENT OF RELATED CASES ................................ 36
CERTIFICATE OF COMPLIANCE REQUIRED BY CIRCUIT
RULE 32(E)(4).............................................. 36
<PAGE>
TABLE OF AUTHORITIES
Cases Page
AHI Metnall, L.P. v. J.C. Nichols Co.
- -------------------------------------
891 F. Supp. 1352 (W.D. Mo. 1995)........................ 31
Anderson v. U.S.
- ----------------
612 F.2d 1112 (9th Cir. 1979)............................ 17
Apple Computer, Inc. v. Formula Int'l, Inc.
- -------------------------------------------
725 F.2d 521 (9th Cir. 1984)............................. 16
Aprahamian v.HBO & Co.
- ----------------------
531 A.2d 1204 (Del.Ch. 1987) ............................ 30
Baron v. Strawbridge & Clothier
- -------------------------------
646 F. Supp. 690 (E.D. Pa. 1986)......................... 34
Betzak Co. v. Bank One Columbus, N.A.
- -------------------------------------
811 F. Supp. 274 (E.D. Mich. 1992)....................... 31
Big Country Foods, Inc. v. Anchorage Board of
- ---------------------------------------------
Education
---------
868 F.2d 1085 (9th Cir. 1989)............................ 16
Blasius Indus., Inc. v. Atlas Corp.
- ----------------------------------- 35, 27,
564 A.2d 651 (Del. Ch. 1988)............................. 29, 30
Bracco v. Lackner
- -----------------
462 F. Supp. 436 (N.D. Cal. 1978)........................ 12
Coalition to Advocate Pub. Util.
- --------------------------------
Responsibilities, Inc. v. Engels
--------------------------------
364 F. Supp. 1202 (D. Minn. 1973)........................ 33
Crane Co. v. Lam
- ----------------
509 F.Supp. 782 (E.D. Pa 1981)........................... 33
Crank v. Nevada Indus. Comm'n
- -----------------------------
675 P.2d 413 (Nev. 1984)................................. 24
Dahl v. HEM Pharmaceuticals Corp.
- ---------------------------------
7 F.3d 1399 (9th Cir. 1993).............................. 17
<PAGE>
Danaher Corp. v. Chicago Pneumatic Tool Co.
- -------------------------------------------
1986 WL 7001 (S.D.N.Y. 1986)............................. 20,30
Dan River, Inc. v. Icahn
- ------------------------
701 F.2d 278 (4th Cir. 1983)............................. 33
Double O Mining Co. v. Simrak
- -----------------------------
132 P.2d 605 (Nev. 1942)................................. 20
ER Holdings, Inc. v. Norton Co.
- -------------------------------
735 F. Supp. 1094 (D. Mass. 1990) ....................... 19, 31
Farmers & Merchants Bank v. Federal Reserve Bank
- ------------------------------------------------
262 U.S. 649 (1923)...................................... 18
Fischer v. C.J. Lawrence & Co.
- ------------------------------
481 F. Supp. 357 (S.D.N.Y. 1979)......................... 19
Georgia-Pacific Corp. v. Great Northern Nekoosa
- -----------------------------------------------
Corp.
-----
727 F. Supp. 31 (D. Me. 1989)............................ 32, 22
Gramanz v. T-Shirts & Souvenirs, Inc.
- -------------------------------------
894 P.2d 342 (Nev. 1995)................................. 24
Hershfang v. Knotter
- --------------------
562 F. Supp. 393 (E.D. Va. 1983), aff'd,
725 F.2d 675 (4th Cir. 1984)............................. 31
Hyde Park Partners, L.P. v. Connolly
- ------------------------------------
839 F.2d 837 (1st Cir. 1988)............................. 33
International Banknote Co., Inc. v. Muller
- ------------------------------------------
713 F. Supp. 612 (S.D.N.Y. 1989)......................... 31
Kidsco Inc. v. Dinsmore
- -----------------------
674 A.2d 483 (Del. Ch.) aff'd, 670 A.2d 1338 19,25,
(Del. 1995).............................................. 26, 27
In re McLinn
- ------------
739 F.2d 1395 (9th Cir. 1984)............................ 16
Nevada ex rel. Flagg v. Board of Trustees
- -----------------------------------------
4 Nev. 400 (1868)........................................ 21
Nevada ex rel. Curtis v. McCullough
- -----------------------------------
3 Nev. 202 (1867)........................................ 21, 33
Nevada ex rel. Sears v. Wright
- ------------------------------
10 Nev. 167 (1875)....................................... 20
<PAGE>
Northwest Environmental Advocates v. City of
- --------------------------------------------
Portland
--------
56 F.3d 979 (9th Cir. 1995), cert. denied,
116 S.Ct. 2550 (1996).................................... 16, 24
Ocilla Indus., Inc. v. Katz
- ---------------------------
677 F. Supp. 1291 (E.D.N.Y. 1987)........................ 14, 20
Saxon Indus., Inc. v.NKFW Partners
- ----------------------------------
488 A.2d 1298 (Del. 1984)................................ 20
Sega Enters., Ltd. v. Accolade, Inc.
- ------------------------------------
977 F.2d 1510 (9th Cir. 1992)............................ 16
Shoen v. Amerco
- --------------- 25, 29,
885 F. Supp. 1332 (D. Nev. 1994)......................... 30, 31
Silver v. Farrell
- -----------------
450 N.Y.S.2d 938 (N.Y. Sup. Ct. 1982).................... 20
Sports Form, Inc. v. United Press International,
- ------------------------------------------------
Inc.
686 F.2d 750 (9th Cir. 1982)............................. 16
Stahl v. Apple Bancorp, Inc.
- ---------------------------- 17, 25-27
579 A.2d 1115 (Del. Ch. 1990)............................ 29-31
Stanley v. University of S. Cal.
- --------------------------------
13 F.3d 1313 (9th Cir. 1994)............................. 17
Stroud v. Grace
- ---------------
606 A.2d 75 (Del. 1992).................................. 25
Topper Acquisition Corp. v. Emhart Corp.
- ----------------------------------------
Civ. No. 89-001100R, 1989 WL 513034 (E.D. Va.
March 23, 1989).......................................... 32
United States v. McConney
- -------------------------
728 F.2d 1195 (9th Cir. 1984)............................ 17
Unocal Corp. v. Mesa Petroleum Co.
- ----------------------------------
493 A.2d 946 (Del. 1985)................................. 25, 28
Williams v. Geier
- -----------------
671 A.2d 1368 (Del. 1996)................................ 30
WLR Foods, Inc. v. Tyson Foods, Inc.
- ------------------------------------
65 F.3d 1172 (4th Cir. 1995), cert.
denied,116 S. Ct. 921 (1996)............................. 28
<PAGE>
Wyser-Pratte v. Smith
- ---------------------
1997 WL 153806 (Del. Ch. March 18, 1997)................. 30
Statutes and Rules
- ------------------
Del. Gen. Corp. L. Section 211............................. 14
Fed. R. App. P. 52(a)...................................... 17
Ind. Code Section 2 31-29-1(a)............................. 14
NRS 78.115................................................. 7
NRS 78.120................................................. 7, 8, 19
NRS 78.138................................................. 7, 8, 12,
28
NRS 78.330................................................. 8, 9, 17,
18, 20, 21
NRS 78.340................................................. 9
NRS 78.345................................................. 8, 14, 18,
19, 20, 21
N.Y.B.C.L. Section 603..................................... 14
NYSE Rule 401.03........................................... 11
SEC Rule 14a-13(a)(3)...................................... 11
Treatises
- ---------
Keith P. Bishop, Nevada Corporation Law & Practice
Section 7.15 (1993)...................................... 28
3 Corbin on Contracts
Section 551 (1960)....................................... 18
<PAGE>
APPELLEE'S COUNTER-STATEMENT OF ISSUES
1. Did the District Court abuse its discretion or
commit an error of law in denying the mandatory injunctive
relief sought?
2. Does a Nevada corporation have to hold an
annual meeting every 12 months where both Nevada law and the
corporation's by-laws give the board of directors discretion
to determine the date of the annual meeting and the only
limit under Nevada law and the by-laws is that the Board
should hold an annual meeting every 18 months?
3. Do the directors of a Nevada corporation breach
their fiduciary duty by not scheduling the corporation's
annual meeting within 12 months of the last annual meeting
where the directors, in accordance with Nevada law and the
corporation's by-laws, are responding to a clearly
inadequate tender offer in good faith and with a view to the
interests of the corporation?
4. Does a hostile bidder that wishes to elect
directors to advance its clearly inadequate offer suffer
irreparable injury if the annual meeting is not held at the
time the bidder wants where (a) Nevada law and the
corporation's by-laws do not require the meeting to be held
at that time, (b) the bidder has publicly acknowledged that
the meeting need not be held at that time, and (c) the
bidder has publicly asserted that
<PAGE>
holding the meeting at a later date will not adversely
affect its offer?
STATEMENT OF JURISDICTION
ITT agrees with the Statement of Jurisdiction
submitted by Hilton Hotels Corporation and HLT Corporation.
STATEMENT OF THE CASE
In January 1997, Hilton Hotels Corporation and HLT
Corporation (collectively "Hilton") announced a tender offer
for the stock of ITT, together with a proposed merger of ITT
and Hilton. Hilton's opportunistic offer was designed to
take advantage of the temporarily depressed price of ITT's
stock and did not reflect the true value of the stock.
Indeed, ITT's stock has consistently traded above the offer
price every day since Hilton's announcement.
ITT's Board of Directors (the "Board"), after
receiving advice from its financial and other advisors,
determined that it would not be in the best interests of
ITT's stockholders to pursue Hilton's offer. Instead, the
Board determined to refine ITT's long-term strategic plan
and to pursue alternative means of providing ITT's
stockholders with higher value.
<PAGE>
Hilton has never argued--either in the District
Court or to ITT stockholders--that its $55 price is
adequate. Nor has Hilton ever argued--either in the District
Court or to ITT stockholders--that ITT's refined strategic
plan or the actions taken pursuant to that plan are somehow
improper. Indeed, Hilton has publicly stated that it is
"pleased" with those actions and has even claimed in this
Court that ITT's refined strategic plan is Hilton's plan.
Hilton's challenge instead relates to its attempt
to force ITT to accept its inadequate offer by the
nomination of directors committed to the merger and its
request for a May 1997 annual meeting in order to stampede
ITT's stockholders to vote for the Hilton nominees. Hilton,
whose interests as a potential purchaser are obviously
adverse to those of ITT's stockholders as potential sellers,
wants to force through its inadequate and coercive offer and
cut off the Board's good faith efforts to carry out the task
given it under Nevada law of enhancing value and protecting
the interests of stockholders and other concerned
constituencies in the face of an inadequate offer.
The District Court denied Hilton's request for
mandatory injunctive relief compelling ITT's Board to set a
May 1997 meeting date. The District Court held that:
<PAGE>
-- ITT is not required by Nevada law or its
by-laws to conduct its annual meeting in May
1997 (ER 971);
-- when the annual meeting has not been set and
is not required to be set, failure to hold
the meeting in May is not a breach of the
directors' fiduciary duty (ER 974); and
-- Hilton would not suffer irreparable harm if
the meeting were not held in May. (ER 975-76)
<PAGE>
SUMMARY OF ARGUMENT
Appellate review of the District Court's denial of
a preliminary injunction is "very limited"; this Court will
reverse only if the District Court abused its discretion or
committed an error of law. The deference to the District
Court is particularly appropriate here. Not only does this
case involve issues of fact as well as law, but Hilton's
request for mandatory relief is subject to heightened
scrutiny and could not have been granted unless the facts
and law clearly favored Hilton. See Point I, infra.
Hilton cannot meet this (or any other) standard of
review; Hilton cannot show that the District Court abused
its discretion or committed any error of law:
First, Hilton has not convincingly challenged the
District Court's finding that "neither Nevada law nor ITT's
by-laws require that the 1997 annual meeting be conducted in
May" (ER 971). Indeed, Nevada law and ITT's by-laws
expressly grant the ITT Board discretion to determine the
date of the annual meeting, and the only statutory or
contractual limit on this discretion is that the Board
should hold the meeting within 18 months of the last annual
meeting. Hilton knows this; its Chief Executive Officer has
publicly admitted that ITT need not hold its annual meeting
in May. See Point II, infra.
<PAGE>
Second, Hilton has not convincingly challenged the
District Court's finding that "Hilton has failed to
demonstrate that ITT has breached its fiduciary duty to
shareholders by failing to schedule an annual meeting for
May 1997" (ER 975). The undisputed facts are that the Board
has acted in good faith and with a view to the interests of
the corporation, as required by Nevada law, in responding to
Hilton's clearly inadequate offer. Indeed, since Hilton did
not adduce any facts--and has indeed taken no discovery--to
show that the Board is motivated by an improper motive,
Hilton failed to show a violation of the Delaware caselaw
that it cites. And that very caselaw holds expressly that,
since the Board has not set a meeting date, there can be no
claim for an inequitable interference with the stockholder
franchise. See Point III, infra.
Third, Hilton has not convincingly challenged the
District Court's finding that Hilton will not suffer
irreparable harm since "there is no impairment of the
shareholder franchise in this case because no annual meeting
of shareholders has yet been set and the time for conducting
the annual meeting has not yet expired" (ER 975). Not only
does Hilton have no right to a meeting in May, but it has in
fact publicly stated its view that a
<PAGE>
later meeting will not adversely affect its offer.
See
Point IV, infra.
STATEMENT OF FACTS
A. Hilton's Tender Offer and ITT's Response In
January 1997, Hilton announced a tender offer for 50.1% of
the common stock of ITT at a price of $55 per share and
proposed a stock merger for the rest. ER 290-91, 301.
ITT's Board considered Hilton's offer and
unanimously voted to recommend that ITT's stockholders
reject the offer. ER 291-92, 301. One reason for this
recommendation is the clear inadequacy of the offer as
described by ITT's financial advisors. ER 351. The stock
market confirms the inadequacy of Hilton's offer--ITT's
stock has traded above the offer price every day since
Hilton's announcement. ER 324. Indeed, as of February 28,
1997 (two days after Hilton moved for an injunction with
respect to the annual meeting), only about 2/3 of 1% of the
outstanding shares had been tendered to Hilton. ER 644.
In the face of Hilton's inadequate and coercive
two-tiered offer, ITT and its advisors are continuing to
refine ITT's long-term strategic plan and are pursuing means
of ensuring that ITT's stockholders realize the full,
long-term benefits of their investment and that
<PAGE>
ITT's other constituencies whose interests may be considered
under Nevada law are protected adequately. ER 292, 294, 350,
352.[1] ITT is delivering value through transactions such as
the recent sale of ITT's interest in Madison Square Garden,
which resulted in ITT nearly doubling its investment in two
years. ER 293-94.[2]
Hilton has never argued--either in the District
Court or to ITT stockholders--that its offer is adequate.
See App. at 3. Indeed, Hilton has stated that it knows it
must revise its offer before stockholders will take it
seriously. SER 184-85. And Hilton has never argued-- either
in the District Court or to ITT stockholders--that ITT's
refined strategic plan or the actions taken pursuant to that
plan are somehow improper. Indeed, Hilton has publicly
stated that it is "pleased" with those actions. ER 424. And
Hilton has asserted in this Court that ITT's refined
strategic plan is Hilton's plan. App. at 2.
- --------
[1] If they are to be implemented reasonably, these
efforts take time. ER 303-04, 322, 324, 338-39, 350. In
fact, Hilton's Chief Executive Officer has specifically
warned against the dangers of a "fire sale". ER 642.
[2] Contrary to Hilton's assertion, ITT has not
"abandoned its previous corporate strategy" and "adopt[ed]
what is, in essence, Hilton's strategy". Brief of
Plaintiffs-Appellants Hilton Hotels Corporation and HLT
Corporation ("App.") at 9. Ever since ITT came into
existence in its present form in late 1995 (as a result of
the split-up of its predecessor), ITT's strategy has been to
divest its non-core assets. ER 293-94. Although the Madison
Square Garden sale represented a change in strategy, it was
an extremely advantageous transaction. ER 294, 424.
<PAGE>
B. The Applicable Nevada Law and ITT's By-laws.
The business of a Nevada corporation "must be
managed by a board of directors", which has "full control
over the affairs of the corporation". NRS 78.115, 78.120.
Directors must "exercise their powers in good faith and with
a view to the interests of the corporation". NRS 78.138(1).
In this regard, directors "may resist a change of control of
the corporation" if they determine that the change is "not
in the best interest of the corporation", including "the
interests of the corporation's employees, suppliers,
creditors and customers", "the economy of the state and
nation", "the interests of the community and of society",
and "the long-term as well as short-term interests of the
corporation and its stockholders, including the possibility
that these interests may be best served by the continued
independence of the corporation". NRS 78.138(3), (4).
Nevada law and ITT's by-laws confirm that the
Board's authority to manage the affairs of the corporation,
including when a change of control is threatened,
encompasses the discretion to determine the date of the
annual meeting, subject only to the statutory limit. Thus,
Nevada law expressly provides that the board of directors
has "the authority to set the date, time and
<PAGE>
place for the annual meeting of the stockholders" (NRS
78.330(1))[3]; the ITT by-laws provide the same (ER 163). The
only statutory limit[4] on this discretion is contained in NRS
78.345(1), which provides that:
"If any corporation fails to elect directors within 18
months after the last election of directors required by
NRS 78.330, the district court has jurisdiction . . .
to order the election of directors in the manner
required by NRS 78.330."
Nevada law and the ITT by-laws provide further
that the "term of office" for directors is from one "annual
meeting required by NRS 78.330" until the next. Indeed,
Section 2.2 of ITT's By-laws, which defines the "term of
office of directors", as its title describes, provides that:
"Each Director shall hold office until the next annual
meeting of stockholders . . . ." ER 168.
Similarly, Nevada law provides that "every director shall
continue to hold his office and discharge his duties until
his successor has been elected" (NRS 78.340), as do ITT's
by-laws (Section 2.2 (ER 168)). Indeed, Hilton conceded
below that Section 2.2 "provides that the incumbent
- --------
3 Nevada law provides that, with an immaterial
exception, "the directors of every corporation must be
elected at the annual meeting of the stockholders". NRS
78.330(1).
4 As the District Court properly found, ITT's by-laws
do not limit the Board's discretion (ER 974); and, in
addition, ITT's by-laws cannot possibly create a contractual
limit on this discretion because Nevada law and ITT's
by-laws give the Board the power to amend the by-laws. See
NRS 78.120(2); ITT By-law Section 13 (ER 191); ER 332-33;
see also n. 16, infra.
<PAGE>
directors continue in office until their successors are
qualified". SER 10.[5]
Hilton always understood that Nevada law and the
ITT by-laws do not require a May meeting. Thus, during a
January 28, 1997 teleconference with industry analysts,
Hilton's Chief Executive Officer stated, in response to a
question regarding whether ITT could delay its annual
meeting: "I am advised by counsel that they can delay it for
a couple of months." ER 428.[6]
Moreover, Hilton's litigation strategy is
consistent with its understanding that ITT's annual meeting
does not have to be held in May.[7] Hilton did not
- --------
5 Hilton's reference to the "succeeding year" in Section 1.3
(App. at 16-17) is simply misleading.
6 Mr. Bollenbach declined to be more specific on what he meant by
"several months". Id. Since there is no principled basis on which to
draw any distinction between a "couple of months" and the longer
period specified in NRS 78.345, it is therefore clear that even Hilton
does not believe its own lawyer's argument that the by-laws require a
meeting in May, especially since Hilton is obviously also on notice
that the by- laws are subject to amendment by the Board. ITT has not
had to take discovery of Hilton to find out the specific advice of
counsel that Mr. Bollenbach waived publicly. See p. 15, infra.
7 The same is true of Hilton's regulatory strategy. As briefed
more fully in ITT's Memorandum in Opposition to Hilton's Emergency
Motion, Hilton waited until March--over a month after it announced its
offer--before filing applications for the necessary regulatory
approvals with the Federal Communications Commission and the New
Jersey gaming authorities. SER 156-58. After delaying these
applications for over a month, Hilton tried to circumvent the
statutory procedures, and ITT objected, as it was entitled to do, on
the ground that Hilton had not complied with the statutory
requirements. ER 875-77, 879-83, 929-32. ITT also filed a brief in
Nevada, at the request of the Nevada gaming authorities, in connection
with Hilton's ruling request there.
<PAGE>
file its motion until a month after it filed its complaint, which
claimed the relief sought in the motion. And even after it moved,
Hilton failed to seek an expedited briefing schedule. This lack of
urgency should be contrasted with Hilton's awareness, as indicated in
its initial moving papers, that, for legal and practical reasons, ITT
requires at least 60 days lead time to take the steps necessary to
prepare for an annual meeting and that ITT had not yet begun taking
those steps. SER 157- 58; see SEC Rule 14a-13(a)(3); NYSE Rule
401.03.[8]
- --------
There is no truth to Hilton's argument (App. at 12) that Hilton's
delay in obtaining regulatory approvals is ITT's fault. At no time has
ITT suggested that any of the agencies delay ruling on Hilton's
applications. To the contrary, ITT agreed to an expedited schedule in
the FCC (ER 813, 883-84), ITT requested an expedited decision in New
Jersey (ER 933), and ITT met the Nevada Board's request for a
response. Although Hilton filed voluminous papers in the District
Court asserting that the FCC and New Jersey gaming approvals would be
obtained by mid-April, in time for a hypothetical May meeting (ER 775,
811-12, 902, 909, 913), Hilton has not yet made any SEC filing to
indicate that either of these approvals has been obtained.
8 In its reply in support of its Emergency Motion, Hilton argued
that it was not concerned about the lack of expedition because it
believed that it would still be possible to hold a meeting by the end
of May as long as the District Court ruled by April 17--the date of
oral argument before the District Court. That argument is refuted by
SEC Rule 14a-13(a)(3) and NYSE Rule 401.03; the former requires 20
business days between the date on which notice of the annual meeting
is sent to stockholders and the record date, and the latter recommends
that a further 30 days be allowed between the record and meeting dates
to allow for the solicitation of proxies. Not only did Hilton advance
no precedent for its assertion that the periods under the SEC Rule and
the NYSE Rule should occur concurrently, but at ITT's prior annual
meeting there was a period of 50 days--not 30--between the record date
and the meeting date. SER 159; ER 192. Thus, even
<PAGE>
C. ITT's 1997 Annual Meeting
ITT's Board has not yet established the date for its
1997 annual meeting. ER 359.[9] ITT's Board was, and is,
considering the numerous, complex issues raised by Hilton's
hostile takeover attempt, its proposed second- step squeeze out
merger and its proxy solicitation. ER 292-93, 359. The Board's
actions have been taken, and will be taken, with a view to the
interests of the corporation, its stockholders and the other
constituencies whose interests are recognized by Nevada law. Id.
ITT's Board, of which only two of the eleven are ITT employees,
is not attempting to entrench itself. ER 294, 359-60.[10]
- --------
if the District Court had ruled on April 17 in Hilton's favor,
the meeting could not have been held before mid to late June.
[9] Contrary to Hilton's assertion (App. at 3, 20), ITT has
not held its annual meeting in May every year for the last 20
years. ITT itself has only had one prior annual meeting. ER
292-93. The fact that its predecessor held annual meetings in May
is of little significance. We note also that ITT's predecessor
did not have its meetings on the 365-day cycle that Hilton now
urges (ER 192) and that because ITT's predecessor was a Delaware
corporation, it was required by statute to hold annual meetings
within 13 months of each other. See Del. Gen. Corp. L. ss. 211.
Nevada has adopted a different rule, and only requires a meeting
every 18 months. NRS 78.345(1).
[10] Hilton's reliance on a statement by Mr. Weadock, ITT's
Senior Vice President in charge of its Sheraton hotels operation,
as an "acknowledgment of entrenchment" (App. at 12) is misplaced.
We note, as a preliminary matter, that (a) Hilton's claim is not
even one of entrenchment, but of interference with the
stockholder franchise; and (b) this hearsay statement is entitled
to no weight (Bracco v. Lackner, 462 F. Supp. 436, 442 n.3 (N.D.
Cal. 1978)). And on the "merits" of Hilton's argument of
"entrenchment", we note that Mr. Weadock is not on the ITT Board
or even a senior officer of the company whose responsibilities
<PAGE>
A stockholder vote in May would have handcuffed the
Board at exactly the point when its stockholders and other
constituencies most rely on it to protect their interests. ER
318, 322, 325-26, 352. Additional time has allowed and will allow
ITT to refine and implement its strategic plan in a
value-enhancing manner. ER 303, 305- 07, 317-29, 350-53. In
addition, the actual value of Hilton's proposed transaction is
uncertain. ER 44-45. Contrary to Hilton's assertion (App. at
12-13), these uncertainties are not ITT's fault--many of them are
of Hilton's own making. For example, the regulatory uncertainties
are the result of Hilton's own attempts to circumvent
statutorily-mandated consent procedures in an effort to make up
time lost because of Hilton's delays in
- ---------
include dealing with the Hilton bid. ER 295-97. Moreover, this
reported statement is perfectly consistent with a considered
belief that the Hilton transaction is not in the best interests
of ITT, its stockholders and the other constituencies required to
be taken into account under NRS 78.138(3)-(4)--indeed, Mr.
Weadock reportedly went on to indicate that he believed the
Hilton offer was inadequate. ER 721. Hilton's hyperbole--that it
is "difficult to imagine a more bare-faced acknowledgment of
entrenchment" (App. at 12)--is just that, hyperbole. At least
Hilton's argument below--namely, that the ITT Chairman was trying
to entrench himself (SER 20-21)--related to a Board member. The
problem with that theory was that ITT's Chairman had been offered
a "generous" position by Hilton's Chairman (ER 298) and by
Hilton's counsel (SER 109). In fact, Hilton has chosen not to
seek any discovery with respect to the Board's intent (or any
other issue) but to rely exclusively for "evidence" of
"entrenchment" on this single reported statement by a non-
director employee.
<PAGE>
seeking consent.[11] Similarly, Hilton could have resolved many
of the uncertainties regarding the value and terms of the Hilton
transaction by making its offer more specific. Instead, Hilton
made the terms of its offer deliberately vague.
D. The Understanding of Corporate America.
An "annual meeting" does not have to be held every
twelve months. As the District Court found:
"The Court finds persuasive the Affidavit of Professor
John C. Coffee, Jr., that the term 'annual meeting' at
issue must be understood as an adjective which
'distinguishes the regular meeting for the election of
directors [from] other special meetings called by the
board for the stockholders.'" ER 971.
The record evidence supports the District Court's
finding.
Not only is there the unrebutted evidence in Professor
Coffee's affidavit (ER 330, 333-39), but statutes in several
other states show that the phrase "annual meeting" does not in
itself require a meeting every twelve months. For example, the
Comment to Indiana
- --------
[11] The burden of non-consummation of the Hilton offer
would be shifted to the ITT stockholders and away from Hilton if
Hilton were to force ITT's stockholders to decide on the proposal
before the regulators have to. ER 326-27. Moreover, if the
regulatory approvals take time, there is even less reason for
ITT's stockholders to make an immediate decision. ER 327.
<PAGE>
Code 23-1-29-1(a), which requires that a shareholders meeting be
held "annually", states:
"While subsection (a) requires a corporation to hold annual
meetings, it does not . . . specify a time period within
which the meeting must be held. The relevant time period
under the BCL is established by IC 23-1-29-3, which
authorizes any shareholder to apply for a court-ordered
meeting if an annual meeting is not held within the earlier
of six months after the end of the corporation's fiscal year
or fifteen months after the last annual meeting."
In Indiana, as in Nevada, Delaware and New York, stockholders can
move to compel an "annual meeting" if one has not been held
within a specified period--18 months in Nevada and 13 months in
New York and Delaware--after the last meeting. See NRS 78.345(1);
Del. Gen. Corp. L. ss. 211; N.Y.B.C.L. ss. 603. These provisions
would have been totally superfluous if corporations were required
to hold their "annual meetings" every twelve months. As the court
concluded in one of the cases relied on by Hilton (App. at 25):
"Presumably, then, under New York law, annual meetings are
contemplated to occur no later than thirteen months after
the last such meeting . . . ." Ocilla Indus., Inc. v. Katz,
677 F. Supp. 1291, 1301 (S.D.N.Y. 1987).
This law is entirely consistent with a publicly
available memorandum prepared by Hilton's counsel that clearly
recognizes that "annual meetings" need not be held every twelve
months. ER 647. Indeed, Hilton's counsel recommended the
amendment of any by-law that specifies a
<PAGE>
particular date for the "annual meeting" to "authorize the board
to set an alternative date" (ER 648-49) and prepared a form of
by-laws that refers to an "annual meeting" and expressly provides
that any "previously scheduled meeting may be postponed" (ER
652). This recommendation refutes Hilton's argument here that the
term "annual meeting" means one that must be held every 365 days.
Further confirmation of ITT's interpretation comes from
the fact that many companies have in fact held their annual
meetings later than usual, or even postponed an annual meeting
that had already been scheduled, in response to a hostile tender
offer or proxy contest. ER 309-10.[12] Indeed, the memorandum
prepared by Hilton's counsel recommends "defensive" by-law
provisions, which will "allow the board of directors some
additional negotiating leverage" (ER 648), and goes on to
describe "typical recent amendments" (ER 648-49) and recommend
by- laws (ER 653).[13]
- --------
12 All of these cases involved the delay or postponement of
annual meetings; 19 of them involved responses to hostile tender
offers, and three involved hostile proxy contests. ER 309-10.
13 Counsel's recommended by-laws provide for nominations for
an "annual meeting" to be made between 60 and 90 days "prior to
the first anniversary of the preceding year's annual meeting" and
go on to provide that "[i]n no event shall the public
announcement of an adjournment of an annual meeting commence a
new time period for the giving of a stockholders' notice." ER
653. Counsel's recommendations contradict Hilton's argument (App.
at 16-17) that the provisions of Sections 1.3(b) and 2.2 of ITT's
by-laws, which require that stockholders submit director
<PAGE>
ARGUMENT
I. THE DISTRICT COURT'S DECISION SHOULD BE REVIEWED UNDER THE
ABUSE OF DISCRETION STANDARD.
Appellate review of an order denying a preliminary
injunction is, in general, "very limited". Big Country Foods,
Inc. v. Anchorage Board of Education, 868 F.2d 1085, 1087 (9th
Cir. 1989). This Court "will reverse 'only if the district court
relied on an erroneous legal premise or abused its discretion'"
(id., quoting Sports Form, Inc. v. United Press International,
Inc., 686 F.2d 750, 752-53 (9th Cir. 1982)); it "will not reverse
merely because we would have arrived at a different result." Big
Country, 868 F.2d at 1087; see also Apple Computer, Inc. v.
Formula Int'l, Inc., 725 F.2d 521, 523 (9th Cir. 1984); Sega
Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510, 1517 (9th Cir.
1992).[14]
This is particularly so where--as here--the lower
court's decision involves issues of fact as well as
- --------
nominations 90 days in advance of the anniversary date of the
last annual meeting, require the meeting to be held in May.
[14] The cases cited by Hilton (App. at 4) are not to the
contrary. In Northwest Environmental Advocates v. Portland, 56
F.3d 979, 982 (9th Cir. 1995), this Court held that
interpretation of an unambiguous state pollution system permit
was a question of law subject to de novo review, but that to the
extent the district court must look to extrinsic evidence in
order to interpret the permit, its findings of fact are reviewed
for clear error. And in In re McLinn, 739 F.2d 1395, 1397 (9th
Cir. 1984), this Court held that questions of state law are
reviewable under the same de novo standard as questions of
federal law.
<PAGE>
law. See Fed. R. Civ. P. Rule 52(a); United States v. McConney,
728 F.2d 1195, 1200-1201 (9th Cir. 1984). Moreover, since Hilton
was seeking a mandatory preliminary injunction (ER 970; see also
Stahl v. Apple Bancorp, Inc., 579 A.2d 1115, 1120-21 (Del. Ch.
1990)), its request for relief is "subject to heightened
scrutiny" (Dahl v. HEM Pharmaceuticals Corp., 7 F.3d 1399, 1403
(9th Cir. 1993)) and is "particularly disfavored under the law of
this circuit." Stanley v. University of S. Cal., 13 F.3d 1313,
1319-20 (9th Cir. 1994). Such relief should not issue unless "the
facts and law clearly favor the moving party." Anderson v. U.S.,
612 F.2d 1112, 1114 (9th Cir. 1979).
II. HILTON CANNOT SHOW THAT THE DISTRICT COURT ABUSED ITS
DISCRETION OR COMMITTED AN ERROR OF LAW IN HOLDING THAT
NEITHER NEVADA LAW NOR THE BY-LAWS REQUIRE ITT TO HAVE A MAY
MEETING.
The District Court held that "neither Nevada law nor
ITT's bylaws require that the 1997 annual meeting be conducted in
May". ER 971.
As summarized above, Nevada law and the ITT by- laws
provide the Board with the discretion to determine when and where
the ITT annual meeting will be held--the Board has the express
authority under NRS 78.330(1) and Section 1.2 of the by-laws to
set the date of the annual meeting, subject only to NRS
78.345(1). See pp. 8-9, supra. The District Court thus correctly
held:
<PAGE>
"The Court concludes that, subject to the right of the board
of directors to specify a shorter period, annual meetings
for Nevada corporations are contemplated to occur no later
than eighteen months after the last such meeting". ER 972.
Hilton's efforts to challenge the District Court's
finding are without merit.
First, contrary to Hilton's argument (App. 4- 6)[15],
"annual meeting" in both Nevada law and ITT's by-laws does not
mean every 365 days.
Hilton's argument is rebutted by both NRS 78.330(1) and
NRS 78.345. Thus, NRS 78.330(1) (and the ITT by-laws) give the
Board discretion when to set the "annual meeting". See p. 8,
supra. The Board can exercise its discretion (subject to NRS
78.345)[16],
- --------
[15] Hilton sometimes argued in its briefs below that there
was a difference between the meaning of "annual meeting" in the
Nevada statute and in the ITT By-laws, and there are remnants of
that argument before this Court (see App. at 23-24). However,
Hilton provides no rationale for adopting an interpretation of
the phrase "annual meeting" in ITT's by-laws that differs from
the interpretation of that phrase in the statute--and, indeed,
there is no such rationale. In any event, Hilton's counsel
conceded at oral argument in the District Court:
"When you talk about an annual meeting you look first at the
statute, go to Nevada statute, they're a Nevada corporation
now, 78.330." SER 52-53.
That concession was correct, given the clear law that the
statutory scheme should be considered in construing the meaning
of the By-laws. See 3 Corbin on Contracts ss. 551, at 198 (1960);
Farmers & Merchants Bank v. Federal Reserve Bank, 262 U.S. 649,
660 (1923).
[16] Although it would have been possible to adopt by-laws
that set a specific date for the annual meeting that is not
subject to change by the Board, even Hilton has not argued that
<PAGE>
including in response to tender offers. This is what other
corporations have done and what has been recommended by Hilton's
own counsel. See p. 15, supra.
Similarly, NRS 78.345 defines the time in which the
"annual meeting" must be held. Not only does this section have
the same function as similar sections in Indiana, Delaware and
New York (see p. 14, supra), but the District Court held
correctly that there is no reason "why the Nevada Legislature [in
NRS 78.345] would postpone for six months a shareholder's remedy
for a corporation's failure to hold an annual meeting which the
Legislature intended to be held within twelve months of the prior
annual meeting." ER 972.[17]
- --------
Section 1.2 is such a by-law. Thus, the District Court correctly
held (ER 971) that ER Holdings, Inc. v. Norton Co., 735 F. Supp.
1094 (D. Mass. 1990) (cited in App. at 14) is irrelevant.
Moreover, even if Hilton's interpretation of the by-laws and the
Nevada statute were correct, Hilton does not have any "vested
right" in the by-laws because the Board has the power to amend
the by-laws. See NRS 78.120(2); ITT By-law Section 13 (ER 191).
In Kidsco Inc. v. Dinsmore, 674 A.2d 483 (Del. Ch.), aff'd, 670
A.2d 1338 (Del. 1995), the court held that:
"where a corporation's by-laws put all on notice that the
by-laws may be amended at any time, no vested rights can
arise that would contractually prohibit an amendment." Id.
at 492.
The court also noted that, with an exception not relevant here,
"no 'contractual' right to maintain an existing by-law has ever
been recognized." Id. at 492 n.6. See also Fischer v. C.J.
Lawrence & Co., 481 F. Supp. 357, 361 (S.D.N.Y. 1979); ER 333.
[17] Hilton's argument (App. at 23-26) that the remedy
provided under NRS 78.345(1) is not exclusive misses the point
that the court must first decide what the limits on the Board's
<PAGE>
The amendment to NRS 78.330(1), which was enacted in
1991, and the adoption of the predecessor to NRS 78.345 in 1925,
dispose of Hilton's reliance on Nevada ex rel. Curtis v.
McCullough, 3 Nev. 202 (1867).[18] In
- --------
authority are and then, if Hilton has a "right" to limit that
authority, the court can look to remedies--exclusive or
otherwise. Hilton plainly has no right. NRS 78.345 defines the
Board's duty to have an annual meeting no later than 18 months
after the last annual meeting. Hilton has no right to complain
that the Board has breached any such duty unless there is an 18-
month gap; and Hilton obviously has no "remedy" for a non-right.
This is entirely consistent with decisions that Hilton relies on
from Nevada and other jurisdictions with similar statutes. In
five of these cases, the stockholders had a right to a meeting
under the applicable statute. See Ocilla Indus., Inc. v. Katz,
677 F. Supp. 1291, 1301 (E.D.N.Y. 1987); Danaher Corp. v. Chicago
Pneumatic Tool Co., 1986 WL 7001, *7 (S.D.N.Y. 1986); Saxon
Indus., Inc. v. NKFW Partners, 488 A.2d 1298, 1301 (Del. 1984);
Nevada ex rel. Sears v. Wright, 10 Nev. 167, 174 (1875); Double O
Mining Co. v. Simrak, 132 P.2d 605, 608 (Nev. 1942). And in the
remaining case, Silver v. Farrell, 450 N.Y.S.2d 938 (N.Y. Sup.
Ct. 1982), the by-laws specified a particular date for the
meeting; which is not the case here (see n. 16, supra).
Similarly unavailing is Hilton's attempt to limit the reach
of NRS 78.345 by noting that it addresses annual meetings
"required by 78.330" rather than annual meetings, like ITT's,
that are "mandated by a by-law provision". App. at 23. Hilton is
wrong. All Nevada corporations, including ITT, must abide by the
terms of NRS 78.330 which mandates that: "Unless elected pursuant
[to the written consent statute], directors of every corporation
must be elected at the annual meeting of stockholders by a
plurality of the votes cast at the election." NRS 78.330
(emphasis added). See also n. 15, supra.
[18] Hilton's principal cases--Flagg and McCullough--show the
importance of viewing the relevant statute. Hilton's reliance on
Nevada ex rel. Flagg v. Board of Trustees, 4 Nev. 400 (1868)
(App. at 22) is mystifying. In Flagg, the court interpreted a
Nevada statute that set forth a six-month term of office for the
initial directors named in the Certificate of Incorporation as
requiring the company to hold its first election of directors
within six months of its incorporation. See 4 Nev. 404-05 (1868).
The court found that the directors could not circumvent the
explicit initial term of office set forth in the statute by
<PAGE>
McCullough, the court, construing California law as it existed in
1867, found that the legislative purpose of a statutory
requirement that directors be "annually elected" was to impose a
twelve month term of office. See 3 Nev. at 224.[19] The
McCullough court's interpretation of the word "annual" was
against the background of the statutes and practices in existence
at that time.[20] In the 130 years since McCullough was decided,
the corporate statutes of both Nevada and California have been
extensively revised. The current Nevada statutory scheme clearly
envisions both that the Board has discretion to
- --------
passing a by-law setting a later meeting date. Id. at 406-07. In
other words, the court held simply that the board could not pass
a by-law to avoid a statutory restriction. Hilton's other
authority, Nevada ex rel. Curtis v. McCullough, 3 Nev. 202 (1867)
(App. at 18-19), is to the same effect. In that case the court,
finding a statutory term of office of one year, held that the
board could not pass a by-law to avoid that statutory
restriction. However, there is no similar term of office
provision--either in ITT's By-laws or in the statutes--that would
require ITT to hold its annual meeting in May.
[19] The court therefore held that the directors could not
extend their statutory term of office by amending, a few days
before the required meeting, a by-law provision that--as the
District Court correctly noted (ER 971)--designated a specific
date for the annual meeting (the second Thursday of July). See
id. at 226-27.
[20] Chapter 128, Section 124 of the relevant statute
provided that the trustees "shall, except the first year, be
annually elected by the stockholders at such time and place as
shall be directed by the laws of the company". Section 125
referred to the election of trustees "on the day designated by
the by-laws of said company", which is inconsistent with NRS
78.330(1). Moreover, that statute did not contain any provision
equivalent to NRS 78.345.
<PAGE>
set the date of the annual meeting and that, absent a contrary
provision in the articles of incorporation or in the by-laws,
annual meetings need be held only once every 18 months. When the
Nevada Legislature amended NRS 78.330(1) in 1991 and passed the
predecessor statute to NRS 78.345 in 1925, it necessarily
abrogated any prior judicial holdings that the use of the phrase
"annual meeting" required the election to occur once every twelve
months. Indeed, if McCullough were still good law, then in
amending NRS 78.330(1) and in passing NRS 78.345 the Legislature
would have enacted meaningless provisions. There is no need to
enact provisions giving directors discretion or granting
stockholders the right to compel an election after 18 months, if
the Board has no discretion and a stockholder already has the
right to compel an election after 12 months merely by virtue of
the words "annual" or "year", which appear in NRS 78.330(1) and
are used in most corporate by-laws. Adopting Hilton's reasoning,
and its reliance on McCullough's out-dated definition of "annual
meeting", would create an internal inconsistency in NRS 78.345
since the statute, which uses the phrase "annual meeting",
clearly permits such a meeting to be held, if the board so
wishes, only once every 18 months. In fact, McCullough has never
<PAGE>
subsequently been cited by any Nevada court for the proposition
advocated by Hilton.
Second, contrary to Hilton's argument (App. at 16-17),
ITT's by-laws do not require a May meeting.
Section 1.3 of the by-laws does not "limit the
directors' service in office to one year." App. at 5. Section 1.3
addresses the purpose of annual meetings, not the term of office
of directors. Section 2.2 defines the "Term of Office of
Directors", as its title describes, and states:
"Each Director shall hold office until the next annual
meeting of stockholders and until his or her successor is
elected and qualified or until his or her earlier death,
retirement, resignation or removal."[21]
Indeed, Hilton conceded below that "Section 2.2 of ITT's by-laws
provides that the incumbent directors continue in office until
their successors are qualified." SER 10.[22]
- --------
21 Consistent with this provision of ITT's by-laws, the
proxy materials for the last annual meeting (the meeting at which
the current directors were elected) stated that the "directors
are to be elected to hold office until the next Annual Meeting of
Shareholders and until their successors are elected and
qualified." ER 612.
22 As explained above, Hilton's further argument that the
90-day notice provisions in Section 1.3(b) and 2.2 of ITT's by-
laws should be interpreted to require annual meetings to be held
every twelve months is contradicted by the draft by-laws prepared
by Hilton's counsel, which contain a similar notice provision and
clearly anticipate that annual meetings may be more than twelve
months apart. See n. 13, supra. If no other provision of the
by-laws require that the meeting be held in May, then these
notice provisions cannot serve to establish such a requirement.
Moreover, contrary to Hilton's unsupported assertion (App. at
<PAGE>
Thus, by Hilton's own admission, if the "annual meeting" is not
held (or even if it is and the stockholders elect someone not
qualified to take office), the incumbents' term will necessarily
be more than a year. In other words, Hilton does not really
believe its assertion that the ITT directors have a one year
term.23
III. HILTON CANNOT SHOW THAT THE DISTRICT COURT ABUSED ITS
DISCRETION OR COMMITTED AN ERROR OF LAW IN HOLDING THAT THE
ITT BOARD DID NOT BREACH ITS FIDUCIARY DUTY.
The District Court held: "ITT has not yet set its
annual meeting, nor is it required by Nevada law or its bylaws to
conduct that meeting in May 1997. The failure to hold an annual
meeting in May, which has not even been set and is not yet
required to be set, cannot be viewed as an
- --------
17), ITT's counsel did not concede at oral argument that its
reading of these provisions means that stockholders may have to
give up to 9 months notice of director nominees and that this
result was "unreasonable and subject to court challenge". To the
contrary, ITT's counsel said that the by-law was irrelevant. See
SER 91.
23 ITT believes that the by-laws unambiguously give the
Board discretion in scheduling the annual meeting and that the
by-laws do not require an annual meeting every twelve months. If,
however, the District Court had found the by-laws ambiguous, it
could have considered parol evidence to resolve the ambiguity.
See Gramanz v. T-Shirts & Souvenirs, Inc., 894 P.2d 342, 347
(Nev. 1995); Crank v. Nevada Indus. Comm'n, 675 P.2d 413, 415
(Nev. 1984). In that event, as Hilton's own authority holds, the
meaning and significance of such parol evidence is a question of
fact and the District Court's decision on this question should
not be reversed unless it is clearly erroneous. See Northwest
Environmental Advocates v. City of Portland, 56 F.3d 979, 982
(9th Cir. 1995), cert. denied, 116 S.Ct. 2550 (1996). That
evidence shows that the use of the phrase "annual meeting" in
ITT's by-laws was never intended to impose a limit on the
discretion of the Board of Directors to determine when, within
the limits set by applicable law, to hold the annual meeting. ER
355-56.
<PAGE>
inequitable manipulation by the incumbent Board primarily
designed to impede the exercise of the shareholder
franchise." ER 974.[24]
Thus, the District Court rejected Hilton's argument, based on
Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988)
(which was applied in Shoen v. Amerco, 885 F. Supp. 1332 (D. Nev.
1994)), that ITT's Board must show a "compelling justification"
for its failure to set a May meeting date.
Hilton cannot show that the District Court abused its
discretion or committed an error of law in so holding. Indeed,
Hilton's argument fails for two separate reasons.
First, as a matter of law, there cannot be a Blasius
violation, even under Delaware law[25], before the
- --------
[24] The District Court further held that "in accord with
NRS 78.138 and relevant case authority, ITT's Board of Directors
retains reasonable discretion in setting an annual meeting to
resist hostile takeover offers." Id.
[25] Blasius does not comport with Nevada law in two ways.
First, even under Delaware law, the Unocal test (see Unocal Corp.
v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985)) and not some
other test would be applied where, as here, there was a potential
change of control. Stroud v. Grace, 606 A.2d 75, 82 (Del. 1992).
And Unocal is not consistent with Nevada law. Second, Blasius's
notion of an unintended breach of a duty of loyalty (564 A.2d at
663) does not comport with Nevada law where NRS 78.138(1)
requires a showing of bad faith. See n. 29, infra. Shoen is not
to the contrary. In Shoen, the court did not address NRS
78.138(1) and assumed that Delaware law applied. See 885 F. Supp.
at 1340-41 & n.20. Moreover, in Shoen, Judge Reed expressly found
that the board had acted in bad faith. 885 F. Supp. at 1343-44.
The conduct thus violated NRS 78.138(1).
<PAGE>
Board has set the meeting date. Stahl v. Apple Bancorp, Inc., 579
A.2d 1115, 1122-23 (Del. Ch. 1990); Kidsco Inc. v. Dinsmore, 674
A.2d 483, 495-96 (Del. Ch), aff'd, 670 A.2d 1338 (Del. 1995). As
Chancellor Allen--the judge in Blasius--has held:
"while postponement of a noticed meeting will in some
circumstances constitute an inequitable manipulation, I can
in no event see that the franchise process can be said to be
sufficiently engaged before the fixing of this meeting date
to give rise to that possibility." Stahl, 579 A.2d at
1123.26
Recognizing that Stahl is fatal to its argument, Hilton
initially represented to the District Court that Stahl is no
longer good authority. Counsel was wrong and
- --------
[26] Chancellor Allen held further that "deferring this
company's annual meeting where no meeting date had been set and
no proxies solicited does not impair or imperil the effective
exercise of the franchise to any extent" (id. at 1122):
"In no sense can the decision not to call a meeting be
likened to kinds of board action found to have constituted
inequitable conduct relating to the vote. In each of these
franchise cases the effect of the board action--to advance
(Schnell) or defer (Aprahamian) a meeting; to adopt a bylaw
(Lerman); or to fill board vacancies (Blasius)--was
practically to preclude effective stockholder action
(Schnell, Blasius, Lerman) or to snatch victory from an
insurgent slate on the eve of the noticed meeting
(Aprahamian).
. . .
"This view may be criticized as placing undue emphasis on
the formal act of fixing the date of the annual meeting.
However, that is an act of some dignity and significance.
Once fixed that date may be postponed at least in some
circumstances. But, while postponement of a noticed meeting
will in some circumstances constitute an inequitable
manipulation, I can in no event see that the franchise
process can be said to be sufficiently engaged before the
fixing of this meeting date to give rise to that
possibility." Id. at 1123 (citations omitted).
<PAGE>
knew it; in 1995, the Delaware Chancery Court in Kidsco found
that the case before it was "functionally indistinguishable from
Stahl" and refused to apply the Blasius "compelling
justification" standard. 674 A.2d at 496.27 On appeal, the
Delaware Supreme Court "affirmed [Kidsco] on the basis of and for
the reasons stated by the Court of Chancery in its well-reasoned
Memorandum Opinion". ER 450. Thus, Stahl is good law.
Hilton now attempts to distinguish Stahl on the grounds
that, in Stahl, "[the target board's] conduct was authorized by
the company's bylaws" and "delay would not necessarily have the
effect of perpetuating [the board] in office because the board
was considering a sale of the company." App. at 32-33.28 The
District Court correctly rejected these purported distinctions.
The conduct of ITT's Board is authorized by both Nevada law and
ITT's by-laws. Moreover, neither of Hilton's attempted
distinctions is relevant to the Stahl and Kidsco holdings that
failure to set an annual meeting date cannot constitute a breach
of Blasius; neither attempted
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[27] Hilton's current counsel of record was the counsel for
the defendant in Kidsco and relied on the holding in Stahl
extensively in its briefing to both the Chancery Court and the
Delaware Supreme Court. ER 462-63, 511, 515-18.
[28] Even if a theoretically valid distinction--which it is
not--Hilton's latter argument is just a restatement of its
entrenchment assertion, which is completely unsupported. See pp.
28-29, infra.
<PAGE>
distinction disposes of Chancellor Allen's "narrow ground that
the action of deferring this company's annual meeting where no
meeting date has yet been set and no proxies even solicited does
not impair or impede the effective exercise of the franchise to
any extent." Stahl, 579 A.2d at 1123; see also Kidsco, 674 A.2d
at 496.
Second, Hilton did not provide any facts to show that
the Board breached its fiduciary duties or is motivated by a
desire to entrench itself.
Here, Hilton had to show that the Board breached NRS
78.138(1), under which directors must "exercise their powers in
good faith and with a view to the interests of the corporation".
Hilton had to show that the directors acted in bad faith, not
that the Board's actions did not comport with some reasonableness
standard such as that articulated in the Unocal case.[29]
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[29] In enacting NRS 78.138(1), the Nevada Legislature
considered, and rejected, any requirement that directors must
exercise their powers pursuant to a "reasonably prudent director"
standard of care. See the Affidavit of Robert M. Sader (SER 1-
6). When NRS 78.138(1) was passed, the Legislature "did not
intend to subject the board of directors' actions to an
'objectively reasonable' standard of judicial review [such as
Delaware's Unocal standard], opting instead for review solely for
compliance with the statutory requirement that the directors act
in subjective good faith and with a view to the interests of the
corporation. In adopting [NRS 78.138(1)], it was the
Legislature's intent to distinguish and disavow standards adopted
in other jurisdictions, which impose other degrees of scrutiny of
directors' decisions in takeover and non-takeover situations."
SER 6; see also Keith P. Bishop, Nevada Corporation Law &
Practice, ss. 7.15 at 173-74 (1993). Courts in other states with
statutory provisions similar to the Nevada statute have concluded
<PAGE>
Hilton cannot make out a breach of NRS 78.138(1).
Contrary to Hilton's speculation that ITT's Board is trying to
entrench itself (ER 72), the undisputed facts are that ITT's
Board is acting in good faith and with a view to the interests of
the corporation, its stockholders and its other constituencies.30
There are good reasons why holding the annual meeting later than
May is in the best interests of the corporation, its stockholders
and its other constituencies.[30] ER 291-92, 303, 317-29, 350-52;
see pp. 12-13, supra. It is those factors that are motivating the
Board's actions rather than any desire for entrenchment. ER
294-95, 359-60.[31]
Hilton has ignored Chancellor Allen's warning about
"the inherently particularized and contextual nature of any
inquiry concerning fiduciary duties." Stahl, 579 A.2d at 1122.
Instead of recognizing the similarity of
- --------
that this form of statute eliminates the "reasonably prudent
director" standard. See, e.g., WLR Foods, Inc. v. Tyson Foods,
Inc., 65 F.3d 1172, 1184-85 (4th Cir. 1995), cert. denied, 116 S.
Ct. 921 (1996).
[30] Moreover, the fact that the Board relied on reputable and
competent advisors, which even Hilton does not dispute, also
means that Hilton cannot show a violation of NRS 78.138. See NRS
78.138.2(b).
[31] Indeed, in contrast to the speculation by an uninformed
affiant (ER 74), the Board has not even discussed whether
Hilton's nominees would be elected if the annual meeting were
held in May rather than at some later time. ER 294-98, 359. Nor
has the Board sought any opinions, from its proxy solicitors or
otherwise, on that question. ER 306, 359.
<PAGE>
the facts here to those in Stahl,[32] Hilton simply asserts that
the rarely applied "compelling justification" test is applicable,
which it is not because Hilton has not shown that the Board's
"primary purpose" is to interfere with the stockholder franchise.
Williams v. Geier, 671 A.2d 1368, 1376 (Del. 1996); Stahl v.
Apple Bancorp, Inc., 579 A.2d 1115, 1120 (Del. Ch. 1990). Unlike
the cases that Hilton cites,[33] Hilton has not proved--and
cannot
- --------
32 In Stahl, Chancellor Allen confronted facts similar to
those before this Court--with the exception that the defendant
board in Stahl had set a record date for the annual meeting (but
not the date of the annual meeting) and then rescinded the record
date in face of the hostile tender offer and accompanying proxy
fight. As the District Court here held, "[t]he circumstances
presented here are far different from those in Shoen or Blasius,
but are not unlike those confronted in Stahl. . . ." ER 974.
Hilton is also wrong in asserting that "'uncertainties' of
this type [i.e., the type that have caused the Board's concern
here] cannot provide a legally sufficient reason to delay an
annual meeting". App. at 33-34. Chancellor Allen again explained
why. Here, the proxy contest that Hilton seeks is not merely a
proxy contest; rather, it is "the special situation in which the
proxy contest [is] tied to a tender offer". Stahl, 579 A.2d at
1124. In Stahl, Chancellor Allen held that, in this "special
situation", the shareholders' need for additional information may
well justify the Board's decision to delay the annual meeting.
Stahl, 579 A.2d at 1124. None of the authorities cited by Hilton
involved a proxy contest tied to a tender offer. Indeed, Hilton's
principal authority, Shoen, expressly recognized--contrary to
Hilton's misreading (App. at 31)--that "a hostile tender offer is
not the same thing as a shareholder's vote against incumbent
managment" and that a different standard of review may apply
where a proxy contest is tied to a tender offer. Shoen, 885
F.Supp. at 1341 n.22.
[33] Hilton's authorities all involved situations where
plaintiffs proved that the board's challenged actions were
designed to entrench the directors or prevent an election. In
Shoen, 885 F. Supp. at 1344, the board advanced the meeting date
to truncate the time available to shareholders to wage a proxy
<PAGE>
prove--such inequitable conduct. Hilton's failure to make this
showing is fatal to its motion. Blasius, 564 A.2d at 658, 660-661
(Del. Ch. 1988). See also Wyser-Pratte v. Smith, 1997 WL 153806,
**1-2 (Del. Ch. March 18, 1997); Hershfang v. Knotter, 562 F.
Supp 393, 399 (E.D. Va. 1983), aff'd, 725 F.2d 675 (4th Cir.
1984).
IV. HILTON CANNOT SHOW THAT THE DISTRICT COURT ABUSED ITS
DISCRETION OR COMMITTED AN ERROR OF LAW IN HOLDING THAT
HILTON FAILED TO SHOW IRREPARABLE HARM.
The District Court held that Hilton would not suffer
irreparable harm if ITT's annual meeting were not held in May. ER
975-76. Hilton has not shown that the District Court abused its
discretion or committed an error of law in so holding.
Hilton's argument that an injunction must issue in
order to prevent the frustration of the ITT stockholders' vote
(App. at 35) is wrong. Hilton has no right to a May meeting. The
District Court correctly held that "there is no impairment of the
shareholder franchise
- -----------
contest to have a new board elected. In Blasius, 564 A.2d 656,
the board increased the number of directors to preclude majority
shareholders from placing a majority of new directors on the
board. In Aprahamian v. HBO & Co., 531 A.2d 1204, 1205, 1207
(Del. Ch. 1987), the board postponed the annual meeting on the
eve of the meeting after it learned that a dissident shareholder
group had proxies representing a majority of the outstanding
shares. And in Danaher, 1986 WL 7001 at *13 (S.D.N.Y. 1986), the
board cancelled the annual meeting only days after it was
notified of a proxy contest, and refused to call a shareholders
special meeting, as it "would not cooperate in steps that would
lead to the enactment of bylaws 'that would strip the board of
directors of management'".
<PAGE>
in this case because no annual meeting of shareholders has yet
been set and the time for conducting the annual meeting has not
yet expired." ER 975; see Stahl, 579 A.2d at 1123.[34]
Hilton's further argument that additional time will
adversely affect the viability of its offer (App. at 36) is
refuted by Hilton's public statements. In an April 8 television
interview, Hilton's President of Gaming Operations asserted that
the only significance for Hilton in having a meeting date set
(which he acknowledged could not be in May) was that it would
enable Hilton to know when to raise its price. SER 184-85.
Moreover, Hilton has publicly acknowledged that a later meeting
will not preclude its offer--after the District Court issued its
decision, Mr. Bollenbach confirmed, "We are committed to making
this transaction a reality" (SER 192) and in the April 24, 1997
edition of the Financial Times, Mr.
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[34] Hilton's authorities are inapposite. In both Shoen v.
Amerco, 885 F. Supp. 1332, 1344 (D. Nev. 1994) and International
Banknote Co., Inc. v. Muller, 713 F. Supp. 612, 623 (S.D.N.Y.
1989), the parties waging a proxy contest suddenly found that
their time to do so had been drastically truncated. And in each
of those cases, as well as in ER Holdings, Inc. v. Norton Co.,
735 F. Supp. 1094 (D. Mass. 1990), AHI Metnall, L.P. v. J.C.
Nichols Co., 891 F. Supp. 1352, 1359 (W.D. Mo. 1995) and Beztak
Co. v. Bank One Columbus, N.A., 811 F. Supp. 274, 284 (E.D. Mich.
1992), the enjoined Board action violated either the applicable
law, the bylaws, or the Board's fiduciary duties and thus
deprived stockholders of their right to vote their shares. Here,
the ITT Board's action is entirely consistent with Nevada law,
the ITT by-laws, and the Board's fiduciary duties and does not
interfere with the stockholder franchise in any way.
<PAGE>
Bollenbach was reported as saying that he still believes Hilton's
offer is "on track for what we are confident will be a successful
conclusion". SER 194. These admissions are fatal to Hilton's
claim of irreparable harm.[35] Unless Hilton can specifically
explain how Hilton will be harmed if the annual meeting is not
held in May (or as soon as possible), the vague and general
statements that Hilton relies on are meaningless.
Georgia-Pacific, 727 F. Supp. at 34.[36]
- --------
[35] Hilton must demonstrate specific harm flowing from
delayed consummation of its offer--simply asserting that "delay
always hurts suitors" is not enough to prove harm. See Georgia-
Pacific Corp. v. Great Northern Nekoosa Corp., 727 F. Supp. 31,
33-34 (D. Me. 1989); see also Topper Acquisition Corp. v. Emhart
Corp., Civ. No. 89-001100-R, 1989 WL 513034, at *4 (E.D. Va.
March 23, 1989) ("The lack of an injunction will harm [the
acquirer] only by delaying the [target] stockholders'
consideration of the offer until after a trial on the merits.
[The acquirer] can easily extend [its] tender offer until that
time without incurring any appreciable injury.")
[36] For this reason, Hilton's authorities are inapposite.
In Coalition to Advocate Pub. Util. Responsibilities, Inc. v.
Engels, 364 F. Supp. 1202, 1207 (D. Minn. 1973), the bidder had
"spent substantial sums of money and labor in preparing for the
upcoming proxy battle", which "would have been wasted" if the
target board were not enjoined. Hilton does not assert that it
has spent significant money or effort in anticipation of the
proposed proxy contest. And in each of the other cases cited by
Hilton, the principal harm relied on by the court was that the
bidder would have been prevented from communicating with the
target's stockholders about the tender offer. Hyde Park Partners,
L.P. v. Connolly, 839 F.2d 837, 853 (1st Cir. 1988) (bidder would
have been prevented from even making an offer for a year); Dan
River, Inc. v. Icahn, 701 F.2d 278, 283-84 (4th Cir. 1983)
(bidder would have been prevented from soliciting proxies); Crane
Co. v. Lam, 509 F. Supp. 782, 791 (E.D. Pa. 1981) (bidder would
have been prevented from sending materials to stockholders
concerning tender offer). In addition, the parenthetical
<PAGE>
Moreover, not only will Hilton suffer no injury, but
its concern for any injury the ITT shareholders would allegedly
sustain is disingenuous. Hilton is wearing "two hats" in its
request for extreme relief. ER 321-22, 325- 26. In fact, Hilton
wants the meeting held as early as possible so that it can
appropriate value for itself from ITT's stockholders before ITT's
stockholders can fully assess or realize the value of their
investment. ER 305, 320-25, 352-53. Simply put, Hilton wants to
steal value from the ITT stockholders. Indeed, Hilton cannot
plausibly argue that the ITT stockholders have an interest in
holding the meeting at this time, as both Hilton and the market
have clearly indicated that Hilton's offer price is too low. ER
306, 323-24, 351-52; SER 184-85. Hilton's financial interest in
bettering its chances of success at an inadequate price, rather
than an interest in protecting the shareholders from any alleged
threat of disenfranchisement, is the motive for its motion.
Indeed--Hilton's "struggle to control [ITT] is at the very root
- ------------
quotation Hilton offers from Hyde Park does not appear anywhere
in the opinion.
Plainly, where stockholders can be bombarded with
information disseminated by the target's board but insulated from
any contrary information the bidder may want to disseminate, the
bidder will suffer, and stockholders will not receive a clear
picture of the merits of the bidder's offer. Here, however,
Hilton is free to communicate with ITT's stockholders and to
counter any information ITT's Board disseminates to them. Indeed,
Hilton has already been in communication repeatedly with ITT's
stockholders. See, e.g., ER 887, 889.
<PAGE>
of [Hilton's] action. [Hilton] is not merely an unhappy
shareholder; rather [it] is also a tender offeror who is seeking
to gain control of the company." Hilton's interests are thus
"manifestly antagonistic". Baron v. Strawbridge & Clothier, 646
F. Supp. 690, 695 (E.D. Pa. 1986).
<PAGE>
CONCLUSION
For all of the reasons set forth above, ITT
respectfully requests that Hilton's appeal be denied and the
District Court's Order re Preliminary Injunction affirmed.
Dated this 27th day of May, 1997.
LeBOEUF, LAMB, GREENE & MacRAE,
LLP
by /s/ SANFORD KINGSLEY
--------------------------
SANFORD KINGSLEY
Cal. State Bar No. 99849
1 Embarcadero Center
4th Floor
San Francisco, CA 94111
THOMAS F. KUMMER
VON S. HEINZ
KUMMER KAEMPFER BONNER &
RENSHAW
Seventh Floor
3800 Howard Hughes Parkway
Las Vegas, NV 89109
RORY O. MILLSON
SANDRA C. GOLDSTEIN
CRAVATH, SWAINE & MOORE
825 Eighth Avenue
New York, NY 10019
Attorneys for Defendant-
Appellee ITT Corporation
<PAGE>
STATEMENT OF RELATED CASES
Pursuant to Ninth Circuit Rule 28-2.6, ITT states that
there are no related matters currently pending before this Court.
CERTIFICATE OF COMPLIANCE REQUIRED BY CIRCUIT RULE 32(E)(4)
This brief uses a monospaced typeface (Courier font),
containing ten (10) characters per inch, and consists of 35
pages.
/S/ SANFORD KINGSLEY
----------------------
Sanford Kingsley
<PAGE>
PROOF OF SERVICE
I, Mary E. Mitchell, declare:
I am employed in the City and County of San Francisco,
California. I am over the age of eighteen and not a party to the
within cause; my business address is LeBoeuf, Lamb, Greene &
MacRae, L.L.P., One Embarcadero Center, Fourth Floor, San
Francisco, California 94111.
On May 27, 1997, I served the following document:
BRIEF OF DEFENDANT-APPELLEE ITT CORPORATION
by placing a true copy thereof in a sealed Federal Express
envelope, in the ordinary course of business for collection that
same day at LeBoeuf, Lamb, Greene & MacRae, L.L.P., One
Embarcadero Center, Fourth Floor, San Francisco, California
94111, addressed to each person as follows:
Bernard W. Nussbaum Steve Morris
Eric M. Roth Kristina Pickering
Marc Wolinsky Matthew McCaughey
Scott L. Black Schreck Morris
Wachtell, Lipton, 1200 Bank of America Plaza
Rosen & Katz 300 South Fourth Street
51 West 52nd Street Las Vegas, NV 89101
New York, NY 10019
I declare that I am readily familiar with the business
practices of LeBoeuf, Lamb, Greene & MacRae, L.L.P. for
collection and processing of correspondence with Federal Express
and that the correspondence would be deposited with Federal
Express that same day in the ordinary course of business.
I declare under penalty or perjury under the laws of the
State of California that the foregoing is true and correct and
that this declaration was executed on May 27, 1997, at San
Francisco, California.
/S/ MARY E. MITCHELL
----------------------
<PAGE>
PROOF OF SERVICE
I, Mary E. Mitchell, declare:
I am employed in the City and County of San Francisco,
California. I am over the age of eighteen and not a party to the
within cause; my business address is LeBoeuf, Lamb, Greene &
MacRae, L.L.P., One Embarcadero Center, Fourth Floor, San
Francisco, California 94111.
On May 27, 1997, I served the following document:
DEFENDANT-APPELLEE ITT CORPORATION'S
SUPPLEMENTAL EXCERPTS OF RECORD
by placing a true copy thereof in a sealed Federal Express
envelope, in the ordinary course of business for collection that
same day at LeBoeuf, Lamb, Greene & MacRae, L.L.P., One
Embarcadero Center, Fourth Floor, San Francisco, California
94111, addressed to each person as follows:
Bernard W. Nussbaum Steve Morris
Eric M. Roth Kristina Pickering
Marc Wolinsky Matthew McCaughey
Scott L. Black Schreck Morris
Wachtell, Lipton, 1200 Bank of America Plaza
Rosen & Katz 300 South Fourth Street
51 West 52nd Street Las Vegas, NV 89101
New York, NY 10019
I declare that I am readily familiar with the business
practices of LeBoeuf, Lamb, Greene & MacRae, L.L.P. for
collection and processing of correspondence with Federal Express
and that the correspondence would be deposited with Federal
Express that same day in the ordinary course of business.
I declare under penalty or perjury under the laws of the
State of California that the foregoing is true and correct and
that this declaration was executed on May 27, 1997, at San
Francisco, California.
/S/ MARY E. MITCHELL
----------------------
