SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
FIRST INTERSTATE BANCORP
(Name of Subject Company)
FIRST INTERSTATE BANCORP
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $2.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
320548100
(CUSIP Number of Class of Securities)
WILLIAM J. BOGAARD, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST INTERSTATE BANCORP
633 WEST FIFTH STREET
LOS ANGELES, CA 90071
(213) 614-3001
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
COPY TO:
FRED B. WHITE III, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
First Interstate Bancorp ("First Interstate") hereby
amends and supplements its statement on Schedule 14D-9
initially filed with the Securities and Exchange
Commission on November 20, 1995, as amended by Amendment
No. 1 thereto (the "Schedule 14D-9"). Unless otherwise
indicated herein, each capitalized term used but not
defined herein shall have the meaning assigned to such
term in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The information set forth in the "Litigation"
subsection of Item (8) of the Schedule 14D-9 is hereby
amended and supplemented by the following information:
On November 22, 1995, the Los Angeles Superior
Court granted the defendants' Motion to Stay filed in
Mesko v. Bryson, et al., (Case No. BC137379). The Court
stayed the action pending the final resolution of the
consolidated class action proceeding in the Delaware
Chancery Court entitled In re First Interstate Bancorp
Shareholder Litig., Del. Ch., Consol. C.A. No. 14623 (the
"Delaware Consolidated Action"). The plaintiff in Mesko
may move to amend or dissolve this stay if any of the
three following events occurs: (1) the Delaware
Consolidated Action does not proceed on behalf of a class
consisting of all public shareholders of First Interstate
(the "Class"); (2) the Class is not certified in the
Delaware Consolidated Action; or (3) if counsel for the
plaintiff in Mesko files an action in the Delaware
Chancery Court similar to the action filed in California
and that action is consolidated with the Delaware
Consolidated Action, such counsel is not then given the
opportunity to be actively included in the Delaware
Consolidated Action. Counsel for the plaintiff in Mesko
agreed on the record that the stay also should apply to
the following cases in which such counsel represents the
plaintiffs: Eaves v. Bryson, et al., (Case No. BC137380);
Grill v. Bryson, et al., (Case No. BC137508); Mondschein
v. Bryson, et al., (Case No. BC137509); Kaplan v. Bryson,
et al., (Case No. BC138639); Kaplan v. Bryson, et al.,
(Case No. BC138409); Thornhill v. Bryson, et al., (Case
No. BC139252). The parties are currently drafting an
attorney order for the Court's approval.
Two actions have been filed in the United
States District Court for the Central District of
California. The two actions are entitled: Kaplin v.
Bryson, et al. (Civ. No. 95-7954 RG) and Bradley v.
Siart, et al. (Civ. No. 95-8047 AAH). The Kaplin action
names the Board of Directors of First Interstate, a
former First Interstate director, First Bank System,
Inc. ("FBS") and FBS' Chairman and Chief Executive
Officer as defendants. The action alleges breach of
fiduciary duty, abuse of control and unjust enrichment.
The plaintiff further alleges that FBS and its Chairman
and Chief Executive Officer aided and abetted the other
defendants in breaching their fiduciary duties. The
plaintiff seeks declaratory relief as well as preliminary
and permanent injunctive relief enjoining defendants from
(1) enforcing defensive measures designed to prevent an
auction, bidding or tender offer for First Interstate;
and (2) proceeding with the Merger with FBS until the
value of that transaction can be shown to compare
favorably with the takeover premium available following
an auction. In addition, plaintiff seeks monetary
damages of an unspecified amount together with
prejudgment interest and attorneys' and experts' fees.
The Bradley action names the Board of Directors
of First Interstate, FBS and Donaldson, Lufkin & Jenrette
("DLJ") as defendants. This complaint alleges that First
Interstate's directors breached their fiduciary duty by
entering into the Merger Agreement with FBS and allegedly
preventing third parties, including Wells Fargo & Company
("Wells"), from acquiring all of First Interstate's
common stock at a price in excess of the current market
price. Plaintiff further alleges that FBS and DLJ aided
and abetted the other defendants in breaching their
fiduciary duties. In addition, this complaint alleges
violations of sections 14(e) and 14(a) of the Securities
Exchange Act of 1934, as amended, abuse of control,
unfair business practices, unjust enrichment and
constructive fraud. The plaintiff seeks injunctive
relief as well as monetary damages of an unspecified
amount, including punitive damages, together with
prejudgment interest and attorneys' fees. The defendants
intend to defend both actions vigorously.
On November 27, 1995, an additional purported
class action was filed in the Los Angeles Superior Court
against the Board of Directors of First Interstate and
FBS. The action, entitled Bradley v. Siart, et al. (Case
No. BC139665), alleges that First Interstate's directors
breached their fiduciary duty by entering into the Merger
Agreement with FBS and allegedly preventing third parties
(including Wells) from acquiring all of First
Interstate's common stock at a price in excess of the
current market price. Plaintiff further alleges that FBS
aided and abetted the other defendants in breaching their
fiduciary duties. In addition, this complaint alleges
abuse of control, unfair business practices, unjust
enrichment and constructive fraud. Plaintiff seeks
injunctive relief as well as monetary damages of an
unspecified amount, including punitive damages, together
with prejudgment interest and attorneys' fees. The
defendants intend to defend this action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 39: Derivative Complaint in Kaplin v. Bryson,
et al. (U.S. District Court, Central
District of California).
Exhibit 40: Complaint in Bradley v. Siart, et al.
(California Superior Court).
Exhibit 41: Complaint in Bradley v. Siart, et al.
(U.S. District Court, Central District of
California).
Exhibit 42: Complaint in Thornhill v. Bryson, et al.
(California Superior Court).
SIGNATURE
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this statement is true, complete
and correct.
FIRST INTERSTATE BANCORP
By: /s/ William J. Bogaard
---------------------------
William J. Bogaard
Executive Vice President
and General Counsel
Dated: November 29, 1995
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
SALLIE A. BLACKMAN (141830)
ERIN C. WARD (147063)
600 West Broadway, Suits 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN (94559)
355 S. Grand Avenue, Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
WEISS & YOURMAN
JOSEPH H. WEISS
319 Fifth Avenue
New York, NY 10016
Telephone: 212/532-4171 PRONGAY & MIKOLAJCZYK
- and - KEVIN M. PRONGAY (87010)
KEVIN J. YOURMAN (147159) EUGENE MIKOLAJCZYK (106929)
10940 Wilshire Blvd. 881 Alma Real Drive
24th Floor Suite 211
Los Angeles, CA 90024 Pacific Palisades, CA 90272
Telephone: 310/208-2800 Telephone: 310/573-3600
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
HOWARD KAPLIN, Derivatively on ) No.
Behalf of FIRST INTERSTATE BANCORP, )
INC., ) (Derivative Action)
Plaintiff, )
vs. )
)
JOHN E. BRYSON, DON C. FRISBEE, ) VERIFIED DERIVATIVE
STEVEN B. SAMPLE, EDWARD M. CARSON, ) COMPLAINT FOR BREACH
GEORGE M. KELLER, FORREST N. ) OF FIDUCIARY DUTY,
SHUMWAY, JEWEL PLUMMER COBB, ) ABUSE OF CONTROL,
W.F. KIESCHNICK, WILLIAM B. SIART, ) UNJUST ENRICHMENT, AND
RALPH P. DAVIDSON, THOMAS L. LEE, )
RICHARD J. STEGEMEIER, MYRON DuBAIN, ) EQUITABLE RELIEF AND
WILLIAM F. MILLER, DANIEL M. TELLEP, ) DAMAGES
MAX MESSMER, FIRST BANK SYSTEM, INC. )
and JOHN F. GRUNDHOFER, )
Defendants. )
- and - )
)
FIRST INTERSTATE BANCORP, INC., a )
Delaware corporation )
) Plaintiff Demands A
Nominal Defendant. ) Trial By Jury
Plaintiff, as and for his complaint, alleges as follows
upon information and belief except as to paragraph 9, which is
alleged upon knowledge. Plaintiff's information and belief is
based upon, inter alia, the investigation made by plaintiff by
and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a stockholder derivative action seeking
equitable relief and compensatory damages as a result of a
"sweetheart" merger transaction, brought on behalf of First
Interstate Bancorp ("First Interstate" or the "Company"),
against First Interstate's top officers and the members of the
Board of Directors of First Interstate and First Interstate's
merger partner, First Bank System, Inc. ("First Bank") and its
Chairman/CEO, seeking to remedy violations of state law arising
out of these defendants' actions and conduct undertaken to
entrench First interstate management in derogation of their
duties to the Company. First Interstate's Board of Directors
has pursued a course of conduct through misuse and self-serving
allocation and waste of the Company's assets and resources
intended to and having the effect of making it extremely
difficult for any outside party to successfully acquire First
Interstate, even at prices well in excess of First Interstate
stock's historical price range. This course of conduct has
been undertaken by the defendants to secure and retain their
lucrative positions of power, prestige and profit with respect
to First Interstate and to enhance and aggrandize their own
interests at the expense of First Interstate.
2. On October 18, 1995, Wells Fargo, a highly successful,
profitable and well-capitalized bank, made an offer to acquire
First Interstate at a price far in excess of First Interstate's
then-market price, by exchanging in a tax-free exchange .625
shares of Wells Fargo stock for each share of First Interstate
stock, an offer worth $133.50 per share based on the October
17, 1995 closing price of Wells Fargo stock of $213.62 per
share. First Interstate's stock jumped from $106 per share to
$140 per share upon this announcement, while Wells Fargo's
stock increased to $228.65 per share, making the offer worth
$142.65 per First Interstate share. The defendants' response
was to reject the Wells Fargo bid without fully exploring the
extent of the bid and without allowing market forces to set the
price through an auction. The defendants rejected Wells
Fargo's bid even though Wells Fargo's CEO had let it be known
that he was willing to negotiate a higher price and thus to
offer a fair and reasonable price for First Interstate stock,
well above the levels at which the stock has traded
historically. First Interstate's investment adviser even
opined that the first proposal was "fair."
3. In recent years, defendants have consistently refused
to entertain highly favorable acquisition offers or overtures
for First Interstate. Defendants have done this to retain
their positions of prestige, power and profit, as they know
they will lose those positions in the event First Interstate is
acquired. Defendants' interests in holding on to their
positions of power, prestige and profit as officers and
directors of First Interstate far exceed their interests as
shareholders in First Interstate, as they collectively own only
about 144,000 of First Interstate's 75.7 million shares -- a
minuscule .001% of its outstanding stock. As a result, their
personal interests in maintaining their positions diverge from,
and are in conflict with, the best interests of First
Interstate.
4. The defendants took defensive steps to thwart the
Wells Fargo bid, or any higher bid by Wells Fargo or any other
suitor by engaging in the merger with First Bank ("First Bank
Transaction") even though: (a) they admittedly did not secure
First Bank's best offering price; (b) they did not fully
investigate or attempt to obtain Wells Fargo's best offer; (c)
they accepted and continue to support the First Bank
Transaction which was worth less than Wells Fargo's position in
negotiations and less than Wells Fargo's subsequent proposal on
November 13, 1995; (d) they are relying on defensive tactics
such as a lock-up fee and break up options which, in effect
impose a $200 million penalty on First Interstate or any other
bidder and they are wielding a "poison pill" to discourage
other bidders; and (e) First Bank is engaging in large
repurchases of its stock to support its stock price, and thus
artificially support the "value" of its stock exchange ratio in
the First Bank Transaction, to give the appearance that the
Transaction is more valuable than it really is, and because, as
stated by the head of First Bank, "If your stock tanks the
deal's over."
5. This action seeks to prevent the defendants from using
their positions to waste the assets of First Interstate and
enrich themselves at the expense of the Company. They should
be required to allow market forces to set the value of First
Interstate and conduct a fair and open auction to set the true
price of the Company. They should also be restrained from,
and/or held liable for any damages their actions are inflicting
upon First Interstate.
JURISDICTION AND VENUE
6. This Court has jurisdiction of this action pursuant to
28 U.S.C. SECTION 1332(a)(1). Plaintiff and all defendants are
residents and citizens of different states. The amount in
controversy between the plaintiff and the defendants exceeds
$50,000 exclusive of interest and costs. This is not collusive
action to confer jurisdiction on this Court which it would not
otherwise have.
7. Venue is proper in this District. Many of the acts
and transactions giving rise to the violations of law
complained of herein occurred in this District. The company
has its principal place of business in Los Angeles and certain
of the defendants reside in Los Angeles County.
8. In connection with the acts alleged in this complaint,
defendants, directly or indirectly, used the means and
instrumentalities of interstate commerce, including the mails
and interstate telephone and wire communications and the
facilities of the national securities markets.
PARTIES AND ACTORS
9. Plaintiff Howard Kaplin, the owner of shares of First
Interstate, is and was at all times relevant hereto a common
shareholder of First Interstate since prior to October 1995.
Plaintiff is a resident of New York and brings this action
derivatively on behalf of and for the benefit of First
Interstate, named as a nominal defendant in this action.
10. (a) First Interstate is a corporation with its
principal executive offices in Los Angeles, California and
which operates principally in California, as well as several
other western states. First Interstate is a bank holding
company. Although it is incorporated in Delaware it does not
do business or maintain offices in that state.
(b) At December 31, 1994, First Interstate owned 16
banks (the "Subsidiary Banks") which operated approximately
1,100 banking offices in 13 states, including California.
Ranked according to assets, the Company was the fourteenth
largest commercial banking organization in the United States at
December 31, 1994, having total deposits of $48.4 billion and
total assets of $55.8 billion.
(c) The Subsidiary Banks accept checking, savings
and other time deposit accounts and employ these funds
principally by making consumer, real estate and commercial
loans and investing in securities and other interest-bearing assets.
(d) The Company also provides banking-related
financial services and products. These include asset-based
commercial financing, asset management and investment
counseling, bank card operations, mortgage banking, venture
capital and investment products. It engages in these
activities both through non-bank subsidiaries of the Company
and through the Subsidiary Banks and their subsidiaries.
(e) The larger Subsidiary Banks provide
international banking services on a limited basis through the
international departments of their domestic offices. They also
maintain correspondent relationships with major banks
throughout the world.
11. (a) Defendant John E. Bryson ("Bryson") was a
director of First Interstate and Board Chairman and Chief
Executive Officer of SCEcorp and Southern California Edison
Company at all times relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a First
Interstate director and Chairman Emeritus PacifiCorp at all
times relevant hereto.
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President of the University of
Southern California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was a
member of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a
director of First Interstate and the retired Chairman and Chief
Executive Officer of Chevron Corporation at all times relevant
hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was a
director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a
director of First Interstate and President Emeritus California
State University, Fullerton at all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was a
director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was
President and Chief Executive Officer First Interstate and a
director at all times relevant hereto.
(j) Defendant Ralph P. Davidson ("Davidson") was a
director of First Interstate and former Chairman of The John F.
Kennedy Center for the Performing Arts at all times relevant
hereto.
(k) Defendant Thomas L. Lee ("Lee") was a director
of First Interstate and Chairman and Chief Executive Officer
The Newhall Land and Farming Company at all times relevant
hereto.
(l) Defendant Richard J. Stegemeier ("Stegemeier")
was a director of First Interstate and Chairman of the Board
Unocal Corporation at all times relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a director
of First Interstate and retired Chairman and Chief Executive
Officer Fireman's Fund Corporation at all times relevant
hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI
International at all times relevant hereto.
(o) Defendant Daniel M. Tellep ("Tellep") was a
director of First Interstate and Chairman and Chief Executive
Officer Lockheed Corporation at all times relevant hereto.
(p) Defendant Max Messmer ("Messmer") was a director
of First Interstate at all times relevant hereto. He is a
longtime friend of Siart and he was added to the board to
assist Siart in defeating any takeover proposals that would not
be in Siart's personal interest.
(q) Defendant First Bank System, Inc. ("First
Bank"), is a Delaware corporation with its principal offices in
Minnesota.
(r) Defendant John F. Grundhofer, ("Grundhofer") has
been the Chairman of the board of directors and Chief Executive
Officer of First Bank at all relevant times hereto.
12. Defendants named in paragraph 8(a) through (p)
(hereinafter collectively referred to as the "Director
Defendants") are each members of First Interstate's Board of
Directors.
13. The Director Defendants owed and owe First Interstate
fiduciary obligations and were and are required to: (i) use
their ability to manage First Interstate in a fair, just and
equitable manner; (ii) act in furtherance of the best interests
of First Interstate and its shareholders; (iii) act to maximize
the value of First Interstate and shareholder value; (iv)
govern First Interstate in such a manner as to utilize the
resources of the Company in a manner which benefits the Company
and its shareholders and not their personal interests or
preferences; (v) refrain from abusing their positions of
control, power, prestige and profit; and (vi) not favor their
own interests at the expense of First Interstate and its
shareholders. By reason of their fiduciary relationships,
these defendants owed and owe First Interstate the highest
obligation of good faith, fair dealing, loyalty and due care.
14. Wells Fargo is a corporation with its principal
executive offices in San Francisco, California. Wells Fargo is
a huge bank holding Company and one of the most well-managed,
profitable and well-capitalized banks in the United States.
With more than 600 branch outlets, 1,900 round-the-clock Wells
Fargo Express ATMs and a popular 24-hour telephone banking
service, Wells Fargo operates one of the largest and busiest
consumer banking businesses in the United States. Besides
serving as banker to some 3.5 million California households,
Wells Fargo provides a full range of banking services to
commercial, agribusiness, real estate and small business
customers, mainly in California. It is one of the nation's
leading managers of personal trust accounts, corporate 401(k)
plans and mutual funds, with approximately $57 billion in
assets under its management and administration.
15. Each Director Defendant, First Bank and Grundhofer
herein is sued individually as a participant and aider and
abettor in the wrongful activity, and the liability of each
arises from the fact that each has engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained
of herein.
FACTUAL BACKGROUND OF THE WRONGDOING
The Director Defendants Reject Wells Fargo's First
Premium Offer Claiming That They Need Six Months To
Evaluate Their Options And Determine Their Strategy
16. As pleaded earlier, First Interstate is an interstate
banking corporation. First Interstate's stock performed poorly
in 1994 through mid-1995, due to First Interstate's lackluster
performance and perceptions that it was poorly managed. For
instance, First Interstate's stock traded at a high of $85 per
share and then fell, falling to a low of $67 per share in
December 1994. First Interstate did not reach $85 per share
again until mid-1995. After June 1995, First Interstate's
stock performed better, reaching over $100 per share in late
September 1995, due to an increase in the prices in bank stocks
generally and because of rumors that a favorable acquisition
offer for First Interstate would be forthcoming as part of the
wave of bank acquisitions and mergers now sweeping the United
States. However, even with this increase, First Interstate's
stock has been a relatively poor performer when compared to
other bank stocks. Because in recent years First Interstate
has not been viewed to be as well-managed as many other large
banks and thus has not performed as well in terms of many of
its key ratios and measurements of success as other banks, its
stock has not performed well and thus, shareholders in First
Interstate have, in recent years, obtained a below-industry
trendline or industry average return. The chart below shows
the price action of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
Line graph showing the daily common stock price for First
Interstate for the period December 31, 1993 through October 17,
1995. Because the document for which this Complaint is an
Exhibit has been filed with the Securities and Exchange
Commission by electronic transmission, this graph is not
contained herein. The following information summarizes the
First Interstate daily closing stock price, plotted along the
graphs's vertical axis, for the dates indicated on the
horizontal axis of the graph:
Date Common Stock Price
--------- -------------------
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
17. In recent years, certain other large financial
institutions have approached First Interstate with favorable
acquisition inquiries and offers. Some years ago, Bank of
America approached First Interstate about a possible
acquisition. Approximately a year ago, Wells Fargo approached
First Interstate about a possible acquisition of First
Interstate at a premium price. First Interstate's Board and
its top management have rejected and frustrated all of these
prior acquisition overtures and offers, even though those
offers would have resulted in First Interstate shareholders
receiving a substantial premium over the then-market price of
First Interstate stock. The Director Defendants have done this
because they know that in the event First Interstate is
acquired by another bank, most or all of the directors of First
Interstate will, either in connection with the acquisition or
shortly thereafter, be removed from the Board of the surviving
bank because their services will not be necessary and they will
be mere surplusage and thus such an acquisition would bring an
and to their positions of power, prestige and profit as
directors of this huge bank. At the same time, top managers
at First Interstate have caused these prior acquisition
overtures and offers to be rejected and/or frustrated, because
they also know that, in the event of an acquisition, they will
also lose their lucrative jobs and their positions of power,
prestige and profit as officers of a major banking institution.
In so acting, these defendants have been aggrandizing their own
personal positions and interests over that of First Interstate
and its broader shareholder community to whom they owe
fiduciary duties to bring about a sale of First Interstate on
favorable terms to all the shareholders, even if it results in
them losing their lucrative positions.
18. Shortly prior to October 18, 1995, Wells Fargo
approached First Interstate and offered to negotiate an
acquisition of First Interstate for a price far in excess of
First Interstate's current stock price. On October 17, 1995,
Paul Hazen ("Hazen"), Wells Fargo's Chief Executive Officer
("CEO"), called Siart and made a proposal for Wells Fargo to
acquire First Interstate. Siart rejected the approach and told
Hazen that he thought that it was in the best interest of
First Interstate to take six months or longer to consider
options, including a merger. In truth, Siart and/or First
Interstate's Board had determined that they would resist any
offer by Wells Fargo to buy the Company. On October 18, 1995,
Wells Fargo made an unsolicited acquisition offer for First
Interstate offering to exchange .625 shares of its stock for
each share of First Interstate stock, a $133.50 per share offer
based on the October 17, 1995 closing price of Wells Fargo
stock of $213.62 per share. Upon the announcement of this
favorable acquisition offer, First Interstate's stock instantly
skyrocketed from $106 per share to over $140 per share,
reflecting the extremely large premium being offered to First
Interstate shareholders in this tax-free exchange, and the
increase in Wells Fargo's stock price to $228.65 per share
making the offer worth $142.65 per First Interstate share.
Wells Fargo's offer to acquire First Interstate is
approximately three times First Interstate's book value, which
is a high offer compared to recent bank acquisition prices.
The acquisition price was also approximately 12.1 times First
Interstate's estimated 1995 earnings per share of $11.29 per
share, which is also reasonable in light of other recent bank
acquisitions, although it is lower than 15 times the estimated
next year's earnings paid in other bank acquisitions.
19. Also, prior to Mr. Hazen's call, Siart had stated
that he was determined to keep First Interstate independent.
The mindset of the Director Defendants was further emphasized
by Joseph Pinola, First Interstate's former chairman, who
predicted a protracted struggle and stated, "I don't see
anything that Wells is offering us that is other than
temporary."
20. On or about October 18, 1995, after becoming aware of
Wells Fargo's intent to acquire First Interstate, Siart also
stated that, "We don't see any advantage to talking to anybody
else about a merger."
21. In response to the Wells proposal, Siart also stated
that he was "deeply disappointed" by the proposal, despite the
fact that First Interstate stock had jumped nearly 30% in
response to the proposal. Over the course of the next two and
one-half weeks, First Interstate attempted to give Wells Fargo
the impression that it might be willing to negotiate a takeover
in good faith, while it was in fact pursuing an "anyone but
Wells" strategy.
The Director Defendants Abandon Their "Six-Month
Strategy" To Put First Interstate Up For Sale And Enter
Into An Inferior Sweetheart Deal In l9 Days
22. As part of the "anyone but Wells" strategy, the
Director Defendants provided other potential bidders for First
Interstate with access to First Interstate's books and records
to conduct due diligence to encourage a proposal to compete
with the Wells bid. This conduct by the Director Defendants
served to give other potential bidders an unfair advantage over
Wells Fargo which was denied equal access to First Interstate's
books and records to refine or enhance its bid.
23. During this time period Wells Fargo indicated both
privately to First Interstate and publicly that it had "wiggle
room" in its bid and that it was willing to go higher.
24. Immediately following Wells Fargo's bid, on October
18, 1995, the Director Defendants abandoned their plan and
strategy, expressed by Siart, of taking six months or longer to
consider their options. They knew that Wells Fargo presented a
very credible proposal, as confirmed by a fairness opinion of
their own adviser, at an extremely high premium over First
Interstate's historic market price and that they would have to
either accept the proposal, and risk losing their positions, or
find an alternative transaction, even if it was inferior, to
discourage Wells Fargo from going forward. As a result, the
Director Defendants abandoned their express long-term strategy,
and instead engaged in defensive tactics and a defensive effort
to put the Company up "for sale" to thwart the Wells Fargo
proposal, and to implement their "anyone but Wells" strategy,
regardless of the cost expense and/or waste of corporate assets
that might result from their newly formed defensive strategy.
25. Because of their commitment to implement an "anyone
but Wells" strategy, the Director Defendants either directly or
by conduct and deference to First Interstate's management,
informed the prospective bidders that they would be preferred
over Wells Fargo and given preferential treatment in an effort
to create an alternative transaction that would discourage or
defeat Wells Fargo's bid. It was also determined that the
Director Defendants' and/or First Interstate's management would
also seek preferential treatment in the course of negotiating
any such "alternative" transaction to enable them to keep their
jobs to the greatest extent possible and in any event, with a
greater certainty than they expected should Wells Fargo succeed
with its bid.
26. As a result of this "anyone but Wells" strategy which
was made known to the potential bidders, the Director
Defendants squandered their negotiating leverage by expressing
a willingness to sell First Interstate at a price which would
be extremely favorable to a friendly bidder, and which would in
turn ensure First Interstate's management and directors
preferential treatment in the aftermath of the deal. As part
of this effort the Director Defendants, directly or through
First Interstate's management, also provided one or more of the
prospective bidders with further favorable treatment in the
form of their expression of a willingness to engage in various
defensive maneuvers to favor a prospective alternative bidder
with defensive steps designed to thwart the Wells Fargo
proposal such as, the triggering of a "poison pill", a lock-up
fee, a break-up option, and/or a no-shop provision. These
defensive devices were improperly offered to prospective
bidders in a show of favoritism to ensure the prospective
bidders that they could offer a less favorable deal than Wells,
with the assurance that their deal would be protected in a
manner that would not only render Wells present bid less
favorable but would also make any future bid by wells Fargo or
another suitor more expensive, even if it were to be more
favorable in the absence of these defensive tactics.
27. On November 6, 1995, the defendants collectively
announced the "merger" between First Interstate and First Bank.
As reported by the Associated Press:
Investors seemed unenthusiastic about First
Interstate's decision. The bank's shares fell 87 1/2
cents to $1.26. 87 1/2 on the New York Stock
Exchange. First Bank Systems' shares also sagged,
ending $1 lower at $49.87 1/2.
28. In spite of the stated plan to take six months to
explore its options, the Director Defendants took exactly 19
days to change direction and enter into the executed defensive
merger agreement with First Bank.
29. The First Bank Transaction not only values First
Interstate lower than Wells Fargo's opening offer, but up to
$500 million, or more lower than Wells Fargo's revised offer of
.65 Wells Fargo shares, which was on the table to First
Interstate before the First Bank Transaction was signed. To
compound the damage, defendants included a $100 million "break
up" fee and a $100 million "lock up" option to protect the deal
with First Bank. This makes it up to $200 million more
expensive for another acquirer to purchase First Interstate and
makes First Interstate responsible for paying the funds to
First Bank, even though First Bank does not provide any
corresponding comparable consideration or value and will not
suffer damages in that amount if a higher alternative bid is
available or accepted.
30. An article in the November 8, 1995 Los Angeles Times
illustrates that the First Interstate and First Bank merger
agreement was a fixed, sweetheart deal that confers no benefit
on the Company or the shareholders. The article provides:
And in an apparent attempt to discourage its
hostile suitor, First Interstate warned Wells that
First Bank stands ready to match any competing bid,
according to a person who was present during a
conversation between senior officials of Wells and
First Interstate.
Los Angeles Times, November 8, 1995. These statements
constitute admissions that First Bank not only can, but will,
bid higher for First Interstate if it is not given preferential
treatment and must respond to an auction. First Interstate's
preferential arrangement with First Bank highlights how
completely defendants abdicated their fiduciary
responsibilities and squandered their bargaining power by
failing to conduct an auction to get First Bank to make its
best offer before the merger deal was signed. First Bank and
Grundhofer in turn extracted the defensive provisions from the
Director Defendants to aid their breach of fiduciary and other
duties knowing that it would result in a lower value for the
Company than would be set by market forces and knowing that it
was a breach of the Director Defendants' duties.
31. It is clear from the comments of large First
Interstate shareholders, and analysts, that the First Bank
Transaction is an inadequate excuse for a defensive play
against Wells Fargo. Defendants' only hope to protect the
merger was with the $200 million hurdle imposed by the lock-up
and break up provisions, along with other defensive tactics and
expenditures of corporate resources, which are a waste of
corporate assets.
32. The Director Defendants have taken an inferior bid
and they are committing corporate resources to implementing the
First Bank Transaction, even though major shareholders are
seriously questioning and opposing the deal,
"The number might be closer to $200 to $300
million" [referring to the $500 million assumption
used to value the First Bank transaction] in cost
cuts by First Bank, said Orphanos of Warburg, Pincas
which owned 412,400 First Interstate shares at mid-
year. "That being the case . . . I think Wells is
the best."
Other investors agreed.
"The Wells-Interstate combination makes more
sense," said Robert Poll, director of equity
investments at Oppenheimer Management Corp., which
owns 360,000 First Interstate shares and 525,000
First Bank shares.
"I still think Wells can top it," said James
Schmidt of John Hancock Funds, which owns 269,000
First Interstate shares.
Bloomberg Wire Service, dated November 7, 1995.
33. As stated in a Wall Street Journal article, dated
November 7, 1995, which quoted First Interstate's second
largest shareholder, which is located here in California:
"The best combination is clearly Wells and First
Interstate," said an executive at one of First
Interstate's largest shareholders, Capital Group,
Inc., based in Los Angeles.
34. As reported in a Los Angeles Times article, dated
November 7, 1995:
"First Interstate is going to get sold -- that's
the one thing we learned today," said Scott Edgar of
the Sife Trust Fund, a mutual fund that holds about
110,000 First Interstate shares. "We still don't
know who's going to be the buyer."
* * *
Several money managers whose institutions own
large First Interstate stocks said Monday that they
were holding on to their stock in hopes of a higher
bid.
35. The above reactions were the result of the
announcement of the First Bank Transaction which, at the time,
valued the holdings of First Interstate's public investors at
$132.275 -- approximately $7.21 per share or $550 million lower
than the implied market valuation of the available proposal by
Wells Fargo.
36. Siart, on behalf of the defendants collectively,
stated several rationales for the First Bank Transaction, which
one analyst summed up as follows:
"The stated rationale (by First Interstate) should
cause shareholders to be upset," said Thomas Brown,
an analyst with Donaldson, Lufkin & Jenrette. He
said the deal boils down to "a senior management job
preservation act" for First Interstate executives.
37. In the course of interviews given after the
announcement of the First Bank Transaction, Siart and
Grundhofer admitted that their merger discussions took place
after the Wells Fargo proposal to Siart on October 17. Thus,
it was an unreasonable defensive move, purely in response to
the Wells Fargo proposal, that failed to allow market forces to
set the true price of First Interstate.
38. It was an unreasonable response because it did not
maximize the value of First Interstate's assets given both
First Bank's and Wells Fargo's known willingness to bid higher.
Under these circumstances, the only reasonable response was to
conduct an auction of First Interstate to obtain maximum value
for its assets. It was unreasonable of the Director Defendants
to commit the resources of First Interstate to the "anyone but
Wells" strategy and to provide First Bank with preferential due
diligence, preferential negotiating privileges, the ability to
close the transaction at significantly less than either First
Bank or Wells Fargo were actually willing to bid, up to $200
million in preferential fees and options at the expense of
First Interstate and the additional protection from a competing
bid by wielding First Interstate's poison pill against any
competing offer.
Wells Fargo Makes Yet A Higher Bid And Offers To Go
Head-to-Head With First Bank For "Best And Final"
Offers -- The Director Defendants Reject This Proposal
Worth Hundreds Of Millions Of Dollars More
39. On Monday, November 13, 1995, Wells Fargo announced
that it intended to take its offer to acquire First Interstate
directly to the shareholders by an exchange offer. Under the
offer, Wells Fargo will offer First Interstate shareholders an
opportunity to exchange their shares for .67 shares of Wells
Fargo, an increase over both the initial .625 exchange proposal
on October 17-18 and the later .65 exchange proposal made prior
to the execution of the First Bank Transaction. Based upon the
closing price of Wells Fargo on November 10, 1995 (the last
trading day before the enhanced offer) Wells Fargo valued the
proposal at $143.58 per share of First Interstate common stock,
giving the transaction a total value of $10.9 billion.
40. However, due to the unreasonable defensive measures
and waste and abuse of First Interstate's assets, the Wells
Fargo offer, although superior to the First Bank Transaction,
is conditioned upon, among other things, the redemption or
invalidation of First Interstate's "poison pill."
41. As evidence of Wells Fargo's good faith and the value
of its proposal, it expressly stated that it would not seek any
break up fees or lock-up options.
42. Additionally, as further evidence that First
Interstate is being sold to First Bank at an inadequate price,
Wells Fargo offered to engage in a process whereby:
Wells Fargo and First Bank System would each be given
10 days to submit its best and final merger proposal,
and First Interstate would agree to submit both
proposals promptly to its stockholders in a manner
fair and acceptable to both bidders so that the
stockholders would be able to decide for themselves
which proposal is in their best interests.
43. The above proposal by Wells Fargo is a clear
indications that if it is treated fairly and equally to First
Bank, it is willing to increase its bid yet a third time to its
"best and final merger proposal." Given that the Director
Defendants and/or First Interstate management acting at their
direction, told Wells Fargo executives that First Bank "stands
ready to match any competing bid," the Director Defendants have
an absolute duty to maximize those bids since First Interstate
was clearly "shopped" and put up "for sale" to obtain the First
Bank Transaction.
44. On November 20, 1995, the Director Defendants, in a
clear breach of their duties and in wrongful continuation of
their "anyone but Wells" strategy, formally rejected the Wells
Fargo proposal in an attempt to continue to shelter and favor
their sweetheart deal with First Bank. The Director Defendants
undertook this rejection of the Wells Fargo proposal because
either: (a) they do not want to force First Bank to offer a
higher price for First Interstate; and/or (b) they are afraid
that First Bank would be unable to match a best and final
merger proposal by Wells Fargo and their "anyone but Wells"
strategy would collapse.
45. Defendants' efforts preserve the First Bank
Transaction flies in the face of the values assigned by the
marketplace to the present competing proposals. As of the
close of the New York Stock Exchange on Monday, November 20,
the trading prices of the three companies' stocks reflected an
implied value of $140.92 per share for the Wells Fargo proposal
(still not "best and final") and $135.85 per share for the
First Bank Transaction (still not its "best and final" either
if it is truthfully willing to match any bid by Wells Fargo as
First Interstate representatives stated). Since there are
approximately 75.7 million First Interstate shares outstanding,
the $5.07 spread makes the market's implied value of the Wells
Fargo bid at least $380 million higher than the First Bank
Transaction as of November 20.
46. First Interstate's top officers and the Director
Defendants are resisting and are going to continue to resist
Wells Fargo so that they can, as they have in the past, retain
themselves in their positions of power, prestige and profit.
For instance, members of First Interstate's Board of Directors
own only a minuscule portion of First Interstate's outstanding
common stock. They actually own only 144,000 shares of First
Interstate's 75.7 million shares of outstanding common stock,
or just .001% of the stock. Thus, whatever interest the
defendants have to protect the interests of the Company, as
shareholders in First Interstate based on their minuscule
holdings of the Company's stock, is far outweighed by their
interest in retaining their lucrative positions of power,
prestige and profit as directors and/or officers of the Company
from which they receive lucrative fees, prestige in the
community, large salaries, and other emoluments of office,
which they will lose if First Interstate is acquired.
47. The outright rejections of the Wells Fargo offers is
a breach of defendants' fiduciary duties to First Interstate,
an abuse of control, and provides unjust enrichment to all
defendants.
48. Unless defendants are enjoined from closing the First
Bank Transaction without conducting an auction of First
Interstate, or taking other actions to avoid maximizing
shareholder value, the Company will continue to suffer injury.
The True Inferior Value Of The First Bank Bid Is Being
Masked And Manipulated By First Bank's Repurchases Of
Its Shares To Prop Up Their Price
49. The defendants stated value of the First Bank
Transaction is also illusory in that First Bank and Grundhofer
are taking steps to prop up First Bank's shares through share
repurchases by First Bank as its stock price starts to drop.
The significance of this slick maneuver cannot be understated
and it is known to all defendants, including the Director
Defendants, to be a required step to give the First Bank
Transaction the appearance of value as close to the Wells Fargo
bid as possible -- albeit still lower. Given that the First
Bank Transaction is an exchange of First Bank shares for First
Interstate shares -- and the exchange ratio determines the
value of the deal, Grundhofer stated the significance of
maintaining First Bank's share price succinctly as follows:
"Grundhofer put it simply, if your stock tanks, the deal's
over."
50. To artificially support First Bank's share price and
prevent it from "tanking," First Bank and Grundhofer, with the
knowledge of the Director Defendants, have engaged in a stock
repurchase pattern by buying large blocks of its shares,
sometimes as much as one half the daily trading volume, as the
price declines to artificially support the price and keep its
bid artificially closer to Wells Fargo's bid.
Defendants Engaged In A Course of Conduct Designed To
Thwart Wells Fargo's Bids At Any Price And Favor First
Bank
51. In the course of Wells Fargo's efforts to acquire
First Interstate, it also attempted to obtain access to non-
public information concerning First Interstate that was made
available to other interested bidders, so that Wells Fargo
could submit its highest and best offer for an acquisition for
First Interstate that would provide the highest value.
Throughout the process the Director Defendants consistently
denied Wells Fargo complete access.
52. Wells Fargo was forced to develop its proposals
without complete assistance from First Interstate, the Director
Defendants or First Interstate management in identifying cost
savings beyond those which could be identified from public
information. As a result, Wells Fargo has been foreclosed from
fully evaluating First Interstate to enable it to make the best
possible offer. Identification of cost savings is a
significant factor in the ability of an acquiring company to
value and/or raise its bid. However, neither the Director
Defendants nor First Interstate, which they controlled, worked
with Wells Fargo to identify these costs savings or synergies
which would exist. They also denied Wells Fargo the
opportunity to conduct a due diligence review comparable to
that provided other interested bidders that would enable Wells
Fargo to conduct the analysis itself.
53. The First Bank Transaction and the accompanying
efforts and expense to implement it and "sell" it to First
Interstate's shareholders, the general public, and regulators
is an uncon-scionable misuse and waste of First Interstate's
assets.
54. The First Bank Transaction serves no legitimate
business purpose toward the maximization of shareholder value.
Rather, it unfairly benefits and entrenches First Interstate's
directors and management at the expense of the Company. For
example, the First Bank Transaction is designed to maximize the
ability of the Director Defendants' and First Interstate's
executives to keep their jobs and already lucrative salaries
and benefits. As a result, the proposed First Bank Transaction
results in the waste of, or unfair dealing in the assets of
First Interstate by the Director Defendants.
55. The pursuit of the First Bank Transaction without
conducting an auction of First Interstate is an unconscionable
and grossly inadequate method of best serving the interests of
the Company. The terms of the First Bank Transaction are
structured to favor the interests of, and to entrench, the
Director Defendants and management of First Interstate, to the
immediate and substantial detriment of the Company.
56. By way of this course of conduct and First Bank
Transaction, the Director Defendants have preferred their own
interests over those of First Interstate.
57. By reason of the foregoing acts, practices and course
of conduct, the Director Defendants have breached and continue
to breach their duties as directors and/or officers of the
Company.
58. Each officer or Director Defendant approved of,
permitted, and facilitated the First Bank Transaction, by among
other things, assisting the First Bank Transaction through the
preparation of documents needed to complete the Transaction,
attending and participating in meetings concerning this matter
and voting in favor of this abusive Transaction, the misuse of
First Interstate's resources and waste of its assets, rather
than the conduct of an auction, which is wrongful to the
Company.
THE "INDEPENDENT" OR "SPECIAL" COMMITTEE
59. The Director Defendants, wrongful scheme and the
First Bank Transaction also included the appointing of an
"Independent" or "Special" Committee of First Interstate
directors made up of certain Director Defendants to provide
what was claimed to be an "independent review" of the Wells
Fargo proposals to First Interstate and the First Bank
Transaction. While these Director Defendants approved of the
rejection of the Wells Fargo bids and the special treatment to
other bidders, and the decision to proceed with the First Bank
Transaction, their approval was not that of "independent"
directors acting in the best interests of the Company but
rather was a continuation of defendants, wrongful acts carrying
out the abuse of control, waste and the breach of fiduciary
duties complained of herein.
60. Siart controlled the Board and thus also the
"Independent" Committee members. None of the Director
Defendants appointed to the "Independent" Committee was truly
independent, and all have an interest in seeing that the
wrongful First Bank Transaction is approved by the Board.
THIS TRANSACTION IS PROCEDURALLY
AND SUBSTANTIVELY UNFAIR
61. The First Bank Transaction is grossly
disproportionately beneficial to the self-serving entrenchment
interests of First Interstate's directors and management and
unfair to the Company. Thus, the Director Defendants, in order
to entrench themselves and aggrandize their positions with
First Interstate have used their power, control and domination
of First Interstate to engineer the abusive First Bank
Transaction in breach of the duties they owe First Interstate.
CONCERTED ACTION
62. At all relevant times mentioned herein, each of the
defendants pursued a common course of conduct, acted with,
pursued a scheme and aided and abetted one another to
accomplish the wrongs complained of herein. The defendants
breached their duties and aided and abetted the breach of
duties by others through their conduct, including, but not
limited to, those acts and omissions outlined herein.
63. The common enterprise and common course of conduct
involved a plan to benefit the defendants, while failing to
protect the interests of First Interstate.
64. Each of the defendants named herein, aided and
abetted and rendered substantial assistance in the
accomplishment of the breach of duty, abuse of control and
waste complained of herein. In taking the action, as
particularized herein, to aid and abet and substantially assist
the commission of this wrongful conduct, each defendant acted
with an awareness of the primary wrongdoing and realized that
his/her conduct would substantially assist the accomplishment
of the abusive and oppressive conduct at issue herein and was
aware of his/her overall contribution to and furtherance of the
common enterprise and common course of conduct. The Director
Defendants each separately and as a group, reached an agreement
with respect to and conspired among themselves to commit the
wrongful acts set forth herein as evidenced by the terms of the
First Bank Transaction, the First Bank share buybacks and the
assurances of roles in the merged company. Defendants'
acts of aiding and abetting include, inter alia, the acts each
of them are alleged to have committed in furtherance of the
common enterprise and common course of conduct complained of
above.
65. As members of the Board of Directors of First
Interstate, the Director Defendants were themselves directly
responsible for authorizing the wrongful conduct. Each of them
had knowledge of and actively participated in and approved of
the wrongdoings alleged, or abdicated his or her
responsibilities with respect to these wrongdoings. All other
defendants assisted the Director Defendants in this wrongful
conduct. The alleged acts of wrongdoing are subjecting First
Interstate to unreasonable lose of value and waste as well as
the continuing risk of reduction of First Interstate's true
value, as described in detail above.
66. Each of the defendants is liable as a direct
participant in, an aider and abettor of, and co-conspirator
with respect to, the wrongs complained of herein. The Director
Defendants each had the power and influence to cause, and did
cause, First Interstate to engage in the conduct complained of
herein.
ABUSE OF CONTROL
67. At all relevant times the Director Defendants owed
First Interstate fiduciary obligations of candor, fidelity,
trust, and loyalty, and are and were required to use their
utmost ability to control First Interstate in a fair, just and
equitable manner, as well as to act in furtherance of the beat
interests of First Interstate and not in furtherance of their
own personal interests.
ADDITIONAL DERIVATIVE ALLEGATIONS
68. Plaintiffs bring this action derivatively pursuant to
Federal Rule of Civil Procedure 23.1 in the right of and for
the benefit of First Interstate to redress injuries suffered
and to be suffered by the Company as a direct result of the
violations of law, breaches of fiduciary duty, corporate
mismanagement, abuse of control as well as the aiding and
abetting thereof, by the defendants. First Interstate is named
as a nominal defendant solely in a derivative capacity. This
is not a collusive action to confer jurisdiction on this Court
which it would not otherwise have.
69. Plaintiffs will adequately and fairly represent the
interests of First Interstate.
70. Plaintiff has not made any demand on the present
Board of Directors of First Interstate to institute this action
since such demand would be a futile and useless act for the
following reasons:
(a) The Director Defendants engaged in the above
wrongful conduct which constituted unreasonable and wasteful
defensive measures in response to Wells Fargo's takeover
proposal not protected by the business judgment rule and they
improperly put First Interstate up "for sale" through
preferential treatment of bidders friendly to management,
without conducting an auction to obtain the Company's true
value.
(b) The First Interstate Board of Directors
participated in and approved the acts, omissions and wrongs
complained of above. The Director Defendants were not
disinterested in those transactions and they were dominated and
controlled by First Interstate's management. In addition,
there is more than a reasonable doubt that they did not
exercise proper business judgment on behalf of First Interstate
in allowing the First Bank Transaction to proceed;
(c) The First Interstate Board of Directors, members
have divided loyalties between their own interests and First
Interstate and as a result of their conflict of interest and
the other circumstances alleged, they did not properly exercise
business judgment on behalf of First Interstate in connection
with the opportunities and transactions alleged;
(d) The acts complained of herein constitute
violations of fiduciary duties owed by the Director Defendants
and these acts are incapable of ratification;
(e) The known principal wrongdoers and beneficiaries
of the wrongdoing complained of herein are in a position to,
and do, dominate and control First Interstate and its Board of
Directors. Thus, the Board could neither exercise independent
objective judgment in deciding whether to bring this action nor
vigorously prosecute this action;
(f) The directors of First Interstate cannot be
relied upon to reach a truly independent decision as to whether
to commence the demanded action against themselves for the
misconduct alleged in this Complaint, in that, inter alia, the
Board of Directors is totally dominated by First Interstate's
management and directly involved in the misconduct alleged and
they have caused the actions complained of. This domination of
the Board of Directors by First Interstate's management has
impaired the Board's ability to validly exercise its business
judgment and rendered it incapable of reaching an independent
decision as to whether to accept plaintiff's demand;
(g) In order to bring this action for breaching
their fiduciary duties, the members of the First Interstate
Board of Directors would have been required to sue themselves
and their fellow directors who are allies in the top ranks of
the Company, and their good friends, with whom they have
entangling financial alliances, interests and dependencies,
which they would not do. Therefore, the Director Defendants
would not be able to vigorously prosecute any such action;
(h) The members of the First Interstate Board of
Directors, who are each defendants herein, receive payments,
benefits, and other emoluments by virtue of their membership on
the Board and association with First Interstate. They are thus
benefitting from the wrongdoing herein alleged and have engaged
in such conduct to preserve their positions of control and the
perquisites thereof, and are incapable of exercising
independent objective judgment in deciding whether to bring
this action. The Board members also have close personal and
business ties with each other and are, consequently, interested
parties and cannot in good faith exercise independent business
judgment to determine whether to bring this action against
themselves and one another;
(i) The Directors would not sue themselves for the
transactions complained of herein, because, inter alia, they
would thereby jeopardize their continued receipt of these
financial benefits;
(j) The composition of First Interstate's Board of
Directors is designed to (and does) make them dependent on and
deferential to the Chairman of the Board of Directors who
controls and dominates the process by which Directors are
selected and approved for nomination or renomination to the
Board and the process by which officers of the Company are
selected;
(k) The entire Board of Directors was and is
involved in the wrongdoing alleged herein, and all Directors
are named as defendants in this action, making it impossible
for any of them to exercise independent judgment in deciding
whether or not to sue themselves and their fellow Directors for
their wrongful conduct; and
(l) The members of the Board of Directors are
beneficiaries of the wrongful transactions complained of
herein.
71. A true copy of this Complaint was delivered to First
Interstate prior to its filing with the Court.
FIRST CAUSE OF ACTION
(Derivative Claim For Intentional
Breach Of Fiduciary Duty)
72. Plaintiff repeats and realleges the preceding
paragraphs as though set forth fully herein. This cause of
action is asserted against all defendants, except nominal
defendant First Interstate.
73. Each of the Director Defendants engaged in and/or
aided and abetted the aforesaid conduct in intentional breach
and/or reckless disregard of the fiduciary duties which he/she
or it owed to First Interstate and First Bank and Grundhofer
aided and abetted the aforesaid conduct.
74. By reason of the foregoing, First Interstate has been
damaged and will continue to sustain significant injuries for
which there is no adequate remedy at law and injuries entitling
an award of damages.
SECOND CAUSE OF ACTION
(Derivative Claim For Breach
Of Fiduciary Duty)
75. Except to the extent they allege intentional or
reckless conduct by any defendant, plaintiff incorporates by
reference and realleges the preceding paragraphs as if set
forth fully herein. This cause of action is asserted against
all defendants, except nominal defendant First Interstate.
76. The Director Defendants engaged in or aided and
abetted the aforesaid conduct without exercising the reasonable
and ordinary care owed to the Company by directors, officers,
managing agents, and/or controlling persons of a corporation.
Defendants First Bank and Grundhofer aided and abetted the
wrongful conduct.
77. First Interstate has been injured by reason of the
defendants, negligent and/or grossly negligent breaches of
their fiduciary duties. Plaintiff seeks equitable relief
damages and other relief as hereinafter set forth.
THIRD CAUSE OF ACTION
(Derivative Claim For Abuse Of Control)
78. Plaintiff repeats and realleges the preceding
paragraphs as though set forth fully herein. This cause of
action is asserted against all defendants, except nominal
defendant First Interstate.
79. The Director Defendants' conduct constituted an
abuse of their ability to control and influence First
Interstate, or, with the assistance of First Bank and
Grundhofer the aiding and abetting of such conduct, for which
all defendants are legally responsible.
80. By reason of the foregoing, First Interstate has been
damaged and has sustained, and will continue to sustain,
significant injuries for which it has no adequate remedy at law
and injuries entitling an award of damages.
FOURTH CAUSE OF ACTION
(Derivative Claim for Unjust Enrichment)
81. Plaintiff repeats and realleges each and every
allegation contained in the preceding paragraphs. This cause
of action is asserted against all defendants, except nominal
defendant First Interstate.
82. As a result of the tortious conduct described above,
certain Director Defendants and First Bank will be unjustly
enriched at the expense of First Interstate.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring the proposed First Bank Transaction in whole
or in part to be invalid, null, void, unenforceable, unfair,
unjust, and inequitable to First Interstate;
B. Preliminarily and permanently enjoining defendants
from enforcing defensive measures designed to prevent an
auction, bidding or tender offer for First Interstate and from
further wasting assets or abusing their control or
relationships with First Interstate and/or from taking any
steps to prevent an acquisition of First Interstate at a
premium over the First Bank Transaction;
C. Preliminarily and permanently enjoining the defendants
from proceeding with the First Bank Transaction unless or until
the value of that Transaction can be shown to compare favorably
with the takeover premium available following an open and fair
auction of First Interstate and/or unless or until the
shareholders are given a choice between two or more
transactions;
D. Setting aside the First Bank Transaction and/or any
lockup, break up, no-shop provisions or other abusive or
wasteful, defensive measures as null, void and unenforceable;
E. Awarding money damages against all defendants, jointly
and severally, in favor of First Interstate for all losses and
damages suffered as a result of the acts and transactions
complained of herein, together with pre-judgment interest from
the day of the wrongs to the day of judgment herein, molded in
a fashion to ensure defendants do not participate therein or
benefit thereby;
F. Directing all defendants to account for all damages
caused by them and all profits and special benefits and unjust
enrichment they obtain as a result of their unlawful conduct
and imposing a constructive trust thereon;
G. Awarding plaintiff the costs and disbursements of this
action, including reasonable attorneys', accountants', and
experts' fees; and
H. Granting such other and further equitable, injunctive,
or other relief as this Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: November 21, 1995
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
SALLIE A. BLACKMAN
ERIN C. WARD
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
MILBERG WEISS BERSHAD
HYNES & LERACH
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
WEISS & YOURMAN
JOSEPH H. WEISS
319 Fifth Avenue
New York, NY 10016
Telephone: 212/532-4171
WEISS & YOURMAN
KEVIN J. YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
Telephone: 310/208-2800
PRONGAY & MIKOLAJCZYK
KEVIN M. PRONGAY
EUGENE MIKOLAJCZYK
881 Alma Real Drive
Suite 211
Pacific Palisades, CA 90272
Telephone: 310/573-3600
Attorneys for Plaintiff
VERIFICATION
I, the undersigned, say:
I am one of the attorneys for plaintiff in the above-
entitled action; I have read the foregoing VERIFIED DERIVATIVE
COMPLAINT FOR BREACH OF FIDUCIARY DUTY, ABUSE OF CONTROL,
UNJUST ENRICHMENT, AND EQUITABLE RELIEF AND DAMAGES and know
the contents thereof; and I certify that the same is true of my
own knowledge, except as to those matters which are therein
stated upon my information or belief, and as to those matters I
believe it to be true. I make this declaration because the
named plaintiff is absent from the county where I maintain my
law office.
I declare under penalty of perjury under the laws of the
State of California that the foregoing is true and correct.
Executed this 21st day of November, 1995, at San Diego,
California.
WILLIAM S. LERACH
VERIFICATION
I, the undersigned, say:
I am one of the attorneys for plaintiff in the above-
entitled action; I have read the foregoing VERIFIED DERIVATIVE
COMPLAINT FOR BREACH OF FIDUCIARY DUTY, ABUSE OF CONTROL,
UNJUST ENRICHMENT, AND EQUITABLE RELIEF AND DAMAGES and know
the contents thereof; and I certify that the same is true of my
own knowledge, except as to those matters which are therein
stated upon my information or belief, and as to those matters I
believe it to be true. I make this declaration because the
named plaintiff is absent from the county where I maintain my
law office.
I declare under penalty of perjury under the laws of the
State of California that the foregoing is true and correct.
Executed this 21st day of November, 1995, at San Diego,
California.
WILLIAM S. LERACH
MAXWELL M. BLECHER (#026202)
HAROLD R. COLLINS, JR. (#037114)
BLECHER & COLLINS, P.C.
611 West Sixth Street, 20th Floor
Los Angeles, CA 90017
(213) 622-4222
JOSEPH W. COTCHETT (#36324)
MARIE SETH WEINER (#112032)
COTCHETT & PITRE
San Francisco Airport Office Center
840 Malcolm Road, Suite 200
Burlingame, CA 94010
(415) 697-6000
Attorneys for Plaintiff
and the Class
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
TIMOTHY W. BRADLEY, Civil No. BC139665
individually and on behalf of
all others similarly situated, CLASS ACTION
Plaintiffs, CLASS ACTION COMPLAINT FOR:
vs. 1. BREACH OF FIDUCIARY DUTY;
WILLIAM E.B. SIART; JOHN E. 2. ABUSE OF CONTROL;
BRYSON; JEWEL PLUMMER COBB;
RALPH P. DAVIDSON; MYRON 3. UNFAIR BUSINESS PRACTICES;
DuBAIN; DON C. FRISBEE; GEORGE
M. KELLER; THOMAS L. LEE; 4. UNJUST ENRICHMENT; and
WILLIAM F. MILLER; WILLIAM S.
RANDALL; STEVEN B. SAMPLE; 5. CONSTRUCTIVE FRAUD.
FORREST N. SHUMWAY; RICHARD J.
STEGEMEIER; DANIEL M. TELLEPL;
FIRST BANK SYSTEM, INC.; and
DOES 1 through 50, inclusive,
Defendants.
_____________________________/
Plaintiff Timothy W. Bradley alleges upon information and
belief, based upon, inter alia, the investigation made by
plaintiff and by and through his attorneys, except as to those
allegations which pertain to the named plaintiff and his counsel,
as follows:
INTRODUCTION
1. This is a class action on behalf of all persons, except
defendants, who own shares of the common stock of First
Interstate Bancorp ("First Interstate"), a holding company whose
principal assets is its wholly-owned subsidiary, First Interstate
Bank. The members of the class have been damaged and deprived of
opportunities to realize the highest price reasonably available
and a fair price for their stock ownership in First Interstate
because the defendants have wrongfully prevented and are
wrongfully preventing the acquisition of all of the common stock
of First Interstate by third parties who are willing and able to
acquire such stock at a price in excess of the current market
price of First Interstate common stock, including but not limited
to Wells Fargo & Company ("Wells Fargo"), headquartered in
California; and because defendants are now attempting to and have
arranged a merger transaction of First Interstate into First Bank
System, headquartered in Minneapolis, pursuant to which the First
Interstate shareholders will received less per share than the
other available transactions and offers. The officers and
directors of First Interstate, to protect and preserve their
positions of power, prestige and profits and officers and
directors of First Interstate, have acted contrary to their
fiduciary obligations to the shareholders of First Interstate,
namely plaintiff and the Class. Indeed, the defendants have now
obligated First Interstate to pay a "poison pill" break-up fee of
$200 million if the merger with First Bank System does not go
forward, despite the fact that the First Bank System offer is
less than the initial offer by Wells Fargo as well as less than
the subsequent pending offer by Wells Fargo. The proposed merger
with First Interstate is also structured to allow at least half
of the defendants to keep their positions as directors and/or
officers, and their positions of power, i.e., although First
Interstate will technically be owned by First Bank System, the
leadership of First Interstate will continue practically
unscathed. The defendants have publicly announced that they are
giving preference over the lower First Bank System's offer
because they want to save the jobs of people at First Interstate,
which includes themselves. In order to persuade the shareholders
of First Interstate to support the offer by First Bank System
rather than the higher offer by Wells Fargo, so as to obtain and
sustain the personal financial and prestigious positions of the
defendants, the defendants have engaged in the dissemination of
misleading statements to plaintiff and the Class.
JURISDICTION AND VENUE
2. The amount in controversy exceeds the jurisdictional
minimum of this Court.
3. At all times herein, the headquarters and principal
place of business of the individual defendants were and are in
Los Angeles, California. The individual defendants are all
officers and/or directors of First Interstate Bancorp, which is a
Delaware corporation with the principal place of business in Los
Angeles, California.
THE PARTIES
Plaintiff
4. Plaintiff Timothy W. Bradley is a resident of Los
Angeles County, California and owns common stock of First
Interstate.
5. Plaintiff Timothy W. Bradley brings this action
individually and on behalf of a Class consisting of all persons
and entities who own the common stock of First Interstate,
excluding the individual defendants, the members of their
immediate families and any entity controlled by any of the
defendants, and excluding defendant First Bank System to the
extent that it holds any First Interstate common stock.
Defendants
6. Defendant William E.B. Siart, at all relevant times
herein, was and is President (since 1990), Chief Executive
Officer (since January 1995), a director (since 1990), and
Chairman of the Board (since May 1995) of First Interstate. As
of March 1995, defendant Siart owned, directly or indirectly,
215,004 shares of First Interstate common stock. During 1994,
defendant Siart received cash compensation of $1,846,133 from
First Interstate, plus other compensation of $19,638 in addition
to lucrative securities options and pension plan benefit.
Defendant Siart was also provided with a preferential loan on his
residence of approximately $875,000 at an interest rate of 6.34%
by First Interstate. There is also an employment agreement
between defendant Siart and First Interstate providing, and in
case of a change of control of First Interstate, the term of the
agreement is automatically extended for two years from the date
of the change of control, plus if terminated, defendant Siart is
entitled to "liquidated damages" of three times annual base
salary and target bonus, plus an amount equivalent to three
additional years of participation in the Company's retirement
plan, plus $30,000 as alleged cost of health and welfare benefit
plan coverage, all payable as a cash lump sum within ten days
after termination.
7. Defendant John E. Bryson, at all relevant times herein,
was and is a director of First Interstate since 1991. As of
March 1995, defendant Bryson owned, directly or indirectly, 7,640
shares of First Interstate common stock.
8. Defendant Jewel Plummer Cobb, et al. relevant times
herein, was and is a director of First Interstate since 1985. As
of March 1995, defendant Cobb owned, directly or indirectly,
8,290 shares of First Interstate common stock.
9. Defendant Ralph P. Davidson, at all relevant times
herein, was and is a director of First Interstate since 1987. As
of March 1995, defendant Davidson owned, directly or indirectly,
9,500 shares of First Interstate common stock.
10. Defendant Myron DuBain, at all relevant times herein,
was and is a director of First Interstate since 1983. As of
March 1995, defendant DuBain owned, directly or indirectly,
36,939 shares of First Interstate common stock.
11. Defendant Don C. Frisbee, at all relevant times herein,
was and is a director of First Interstate since 1985. As of
March 1995, defendant Frisbee owned, directly or indirectly,
3,872 shares of First Interstate common stock.
12. Defendant George M. Keller, at all relevant times
herein, was and is a director of First Interstate since 1974.
Defendant Keller is also a director of First Interstate Bank of
California. As of March 1995, defendant Keller owned, directly
or indirectly, 10,896 shares of First Interstate common stock.
13. Defendant Thomas L. Lee, at all relevant times herein,
was and is a director of First Interstate since 1993. Defendant
Lee is also a director of First Interstate Bank of California.
As of March 1995, defendant Lee owned, directly or indirectly,
6,300 shares of First Interstate common stock.
14. Defendant William F. Miller, at all relevant times
herein, was and is a director of First Interstate since 1980.
Defendant Miller is also a director of First Interstate Bank of
California. As of March 1995, defendant Miller owned, directly
or indirectly, 10,310 shares of First Interstate common stock.
15. Defendant William S. Randall, at all relevant times
herein, was and is Executive Vice President, Chief Operating
Officer, and a director of First Interstate. As of March 1995,
defendant Randall owned, directly or indirectly, 115,940 shares
of First Interstate common stock. During 1994, defendant Randall
received cash compensation of $939,252 from First Interstate,
plus other compensation of $14,530 in addition to lucrative
securities options and pension plan benefit. There is also an
employment agreement between defendant Randall and First
Interstate providing, and in case of a change of control of First
Interstate, the term of the agreement is automatically extended
for two years from the date of the change of control, plus if
terminated, defendant Randall is entitled to "liquidated damages"
of three times annual base salary and target bonus, plus an
amount equivalent to thee additional years of participation in
the Company's retirement plan, plus $30,000 as alleged cost of
health and welfare benefit plan coverage, all payable as a cash
lump sum within ten days after termination.
16. Defendant Steven B. Sample, at all relevant times
herein, was and is a director of First Interstate since 1991. As
of March 1995, defendant Sample owned, directly or indirectly,
7,000 shares of First Interstate common stock.
17. Defendant Forrest N. Shumway, at all relevant times
herein, was and is a director of First Interstate since 1982. As
of March 1995, defendant Shumway owned, directly or indirectly,
10,000 shares of First Interstate common stock.
18. Defendant Richard J. Stegemeier, at all relevant times
herein, was and is a director of First Interstate since 1989. As
of March 1995, defendant Stegemeier owned, directly or
indirectly, 7,800 shares of First Interstate common stock.
19. Defendant Daniel M. Tellep, at all relevant times
herein, was and is a director of First Interstate since 1991. As
of March 1995, defendant Tellep owned, directly or indirectly,
7,500 shares of First Interstate common stock.
20. The defendants named in Paragraphs 6 through 19 above,
are hereinafter referred to collectively as the "Officer and
Director Defendants".
21. Defendant First Bank System, Inc. ("First Bank System")
was and is a Minnesota corporation with its principal place of
business in Minneapolis, Minnesota.
22. Plaintiff is ignorant of the true names and capacities
of other defendants sued herein as DOES 1 through 50, inclusive,
and therefore sues these defendants by such fictitious names.
Plaintiff will amend this complaint to allege their true names
and capacities when ascertained. Plaintiff is informed and
believes and thereon alleges that each such fictitiously named
defendant is legally responsible in some manner for the events
and conduct referred to, and legally caused injury and damages to
plaintiff and the members of the Class as herein alleged.
CLASS ACTION ALLEGATIONS
23. This lawsuit is brought on behalf of a Class consisting
of all persons and entities who own First Interstate common
stock. Excluded from the Class are the individual defendants
herein, and their immediate family and any subsidiary, affiliate
or controlled person or entity of any such defendants, and
excluding defendant First Bank System to the extent that it holds
any First Interstate common stock.
24. The members of the Class are so numerous that joinder
of all members is impracticable. First Interstate common stock
is traded on the New York Stock Exchange, a nationwide,
recognized stock exchange, under the symbol "I". While the exact
number of the Class members is unknown to plaintiff at this time,
as of November 1995, First Interstate had approximately 75.7
million shares of its common stock outstanding; and as of March
9, 1995 had 76,268,424 common shares outstanding. The Class
members can be identified from the books and records maintained
by the defendants and their agents.
25. Plaintiff's claims are typical of the claims of the
members of the Class, including issues of law and facts such as
whether: (i) defendants violated California state law, (ii)
whether defendants failed to obtain the best and highest price
for First Interstate shareholders for their shares, (iii) whether
defendants acted contrary to their fiduciary obligations to First
Interstate shareholders in order to protect defendants' own
personal, financial, and professional interests, and (iv)
sustained damages arising out of defendants' wrongful conduct in
violation of California state law.
26. Plaintiff will fairly and adequately represent and
protect the interests of the members of the Class, and has
retained counsel competent and experienced in class actions and
complex litigation.
27. A class action is superior to other available methods
for the fair and efficient adjudication of this controversy,
since joinder of all members is impracticable. Furthermore, as
the damages suffered by the individual members of the Class may
be relatively small, the expense and burden of individual actions
makes it impossible for the Class members to individually redress
the wrongs from which they have suffered. There will be no real
difficulty in the management of this action as a class action.
28. Common questions of law and fact exist as to all
members of the Class, and predominate over any questions
affecting solely individual members of the Class. Among the
questions of law and fact common to the Class are:
A. Whether defendants acted in violation of
California law;
B. Whether defendants, who were in positions of
control of First Interstate, breached their fiduciary obligations
to the Class members;
C. Whether defendants abused their positions of
control of First Interstate;
D. Whether defendants concealed, failed to disclose,
or misrepresented to the Class members regarding the offers to
purchase all or a controlling interest of First Interstate stock
in excess of the then market value of First Interstate common
stock;
E. Whether defendants participated in and pursued a
conspiracy, scheme, or common course of conduct as alleged
herein;
F. Whether the defendants acted wilfully, recklessly
or intentionally in committing the wrongful conduct complained of
herein; and
G. Whether the members of the Class have sustained
damages, and the proper measure of damages.
DEFENDANTS' WRONGFUL CONDUCT
29. On or about October 18, 1995, Wells Fargo & Company,
the holding company of California-based Wells Fargo Bank, offered
to purchase all outstanding stock of First Interstate Bancorp,
the holding company of California-based First Interstate Bank, in
a stock swap of 0.625 share of Wells Fargo common stock for each
share of First Interstate common stock, which bid was valued at
approximately $10.2 billion. The offering price was in excess of
the market price of First Interstate common stock. The offer was
considered by First Interstate to be a "hostile takeover" bid,
and the Officer and Director Defendant responded to it by an
announcement that First Interstate would be exploring
"alternatives".
30. On or about October 23, 1995, Wells Fargo announced
that it would move forward with seeking approval under the
federal antitrust laws to start buying First Interstate stock.
31. Without given due consideration to the offer by Wells
Fargo, the Officer and Director Defendants proceeded to solicit
"white knight" purchasers of First Interstate, and specifically
financial institutions which did business outside of California.
The Officer and Director Defendants invited Norwest Bancorp of
Minneapolis, Minnesota, and Banc One Corp of Columbus, Ohio to
inspect the books of First Interstate and otherwise conduct due
diligence with an eye towards a "friendly" counteroffer. The
Officer and Director Defendants also engaged in communications
with defendant First Bank System of Minneapolis in this regard.
32. On or about November 5, 1995, Wells Fargo publicly
announced that it had increased its bid to a stock swap of 0.65
to 1.00, or $136.91 per share of First Interstate.
33. On or about November 6, 1995, First Interstate
announced that it had rejected the Wells Fargo offer of
approximately $10.9 billion and, instead, proposed a merger with
defendant First Bank System of Minneapolis in a stock swap valued
at $9.88 billion, or $129.55 per share of First Interstate.
First Bank System's offer is slightly above the market price of
First Interstate common stock. At the end of November 6, 1995,
the market price of Wells Fargo placed its bid at a value of
$10.04 billion, or $131.41 per share of First Interstate.
34. As the bid by Wells Fargo envisioned a complete
acquisition and integration of First Interstate into Wells Fargo,
with Wells Fargo to be the surviving business, the Officer and
Director Defendants endeavored to obtain a bid by another
financial institution holding company which would leave
defendants with their existing positions. Although characterized
by the Officer and Director Defendants as an offer to acquire and
takeover First Interstate by defendant First Bank System, in
reality it is nothing but a merger that would leave both
financial institutions relatively intact.
35. The reality of the proposed transaction between First
Interstate and defendant First Bank System is that (i) First Bank
System is only about one-half the size of First Interstate, (ii)
their bank subsidiaries have branches located, predominantly, in
different locations, different cities, and different states,
(iii) the Board of Directors of the merged company consist one-
half of "former" First Interstate directors, including certain of
the Officer and Director Defendants herein.
36. Indeed, First Interstate and defendant First Bank
System only have potentially overlapping operations in Colorado,
Montana and Wyoming, despite the fact that combined operations
would exist in 21 states. On the other hand, Wells Fargo only
has bank branches in California, while First Interstate has half
of its bank branches in California, despite operations over 13
states.
37. The Officer and Director Defendants supported defendant
First Bank System's bid as they would be provided with retaining
or obtaining personal and financial benefits, whereas they would
be subject to possibly losing their positions if the Wells Fargo
bid was accepted. For example, under the terms of the proposed
transactions with defendant First Bank System, (i) defendant
Siart would be the President and Chief Operating Officer of the
combined company, (ii) the bank of the combined company would
operate under the First Interstate name, (iii) membership on the
Board of Directors of the combined company would be even split
between present directors of First Interstate and present
directors of First Bank System, and (iv) the corporate
headquarters would remain in Minneapolis, but all business lines
would be run by personnel in Los Angeles, including certain of
the Officer and Director Defendants.
38. In order to further protect their positions and
financial benefits, the Officer and Director Defendants agreed
with defendant First Bank System to a "poison pill" provision.
The poison pill, designed to discourage other offers by other
interested buyers and designed to make a hostile takeover more
difficult, potentially obligates First Interstate to pay a $200
million break-up fee to defendant First Bank System if their
merger transaction is not completed.
39. In an attempt to further shore-up to the First Bank
System "sweetheart" deal, the Officer and Director Defendants
also agreed to a "lock-up" agreement, whereby First Bank System
holds and controls certain First Interstate shares in a fiduciary
capacity, and agreed to grant stock options to purchase 19.9% of
all outstanding shares of First Interstate common stock.
40. According to the New York Times in an article published
on November 7, 1995, defendant Siart publicly announced that
First Bank System's bid "was superior, despite its lower price,
because it offered the best opportunity for growth, whereas the
proposal from Wells Fargo focused mainly on cost-cutting."
41. It has been rumored that, prior to the announcement of
the transaction with First Bank System (and the poison pill
provision), Banc One was interested and willing to pay more than
the offering price proposed by defendant First Bank System.
42. In response, on or about November 13, 1995, Wells Fargo
announced a new bid valued at $10.6 billion to $10.9 billion, in
a proposed stock swap of 0.666 share of Wells Fargo common stock
for one share of First Interstate common stock, which bid Wells
Fargo intends to pursue through a tender offer directly to First
Interstate shareholders. The valid of the First Bank System's
bid was valued at this time at approximately $10.4 billion. By
the close of the market on November 13, 1995, the Wells Fargo bid
was worth $140.19 to $140.32 per First Interstate share, while
First Bank System's offer was only worth $137.80 per share.
43. To bolster its superior offer, Wells Fargo also
informed the Officer and Director Defendants that it would move
forward with all regulatory steps for approval of such a proposed
acquisition, that any rejection of the latest bid would lead to
Wells Fargo and First Bank System having 10 days to submit their
best offer to the First Interstate shareholders, that it would be
filing a legal action and seeking shareholder action to depose
Wells Fargo's current Board to be replaced by directors who
support the Wells Fargo higher offer, and that it was seeking
judicial intervention to negate the $200 million poison pill
provision. Wells Fargo Chairman, Paul Hazen, in a letter to
defendant Siart requested, if its last bid was not accepted, that
Wells Fargo and First Bank System submit their "best and final"
offers and present them side-by-side on a proxy ballot to the
First Interstate shareholders for a vote. Hazen went on to
state, "As you know, the economic benefit to our respective
stockholders that can be generated from the combination of our
two companies is enormous, and far outstrips the benefits of a
First Interstate First Bank System combination."
44. Upon the announcement by Wells Fargo, First Bank
System's Chairman, John Grundhofer, made a public statement that
the proposed merger between defendant First Bank System and First
Interstate would proceed to completion (stating, "this deal will
close as planned"), and accused Wells Fargo of exaggerating the
economic benefits of its new proposal, stating that he was
"incredulous". He further questioned Wells Fargo's ability to
manage the combined company better than First Bank System, and
that Wells Fargo has "no multistate operating experience and a
very limited recent acquisition history."
45. Wells Fargo has affirmatively filed with the Federal
Reserve for approval of its application to be permitted to
purchase and to increase its ownership of First Interstate common
stock to beyond 4.9%. That clearance has now been given as of
November 20, 1995.
46. On or about November 17, 1995, John Grundhofer, the
Chairman of First Bank System, and Richard Zona, its Chief
Financial Officer, held a conference with financial analysts, in
an attempt to debunk statements by Wells Fargo as to earnings and
cost savings projections should Wells Fargo's bid be accepted and
First Interstate be merged into Wells Fargo. First Bank System
accused Wells Fargo of projecting numbers which "are not
credible", that Wells Fargo has "overstated cost savings", and
that Wells Fargo has "understated revenue losses".
47. In addition, First Bank System, on or about November
17, 1995, published non-SEC approved, full-page advertisement in
California newspapers attacking the Wells Fargo offer, and
calling such a transaction between Wells Fargo and First
Interstate a "disaster for California", citing the possible loss
of jobs.
48. What First Bank System has failed to fully and fairly
disclose is the fact of and extent to which its own stock market
price, which is the basis of the value of the proposed stock swap
bid, has been orchestrated and manipulated by First Bank System
to be more buoyant than if the market price reflected the
market's response to the competition for Wells Fargo. Indeed, it
has been reported by the Wall Street Journal on November 20,
1995, that First Bank System has been actively buying up its own
stock since its announcement of its potential transaction with
First Interstate. This repurchase activity by First Bank System
has propped up the market price of First Bank System's stock, and
thus kept a higher value on its stock-swap bid than would
otherwise be the case. Indeed, since November 7, 1995, through
its brokerage, First Bank System has been an enormous buyer of
First Bank System stock, accounting for 47% of the total volume
of First Bank System stock for the trading days from November 6,
1995 through November 15, 1995, in purchases totalling
approximately 2.4 million to 2.7 million shares. Specifically,
First Bank System, through its stockbroker, Donaldson Lufkin &
Jenrette, bought more than half of all First Bank System shares
traded on four of those trading dates; nearly two-thirds of all
shares traded on November 7, 1995 (the day after the
announcement); yet, bought zero shares the four trading days
prior to the November 6, 1995 announcement. Furthermore, those
trades have, circumspectly, been timed so that purchases are made
by First Bank System when its stock is declining in price --
thus, keeping the First Bank System stock artificially high.
Upon inquiry, First Bank System, through its spokesperson Wendy
Raway, publicly declined to say whether First Bank System had
been engaging in repurchase of its shares since the announcement
of its agreement with First Interstate.
49. On the other hand, Wells Fargo has publicly announced
that it had affirmatively refrained from any repurchasing of its
own shares during the time of this bidding competition for First
Interstate.
50. On November 20, 1995, First Interstate issued a press
release, which was publicly disseminated, announcing that the
Board of Directors of First Interstate, i.e., the Officer and
Director Defendants, had rejected the latest Wells Fargo bid and
would be moving forward with consummation of the proposed
transaction with defendant First Bank System. In that press
release, the Officer and Director Defendants made the false
representation to all First Interstate shareholders, including
plaintiff and the members of the Class, that the Wells Fargo
increased offer was "not in the best interests of First
Interstate and its shareholders", while stating that the First
Bank System offer was in the best interests of First Interstate
and its shareholders. The Officer and Director Defendants
further instructed the First Interstate shareholders to reject
the Wells Fargo offer and not to tender their shares to Wells
Fargo.
51. Defendant Siart, on behalf of all of the Officer and
Director Defendants, issued an open letter to the First
Interstate shareholders, as follows:
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced
that it had entered into a merger agreement with First
Bank System, Inc. (FBS) pursuant to which First
Interstate would merge with a subsidiary of FBS and
each of your shares of First Interstate common stock
would be converted into 2.6 shares of FBS common stock.
On November 13, 1995, Wells Fargo & Company
announced that it intended to commence an unsolicited
exchange offer in which holders of First Interstate
common stock would have the right to exchange each of
their shares for two-thirds of a share of Wells common
stock. (The Wells exchange offer has not yet commenced
and it may be several weeks or longer before you
receive any materials with respect to it.) This
announcement followed the First Interstate Board's
rejection of Wells' earlier unsolicited proposal to
merge with First Interstate in a transaction in which
First Interstate's shareholders would receive .625 (or
possibly .65) shares of Wells common stock for each
First Interstate share.
Your Board of Directors believes that the merger
with FBS is in the best interests of First Interstate
and its shareholders. Accordingly, the Board
recommends that you reject the Wells Fargo & Company
exchange offer and, when and if such offer is
commenced, not tender any of your shares to Wells
Fargo.
Your Board's consideration of Wells Fargo's
revised proposal and the FBS merger follows an
extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. This
process began several months prior to Wells' initial
unsolicited bid and included discussions and
evaluations of several potential merger possibilities,
including one with Wells Fargo. The record is clear.
After Wells made its initial takeover proposal public
on October 18, on behalf of your Board I engaged in
extensive discussions with Wells Fargo, as well as with
other potential merger candidates. A full account of
that process is contained in the Schedule 14D-9 filed
today by First Interstate with the Securities and
Exchange Commission and enclosed with this letter.
The First Interstate Board believes that the
strategic combination of First Interstate and FBS
creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and
long-range value to you. Your Board and management
believe that this combination offers better value to
First Interstate's shareholders than the Wells offer.
In reaching its determination to reaffirm the FBS
merger and recommend rejection of the Wells offer, the
First Interstate Board relied upon a number of factors,
including: -- the greater earnings per share and cash
flow per share of an FBS combination compared to a
Wells Fargo combination; -- the higher dividends per
share to be received by First Interstate shareholders
as a result of the FBS merger than with a Wells Fargo
combination; -- the reduced credit risk resulting from
operations in 21 states under the FBS merger as
contrasted with the substantially greater exposure to
the California market that would result from a merger
with Wells; -- the superior market position created by
an FBS merger--a top three ranking, in terms of deposit
market share, in ten states--as opposed to increasing
First Interstate's top three ranking in only one state
in a Wells merger; -- the substantial loss of revenue,
as compared to Wells' public statements, that would
result from Wells' proposed branch closings, other cost
saving measures and antitrust divestitures (revenue
losses not present in the FBS merger); -- the
dependence of the value of the Wells offer on Wells'
sustaining its high price-to-earnings ratio relative to
other high quality bank stocks, including FBS; --
Wells' use of purchase accounting for the transaction,
which creates additional goodwill in excess of $7
billion, which would substantially reduce future
earnings and returns on equity; and -- the opinions of
First Interstate's independent financial advisors,
Goldman Sachs & Co. and Morgan Stanley & Co.
Incorporated, that the exchange ratio of the FBS merger
is fair to First Interstate shareholders.
We understand very well why our highly successful
multi-state franchise, with its operating scope and
strengths, is attractive to Wells Fargo. Our concern
is not with Wells' interests, but the strategic
alternative that is best for you.
We expect the First Interstate/FBS combined
company to achieve 1997 EPS accretion of 23% and a
return on equity of 27.5%, with virtually no tangible
book value dilution. Because cost reductions would be
achieved through bank office and staff cuts and systems
integration, they can be accomplished quickly and with
minimal impact to our customers and revenue. Under
pooling accounting, the combined company will avoid the
creation of goodwill and still be able to continue
returning excess capital to shareholders through share
repurchases. The company will have a reduced risk
profile and an expanded foundation for future business
growth across our 21-state service territory. It will
have an exceptional, low-cost deposit base and be a
leader in pioneering alternative delivery systems. And
the combined company will be the number one ranked bank
in the country in corporate cards, purchasing cards,
corporate trust and ATM/POS, in addition to being among
the top five banks in merchant card processing and
asset management.
Your Board and management are convinced that the
FBS merger is a winning combination for the long-term
benefit of our shareholders. It is unfortunate that a
respected institution like Wells Fargo would jeopardize
its reputation by ignoring your Board of Directors'
carefully considered decision and choosing instead to
recklessly pursue its hostile takeover proposal. We
will not be deterred or distracted from completing our
pending merger with First Bank on your behalf.
A more detailed description of the factors
considered by your Board of Directors is contained in
the Schedule 14D-9. We urge you to read it carefully
and in its entirety so that you will be fully informed
as to the Board's recommendation.
The date of the special meeting of First
Interstate's shareholders which will be called to
consider the proposed merger with FBS has not yet been
set. First Interstate is not soliciting proxies from
shareholders with respect to the FBS merger at this
time. A Joint Proxy Statement/Prospectus of First
Interstate and FBS will be mailed to the Company's
shareholders in connection with the special meeting of
each company's shareholders which will be called to
vote upon the merger.
On behalf of the Board of Directors,
William E.B. Siart
Chairman and Chief Executive Officer
52. Grundhofer of defendant First Bank System quickly
followed with a public statement, supporting the decision and
statements of the Officer and Director Defendants: "The
continued support of the people who serve on the board of First
Interstate is gratifying and welcome news. We thank them for
sharing our conviction that the union of First Bank System and
First Interstate is clearly in the best interests of
shareholders, employees and the communities we serve."
53. As to November 20, 1995, the competing offers were
valued at approximately $10.4 billion for the First Bank System
bid and approximately $10.7 billion for the Wells Fargo bid.
FIRST CAUSE OF ACTION
Breach of Fiduciary Duty
(Direct and Secondary Liability of the Officer and Director
Defendants) Secondary Liability of Defendant First Bank System)
54. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
55. The Officer and Director Defendants, and each of them,
owed to plaintiff and the Class, as First Interstate
shareholders, a fiduciary duty of the highest good faith,
integrity and fair dealing, and said fiduciary relationship
existed at all relevant times herein.
56. The Officer and Director Defendants, and each of them,
breached their fiduciary duties to plaintiff and the Class by the
acts and omissions set forth above.
57. The Officer and Director Defendants, and each of them,
committed the acts and omissions alleged herein with the intent
to gain an advantage over plaintiff and the Class and to benefit
themselves to the detriment of plaintiff and the Class.
58. The breaches of fiduciary duty by the Officer and
Director Defendants, and each of them, caused detriment to
plaintiff and the Class, including but not limited to (i) the
wrongful dissipation of assets by the Officer and Director
Defendants obligating First Interstate to a "poison pill"
provision with defendant First Bank System providing a break-up
fee of $200 million; (ii) refusing to accept or support the offer
which provides the greatest return to the First Interstate
shareholders and is in their best interests; (iii) by refusing to
accept or support any offer which does not protect the Officer
and Director Defendants' own positions of power, prestige and
money; and (iv) by not making available, fully and fairly, to the
First Interstate shareholders, all of the offers that have been
made and the terms thereof so that they can make an informed
decision regarding the offers.
59. Defendant First Bank System aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the breaches of fiduciary duties committed by the Officer and
Director Defendants, and each of them. Without the involvement
of and agreement by defendant First Bank System to act as a
"white knight" merger partner to First Interstate, the Officer
and Directors Defendants could not accomplish their wrongful
goals, including the retention or obtaining of lucrative
positions with the ultimately existing corporation and bank. In
return of its granting of preferential, job-saving provisions to
the Officer and Director Defendants, and the making of a merger
offer (although less than any other offer made to date),
defendant First Bank System is to receive ownership of First
Interstate at a reduced "price", and defendant First Bank System
is pledged to receive $200 million if the deal with First
Interstate does not go through. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, defendant First Bank System acted with an
awareness of its primary wrongdoing and realized that its conduct
would substantially assist the accomplishment of the wrongful
conduct, wrongful goals, and wrongdoing.
60. The Officer and Director Defendants, and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
61. Defendants, and each of them, pursued a conspiracy,
common enterprise and common course of conduct to accomplish the
wrongs complained of herein. The purpose and effect of the
conspiracy, common enterprise and common course of conduct
complained of was, inter alia, to allow continuing monetary and
non-monetary benefits to defendants, and to allow continuing
control of First Interstate operations by the Officer and
Director Defendants, to the detriment of plaintiff and the Class.
Defendants accomplished their conspiracy, common enterprise and
common course of conduct by making misrepresentations and
concealing information, as specified herein, and by breaching
their fiduciary obligations, and by taking steps and making
statements in furtherance of their wrongdoing as specified
herein. Each defendant was a direct, necessary and substantial
participant in the conspiracy, common enterprise and common
course of conduct complained of herein, and was aware of his/its
overall contribution to, and furtherance of the conspiracy,
common enterprise and common course of conduct. Defendants' acts
of conspiracy include, inter alia, all of the acts that each of
them are alleged to have committed in furtherance of the wrongful
conduct complained of herein, except those relating to the
reaching of agreements or understandings sufficient to
characterize their conduct as conspiratorial.
62. Other persons and entities not named as defendants
herein were also participants in the conspiracy alleged and acted
in furtherance of the objectives of the conspiracy as co-
conspirators.
63. As a result of the defendants', and each of their,
wrongful conduct, plaintiff and the other members of the Class
have sustained and will sustain economic losses and other general
and specific damages, including but not limited to the amounts
which the First Interstate shareholders could have received if
the highest offer had been accepted and supported by the
defendants, and the amount of the $200 million "poison pill"
which potentially will reduce the assets of First Interstate,
loss of future income, and lost profits, all in an amount to be
determined according to proof.
64. The wrongful acts of defendants, and each of them, were
done maliciously, oppressively, and fraudulently, and plaintiff
and the other members of the Class are entitled to punitive and
exemplary damages in an amount to be ascertained according to
proof, which is appropriate to punish or set an example of the
defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
SECOND CAUSE OF ACTION
Abuse of Control
(Direct and Secondary Liability of the Officer and Director
Defendants; Secondary Liability of Defendant First Bank System)
65. Plaintiff hereby incorporates by reference paragraphs l
through 53 above as though fully set forth hereinafter.
66. The Officer and Director Defendants, and each of them,
dominated and controlled the business and corporate affairs of
First Interstate through the corporate positions, relationship
with the other defendants, personal stock ownership, and their
control over other related entities and shareholders. There
exists an imbalance and disparity of knowledge and economic power
between the Officer and Director Defendants, and the Plaintiff
Class. In doing the acts alleged hereinbefore, the defendants,
and each of them, have acted to further their own private
financial interests to the detriment of the interests of
plaintiff and the Class, in flagrant abuse of their positions of
corporate control.
67. The Officer and Director Defendants, and each of them,
caused detriment to plaintiff and the Class by their abuses of
control, including but not limited to (i) the wrongful
dissipation of assets by the defendants obligating First
Interstate to a "poison pill" provision with defendant First Bank
System providing a break-up fee of $200 million; (ii) not
attempting to realize the highest recovery possible for the First
Interstate shareholders in a sale or merger of First Interstate;
(iii) by refusing to accept or support any offer which does not
protect defendants' own positions of power, prestige and money;
and (iv) by not making available, fully and fairly, to the First
Interstate shareholders, all of the offers that have been made
and the terms thereof so that they can make an informed decision
regarding the offers.
68. The Director and Officer Defendants, and each of them,
knew that the acts of the other defendants constituted a breach
of duty and an abuse of control. Nevertheless, each Director and
Officer Defendants conspired and acted in concert with the other
defendants to accomplish the improper acts and transactions
alleged. Defendants' actions were illegal and improper, and are
in furtherance of the common design to achieve the unlawful
purpose of the conspiracy. Each of the Director and Officer
Defendants had knowledge of the conspiracy and its unlawful
purpose.
69. Defendant First Bank System aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the abuses of control committed by the Officer and Director
Defendants, and each of them. Without the involvement of and
agreement by defendant First Bank System to act as a "white
knight" merger partner to First Interstate, the Officer and
Directors Defendants could not accomplish their wrongful goals,
including the retention or obtaining of lucrative positions with
the ultimately existing corporation and bank. In return of its
granting of preferential, job-saving provisions to the Officer
and Director Defendants, and the making of a merger offer
(although less than any other offer made to date), defendant
First Bank System is to receive ownership of First Interstate at
a reduced "price", and defendant First Bank System is pledged to
receive $200 million if the deal with First Interstate does not
go through. In taking action, as particularized herein, to aid
and abet and substantially assist the commission of these
wrongful acts and other wrongdoings complained of, defendant
First Bank System acted with an awareness of its primary
wrongdoing and realized that its conduct would substantially
assist the accomplishment of the wrongful conduct, wrongful
goals, and wrongdoing.
70. The Officer and Director Defendants and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
71. Defendants, and each of them, pursued a conspiracy,
common enterprise and common course of conduct to accomplish the
wrongs complained of herein. The purpose and effect of the
conspiracy, common enterprise and common course of conduct
complained of was, inter alia, to allow continuing monetary and
non-monetary benefits to defendants, and to allow continuing
control of First Interstate operations by defendants, to the
detriment of plaintiff and the Class. Defendants accomplished
their conspiracy, common enterprise and common course of conduct
by making misrepresentations and concealing information, as
specified herein, and by breaching their fiduciary obligations,
and by taking steps and making statements in furtherance of their
wrongdoing as specified herein. Each defendant was a direct,
necessary and substantial participant in the conspiracy, common
enterprise and common course of conduct complained of herein, and
was aware of his/its overall contribution to, and furtherance of
the conspiracy, common enterprise and common course of conduct.
Defendants' acts of conspiracy include, inter alia, all of the
acts that each of them are alleged to have committed in
furtherance of the wrongful conduct complained of herein, except
those relating to the reaching of agreements or understandings
sufficient to characterize their conduct as conspiratorial.
72. Other persons and entities not named as defendants
herein were also participants in the conspiracy alleged and acted
in furtherance of the objectives of the conspiracy as co-
conspirators.
73. As a result of the defendants', and each of their,
wrongful conduct, plaintiff and the other members of the Class
have sustained and will sustain economic losses and other general
and specific damages, including but not limited to the amounts
which the First Interstate shareholders could have received if
the highest offer had been accepted and supported by the
defendants, and the amount of the $200 million "poison pill"
which potentially will reduce the assets of First Interstate,
loss of future income, and lost profits, all in an amount to be
determined according to proof.
74. The wrongful acts of the defendants, and each of them,
were done maliciously, oppressively, and fraudulently, and
plaintiff and the other members of the Class are entitled to
punitive and exemplary damages in an amount to be ascertained
according to proof, which is appropriate to punish or set an
example of the defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
THIRD CAUSE OF ACTION
Unfair Business Practices
(Direct and Secondary Liability Against All Defendants)
75. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
33. By their wrongful conduct, as set forth above,
defendants, and each of them, have engaged in unfair competition
including unlawful, unfair or fraudulent business practice, in
violation of business and Professions Code section 17200 et seq.,
and have destroyed or prevented fair and honest competition for
the purchase of First Interstate common stock as part of a merger
or acquisition of First Interstate.
76. Defendants, and each of them, aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the wrongful conduct and their wrongful goals and other
wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his or its primary wrongdoing and realized that his/its conduct
would substantially assist the accomplishment of the wrongful
conduct, wrongful goals, and wrongdoing.
77. Plaintiff and the Class have standing to bring this
cause of action for injunctive relief, pursuant to California
Business & Professions Code section 17203.
78. If defendants, and each of them, proceed with a merger
between First Interstate and defendant First Bank System at the
price offered by First Bank System, it will irreparably harm the
First Interstate shareholders, namely plaintiff and the Class,
unless appropriate injunctive relief is granted. If defendants,
and each of them, proceed with payment of a $200 million break up
fee pursuant to the "poison pill" provision of the agreement
between First Interstate and defendant First Bank System, it is
will irreparably harm the First Interstate shareholders, namely
plaintiff and the Class, unless appropriate injunctive relief is
granted.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
FOURTH CAUSE OF ACTION
Uniust Enrichment
(Direct Liability Against All Defendants)
79. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
80. If defendants, and each of them, proceed with a merger
between First Interstate and defendant First Bank System at the
price offered by First Bank System, rather than accepting the
higher offer(s) by Wells Fargo, or soliciting and attempting to
obtain the highest offer possible for the benefit of the First
Interstate shareholders, because the Officer and Director
Defendants want to keep and obtain personal and financial
benefits for themselves instead, this would be an unjust
enrichment to the Officer and Director Defendants, and each of
them, to the detriment of plaintiff and the Class.
81. If defendant First Bank System obtains payment of a
$200 million break up fee pursuant to the "poison pill" provision
of the agreement between First Interstate and defendant First
Bank System, for which compensation defendant First Bank System
is not entitled, has not earned, and is not the result of any
benefit to the First Interstate shareholders, this would be an
unjust enrichment to defendant First Bank System, to the
detriment of plaintiff and the Class.
82. Any unjust enrichment obtained by the defendants, and
each of them, should be disgorged, and placed in trust for the
financial benefit of plaintiff and the Class.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
FIFTH CAUSE OF ACTION
Constructive Fraud
(Direct and Secondary Liability Against the
Officer and Director Defendants)
83. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
84. As a result of the tortious conduct of the Officer and
Director Defendants, and each of them, as set forth above, and
because of the fiduciary relationship between First Interstate
shareholders and these defendants, the Officer and Director
Defendants are liable to plaintiff and the Class for constructive
fraud.
85. The Officer and Director Defendants, and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
86. As a result of the Officer and Director Defendants',
and each of their, wrongful conduct, plaintiff and the Class have
suffered and continue to suffer economic losses, and other
general and specific damages, all in an amount to be determined
according to proof at time of trial.
WHEREFORE, plaintiff and the Class pray for relief as
follows:
1. Compensatory and general damages according to proof;
2. Special damages according to proof;
3. Prejudgment interest at the maximum legal rate;
4. Punitive and exemplary damages according to proof;
5. For injunctive relief;
6. Costs of the proceedings herein;
7. Reasonable attorneys' fees; and
8. All such other and further relief as the Court deems
just.
DATED: November 22, 1995 BLECHER & COLLINS, P.C.
By:____________________
MAXWELL M. BLECHER
COTCHETT & PITRE
By:____________________
MARIE SETH WEINER
Attorneys for Plaintiff
and the Class
MAXWELL M. BLECHER (#026202),
HAROLD R. COLLINS, JR. (#037114)
BLECHER & COLLINS, P.C.
611 West Sixth Street, 20th Floor
Los Angeles, CA 90017
(213) 622-4222
JOSEPH W. COTCHETT (#36324)
MARIE SETH WEINER (#112032)
COTCHETT & PITRE
San Francisco Airport Office Center
640 Malcolm Road, Suite 200
Burlingame, CA 94010
(415) 697-6000
Attorneys for Plaintiff
and the Class
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
TIMOTHY W. BRADLEY, Civil
individually and on behalf of
all others similarly situated,
CLASS ACTION
Plaintiffs,
CLASS ACTION COMPLAINT FOR:
vs.
1. VIOLATION OF SECTION
WILLIAM E.B. SIART; JOHN E. 14(e) OF THE SECURITIES
BRYSON; JEWEL PLUMMER COBB; RALPH EXCHANGE ACT OF 1934;
P. DAVIDSON; MYRON DuBAIN; DON C.
FRISBEE; GEORGE M. KELLER; THOMAS 2. VIOLATION OF SECTION
L. LEE; WILLIAM P. MILLER, WILLIAM 14(a) OF THE SECURITIES
S. RANDALL; STEVEN B. SAMPLE; EXCHANGE ACT OF 1934, AND
FORREST N. SHUMWAY; RICHARD J. RULE 14a-9;
STEGEMEIER; DANIEL M. TELLEP;
FIRST BANK SYSTEM, INC.; 3. BREACH OF FIDUCIARY DUTY;
DONALDSON, LUFKIN & JENRETTE,
INC., 4. ABUSE OF CONTROL;
Defendants. 5. UNFAIR BUSINESS
PRACTICES;
6. UNJUST ENRICHMENT; and
7. CONSTRUCTIVE FRAUD.
PLAINTIFFS DEMAND A TRIAL BY
JURY
Plaintiff Timothy W. Bradley alleges upon
information and belief, based upon, inter alia, the
investigation made by plaintiff and by and through his
attorneys, except as to those allegations which pertain
to the named plaintiff and his counsel, as follows:
INTRODUCTION
1. This is a class action on behalf of all
persons, except defendants, who own shares of the common
stock of First Interstate Bancorp ("First Interstate"), a
holding company whose principal assets in its wholly-
owned Subsidiary, First Interstate Bank. The members of
the class have been damaged and deprived of opportunities
to realize the highest price reasonably available and a
fair price for their stock ownership in First Interstate
because the defendants have wrongfully prevents and are
wrongfully preventing the acquisition of all of the
common stock of First Interstate by third parties who are
willing and able to acquire such stock at a price in
excess of the current market price of First Interstate
common stock, including but not limited to Wells Fargo &
Company ("Wells Fargo"), headquartered in California; and
because defendants are now attempting to and have
arranged a merger transaction of First Interstate into
First Bank System, headquartered in Minneapolis, pursuant
to which the First Interstate shareholders will received
less per share than the other available transactions and
offers. The officers and directors of First Interstate,
to protect and preserve their positions of power,
prestige and profits and officers and directors of First
Interstate have acted contrary to their fiduciary
obligation to the shareholders of First Interstate,
namely plaintiff and the Class. Indeed, the defendants
have now obligated First Interstate to pay a "poison
pill" break-up fee of $200 million if the merger with
First Bank System does not go forward, despite the fact
that the First Bank System offer is less than the initial
offer by Wells Fargo as well as less than the subsequent
pending offer by Wells Fargo. The proposed merger with
First Interstate is also structured to allow at least
half of the defendants to keep their positions as
directors and/or officers, and their positions of power,
i.e., although First Interstate will technically be owned
by First Bank System, the leadership of First Interstate
will continue practically unscathed. The defendants have
publicly announced that they are giving preference over
the lower First Bank System's offer because they want to
save the jobs of people at First Interstate, which
includes themselves. In order to persuade the
shareholders of First Interstate to support the offer by
First Bank System rather than the higher offer by Wells
Fargo, so as to obtain and sustain the personal financial
and prestigious positions of the defendants, the
defendants have engaged in the dissemination of
misleading statements to plaintiff and the Class.
2. Defendant First Bank System and its
stockbroker, defendant Donaldson, Lufkin & Jenrette Inc.,
have engaged in the market manipulation of First Bank
System common stock in order to keep the market price
artificially high, so as to keep its proposed stock swap
merger with First Interstate at a higher value (and for
less First Bank System shares) than would otherwise be
the case if the market value of that stock was subject to
unrestricted adjustment through disinterested purchasers
and sellers on the open market.
JURISDICTION AND VENUE
3. This Court has jurisdiction over the
subject matter of this action under SECTION27 of the Securities
Exchange Act of 1934, 15 U.S.C. SECTION78aa. The claims
alleged herein arise principally under SECTION14 of the
Securities Exchange Act, 15 U.S.C. SECTION78n and rules
promulgated thereunder by the Securities and Exchange
Commission.
4. Venue is proper in this District pursuant
to SECTION27 of the Securities Exchange Act and 28 U.S.C.
SECTION1391(b). Certain acts and transactions giving rise to
the violations of the law complained of herein, including
the preparation and dissemination to the First Interstate
shareholders of false and misleading information,
occurred in this District. Further, at all times herein,
the headquarters and principal place of business of the
individual defendants were and are in Los Angeles, Los
Angeles County, California. The individual defendants
are all officers and/or directors of First Interstate
Bancorp, which is a Delaware corporation with the
principal place of business in Los Angeles, California.
5. In connection with the acts, conduct and
other wrongs complained of herein, the defendants,
directly or indirectly, used the means and
instrumentalities of interstate commerce, and United
States mails, and/or the facilities of a national
securities exchange market.
THE PARTIES
Plaintiff
6. Plaintiff Timothy W. Bradley is a resident
of Los Angeles County, California and owns common stock
of First Interstate.
7. Plaintiff Timothy W. Bradley brings this
action individually and on behalf of a Class consisting
of all persons and entities who own the common stock of
First Interstate, excluding the individual defendants,
the members of their immediate families and any entity
controlled by any of the defendants, and excluding
defendants First Bank System and DLJ to the extent that
they hold any First Interstate common stock.
Defendants
8. Defendant William E.B, Siart, at all
relevant times herein, was and is President (Since 1990),
Chief Executive Officer (since January 1993), a director
(since 1990), and Chairman of the Board (since May 1995)
of First Interstate. As of March 1995, defendant Siart
owned, directly or indirectly 213,004 shares of First
Interstate common stock. During 1994, defendant Siart
received cash compensation of $1,846,133 from First
Interstate, plus other compensation of $19,638 in
addition to lucrative securities options and pension plan
benefit. Defendant Siart was also provided with a
preferential loan on his residence of approximately
$875,000 at an interest rate of 6.34% by First
Interstate. There is also an employment agreement
between defendant Siart and First Interstate providing,
and in case of a change of control of First Interstate,
the term of the agreement is automatically extended for
two years from the date of the change of control, plus if
terminated, defendant Siart is entitled to "liquidated
damages" of three times annual bass salary and target
bonus, plus an amount equivalent to thee additional years
of participation in the Company's retirement plan, plus
$30,000 as alleged cost of health and welfare benefit
plan coverage, all payable as a cash lump sun within ten
days after termination.
9. Defendant John S. Bryson, at all relevant
times herein, was and is a director of First Interstate
since 1991. As of March 1995, defendant Bryson owned,
directly or indirectly, 7,640 shares of First Interstate
common stock.
10. Defendant Jewel Plummer Cobb, at all
relevant times herein, was and is a director of First
Interstate since 1985. As of March 1955, defendant Cobb
owned, directly or indirectly, 8,290 shares of First
Interstate common stock.
11. Defendant Ralph P. Davidson, at all
relevant times herein, was and in a director of First
Interstate since 1987. As of March 1995, defendant
Davidson owned, directly or indirectly, 9,500 shares of
First Interstate common stock.
12. Defendant Myron DuBain, at all relevant
times herein, was and is a director of First Interstate
since 1983. As of March 1995, defendant DuBain owned,
directly or indirectly, 36,939 shares of First Interstate
common stock.
13. Defendant Don C. Frisbee, at all relevant
times herein, was and is a director of First Interstate
since 1985. As of March 1995, defendant Frisbee owned,
directly or indirectly, 3,872 shares of First Interstate
common stock.
14. Defendant George M. Keller, at all
relevant times herein, was and is a director of First
Interstate since 1974. Defendant Keller in also a
director of First Interstate Bank of California. As of
March 1995, defendant Keller owned, directly or
indirectly, 10,896 shares of First Interstate common
stock.
15. Defendant Thomas L. Lee, at all relevant
times herein, was and is a director of First Interstate
since 1993. Defendant Lee is also a director of First
Interstate Bank of California. As of March 1995,
defendant Lee owned, directly or indirectly, 6,300 shares
of First Interstate common stock.
16. Defendant William P. Miller, at all
relevant times herein, was and in a director of First
Interstate since 1990. Defendant Miller is also a
director of First Interstate Bank of California, As of
March 1995, defendant Miller owned, directly or
indirectly, 10,310 shares of First Interstate common
stock.
17. Defendant William S. Randall, at all
relevant times herein, was and is Executive Vice
President, Chief Operating Officer, and a director of
First Interstate. As of March 1995, defendant Randall
owned, directly or indirectly, 115,940 shares of First
Interstate common stock. During 1994, defendant Randall
received cash compensation of $939,232 from First
Interstate, plus other Compensation of $14,530 in
addition to lucrative securities options and pension plan
benefit. There is also an employment agreement between
defendant Randall and First Interstate providing, and in
case of a change of control of First Interstate, the term
of the agreement in automatically extended for two years
from the data of the change of control, plus it
terminated, defendant Randall is entitled to "liquidated
damages" of thee times annual bass salary and target
bonus, plus an amount equivalent to the additional years
of participation in the Company's retirement plan, plus
$30,000 an alleged coot of health and welfare benefit
plan coverage, all payable as a cash lump sum within ten
days after termination.
18. Defendant Steven B. Sample, at all
relevant times herein, was and is a director of First
Interstate since 1991. As of March 1995, defendant
sample owned, directly or indirectly, 7,000 shares of
First Interstate common stock.
19. Defendant Forrest N. Shumway, at all
relevant times herein, was and is a director of First
Interstate since 1982. As of March 1995, defendant
Shumway owned, directly or indirectly, 10,000 shares of
First Interstate common stock.
20. Defendant Richard J. Stegemeier, at all
relevant times herein, was and is a director of First
Interstate since 1989. As of March 1995, defendant
Stegemeier owned, directly or indirectly 7,000 shares of
First Interstate common stock.
21. Defendant Daniel N. Tellep, at all
relevant times herein, was and is a director of First
Interstate since 1991. As Of March 1995, defendant
Tellep owned, directly or indirectly, 7,500 shares of
First Interstate common stock,
22. The defendants named in Paragraphs 8
through 21 above, are hereinafter referred to
collectively as the "Officer and Director Defendants".
23. Defendant First bank System, Inc. ("First
Bank System") was and in a Minnesota corporation with its
principal place Of business in Minneapolis, Minnesota.
24. Defendant Donaldson, Lufkin & Jenrette,
Inc. ("DLJ"), a Delaware corporation with its corporate
headquarters in New Jersey, was and is a registered
broker-dealer and financial institution.
CLASS ACTION ALLEGATIONS
25. This lawsuit is brought on behalf of a
Class consisting of all persons and entities who own
First Interstate common stock. Excluded from the Class
are the individual defendants herein, and their immediate
family and any subsidiary, affiliate or controlled person
or entity of any such defendants, and excluding
defendants First Bank System and DLJ to the extent that
they hold any First Interstate common stock.
26. The members of the Class are so numerous
that joinder of all members is impracticable. First
Interstate common stock is traded on the New York Stock
Exchange, a nationwide, recognized stock exchange, under
the symbol "I". While the exact number of the Class
members In unknown to plaintiff at this time, as of
November 1995, First Interstate had approximately 73.7
million Shares of its common stock outstanding, and as of
March 9, 1995 had 76,268,424 common shares outstanding.
The class members can be identified from the books and
records maintained by the defendants and their agents.
27. Plaintiff's claims are typical of the
claims of the members of the Class, including issues of
law and facts such as whether: (i) defendants violated
federal securities laws, (ii) defendants make material
false representations and omissions to First Interstate
shareholders regarding the Competing takeover bids by
First Bank System and Wells Fargo, (iii) defendants
violated California state laws, (iv) defendants failed to
obtain the best and highest price for First Interstate
shareholders for their shares, (v) whether defendants
acted contrary to their fiduciary obligations to First
Interstate shareholders in order to protect defendants'
own personal, financial, and professional interests, and
(vi) sustained damages arising out of defendants'
wrongful conduct In violation of federal and state law.
28. Plaintiff will fairly and adequately
represent and protect the interests of the members of the
Class, and has retained counsel competent and experienced
in class actions and complex litigation.
29. A class action is superior to other
available methods for the fair and efficient adjudication
of this controversy, since joinder of all members is
impracticable. Furthermore, as the damages suffered by
the individual members of the Class may be relatively
small, the expense and burden of individual actions makes
it impossible for the Class members to individually
redress the wrongs from which they have suffered, There
will be no real difficulty in the management of this
action as a class action.
30. Common questions of law and fact exist of
to all members of the Class, and predominate over any
questions affecting solely individual members of the
Class. Among the questions of law and fact common to the
Class are:
A. Whether defendants acted in violation
of federal securities law;
B. Whether defendants acted in violation
of California state law;
C. Whether defendants made or
participated in the making of false and misleading
statements and material omissions in connection with a
proxy solicitation or a tender offer takeover;
D. Whether defendants, who were in
positions of control of First Interstate, breached their
fiduciary obligations to the class members;
E. Whether defendants abused their
positions of control of First Interstate;
F. Whether defendants concealed, failed
to discloses or misrepresented to the Class members
regarding the offers to purchase all or a controlling
interest of First Interstate stock in excess of the then
market value of First Interstate common stock;
G. Whether defendants participated in and
pursued a conspiracy, schemes, or common course of
conduct as alleged herein;
H. Whether the defendants acted wilfully,
recklessly or intentionally in committing the wrongful
conduct complained of herein; and
I. Whether the members of the Class have
sustained damages, and the proper measure of damages.
DEFENDANTS' WRONGFUL CONDUCT
31. On or about October 18, 1995, Wells Fargo
& Company, the holding company of California-based Wells
Fargo Bank, offered to purchase all outstanding stock of
First Interstate Bancorp, the holding company of
California-based First Interstate Bank, in a stock swap
of 0.625 share of Wells Fargo common stock for each share
of First Interstate common stock, which bid was valued at
approximately $10.2 billion. The offering price was in
excess of the market price of First Interstate common
stock. The offer was considered by First Interstate to
be a "hostile takeover" bid, and the Officer and Director
Defendant responded to it by an announcement that First
Interstate would be exploring "alternatives".
32. On or about October 23, 1995, Wells Fargo
announced that it would move forward with seeking
approval under the federal antitrust laws to start buying
First Interstate stock.
33. Without giving due consideration to the
offer by Wells Fargo, the officer and Director Defendants
proceeded to solicit "white knight" purchasers of First
Interstate, and specifically financial institutions which
did business outside of California. The Officer and
Director Defendants invited Norwest Bancorp of
Minneapolis, Minnesota and Banc One Corp of Columbus,
Ohio to inspect the books of First Interstate and
otherwise conduct due diligence with an eye towards a
"friendly" counteroffer. The Officer and Director
Defendants also engaged in communications with defendant
first Bank System of Minneapolis in this regard.
34. On or about November 5, 1995, Wells Fargo
publicly announced that it had increased its bid to a
stock swap of 0.65 to 1.00, or $136.91 per share of First
Interstate.
35. On or about November 6 1995, First
Interstate announced that it had rejected the Wells Fargo
offer of approximately $10.9 billion and, instead,
proposed a merger with defendant First Bank System of
Minneapolis in a stock swap valued at $9.88 billion, or
$129.55 per share of First Interstate. First Bank
System's offer is slightly above the market price of
First Interstate common stock. At the end of November 6,
1995, the market price of Wells Fargo placed its bid at a
value of $10.04 billion, or $131.41 per share of First
Interstate.
36. As the bid by Wells Fargo envisioned a
complete acquisition and integration of First Interstate
into Wells Fargo, with Wells Fargo to be the surviving
business, the Officer and Director Defendants endeavored
to obtain a bid by another financial institution holding
company which would leave defendants with their existing
positions. Although characterized by the Officer and
Director Defendants as an offer to acquire and takeover
First Interstate by defendant First Bank System, in
reality it is nothing but a merger that would leave both
financial institutions relatively intact.
37. The reality of the proposed transaction
between First Interstate and defendant First Bank System
is that (i) First Bank System is only about one-half the
size of First Interstate, (ii) their bank subsidiaries
have branches located, predominantly, in different
locations, different cities and different states, (iii),
the Board of Directors of the merged company consists
one-half of "former" First Interstate directors,
including certain of the Officer and Director Defendants
herein.
38. Indeed, First Interstate and defendant
First Bank System only have potentially overlapping
operations in Colorado, Montana and Wyoming, despite the
fact that combined operations would exist in 21 states.
On the other hand, Wells Fargo only has bank branches in
California, while First Interstate has half of its bank
branches in California, despite operations over 13
states.
39. The Officer and Director Defendants
supported defendant First Bank System's bid as they would
be provided with retaining or obtaining personal and
financial benefits, whereas they would be subject to
possibly losing their positions if the Wells Fargo bid
was accepted. For example, under the terms of the
proposed transactions with defendant First Bank System,
(i) defendant Siart would be the President and Chief
Operating Officer of the combined company, (ii) the bank
of the combined company would operate under the First
Interstate name, (iii) membership on the Board of
Directors of the combined company would be even split
between present directors of First Interstate and present
directors of First Bank System, and (iv) the corporate
headquarters would remain in Minneapolis, but all
business lines would be run by personnel in Los Angeles,
including certain of the Officer and Director Defendants,
40. In order to further protect their
positions and financial benefits, the Officer and
Director Defendants agreed with defendant First Bank
System to a "poison pill" provision. The poison pill,
designed to discourage other offers by other interested
buyers and designed to make a hostile takeover more
difficult, potentially obligates First Interstate to pay
a $200 million break-up fee to defendant First Bank
System if their merger transaction is not completed.
41. In an attempt to further shore-up the
First Bank System "sweetheart" deal, the Officer and
Director Defendants also agreed to a "lock-up" agreement,
whereby First Bank System holds and controls certain
First Interstate shares In a fiduciary capacity, and
agreed to grant stock options to purchase 19.9% of all
outstanding shares of First Interstate common stock.
42. According to the New York Times in an
article published on November 7, 1995, defendant Siart
publicly announced that First Bank System's bid "was
superior, despite its lower price, because it offered the
best opportunity for growth, whereas the proposal from
Wells Fargo focused mainly on cost-cutting."
43. It has been rumored that, prior to the
announcement of the transaction with First Bank System
(and the poison pill provision), Banc One was interested
and willing to pay more than the offering price proposed
by defendant First Bank System.
44. In response, on or about November 13,
1995, Wells Fargo announced a new bid valued at $10.6
billion to $10.9 billion, in a proposed stock swap of
0.666 share of Wall Fargo common stock for one share of
First Interstate common stock, which bid Wells Fargo
intends to pursue through a tender offer directly to
First Interstate shareholders. The valid of the First
Bank System bid was valued at this time at approximately
$10.4 billion. By the close of the market on November
23, 1995, the Wells Fargo bid was worth $140.29 to
$140.32 per First Interstate share, while First Bank
System's offer was only worth $137.80 per share.
45. To bolster its superior offer, Wells Fargo
also informed the Officer and Director Defendants that it
would move forward with all regulatory steps for approval
of such a proposed acquisition, that any rejection of the
latent bid would lead to Wells Fargo and First Bank
System having 10 days to submit their best offer to the
First Interstate shareholders, that it would be filing a
legal action and seeking shareholder action to depose
Wells Fargo's current Board to be replaced by directors
who support the Wells Fargo higher offer, and that it was
seeking judicial intervention to negate the $200 million
poison pill provision. Wells Fargo Chairman, Paul Hazen,
in a letter to defendant Siart requested, if its last bid
was not accepted, that Wells Fargo and First Bank System
submit their "best and final" offers and present them
side-by-side on a proxy ballot to the First Interstate
shareholders for a vote. Hazen went on to state "As you
know, the economic benefit to our respective stockholders
that can be generated from the combination of our two
companies is enormous, and far outstrips the benefits of
a First Interstate-First Bank System combination."
46. Upon the announcement by Wells Fargo,
First Bank System's Chairman, John Grundhofer made a
public statement that the proposed merger between
defendant First Bank System and First Interstate would
proceed to completion (stating, "this deal will close as
planned"), and accused Wells Fargo of exaggerating the
economic benefits of its new proposal, stating that he
was "incredulous." He further questioned Wells Fargo's
ability to manage the combined company better than First
Bank System, and that Wells Fargo has "no multistate
operating experience and a very limited recent
acquisition history."
47. Wells Fargo has affirmatively filed with
the Federal Reserve for approval of its application to be
permitted to purchase and to increase its ownership of
First Interstate common stock to beyond 4.9%. That
clearance has now been given as of November 20, 1995.
48. On or about November 17, 1995, John
Grundhofer, the Chairman of First Bank System, and
Richard Zone, its Chief Financial Officer, held a
conference with financial analysts, in an attempt to
debunk statements by Wells Fargo as to earnings and cost
savings projections should Wells Fargo's bid be accepted
and First Interstate be merged into Wells Fargo. First
Bank System accused Wells Fargo of projecting numbers
which "are not credible," that Wells Fargo has
"overstated cost savings," and that Wells Fargo has
"understated revenue losses."
49. In addition, First Sank System, on or
about November 17, 1995, published a non-SEC approved,
full-page advertisement in California newspapers
attacking the Wells Fargo offer, and calling such a
transaction between Wells Fargo and First Interstate a
"disaster for California," citing the possible loss of
jobs.
50. What First Bank System has failed to fully
and fairly disclose is the fact of and extent to which
its own stock market advice, which is the basis of the
value of the proposed stock swap bid, has been
orchestrated and manipulated by defendant First Bank
System and defendant DLJ to be more buoyant than if the
market price reflected the market's response to the
competition for Wells Fargo. Indeed, it has been
reported by the Wall Street Journal on November 20, 1995
that defendant First Bank System has been actively buying
up its own stock, through defendant DLJ, since its
announcement of its potential transaction with First
Interstate. This repurchase activity by First Bank
System and DLJ has propped up the market price of First
Bank System's stock, and thus kept a higher value on its
stock-swap bid than would otherwise be the case. Indeed,
since November 7, 1995, through defendant DLJ, defendant
First Bank System has been an enormous buyer of First
Bank System stock, accounting for 47% of the total volume
of First Bank System stock for the trading days from
November 6, 1995 through November 15, 1995, in purchases
totalling approximately 2.4 million to 2.7 million
shares. Specifically, First Bank System, through DLJ,
bought more than half of all First Bank System shares
traded on four of those trading dates; nearly two-thirds
of all shares traded on November 7, 1995 (the day after
the announcement); yet, bought zero shares the four
trading days prior to the November 6, 1993 announcement.
Furthermore, those trades have, circumspectly, been timed
so that purchases are made by First Bank System through
DLJ when its stock is declining in price--thus, keeping
the First Bank System stock artificially high. Upon
inquiry, First Bank System, through its spokesperson
Wendy Raway, publicly declined to say whether First Bank
System had been engaging in repurchase of its shares
since the announcement of its agreement with First
Interstate.
51. On the other hand, Wells Fargo has
publicly announced that it had affirmatively retrained
from any repurchasing of its own shares during the time
of this bidding competition for First Interstate.
52. On November 20, 1995, First Interstate
issued a press release, which was publicly disseminated,
announcing that the Board of Directors of First
Interstate, i.e., the Officer and Director Defendants,
had rejected the latest Wells Fargo bid and would be
moving forward with consummation of the proposed
transaction with defendant First Bank System. In that
press release, the Officer and Director Defendants made
the false representation to all First Interstate
shareholders, including plaintiff and the members of the
Class, that the Wells Fargo increased offer was "not In
the best interests of First Interstate and its
shareholders," while stating that the First Bank System
offer was in the best interests of First Interstate and
its shareholders. The Officer and Director Defendants
further instructed the First Interstate shareholders to
reject the Wells Fargo offer and not to tender their
shares to Wells Fargo.
53. Defendant Siart, on behalf of all of the
Officer and Director Defendants, issued an open letter to
the First Interstate shareholders, as follows:
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced
that it had entered into a merger agreement with
First Bank System, Inc. (FBS) pursuant to which
First Interstate would merge with a subsidiary of
FBS and each of your shares of First Interstate
common stock would be converted into 2.6 shares of
FBS common stock.
On November 13, 1995, Wells Fargo & Company
announced that it intended to commence an
unsolicited exchange offer in which holders of First
Interstate common stock would have the right to
exchange each of their shares for two-thirds of a
share of Wells common stock. (The Wells exchange
offer has not yet commenced and it may be several
weeks or longer before you receive any materials
with respect to it.) This announcement followed the
First Interstate Board's rejection of Wells' earlier
unsolicited proposal to merge with First Interstate
in a transaction in which First Interstate's
shareholders would receive .625 (or possibly .65)
shares of Wells common stock for each First
Interstate share.
Your Board of Directors believes that the
merger with FBS is in the best interests of First
Interstate and its shareholders. Accordingly, the
Board recommends that you reject the Wells Fargo &
Company exchange offer and, when and if such offer
is commenced, not tender any of your shares to Wells
Fargo.
Your Board's consideration of Wells Fargo's
revised Proposal and the FBS merger follows an
extensive process of evaluating the company's
strategic alternatives for enhancing shareholder
value. This process began several months prior to
Wells' initial unsolicited bid and included
discussions and evaluations of several potential
merger possibilities, including one with Wells
Fargo. The record is clear. After Wells made its
initial takeover proposal public on October 18, on
behalf of your Board I engaged in extensive
discussions with Wells Fargo as well as with other
potential merger candidates. A full account of that
process is contained in the Schedule 14D-9 filed
today by First Interstate with the Securities and
Exchange Commission and enclosed with this letter.
The First Interstate Board believes that the
strategic combination of First Interstate and FBS
creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and
long-range value to you. Your Board and management
believe that this combination offers better value to
First Interstate's shareholders than the Wells
offer.
In reaching its determination to reaffirm the
FBS merger and recommend rejection of the Wells
offer, the First Interstate Board relied upon a
number of factors, including: -- the greater
earnings per share and cash flow per share of an FBS
combination compared to a Wells Fargo combination; -
- the higher dividends per share to be received by
First Interstate shareholders as a result of the FBS
merger than with a Wells Fargo combination; the
reduced credit risk resulting from operations in 21
states under the FBS merger as contrasted with the
substantially greater exposure to the California
market that would result from a merger with Wells; -
- the superior market position created by an FBS
merger -- a top three ranking, in terms of deposit
market share, in ten states -- as opposed to
increasing First Interstate's top three ranking in
only one state in a Wells merger; -- the substantial
loss of revenue, as compared to Wells' public
statements, that would result from Wells' proposed
branch closings, other cost saving measures and
antitrust divestitures (revenue losses not present
in the FBS merger); -- the dependence of the value
of the Wells offer on Wells' sustaining its high
price-to-earnings ratio relative to other high
quality bank stocks, including FBS; -- Wells' use of
purchase accounting for the transaction, which
creates additional goodwill in excess of $7 billion,
which would substantially reduce future earnings and
returns on equity; and -- the opinions of First
Interstate's independent financial advisors, Goldman
Sachs & Co. and Morgan Stanley & Co. Incorporated,
that the exchange ratio of the FBS merger is fair to
First Interstate shareholders.
We understand very well why our highly
successful multi-state franchise, with its operating
scope and strengths, is attractive to Wells Fargo.
Our concern is not with Wells interests but the
strategic alternative that is best for you.
We expect the First Interstate/FBS combined
company to achieve 1997 EPS accretion of 23% and a
return on equity of 27.5%, with virtually no
tangible book value dilution. Because cost
reductions would be achieved through bank office and
staff cuts and systems integration, they can be
accomplished quickly and with minimal impact to our
customers and revenue. Under pooling accounting,
the combined company will avoid the creation of
goodwill and still be able to continue returning
excess capital to shareholders through share
repurchases. The company will have a reduced risk
profile and an expanded foundation for future
business growth across our 21-state service
territory. It will have an exceptional, low-cost
deposit base and be a leader in pioneering
alternative delivery systems. And the combined
company will be the number one ranked bank in the
country in corporate cards, purchasing cards,
corporate trust and ATM/POS, in addition to being
among the top five banks in merchant card processing
and asset management.
Your Board and management are convinced that
the FBS merger is a winning combination for the
long-term benefit of our shareholders. It is
unfortunate that a respected institution like Wells
Fargo would jeopardize its reputation by ignoring
your Board of Directors' carefully considered
decision and choosing instead to recklessly pursue
its hostile takeover proposal. We will not be
deterred or distracted from completing our pending
merger with First Bank on your behalf.
A more detailed description of the factors
considered by your Board of Directors is contained
in the Schedule 14D-9. We urge you to read it
carefully and in its entirety so that you will be
fully informed as to the Board's recommendation.
The date of the special meeting of First
Interstate shareholders which will be called to
consider the proposed merger with FBS has not yet
been set. First Interstate is not soliciting
proxies from shareholders with respect to the FBS
merger at this time. A Joint Proxy
Statement/Prospectus of First Interstate and FBS
will be mailed to the Company's shareholders in
connection with the special meeting of each
company's shareholders which will be called to vote
upon the merger.
On behalf of the Board of Directors,
William E. B. Siart
Chairman and Chief Executive Officer
54. The letter to the shareholders set forth
in the preceding paragraph incorporates by reference the
Schedule 14d-9 filed by the Officer and Director
Defendants on or about November 20, 1995. The Schedule
14d-9 also contains similar representations as set forth
in the letter to the shareholders.
55. Grundhofer of defendant First Bank System
quickly followed with a public statement, supporting the
decision and statement of the Officer and Director
Defendants: "The continued support of the people who
serve on the Board of First Interstate is gratifying and
welcome news. We thank them for sharing our conviction
that the union of First Bank System and First Interstate
is clearly in the best interests of shareholders,
employees and the communities we serve."
56. As to November 20, 1995, the competing
offers were valued at approximately $10.4 billion for the
First Bank System bid and approximately $10.7 billion for
the Wells Fargo bid.
FIRST CAUSE OF ACTION
Violation of Section 14(e) of the Securities Exchange Act
(Direct Liability of All Defendants)
57. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above as though fully set forth
hereinafter.
58. Defendants, and each of them violated
federal securities law, 15 U.S.C. SECTION78n(e), Section 14(e)
of the Securities Exchange Act of 1934, in that
defendants and each of them, made an untrue statement or
a material fact or omitted to state a material fact
necessary in order to make the statements made, in the
light of the circumstances under which they are made, not
misleading, or engaged in a fraudulent, deceptive or
manipulative act or practice, in connection with the
tender offer or request or invitation for lenders, or a
solicitation of First Interstate shareholders in
opposition to such offer, request, or invitation of Wells
Fargo and in favor of such offer, request, or invitation
of First Bank System. The false and misleading
representations and omissions by defendants include, but
are not limited to, the November 20th letter to the
shareholders, the Schedule 14d-9, press releases and
public statements regarding the tender offers. The
fraudulent deceptive or manipulative acts or practices of
the defendants include, but are not limited to, the
carefully timed purchases of First Bank System stock by
defendant First Bank System through its broker defendant
DLJ which were intended to and did manipulate and
artificially inflate the market price of First Bank
System in order to inflate the value of First Bank
System's offer and proposed stock swap merger transaction
with First Interstate, particularly as compared with the
stock swap offer by Wells Fargo.
59. In doing the acts, practices, and
omissions complained of herein, defendants, and each of
them, acted with an intent to deceive, manipulate or
defraud, or were reckless.
60. As a result of the violation of Section
14(e) by the defendants, and each of them, plaintiff and
the members of the Class, and each of them, sustained
losses and were damages, are also entitled to prejudgment
interest at the appropriate legal rate.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
SECOND CAUSE OF ACTION
Violation of Section 14(e) of the Securities Exchange Act
and Rule 14a-9 Promulgated by the SEC
(Direct Liability of All Defendants)
61. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above aa though fully set forth
hereinafter.
62. Defendants, and each of them, violated
federal securities law, 13 U.S.C. SECTION78n(e), Section 14(a)
of the Securities Exchange Act of 1934, and Rule 14a-9
promulgated thereunder by the Securities and Exchange
Commission, in that defendants, and each of them,
solicited or permitted the use of his name to solicit a
proxy or consent or authorization in respect to First
Interstate common stock, and which solicitation was, at
the time and in the light of the circumstances under
which it was made, false or misleading, or failed to
state a material fact necessary to make he statements
therein not false or misleading. The false and
misleading representations and omissions by defendants
include, but are not limited to, the November 20th letter
to the shareholders, the Schedule 14d-9, press releases
and public statements regarding the tender offers.
63. Defendants, and each of them, knew, or in
the exercise of reasonable discretion and due diligence
should have known, that these representations were false
and misleading and/or omitted to state material facts
necessary in order to make the statement made in light of
the circumstances under which they were made not
misleading.
64. In doing the acts, practices, and
omissions complained of herein, defendants, and each of
them, acted with an intent to deceive, manipulate or
defraud, or were reckless, or were negligent.
65. As a result of the violation of Section
14(a) and Rule 14a-9 by the defendant and each of them,
plaintiff and the members of the Class, and each of them,
sustained losses and were damages, are also entitled to
prejudgment interest at the appropriate legal rate.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
THIRD CAUSE OF ACTION
Breach of Fiduciary Duty
(Direct and Secondary Liability of the Officer
and Director Defendants; Secondary Liability of Defendant
First Bank System)
66. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above as though fully set forth
hereinafter.
67. The Officer and Director Defendants, and
each of them, owed to plaintiff and the Class, as First
Interstate shareholders, a fiduciary duty of the highest
good faith, integrity and fair dealing, and said
fiduciary relationship existed at all relevant times
herein.
68. The Officer and Director Defendants, and
each of them, breached their fiduciary duties to
plaintiff and the Class by the acts and omissions set
forth above.
69. The Officer and Director Defendants, and
each of them, committed the acts and omissions alleged
herein with the intent to gain an advantage over
plaintiff and the Class and to benefit themselves to the
detriment of plaintiff and the Class.
70. The breaches of fiduciary duty by the
officer and Director Defendants, and each of theme caused
detriment to plaintiff and the Class, including beat not
limited to (i) the wrongful dissipation of assets by the
Officer and Director Defendants obligating First
Interstate to a "poison pill" provision with defendant
First Bank System providing a break-up fee of $200
million; (ii) refusing to accept or support the offer
which provides the greatest return to the First
Interstate shareholders and is in their best interets;
(iii) by refusing to accept or support any offer which
does not protect the Officer and Director Defendants' own
positions of power, prestige and money; and (iv) by not
making available, fully and fairly, to the First
Interstate shareholders, all of the offers that have been
made and the terms thereof so that they can make an
informed decision regarding the offers.
71. Defendant First Bank System aided and
abetted, encouraged and rendered substantial assistance
in accomplishing the breaches of fiduciary duties
committed by the Officer and Director Defendants, and
each of them. Without the involvement of and agreement
by defendant First Bank System to act as a "white knight"
merger partner to First Interstate, the Officer and
Directors Defendants could not accomplish their wrongful
goals, including the retention or obtaining of lucrative
positions with the ultimately existing corporation and
bank. In return of its granting of preferential, job-
saving provisions to the Officer and Director Defendants,
and the making of a merger offer (although less than any
other offer made to date), defendant First Bank System is
to receive ownership of First Interstate at a reduced
"price", and defendant First Bank System is pledged to
receive $200 million if the deal with First Interstate
does not go through. In taking action, as particularized
herein, to aid and abet and substantially assist the
commission of those wrongful acts and other wrongdoings
complained of, defendant First Bank System acted with an
awareness of its primary wrongdoing and realized that its
conduct would substantially assist the accomplishment of
the wrongful conduct, wrongful goals, and wrongdoing.
72. The Officer and Director Defendants, and
each of them, aided and abetted, encouraged and rendered
substantial assistance in accomplishing the wrongful
Conduct and their wrongful goals and other wrongdoing
complained of herein. In taking action, as
particularized herein, to aid and abet and substantially
assist the commission of these wrongful acts and other
wrongdoings complained of, each of the defendants acted
with an awareness of his primary wrongdoing and realized
that his conduct would substantially assist the
accomplishment of the wrongful conduct, wrongful goals,
and wrongdoing.
73. Defendants, and each of them, pursued a
conspiracy, common enterprise and common course of
conduct ta accomplish the wrongs complained of herein.
The purpose and effect of the conspiracy, common
enterprise and common course of conduct complained of
was, inter alia, to allow continuing monetary and non-
monetary benefits to defendants, and to allow continuing
control of First Interstate operations by the Officer and
Director Defendants, to the detriment of plaintiff and
the Class. Defendants accomplished their conspiracy,
common enterprise and common course of conduct by making
misrepresentations and concealing information, as
specified herein, and by breaching their fiduciary
obligations, and by taxing steps and making statements in
furtherance of their wrongdoing as specified herein.
Each defendants was a direct, necessary and substantial
participant in the conspiracy, common enterprise and
common course of conduct complained of herein, and was
aware of his/its overall contribution to, and furtherance
of the conspiracy, common enterprise and common course of
conduct. Defendants' acts of conspiracy include, inter
alia, all of the acts that each of them are alleged to
have committed in furtherance of the wrongful conduct
complained of herein, except those relating to the
reaching of agreements or understandings sufficient to
characterize their conduct as conspiratorial.
74. Other persons and entities not named as
defendants herein were also participants in the
conspiracy alleged and acted in furtherance of the
objectives of the conspiracy as co-conspirators.
75. As a result of the defendants', and each
of their, wrongful conduct, plaintiff and the other
members of the Class have sustained and will sustain
economic losses and other general and specific damages,
including but not limited to the amounts which the First
Interstate shareholders could have received if the
highest offer had boon accepted and supported by the
defendants, and the amount of the $200 million "poison
pill" which potentially will reduce the assets of First
Interstate, loss of future income, and lost profits, all
in an amount to be determined according to proof.
76. The wrongful acts of defendants, and each
of them, were done maliciously, oppressively, and
fraudulently and plaintiff and the other members of the
Class are entitled to punitive and exemplary damages in
an amount to be ascertained according to proof, which is
appropriate to punish or set an example of the
defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
FOURTH CAUSE OF ACTION
Abuse of Control
(Direct and Secondary Liability of the Officer and
Director Defendants; Secondary Liability of Defendant
First Bank System)
77. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above an though fully set forth
hereinafter.
78. The Officer and Director Defendants, and
each of them, dominated and controlled the business and
corporate affairs of First Interstate through the
corporate positions, relationship with the other
defendants, personal stock ownership, and their control
over other related entities and shareholders. There
exists an imbalance and disparity of knowledge and
economic power between the Officer and Director
Defendants, and the Plaintiff class. In doing the acts
alleged hereinbefore, the defendants, and each of them,
have acted to further their own private financial
interests to the detriment of the interests of plaintiff
and the Class, in flagrant abase of their positions of
corporate control.
79. The Officer and Director Defendants, and
each of them, caused detriment to plaintiff and the Class
by their abuses of control, including but not limited to
(i) the wrongful dissipation of assets by the defendants
obligating First Interstate to a "poison pill" provision
with defendant First Bank System providing break-up fee
of $200 million, (ii) not attempting to realize the
highest recovery possible for the First Interstate
shareholders in sale or merger of First Interstate; (iii)
by refusing to accept or support any offer which does not
protect defendants' own positions of power, prestige and
money; and (iv) by not making available, fully and
fairly, to the First Interstate shareholders, all of the
offers that have been made and the terms thereof so that
they can make an informed decision regarding the offers.
80. The Director and Officer Defendants, and
each of them, knew that the acts of the other defendants
constituted a breach of duty and an abuse of control.
Nevertheless, each Director and Officer Defendants
conspired and acted in concert with the other defendants
to accomplish the improper acts and transactions alleged.
Defendants' actions were illegal and improper, and are in
furtherance of the Common design to achieve the unlawful
purpose of the conspiracy. Each of the Director and
Officer Defendants had knowledge of the conspiracy and
its unlawful purpose.
81. Defendant First Bank System aided and
abetted, encouraged and rendered substantial assistance
in accomplishing the abuses of control committed by the
Officer and Director Defendants, and each of them.
Without the involvement of and agreement by defendant
First Bank System to act as a "white night" merger
partner to First Interstate, the Officer and Directors
Defendants could not accomplish their wrongful goals,
including the retention or obtaining of lucrative
position with the ultimately existing corporation and
bank. In return of its granting of preferential, job-
saving provisions to the Officer and Director Defendants,
and the making of a merger offer (although less than any
other offer made to date), defendant First Bank System is
to receive ownership of First Interstate at a reduced
"price", and defendant First Bank System is pledged to
receive $200 million if the deal with First Interstate
does not go through. In taking action, as particularized
herein, to aid and abet and substantially assist the
commission of these wrongful acts and other wrongdoings
complained of, defendant First Bank System acted with an
awareness of its primary wrongdoing and realized that its
conduct would substantially assist the accomplishment of
the wrongful conduct, wrongful goals, and wrongdoing.
82. The Officer and Director Defendants, and
each of them, aided and abetted, encouraged and rendered
substantial assistance in accomplishing the wrongful
conduct and their wrongful goals and other wrongdoing
complained of herein. In taking action, as
particularized herein, to aid and abet and substantially
assist the commission of these wrongful acts and other
wrongdoings complained of, each of the defendants acted
with an awareness of his primary wrongdoing and realized
that his conduct would substantially assist the
accomplishment of the wrongful conduct, wrongful goals,
and wrongdoing.
83. Defendants, and each of them, pursued a
conspiracy, common enterprise and common course of
conduct to accomplish the wrongs complained of herein.
The purpose and effect of the conspiracy, common
enterprise and common course of conduct complained of
was, inter alia, to allow continuing monetary and non-
monetary benefits to defendants, and to allow continuing
control of First Interstate operations by defendants, to
the detriment of plaintiff and the Class. Defendants
accomplished their conspiracy, common enterprise and
common course of conduct by making misrepresentations and
concealing information, as specified herein, and by
breaching their fiduciary obligations, and by taking
steps and making statements in furtherance of their
wrongdoing an specified herein. Each defendant was a
direct, necessary and substantial participant In the
conspiracy, common enterprise and common course of
conduct complained of herein, and was aware of his/its
overall contribution of and furtherance of the
conspiracy, common enterprise and common course of
conduct. Defendants' acts of conspiracy include, inter
alia, all of the acts that each of them are alleged to
have committed in furtherance of the wrongful conduct
complained of herein, except those relating to the
reaching of agreements or understandings sufficient to
characterize their conduct as conspiratorial.
84. Other persons and entities not named as
defendants herein were also participants in the
conspiracy alleged and acted in furtherance of the
objective of the conspiracy an co-conspirators.
85. As a result of the defendants', and each
of their, wrongful conduct, plaintiff and the other
members of the Class have sustained and will sustain
economic losses and other general and specific damages,
including but not limited to the amounts which the First
Interstate shareholders could have received if the
highest offer had been accepted and supported by the
defendants, and the amount of the $200 million "poison
pill" which potentially will reduce the assets of First
Interstate, loss of future income, and lost profits, all
in an amount to be determined according to proof.
86. The wrongful acts of the defendants, and
each of them, were done maliciously, oppressively, and
fraudulently, and plaintiff and the other members of the
Class are entitled to, punitive and exemplary damages in
an amount to be ascertained according to proof, which is
appropriate to punish or set an example of the
defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
FIFTH CAUSE OF ACTION
Unfair Business Practices
(Direct and Secondary Liability of All Defendants)
87. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above as though fully set forth
hereinafter.
33. By their wrongful conduct, as set forth
above, defendants, and each of them, have engaged in
unfair competition including unlawful, unfair or
fraudulent business practice, in violation of business
and Professions Code section 17200 et seq., and have
destroyed or prevented fair and honest competition for
the purchase of First Interstate common stock as part of
a merger or acquisition of First Interstate.
88. Defendants, and each of them, aided and
abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful
goals and other wrongdoing complained of herein. In
taking action, as particularized herein, to aid and abet
and substantially assist the commission of these wrongful
acts and other wrongdoings complained of, each of the
defendants acted with an awareness of his or its primary
wrongdoing and realized that his/its conduct would
substantially assist the accomplishment of the wrongful
conduct, wrongful goals, and wrongdoing.
89. Plaintiff and the Class have standing to
bring this cause of action for injunctive relief,
pursuant to California Business & Professions Code
Section 17203.
90. If defendants, and each of them, proceed
with a merger between First Interstate and defendant
First Bank System at the price offered by First Bank
System, it will irreparably harm the First Interstate
shareholders, namely plaintiff and the Class, unless
appropriate Injunctive relief is granted. If defendants,
and each of them, proceed with payment of a $200 million
break up fee pursuant to the "poison pill" provision of
the agreement between First Interstate and defendant
First Bank System, it is will irreparably harm the First
Interstate shareholders, namely plaintiff and the Class,
unless appropriate injunctive relief is granted.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
SIXTH CAUSE OF ACTION
Unjust Enrichment
(Direct Liability of All Defendants, Except
Defendant DLJ)
91. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above as though fully set forth
hereinafter
92. If defendants, and each of them, proceed
with a merger between First Interstate and defendant
First Bank System at the price offered by first Bank
System, rather than accepting the higher offer(s) by
Wells Fargo, or soliciting and attempting to obtain the
highest offer possible for the benefit of the First
Interstate shareholders, because the Officer and Director
Defendants want to keep and obtain personal and financial
benefits for themselves instead, this would be an unjust
enrichment to the Officer and Director Defendants, and
each of theme to the detriment of plaintiff and the
Class.
93. If defendant First Bank System obtains
payment of a $200 million break up fee pursuant to the,
"poison pill" provision of the agreement between First
Interstate and defendant First Bank System, for which
compensation defendant First Bank System is not entitled,
has not earned, and is not the result of any benefit to
the First Interstate shareholders, this would be an
unjust enrichment to defendant First Bank System, to the
detriment of plaintiff and the Class.
94. Any unjust enrichment obtained by the
defendants, and each of them, should be disgorged, and
placed in trust for the financial benefit of plaintiff
and the Class.
WHEREFORE, plaintiff and the Class pray for
relief as set forth below.
SEVENTH CAUSE OF ACTION
Constructive Fraud
(Direct and Secondary Liability of the
Officer and Director Defendants)
95. Plaintiff hereby incorporates by reference
paragraphs 1 through 56 above as though fully set forth
hereinafter.
96. As a result of the tortious conduct of the
officer and Director Defendants, and each of them, as set
forth above, and because of the fiduciary relationship
between First Interstate shareholders and these
defendants, the Officer and Director Defendants are
liable to plaintiff and the Class for constructive fraud.
97. The Officer and Director Defendants, and
each of them, aided and abetted, encouraged and rendered
substantial assistance in accomplishing the wrongful
conduct and their wrongful goals and other wrongdoing
complained of herein. In taking action, as
particularized herein, to aid and abet and substantially
assist the commission of these wrongful acts and other
wrongdoings complained of, each of the defendants acted
with an awareness of his primary wrongdoing and realized
that his conduct would substantially assist the
accomplishment of the wrongful conduct, wrongful goals,
and wrongdoing.
98. As a result of the Officer and Director
Defendants', and each of their, wrongful conduct,
plaintiff and the Class have suffered and continue to
suffer economic losses, and other general and specific
damages, all in an amount to be determined according to
proof at time of trial.
WHEREFORE, plaintiff and the Class pray for
relief as follows:
1. Compensatory and general damages according
to proof;
2. Special damages according to proof;
3. Prejudgment interest at the maximum legal
rate;
4. Punitive and exemplary damages according
to proof;
5. For injunctive relief
6. Costs of the proceedings herein;
7. Reasonable attorneys' fees; and
8. All such other and further relief as the
Court deems just.
DATED: November 24, 1995 BLECHER & COLLINS, P.C.
By: ________________________
MAXWELL M. BLECHER
COTCHETT & PITRE
By: ________________________
MARIE SETH WEINER
Attorneys for Plaintiff and
the Class
JURY DEMAND
Plaintiff TIMOTHY W. BRADLEY, individually and on
behalf of all others similarly situated, demands a trial by jury.
DATED: November 24, 1995 BLECHER & COLLINS, P.C.
By: ________________________
MAXWELL M. BLECHER
COTCHETT & PITRE
By: ________________________
MARIE SETH WEINER
Attorneys for Plaintiff and
the Class
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
SALLIE A. BLACKMAN (141830)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
SULLIVAN, HILL, LEWIN
& MARKHAM (71814)
550 West C Street
Suite 1500
San Diego, CA 92101-3540
Telephone: 619/233-4100
BLUMENTHAL & OSTROFF
NORMAN BLUMENTHAL (068687)
1420 Kettner Blvd., 7th Floor
San Diego, CA 92101-2431
Telephone: 619/239-7373
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
JOSEPH M. THORNHILL, On Behalf ) Case No. BC139252
of Himself and All Others )
Similarly Situated )
) CLASS ACTION
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT FOR
) BREACH OF FIDUCIARY DUTY,
JOHN E. BRYSON, DON C. ) ABUSE OF CONTROL, UNJUST
FRISBEE, STEVEN B. SAMPLE, ) ENRICHMENT, INTERFERENCE
EDWARD M. CARSON, GEORGE M. ) WITH PROSPECTIVE ECONOMIC
KELLER, FORREST N. SHUMWAY, ) ADVANTAGE AND EQUITABLE
JEWEL PLUMMER COBB, W.F. ) RELIEF AND DAMAGES
KIESCHNICK, WILLIAM B. SIART, )
RALPH P. DAVIDSON, THOMAS L. )
LEE, RICHARD J. STEGEMEIER, ) Plaintiff Demands A
MYRON DuBAIN, WILLIAM F. ) Trial By Jury
MILLER, DANIEL M. TELLEP and )
J.J. PINOLA, )
)
)
Defendants.
Plaintiff, as and for his complaint, alleges as follows
upon information and belief except as to paragraph 4, which is
alleged upon knowledge. Plaintiff's information and belief is
based upon, inter alia, the investigation made by Plaintiff by
and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking
equitable relief and compensatory damages on behalf of all
shareholders of First Interstate Bancorp ("First Interstate" or
the "Company") against First Interstate's top officers and the
members of the board of Directors of First Interstate, seeking to
remedy violations of state law arising out of these defendants'
actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co.
("Wells Fargo"). First Interstate's board of Directors has
pursued a course of conduct intended to and having the effect of
making it extremely difficult for any outside party to
successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This
course of conduct has been undertaken by the defendants to secure
and retain their lucrative positions of power, prestige and
profit with respect to First Interstate and to enhance and
aggrandize their own interests at the expense of First
Interstate's other shareholders.
2. On October 18, 1995, Wells Fargo, a highly
successful, profitable and well-capitalized bank, made an offer
to acquire First Interstate at a price far in excess of First
Interstate'S then-market price, by exchanging in a tax-free
exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the
October 17, 1995 closing price of Wells Fargo stock of $213.62
per share. First Interstate'S stock jumped from $106 per share
to $140 per share upon this announcement, while Wells Fargo's
stock increased to $228.65 per share, making the offer worth
$142.65 per First Interstate share. However, the defendants are
rejecting such offer and have refused to negotiate an acquisition
of the Company at any higher price, even though Wells Fargo has
told First Interstate's board it is willing to negotiate a higher
price and thus to offer a fair and reasonable price for First
Interstate stock, well above the levels at which the stock has
traded historically.
3. In recent years, defendants have consistently
refused to entertain highly favorable acquisition offers or
overtures for First Interstate, thus preventing an acquisition of
the Company at a favorable price for the shareholders.
Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in
the event First Interstate is acquired. Defendants' interests in
holding on to their positions of power, prestige and profit as
officers and directors of First Interstate far exceeds their
interests as shareholders in First Interstate, as they
collectively own only about 144,000 of First Interstate'S 75.7
million shares -- a minuscule .001% of its outstanding stock.
PARTIES AND ACTORS
4. Plaintiff Joseph M. Thornhill, a resident of
California and the owner of 100 shares of First Interstate, is
and was at all times relevant hereto a common shareholder of
First Interstate. Plaintiff brings this action on behalf of the
holders of the common stock of First Interstate for injunctive
and other relief in connection with the proposed acquisition of
First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its
principal executive offices in Los Angeles, California and which
operates principally in California, as well as several other
western states. First Interstate is a bank holding company.
(b) At December 31, 1994, it owned 16 banks (the
"subsidiary banks") which operated approximately 1,100 banking
offices in 13 states, including California. Ranked according to
assets, the Company was the fourteenth largest commercial banking
organization in the United States at December 31, 1994, having
total deposits of $48.4 billion and total assets of $55.8
billion.
(c) The subsidiary Banks accept checking, savings
and other time deposit accounts and employ these funds
principally by making consumer, real estate and commercial loans
and investing in securities and other interest-bearing assets.
(d) The Company also provides banking-related
financial services and products. These include asset-based
commercial financing, asset management and investment counseling,
bank card operations, mortgage banking, venture capital and
investment products. It engages in these activities both through
non-bank subsidiaries of the Company and through the Subsidiary
Banks and their subsidiaries.
(e) The larger Subsidiary Banks provide
international banking services on a limited basis through the
international departments of their domestic offices. They also
maintain correspondent relationships with major banks throughout
the world.
6. (a) Defendant John E. Bryson ("Bryson") was a
director of First Interstate and Board Chairman and Chief
Executive Officer of SCEcorp and Southern California Edison
Company at all times relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a
First Interstate director and Chairman Emeritus PacifiCorp at all
times relevant hereto.
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was
Chairman of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a
director of First Interstate and the retired Chairman and Chief
Executive Officer of Chevron Corporation at all times relevant
hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was
a director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a
director of First Interstate and president Emeritus California
State University, Fullerton at all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was
a director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was
President and Chief Executive Officer First Interstate and a
director at all times relevant hereto.
(j) Defendant Ralph P. Davidson ("Davidson") was
a director of First Interstate and former Chairman of The John F.
Kennedy Center for the Performing Arts at all times relevant
hereto.
(k) Defendant Thomas L. Lee ("Lee") was a
director of First Interstate and Chairman and Chief Executive
Officer The Newhall Land and Farming Company at all times
relevant hereto.
(1) Defendant Richard J. Stegemeier
("Stegemeier") was a director of First Interstate and Chairman of
the Board Unocal Corporation at all times relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a
director of First Interstate and retired Chairman and Chief
Executive Officer Fireman's Fund Corporation at all times
relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI
International at all times relevant hereto.
(o) Defendant Daniel M. Tellep ("Tellep") was a
director of First Interstate and Chairman and Chief Executive
Officer Lockheed Corporation at all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola") was the
retired Chairman and Chief Executive Officer of First Interstate
and a director at all times relevant hereto.
7. Defendants (hereinafter collectively referred to
as the "Individual Defendants") are each members of First
Interstate's Board of DirectorS.
8. The individual Defendants owed and owe First
Interstate's public shareholders fiduciary obligations and were
and are required to: (i) use their ability to manage First
Interstate in a fair, just and equitable manner; (ii) act in
furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv)
govern First Interstate in such a manner as to heed the expressed
views of its public shareholders; (v) refrain from abusing their
positions of control, power, prestige and profit; and (vi) not
favor their own interests at the expense of First Interstate and
its shareholders. By reason of their fiduciary relationships,
these defendants owed and owe plaintiff and other members of the
Class the highest obligation of good faith, fair dealing, loyalty
and due care.
9. Wells Fargo is a corporation with its principal
executive offices in San Francisco, California. Wells Fargo is a
huge bank holding company and one of the most well-managed,
profitable and well-capitalized banks in the United States. With
more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express ATMs and a popular 24-hour telephone banking service,
Wells Fargo operates one of the largest and busiest consumer
banking businesses in the United States. Besides serving as
banker to some 3.5 million California households, Wells Fargo
provides a full range of banking services to commercial,
agribusiness, real estate and small business customers, mainly in
California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds,
with approximately $57 billion in assets under its management and
administration.
10. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his capacity as
a director of the Company, and the liability of each arises from
the fact that he has engaged in all or part of the unlawful acts,
plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except
defendants herein and any person, firm, trust, corporation or
other entity related to, controlled by or affiliated with any of
the defendants and any of their successors in interest (the
"Class")
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
Interstate had over 75 million shares of common stock outstanding
owned by over 20,000 shareholders. Members of the Class are
scattered throughout the United States and are so numerous as to
make it impracticable to bring them all before this Court.
13. There are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common
questions include, inter alia, the following:
(a) Whether the Individual Defendants have
breached their fiduciary duties owed by them to plaintiff and the
other members of the Class;
(b) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to hold a fair
auction of the Company or its assets or to sell the Company on
the favorable terms;
(c) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to provide for a
sale of First Interstate;
(d) Whether Plaintiff and the other members of
the Class will be irreparably damaged if the Wells Fargo
acquisition iss not completed;
(e) Whether the Individual Defendants have
breached or aided and abetted the breach of the fiduciary and
other common law duties owed by them to Plaintiff and other
members of the Class; and
(f) Whether Plaintiff and other members of the
Class are being and will continue to be injured by the wrongful
conduct alleged herein and, if so, what is the proper remedy
and/or measure of damages.
14. The claims of Plaintiff are typical of the claims
of other members of the Class and plaintiff has no interests that
are adverse or antagonistic to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution
of this action and has retained competent counsel experienced in
litigation of this nature. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is
superior to any other method available for the fair and efficient
adjudication of this controversy since it would be impractical
and undesirable for each of the members of the Class who has
suffered or will suffer damages to bring separate actions in
various parts of the country. Classwide remedies will assure
uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an
interstate banking corporation. First Interstate's stock
performed poorly in 1994 through mid-1995, due to First
Interstate'S lackluster performance and perceptions that it was
poorly managed. For instance, First Interstate's stock traded at
a high of $85 per share and then fell, falling to a low of $67
per share in December 1994. First Interstate did not reach $85
per share again until mid-1995. After June 1995, First
Interstate's stock performed better, reaching over $100 per share
in late September 1995, due to an increase in the prices in bank
stocks generally and because of rumors that a favorable
acquisition offer for First Interstate would be forthcoming as
part of the wave of bank acquisitions and mergers now sweeping
the United States. However, even with this increase, First
Interstate's stock has been a relatively poor performer when
compared to other bank stocks. Because in recent years First
Interstate has not been viewed to be as well-managed as many
other large banks and thus has not performed as well in terms of
many of its key ratios and measurements of success as other
banks, its stock has not performed well and thus, shareholders in
First Interstate have, in recent years, obtained a below industry
trendline or industry average return. The chart below shows the
price action of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First
Interstate for the period December 31, 1993 through October 17,
1995. Because the document for which this Complaint is an
Exhibit has been filed with the Securities and Exchange
Commission by electronic transmission, this graph is not
contained herein. The following information summarizes the First
Interstate daily closing stock price, plotted along the graph's
vertical axis, for the dates indicated on the horizontal axis of
the graph:
Date Common Stock Price
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial
institutions have approached First Interstate with favorable
acquisition inquiries and offers. Some years ago, Bank of
America approached First Interstate about a possible acquisition.
Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium
price. First Interstate's Board and its top management have
rejected and frustrated all of these prior acquisition overtures
and offers, even though those offers would have resulted in First
Interstate shareholders receiving a substantial premium over the
then-market price of First Interstate stock. Defendants have
done this because they know that in the event First Interstate is
acquired by another bank, most or all of the directors of First
Interstate will, either in connection with the acquisition or
shortly thereafter, be removed from the Board of the surviving
bank because their services will not be necessary and they will
be mere surplusage and thus such an acquisition would bring an
end to their positions of power, prestige and profit as directors
of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and
offers to be rejected and/or frustrated, because they also know
that, in the event of an acquisition, they will also lose their
lucrative jobs and their prestigious positions of power, prestige
and profit as officers of a major banking institution. In so
acting, these defendants have been aggrandizing their own
personal positions and interests over that of First Interstate
and its broader shareholder community to whom they owe fiduciary
duties to bring about a sale of First Interstate on favorable
terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo
approached First Interstate and offered to negotiate an
acquisition of First Interstate for a price far in excess of
First Interstate's current stock price. First Interstate's
Chairman refused this offer and told Wells Fargo that First
Interstate's Board would not negotiate to sell the bank and would
resist any offer by Wells Fargo to buy the bank. On October 18,
1995, Wells Fargo made an unsolicited acquisition offer for First
Interstate offering to exchange .625 shares of its stock for each
share of First Interstate stock, a $133.50 per share offer based
on the October 17, 1995 closing price of Wells Fargo stock of
$213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed
from $106 per share to over $140 per share, reflecting the
extremely large premium being offered to First Interstate
shareholders in this tax-free exchange, and the increase in Wells
Fargo's stock price to $228 per share making the offer worth $142
per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book
value, which is a high offer compared to recent bank acquisition
prices. The acquisition price is also approximately 12.1 times
First Interstate's estimated 1995 earnings per share of $11.29
per share, which is also reasonable in light of other recent bank
acquisitions, although it is lower than 15 times the estimated
next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First
Interstate's officers and directors that they are willing and
will increase the price of their offer to acquire First
Interstate if First Interstate's Board will cooperate in bringing
about a consensual acquisition. However, First Interstate'S top
officers and its Board are resisting and are going to continue to
resist this acquisition offer so that they can, as they have in
the past, retain themselves in their positions of power, prestige
and profit. For instance, members of First Interstate's Board of
Directors own only a minuscule portion of First Interstate's
outstanding common stock. They actually own only 144,000 shares
of First Interstate's 75.7 million shares of outstanding common
stock, or just .001% of the stock. Thus, whatever interest the
defendants have as shareholders in First Interstate based on
their minuscule holdings of the Company's stock is far outweighed
by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the
Company from which they receive lucrative fees, prestige in the
community, large salaries, and other emoluments of office, which
they will lose if First Interstate is acquired.
22. The rejection of the Wells Fargo offer is a breach
of defendants' fiduciary duties, an abuse of control, provides
unjust enrichment to all defendants, is an unfair business
practice and has been perpetrated through tortious interference
with the class members' prospective economic interests and
opportunities and through material misrepresentations and the
failure by defendants to disclose material information to the
members of the Class.
23. Unless defendants are enjoined form refusing to
negotiate a sale of First Interstate, plaintiff and the members
of the Class will continue to suffer injury. Plaintiff and the
members of the Class have no adequate remedy at law.
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their
fiduciary duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells
Fargo's offer, knew that the market price of First Interstate
stock reflected both the intrinsic value of First Interstate and
a premium which resulted from market expectations that Wells
Fargo's efforts to acquire control of First Interstate would
produce greater returns for investors.
27. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which
directors and officers owe to their shareholders, and thereby
breached their fiduciary duties to plaintiff and other members of
the Class.
30. Defendants, at the time they rejected Wells
Fargo's offer, knew or should have known, that the market price
of First Interstate stock at the time reflected both the
intrinsic value of First Interstate and a premium which resulted
from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce greater returns for
investors.
31. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
32. Defendants did the things alleged herein without
exercising the reasonable and ordinary care owed by corporate
directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference 1-23 above.
34. The Individual Defendants owed duties as
controlling persons and/or as controlling or dominant directors
to plaintiff and the other members of the Class not to use their
positions of control of First Interstate for their own personal
interests and contrary to the interests of First Interstate's
remaining shareholders.
35. The foregoing conduct by the director defendants
amounted to an abuse of their abilities to control First
Interstate in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other
members of the Class have been damaged and will continue to be
damaged unless defendants are enjoined, and defendants are each
jointly and severally liable to plaintiff and the other members
of the Class for all loss and damage they have suffered resulting
from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference 1-23 above.
38. As a proximate result of the tortious conduct
described above, all of the defendants have been and will be
unjustly enriched at the expense of the members of the Class.
The director defendants will retain control of First Interstate
and their positions of power, prestige and profit. Defendants
have obtained these unjust benefits at the expense of the members
of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference 1-23 above.
40. By reason, inter alia, of Wells Fargo's announced
offer to purchase First Interstate stock at $133+ a share,
plaintiff and the members of the Class had an expectancy that
they could tender their shares and realize at least the $133+ per
share offer. Moreover, all class members had the expectancy of
sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages
presented to plaintiff and the members of the Class and
defendants intended to interfere and did interfere with those
advantages when they rejected the Wells Fargo offer.
42. Plaintiff and the members of the Class were
prevented from obtaining the foregoing advantages as a result of
the conduct of all defendants described above.
43. The defendants, and each of them, did the things
alleged in this Complaint with the intent to injure plaintiff and
the members of the Class.
WHEREFORE, plaintiff and members of the Class demand
judgment against defendants as follows:
1. Declaring that this action is properly
maintainable as a class action and certifying plaintiff as the
representative of the Class;
2. Declaring that the defendants have breached and
are breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminarily and permanently enjoining the
defendants and their counsel, agents, employees and all persons
acting under, in concert with, or for them, from taking steps to
prevent or frustrate the sale to Wells Fargo or refusing to
proceed with negotiations with Wells Fargo to increase the
offered price;
4. Awarding compensatory damages against defendants
individually and severally in an amount to be determined at
trial, together with prejudgment interest at the maximum rate
allowable by law, arising from the proposed transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and experts
and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: November 16, 1995
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
________________________________
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
SULLIVAN, HILL, LEWIN
& MARKHAM
DAVID MARKHAM
550 West C Street
Suite 1500
San Diego, CA 92101-3540
Telephone: 619/233-4100
BLUMENTHAL & OSTROFF NORMAN
BLUMENTHAL
1420 Kettner Blvd., 7th Floor
San Diego, CA 92101-2431
Telephone: 619/239-7373
Attorneys for Plaintiff
