<PAGE>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities and Exchange Act of 1934
(Amendment No. 6)*
First Union Real Estate Equity and Mortgage Investments
- -------------------------------------------------------------------------------
(Name of Issuer)
Shares of Beneficial Interest
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(Title of Class of Securities)
337400-10-5
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(CUSIP Number)
Marc C. Krantz, Kohrman Jackson & Krantz,
1375 East 9th Street, Cleveland, Ohio 44114, 216-736-7204
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 7, 1995
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person s
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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<TABLE>
SCHEDULE 13D
CUSIP NO. 337400-10-5
<S> <C>
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Turkey Vulture Fund XIII, Ltd.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [x]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
BK,WC,OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
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NUMBER OF 7 SOLE VOTING POWER
SHARES 1,690,500
------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,690,500
------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,690,500
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*[ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.3%
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14 TYPE OF REPORTING PERSON*
OO
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</TABLE>
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CUSIP No. 337400-10-5
This Amendment No. 6 to Schedule 13D Statement is filed on behalf of TURKEY
VULTURE FUND XIII, LTD., an Ohio limited liability company (the "Fund"), for
the purpose of reporting (1) events relating to litigation commenced by First
Union Real Estate Equity and Mortgage Investments ("First Union"), and
(2) litigation commenced by Richard M. Osborne, sole managing member of the
Fund ("RMO"), and the Fund.
Item 4. Purpose of Transaction.
Item 4 is amended and supplemented as follows:
As previously reported, on February 3, 1995, First Union commenced an
action (the "First Union Action") in the U.S. District Court for the Northern
District of Ohio, Eastern Division, against RMO, the Fund, The Wolstein Group,
Inc., Bert Wolstein, Scott Wolstein, Heritage Capital Corporation, Developers
Diversified Realty Corporation, 2000 OCC Corp., 1600 CNB Corp., Mark P. Escaja,
Gerald E. Wedren and Craig Capital Co. (No. 1:95CV0274).
On November 1, 1995, the Fund and RMO commenced suit in Common Pleas Court
of Cuyahoga County, Ohio against First Union and its trustees (No.: 297673).
The Fund and RMO are seeking (1) an award of damages from First Union to them
exceeding $750,000 in compensatory damages and punitive damages in the amount
of $2 million for the abuse of process in proceeding with the First Union
Action after the inaccuracy of its allegations were apparent, (2) an award of
damages from First Union to them exceeding $200,000 in compensatory damages and
punitive damages in the amount of $600,000 for asserting claims under Section
14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (3) an award of damages to First Union of compensatory damages exceeding
$1.4 million and punitive damages in the amount of $4 million, jointly and
severally from each of the individual trustees of First Union, plus interest
and an award of costs and attorneys fees arising from the violation by the
trustees of their fiduciary duty to First Union and its shareholders. This
lawsuit restates in state court certain counterclaims previously filed by the
Fund and RMO in the First Union Action, but dismissed without prejudice in the
federal court First Union Action. The dismissal without prejudice permitted
the refiling in state court. The complaint of RMO and the Fund is attached
hereto as Exhibit 7.16, which Exhibit is hereby incorporated by reference.
On November 7, 1995, the court in the First Union Action dismissed all
remaining counts against The Wolstein Group, Inc., Bert Wolstein,
Scott Wolstein, Heritage Capital Corporation, and Developers Diversified Realty
Corporation. The case proceeds to trial on (1) the following counts of First
Union against RMO and the Fund: (i) the alleged violation of Section 13(d)
of the Exchange Act; (ii) the alleged violation of Section 14(d) of the
Exchange Act; (iii) the alleged violations of Section 14(e) of the Exchange
Act; (iv) the alleged violation of First Union's Declaration of Trust; (v) the
alleged intentional and malicious disparagement and interference with business
relationships and opportunities; and (vi) the alleged violation of First
Union's by-laws; and (2) the following counterclaims by RMO and the Fund
against First Union: (i) the alleged violation of Section 14(a) of the Exchange
Act; and (ii) alleged defamation. As previously reported, RMO and the Fund
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CUSIP No. 337400-10-5
vehemently deny all charges made by First Union and intend to contest the
charges vigorously. The only other remaining count in the First Union Action
is a claim by First Union against Mr. Escaja for the alleged violation of
Section 14(e) of the Exchange Act.
Due to the illness of RMO, the court in the First Union Action has
now set the trial date for January 3, 1996, on which date RMO is expected to be
available.
Item 7. Material to be Filed as Exhibits.
<TABLE>
<S> <C> <C>
Exhibit 7.16 -- Complaint filed November 1, 1995
</TABLE>
<PAGE>
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CUSIP No. 337400-10-5
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
TURKEY VULTURE FUND XIII, LTD.
Dated: November 14, 1995 /s/ Richard M. Osborne
----------------------
Richard M. Osborne
Managing Member
<PAGE>
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit 7.16 -- Complaint filed November 1, 1995 by RMO and
the Fund
</TABLE>
<PAGE>
<PAGE> 1
EXHIBIT 7.16
IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
RICHARD M. OSBORNE ) Case No.
8635 East Avenue )
Mentor, Ohio 44060 )
) Judge
-and- )
)
TURKEY VULTURE FUND XIII, )
LTD. )
8635 East Avenue )
Mentor, Ohio 44060 )
)
vs. )
)
JAMES C. MASTANDREA, )
First Union Realty Trust )
55 Public Square, Suite 1900 )
Cleveland, Ohio 44113 )
)
-and- )
)
FIRST UNION REAL ESTATE )
EQUITY AND MORTGAGE )
INVESTMENTS )
55 Public Square )
Suite 1900 ) COMPLAINT
Cleveland, Ohio 44113 ) (Jury Demand Endorsed Hereon)
)
-and- )
)
ALLEN H. FORD )
1666 Hanna Building )
1422 Euclid Avenue )
Cleveland, Ohio 44115 )
)
-and- )
)
OTES BENNET, JR. )
3460 S. Green Road, Apt. 202 )
Beachwood, Ohio 44112 )
)
-and- )
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DANIEL G. DEVOS )
Lanquest International )
201 Monroe N.W., Suite 500 )
Grand Rapids, Michigan 49503 )
)
-and- )
)
STEPHEN R. HARDIS )
Eaton Corp. )
1111 Superior Avenue, 19th Floor )
Cleveland, Ohio 44114-2584 )
)
-and- )
)
RUSSELL R. GIFFORD )
CNG Energy Services )
1 Park Ridge Ctr. )
P.O. Box 15746 )
Pittsburgh, Pennsylvania 15244 )
)
-and- )
)
E. BRADLEY JONES )
30195 Chagrin Boulevard )
Suite 104W )
Pepper Pike, Ohio 44124 )
)
-and- )
)
WILLIAM E. CONWAY )
Fairmount Minerals, LTD. )
11833 Ravenna Road )
Chardon, Ohio 44024 )
)
-and- )
)
KENNETH K. CHALMERS )
Executive Vice President )
Bank of America Illinois )
231 South LaSalle Street )
Chicago, Illinois 60697 )
)
Defendants. )
<PAGE>
<PAGE> 3
NATURE OF CASE
1. This action arises from a spurious lawsuit brought by a real estate
investment trust and its Board of Trustees in an attempt to silence a
potentially dissident shareholder. The Plaintiffs incurred more than $750,000
in damages as a result of this unjustified litigation, which the Defendants had
filed in United States District Court.
2. Under the Defendants' control, the Trust itself also expended at
least $1,432,000 of its shareholders' money in pursuing the baseless federal
case, which served only the personal interests of the Trustees, their cronies,
and the mercenary law firm they engaged to represent them.
3. On these grounds, the Plaintiffs individually seek both compensatory
and punitive damages under claims for abuse of process and malicious
prosecution. In their capacity as shareholders, the Plaintiffs have also sued
the individual Defendants for breach of fiduciary duty in connection with their
decision to embroil the Trust in a lawsuit having no legitimate purpose.
4. The Plaintiffs initially asserted these causes of action as
counterclaims in the unfounded District Court proceedings. In September, 1995,
however, the federal trial judge dismissed the claims without prejudice,
holding that they properly belonged in this forum as part of a separate action.
In keeping with this ruling, the Plaintiffs now file their Complaint.
<PAGE>
<PAGE> 4
THE PARTIES
5. An Ohio limited liability company, Plaintiff Turkey Vulture Fund
XIII, Ltd. constitutes an investment vehicle for its various members, who
pooled their money for use in buying and selling publicly-traded securities.
As the Fund's managing member, Plaintiff Richard M. Osborne has exclusive
authority to decide which particular transactions that Turkey Vulture will
pursue.
6. A real estate investment trust organized under Ohio law, Defendant
First Union Real Estate Investment Trust maintains its offices in Cleveland,
Ohio. The individual Defendants each serve on First Union Board of Trustees.
In addition, Defendant James C. Mastandrea serves as the Trust's president,
chief executive officer, and chairman of the board.
7. First Union shares trade on the New York Stock Exchange. Over a
seven-month period beginning in August, 1994, Osborne and Turkey Vulture
accumulated more than 1.6 million shares in the Trust. Osborne has since
transferred his stock to Turkey Vulture, which now stands as the Trust's
largest shareholder.
JURISDICTIONAL CONCERNS
8. All but two of the individual Defendants reside in Ohio, where First
Union prosecuted the unjustified federal lawsuit. The two exceptions, Daniel
G. DeVos and Kenneth K. Chalmers, both attended Board meetings in Ohio and
engaged in communications with First Union in this state in connection with the
litigation.
9. Through these means, DeVos and Chalmers participated in sanctioning
the abusive lawsuit that First Union filed in this state. The Court has
jurisdiction over these Defendants in light of these facts and in light of
their position as Trustees of an entity headquartered in Ohio and created under
the auspices of its laws.
FACTUAL BACKGROUND
I. First Union's Status As A Real Estate Investment Trust
10. From the time of its creation in 1961, First Union has done business
as a real estate investment trust, common known as a "REIT." REITs serve as a
means for investors to participate in the real estate market while maintaining
the liquidity of their funds.
11. The United States Internal Revenue Code extends certain benefits to
REITs that remain unavailable to other forms of business enterprises.
Specifically, REITs need not pay tax on the income they earn, so long as they
distribute these sums to beneficiaries. This exemption maximizes the funds
available for distribution to investors.
<PAGE>
<PAGE> 5
12. REITs must satisfy certain conditions to preserve their eligibility
for this favorable treatment. In particular, such organizations must have at
least 100 shareholders. In addition, at no time during the last half of a
taxable year can five or fewer investors own as much as half of a REIT's
outstanding shares.
II. First Union's Declining Fortunes
13. Once highly successful, First Union's performance has declined
markedly in recent years. The price of its stock reflects the severity of this
change in circumstances:
<TABLE>
Price of First Union Stock
<CAPTION>
Closing Monthly Price
-------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 25.375 21.75 19 15.25 9.5 7.625 11.25 10 7.625
February 25.5 22.75 19.5 15.75 9 8.125 11.25 8 7.5
March 25.25 21.125 18.625 17.625 9.75 8.375 11.5 7.125 7.25
April 26.25 21.75 19.125 15.25 10.25 8.5 10.25 7.25 7.625
May 26.625 22.125 19.25 15.75 10.5 7.75 9.75 6.375 7.375
June 27.125 19.825 18.825 15.375 10.125 8.5 10.125 6.25 7.5
July 26.75 20 19.625 15.5 9.825 8.25 10.825 6.625 7.75
August 25.5 18.625 19.25 13.625 9.5 8.625 11.125 7.125 7.375
September 25.375 18.625 17.75 10.5 9.75 8.75 11.25 7.625 7.125
October 18.375 18.625 17.375 10.375 8.625 10 10.375 6.75
November 18 17.825 17.5 11.5 8.25 9.125 9.625 6.625
December 18.125 18.25 16.375 7.375 7 9.75 10.125 8.14
</TABLE>
[The table represents information from a graph illustrating the decline in the
price of First Union Stock from January 1987 to October of 1995.]
14. Beneficiaries in First Union have thus lost over half the value of
their investment since 1990, with the price of their stock dropping from $16-
to approximately $7-per-share.
15. Not even the dividends paid by First Union erase this monumental
downturn. Taking into account such distributions, beneficiaries in the Trust
have still lost close to 12 percent of their original investment over the past
five years. In contrast, the stock of other large, public-traded companies has
yielded a positive total average return of close to 50 percent over the same
period.
III. The Reign Of Mastandrea
16. Mastandrea joined First Union of July of 1993 as the heir apparent
to Chairman and Chief Executive Officer Donald Schofield. By the end of that
year, Schofield had retired with a lucrative severance package and "consulting
agreement" in hand.
<PAGE>
<PAGE> 6
17. First Union hired Mastandrea to turn around its abysmal performance
and to restore its attractiveness among investors. Mastandrea at least paid
lip service to these goals, vowing to pursue means that would realize the
latent worth of the Trust's real estate assets and thus boost the value of its
stock.
18. Rather than benefit investors, however, the program implemented by
Mastandrea served principally to line his own pockets. Within months of
assuming control, Mastandrea had First Union slash its dividend by more than 40
percent. The price of First Union stock dropped by one-fifth in the two weeks
following the public announcement of this decision.
19. At this same time, Mastandrea presented for consideration by
beneficiaries a stock incentive plan for First Union management. Under the
plan, the Compensation Committee of the Board of Trustees would have the
discretion to award stock options to Mastandrea and other members of his
administration, regardless of First Union's performance or the state of its
finances.
20. Upon putting the stock incentive plan to a vote, Mastandrea and his
affiliates knew that its passage constituted a virtual lock. Under the Trust's
internal rules, any beneficiary who did not participate in the election for
whatever reason would nevertheless have his vote counted in favor of the plan.
With this skewed procedure playing a decisive role, beneficiaries endorsed (or,
more accurately, acquiesced to) the stock incentive plan at their annual
meeting in April, 1994.
21. During Mastandrea's stewardship, First Union's expenses have
mushroomed, its earnings have shrunk, and the downward spiral of its stock has
actually accelerated. Nevertheless, the First Union Compensation Committee has
seen fit to award Mastandrea and other officers millions of dollars in stock
and stock options, much of it under the authority of the newly adopted
incentive plan.
IV. Osborne And Turkey Vulture
22. During 1994, Osborne came to the conclusion that First Union's real
estate holdings made its stock far more valuable than its market price
suggested. In August of that year, Osborne began to purchase First Union
shares in his personal securities brokerage account.
23. Osborne formed Turkey Vulture toward the end of 1994 and contributed
his First Union stock to the Fund, which continued to invest in First Union.
By mid-January, 1995, Turkey Vulture owned 906,600 shares at a cost of more
than $6,000,000.
24. Federal securities law obligates investors to submit a disclosure
statement known as a Schedule 13D to the Securities and Exchange Commission
when the size of their interest in a company comes to exceed five percent. The
13D alerts other shareholders to substantial accumulations of stock that might
impact the value of their investment.
<PAGE>
<PAGE> 7
25. Turkey Vulture's 906,600 shares represented 5.2 percent of all
outstanding First Union stock. Accordingly, Turkey Vulture filed a Schedule
13D with the Securities and Exchange Commission on January 16, 1995.
V. Fear And Loathing At First Union
26. Mastandrea routinely monitored the volume of trading in the Trust's
stock. In late 1994, he noticed the increase caused by the Plaintiffs'
purchases.
27. Given the Trust's dismal recent history, Mastandrea should have
celebrated the notion of increased investment in First Union. Even before he
knew exactly who was buying stock, however, Mastandrea became suspicious and
defensive. He had no inclination to deal with new shareholders who might ask
hard questions about the Trust's languishing prospects and the self-serving
policies adopted by management.
28. This reaction only intensified with the filing of the 13D, which
revealed the Plaintiffs as the ones who had been purchasing shares. Osborne
had a well-publicized history as an investor; the media had noted his
willingness to take on corporate management that he deemed mediocre or
ineffective. Mastandrea wished to avoid any such confrontation, whatever the
cost. He embarked upon a surreptitious investigation of the Plaintiffs and
their intentions with respect to First Union.
VI. The Federal Lawsuit
29. Mastandrea's efforts culminated with the lawsuit against Osborne,
Turkey Vulture, and a host of other Defendants. First Union filed the case on
February 3, 1995 in United States District Court in Cleveland. The Honorable
Lesley Brooks Wells presided over the action.
30. A copy of the federal complaint filed by First Union appears as
Exhibit "A" to this Complaint. The pleading accuses Osborne and Turkey Vulture
of forming a cabal with the other Defendants to stage a takeover of the Trust.
After achieving this illicit purpose, the alleged conspirators purportedly
planned to plunder First Union's assets for their own benefit. Such conduct
would supposedly disqualify the Trust from the favorable tax treatment extended
to REITs.
31. These allegations derived solely from Mastandrea's single-minded
desire to eliminate the Plaintiffs as investors in First Union. Either Judge
Wells or First Union itself dismissed the claims against the other ten federal
Defendants for participating in the purported attempt to seize control of the
Trust.
32. In truth, the Plaintiffs never planned to take over First Union. Any
such plot would have necessarily failed -- the Trust's By-Laws nullified
acquisitions of stock that would give a particular investor more than 9.8
percent of all outstanding shares. With this provision in place, the
Plaintiffs' interest in First Union never could have grown large enough to
permit the alleged coup.
<PAGE>
<PAGE> 8
33. The impossibility of its allegations did not dissuade First Union
from proceeding with the federal lawsuit. Instead, it concocted a basis for
the suit by drawing connections between unrelated events, entrapping unwitting
parties in patently invalid admissions, ignoring evidence that revealed the
improbability of its claims, and other similar tactics.
VII. First Union's Refusal To Meet With Osborne
34. To the extent that First Union's officers and Trustees harbored
legitimate doubts about the Plaintiffs, these parties willfully maintained
their ignorance of the true state of affairs. Both before and after the
inception of the federal lawsuit, Osborne repeatedly attempted to arrange a
meeting with Mastandrea and individual board members to explain the nature and
purpose of Turkey Vulture's investment.
35. No trustee, however, would ever consent to see Osborne. Mastandrea
as well eschewed such discussions until the late summer of 1995, when he and
Osborne met in an unsuccessful effort to settle the federal action.
VIII. The Proxy Fight
36. First Union's Board of Trustees consists of nine members. Each year,
three of the positions come up for election at the Trust's annual meeting of
shareholders.
37. The Trustees whose terms expired in 1995 included Hardis, Jones, as
well as Mastandrea himself. Each of these Defendants sought reelection to
their respective positions.
38. In the wake of the abusive federal lawsuit and First Union's
steadfast refusal to meet, the Plaintiffs chose to assemble and support their
own slate of candidates for the Board of Trustees. Their nominees included
Osborne; Steven A. Calabrese (the Executive Vice President of a real estate
appraisal company); and James R. Webb, Ph.D. (a professor of Finance at
Cleveland State University).
39. Beneficiaries who did not attend First Union's annual meeting could
nevertheless participate in the election of Trustees by submitting a proxy to
either the Trust or a representative of the nominees endorsed by Osborne and
Turkey Vulture. Recipients of these proxies could in turn cast the votes in
favor of their respective candidates. Both First Union and the Plaintiffs'
slate of candidates circulated proxies and related campaign materials among
beneficiaries of the Trust.
40. In March, 1995, First Union amended its federal Complaint to include
various new causes of action against the Plaintiffs. Included was a claim
under Section 14(a) of the federal Securities Exchange Act, which prohibits the
misrepresentation of relevant information in proxy materials. First Union
specifically accused Osborne and Turkey Vulture of failing to inform other
beneficiaries of their purported intention to seize control of the Trust.
<PAGE>
<PAGE> 9
41. By the time First Union raised this allegation, it knew full well
that the Plaintiffs could never stage such a takeover and never had planned to
do so. It nevertheless asserted the Section 14(a) claim in order to taint the
validity of their proxies in the eyes of other beneficiaries.
42. While introducing the proxy claim, First Union's amended pleading
also charge Osborne with unlawfully interfering with business relations. The
Trust putatively sought to recover $30 million in compensatory damages under
this theory of liability, which failed to enumerate any of the particular
transactions that Osborne supposedly disrupted.
43. The absence of such detail represented more than a pleading
deficiency -- First Union knew from the onset that it could never substantiate
any actionable interference by Osborne. The Trust nevertheless brought this
claim as a predicate for bribing beneficiaries to support the incumbents in the
upcoming election. In a press release issued on March 20, 1995, Mastandrea
stated that First Union investors "are entitled to" share in the damages it
would recover from Osborne under the interference claim. He further declared
that First Union would "distribute any damage award to our [beneficiaries] to
the extent legally possible." While emphasizing the $30 million prayer for
damages, Mastandrea left beneficiaries in the dark about the phantom grounds
for the tortious interference claim.
44. First Union's annual meeting took place on April 11, 1995.
Although the challengers each garnered more than 4.5 million votes, Hardis,
Jones, and Mastandrea managed to retain their positions on the Board.
IX. Squire, Sanders & Dempsey
45. The law firm of Squire, Sanders & Dempsey represented First Union in
the federal lawsuit. While serving in this capacity, SS&D owed a duty to the
Trust's beneficiaries to protect all of their interests and to refrain from
any conduct that impaired the value of their investment.
46. SS&D ignored these obligations in prosecuting the federal lawsuit.
In order to indulge Mastandrea's desire to eliminate the Plaintiffs as
investors, the law firm took the lead in digging for incriminating information
concerning these parties. Despite the obvious impropriety of this attack upon
First Union's largest beneficiary, and notwithstanding evidence that betrayed
the speciousness (and worse) of the claims it was pursuing, SS&D persisted in
prosecuting the District Court case.
47. SS&D disregarded all constraints in this effort. After nine months,
the parties had submitted more than 600 pleadings to Judge Wells, virtually all
of which the law firm either filed itself or necessitated by its no-holds-
barred litigation strategy.
48. First Union handsomely compensated SS&D for this offensive. In a
conference call with investment analysts on October 20, 1995, Mastandrea
admitted that First Union had expended $1,432,000 in legal fees in connection
with the federal case. This total encompasses an expenditure of almost EIGHT
CENTS PER SHARE.
<PAGE>
<PAGE> 10
49. Despite SS&D's obvious self-interest, First Union's Trustees
completely abdicated their responsibility to ensure that the federal lawsuit
comported with the best interest of the beneficiaries. The Trustees exercised
no oversight whatsoever over the costly litigation orchestrated by the law
firm. Even in the face of patent defects in the case against the Plaintiffs,
the First Union Board allowed SS&D and SS&D alone to decide how the case would
proceed.
X. The Status Of The Federal Case
50. In September, 1995, Judge Wells dismissed First Union's proxy claims
with prejudice, holding that the victory of the incumbent Trustees rendered
this cause of action moot. The Court also summarily dismissed of various
other counts alleged against Osborne and Turkey Vulture. The trial of what
remained of First Union's case is set to begin on November 6, 1995.
51. The Plaintiffs spent more than $750,000 in defending against the
bogus claims alleged against them by First Union.
COMPLIANCE WITH CIV. R. 23.1
52. As part of this lawsuit, Turkey Vulture seeks recovery on First
Union's behalf for the Trustees' waste of assets in financing the federal
action. As previously discussed, Osborne unsuccessfully attempted to meet with
the individual Defendants in an attempt to dissuade them from perpetuating the
groundless litigation.
<PAGE>
<PAGE> 11
53. Given the Trustees' refusal to communicate with Osborne, and given
the personal liability these individuals face under Turkey Vulture's derivative
claim, any attempt to convince the Board to have First Union directly prosecute
this cause of action for itself would constitute an exercise in futility.
54. Ohio law does not obligate Turkey Vulture to obtain the consent of
other First Union shareholders before asserting derivative claims for the
Trust. Even if such a requirement actually existed, the Fund could not
practicably comply, given the overwhelming number of investors and the lack of
any means to determine their whereabouts.
COUNT ONE
[Abuse Of Process Claim]
55. Osborne and Turkey Vulture incorporate by reference the allegations
contained in Paragraphs 1 through 54 of this Complaint.
56. While First Union may have initially had valid grounds to file the
federal lawsuit against Osborne and Turkey Vulture, the inaccuracy of its
allegations soon became patently clear. First Union nonetheless proceeded with
its case as a means to force the Plaintiffs to relinquish their interest in the
Trust, to protect Mastandrea and his affiliates from any challenge they might
mount, to enhance their chances of prevailing in the proxy contest, and for
other, equally invalid purposes. As a proximate result of this unlawful
conduct, Osborne and Turkey Vulture suffered damages in excess of $750,000.
57. First Union intentionally and maliciously perpetrated its abuse of
process, thus exposing the Plaintiffs to the significant harm that they
ultimately suffered. As a consequence, Osborne and Turkey Vulture deserve an
award of punitive damages.
COUNT TWO
[Malicious Prosecution]
58. Osborne and Turkey Vulture incorporate by reference the allegations
contained in Paragraphs 1 through 57 of this Complaint.
59. First Union lacked probable cause in asserting its federal proxy
claims against the Plaintiffs, which Judge Wells dismissed with prejudice.
First Union knew full well that Osborne and Turkey Vulture had not violated
Section 14(a) of the Securities Exchange Act. The Trust nevertheless included
the proxy count in its federal pleadings for the same untoward tactical reasons
that precipitated the remainder of the lawsuit. As a proximate result of this
malicious prosecution, the Plaintiffs suffered damages in excess of $200,000.
60. First Union acted intentionally and maliciously in prosecuting its
groundless proxy claim, thus exposing the Plaintiffs to the significant harm
that they ultimately suffered. As a consequence, Osborne and Turkey Vulture
deserve an award of punitive damages.
<PAGE>
<PAGE> 12
COUNT THREE
[Derivative Claim For Breach Of Fiduciary Duty]
61. Turkey Vulture incorporates by reference the allegations contained in
Paragraphs 1 through 60 of this Complaint.
62. As members of the Board of Trustees, the individual Defendants have a
fiduciary obligation to preserve First Union's assets and to act prudently in
taking action on the Trust's behalf.
63. The Trustees violated this duty by authorizing the federal lawsuit on
the basis of trumped-up charges, all for the purpose of deflecting attention
from their own actions, entrenching the position of First Union's current
officers, and forcing the Plaintiffs to relinquish their interest in the Trust.
As a proximate result of this gross malfeasance, First Union has suffered
damages that exceed $1,432,000.
64. The Trustees consciously disregarded the great probability that their
dereliction of duty would substantially harm First Union. As a consequence,
the Trust deserves an award of punitive damages.
WHEREFORE, Plaintiffs Richard M. Osborne and Turkey Vulture Fund XIII,
Ltd. pray for the following:
1) Under Count One, an award from First Union of compensatory
damages exceeding $750,000 and punitive damages in the
amount of $2,000,000;
2) Under Count Two, an award from First Union of compensatory
damages exceeding $200,000 and punitive damages in the
amount of $600,000;
3) Under Count Three, an award in favor of First Union of
compensatory damages exceeding $1,432,000 and punitive
damages in the amount of $4,000,000, jointly and severally
from each of the individual Defendants; plus
4) Interest;
5) An award of the costs and attorneys fees incurred in
seeking derivative relief on behalf of First Union, jointly
and severally from each of the individual Defendants;
6) An award of the costs and attorneys fees incurred in
prosecuting the balance of the lawsuit; plus<PAGE>
<PAGE> 13
7) Any other relief that the Court deems just and proper.
KOHRMAN JACKSON & KRANTZ
/s/ Joshua R. Cohen
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Byron S. Krantz (Ohio S.Ct. Reg. # 0031431)
Joseph E. Rutigliano (Ohio S.Ct. Reg. #007216)
Joshua R. Cohen (Ohio S.Ct. Reg. #0032356)
20th Floor, One Cleveland Center
1375 East Ninth Street
Cleveland, Ohio 44114
(216) 696-8700
JURY DEMAND
Under the authority of Civ. R. 38, the Plaintiffs respectfully demand
trial by jury on all eligible claims and issues.
/s/ Joshua R. Cohen
-------------------
Joshua R. Cohen
