<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 5)
Giant Group, Ltd.
-----------------
(Name of Issuer)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class of Securities)
374503 1 10 0
--------------------------------------
(CUSIP Number)
Andrew F. Puzder
Executive Vice President and General Counsel
Fidelity National Financial, Inc.
17911 Von Karman Avenue
Irvine, California 92714
Tel. (714) 622-5000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Lawrence Lederman, Esq.
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Tel. (212) 530-5000
January 16, 1996
----------------
(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 / /.
Page 1 of 35 Pages
Exhibit Index on Page 8
<PAGE> 2
SCHEDULE 13D
CUSIP NO.: 374503 1 10 0
(1) NAME OF REPORTING PERSON:
Fidelity National Financial, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
IRS No. 86-0498599
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 586,489(1)
(8) SHARED VOTING POWER: 0
(9) SOLE DISPOSITIVE POWER: 586,489(1)
(10) SHARED DISPOSITIVE POWER: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 586,489(1)
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [x]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 13.1(2)
(14) TYPE OF REPORTING PERSON: CO
- --------------------
(1) Fidelity disclaims beneficial ownership of 10,000 shares of Common
Stock held by William P. Foley, II. Mr. Foley owns 21.7% of the
outstanding common stock of Fidelity and he is the Chairman of the
Board and Chief Executive Officer of Fidelity. By virtue of such stock
ownership and positions, Mr. Foley may be deemed a "controlling
person" of Fidelity.
(2) Based upon 4,478,385 shares of Common Stock outstanding as of
January 10, 1996, as disclosed in the Company's press release dated
January 12, 1996.
Page 2 of 35 Pages
<PAGE> 3
CUSIP NO.: 374503 1 10 0
(1) NAME OF REPORTING PERSON:
William P. Foley, II
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
IRS No. ###-##-####
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: PF
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) [ ]
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States of America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 10,000(3)
(8) SHARED VOTING POWER: 0
(9) SOLE DISPOSITIVE POWER: 10,000(3)
(10) SHARED DISPOSITIVE POWER: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 10,000(3)
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [x]
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): .2(4)
(14) TYPE OF REPORTING PERSON: IN
- ------------------
(3) Mr. Foley disclaims beneficial ownership of 586,489 shares of Common
Stock held by Fidelity. Mr. Foley owns 21.7% of the outstanding
common stock of Fidelity, and he is Chairman of the Board and Chief
Executive Officer of Fidelity. By virtue of such stock ownership and
positions, Mr. Foley may be deemed a "controlling person" of Fidelity.
(4) Based upon 4,478,385 shares of Common Stock outstanding as of
January 10, 1996, as disclosed in the Company's press release dated
January 12, 1996.
Page 3 of 35 Pages
<PAGE> 4
This Amendment No. 5 amends the statement on Schedule 13D filed with the
Securities and Exchange Commission on December 8, 1995, as heretofore amended
(the "Schedule 13D"), with respect to the common stock, par value $0.01 per
share, of Giant Group, Ltd. (the "Common Stock"), a corporation having its
principal executive offices located at 150 El Camino Drive, Suite 303, Beverly
Hills, California 90212 (the "Company"). All capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Schedule 13D.
Other than as set forth herein, there has been no material change in the
information set forth in the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended to add the following:
(E) On January 16, 1996, Fidelity and Mr. Foley answered the First Amended
Complaint and filed counterclaims against the Company and all of its directors
(the "Answer and Counterclaim"). A copy of the Answer and Counterclaim is
attached hereto as Exhibit 99.4, and is incorporated herein by reference.
In the Answer and Counterclaim, Fidelity and Mr. Foley deny that they
engaged in any unlawful activities, including, among other things, trading on
nonpublic confidential and/or inside information, misappropriating confidential
and proprietary information from the Company or Rally's, or violating the
disclosure requirements of Section 13(d) of the Securities Exchange Act of
1934. Fidelity and Mr. Foley further deny that they breached any
confidentiality agreements or fiduciary duties, or that they fraudulently made
promises without intending to perform them, or conspired to defraud. In
addition, Fidelity and Mr. Foley assert equitable affirmative defenses, allege
that each of the Company's claims fail to state a cause of action, and allege
that the Company's second cause of action is barred by the statute of frauds.
A summary of the counterclaims is contained in paragraphs 94 to and
including 120 of the Answer and Counterclaim, attached hereto as Exhibit 99.4.
In its counterclaims, Fidelity and Mr. Foley seek the following
declarations: (1) that the Rights Plan adopted by the Company's directors is
invalid, (2) that the Company lacked the authority to adopt the Rights Plan,
and (3) that the directors, and each of them, breached their fiduciary duties
in taking the actions described in the counterclaims. Fidelity and Mr. Foley
also seek injunctive relief: (1) directing counterclaim defendants to rescind,
or in the alternative to redeem, the rights, (2) ordering that the
counterclaim defendants not take any action in furtherance of the Rights Plan,
(3) directing that the Company disclose all of the terms of the Rights Plan,
(4) enjoining counterclaim defendants from engaging in any transactions
involving the issuance of the Company's voting securities, and (5) directing
the Company to disgorge the more than 400,000 shares of the Company's stock
that was purchased on or about January 5, 1996. Lastly, Fidelity and Mr. Foley
seek damages with respect to certain of the counterclaims.
Page 4 of 35 Pages
<PAGE> 5
(F) As disclosed in the Company's Current Report on Form 8-K, dated January
14, 1996, the Company amended its bylaws to adopt an advance notice bylaw
provision. Such provision, among other things, requires that in order to
nominate persons for election as directors or to bring other business at the
annual meeting, a stockholder must deliver notice to the Company's Secretary
not less than 70 days nor more than 90 days prior to the first anniversary of
the preceding year's annual meeting.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Schedule 13D is hereby amended to add the following:
99.4 Answer and Counterclaim filed on January 16, 1996 in the Federal Action.
Page 5 of 35 Pages
<PAGE> 6
SIGNATURE
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.
January 19, 1996
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ WILLIAM P. FOLEY, II
--------------------------------
Name: William P. Foley, II
Title: Chairman of the Board and
Chief Executive Officer
Page 6 of 35 Pages
<PAGE> 7
SIGNATURE
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.
January 19, 1996
/s/ WILLIAM P. FOLEY, II
---------------------------
William P. Foley, II
Page 7 of 35 Pages
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
99.4 Answer and Counterclaim filed on January 16, 1996
in the Federal Action. Page 9
</TABLE>
Page 8 of 35 Pages
<PAGE> 1
EXHIBIT 99.4
C. STEPHEN HOWARD (State Bar No. 43434)
JEFFERY D. McFARLAND (State Bar No. 157628)
SCOTT VICK (State Bar No. 171944)
CHERI L. WOOD (State Bar No. 180527)
MILBANK, TWEED, HADLEY & McCLOY
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017-5704
(213) 892-4000
Attorneys for defendants
and counterclaim plaintiffs
FIDELITY NATIONAL FINANCIAL, INC. and
WILLIAM P. FOLEY, II
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
GIANT GROUP, LTD., a Delaware ) CASE NO. SA CV-95-1095 LHM(EEx)
corporation, )
)
Plaintiff, )
) ANSWER AND COUNTERCLAIMS OF
) DEFENDANTS FIDELITY NATIONAL
v. ) FINANCIAL, INC. AND WILLIAM P.
) FOLEY, II
)
WILLIAM P. FOLEY, II, a )
California citizen; CKE ) DEMAND FOR JURY TRIAL
RESTAURANTS, INC., a Delaware )
corporation; FIDELITY NATIONAL )
FINANCIAL, INC., a Delaware )
corporation; William Davenport, )
a California citizen; and )
ROBERT MARTIN, a Missouri )
citizen, )
)
Defendants. )
__________________________________)
)
FIDELITY NATIONAL FINANCIAL, )
INC. and WILLIAM P. FOLEY, II, )
)
Counterclaim )
Plaintiffs )
)
v. )
)
GIANT GROUP, LTD. )
)
Counterclaim )
Defendant )
)
and )
)
)
Page 9 of 35 Pages
<PAGE> 2
BURT SUGARMAN; TERRY )
CHRISTENSEN; DAVID GOTTERER and )
ROBERT WYNN )
)
Additional )
Counterclaim )
Defendants. )
__________________________________)
Defendants Fidelity National Financial, Inc. and William P. Foley, II
(collectively, "Fidelity") respond to Plaintiff's First Amended Complaint
("Complaint") as follows:
1. In answer to paragraph 1 of the Complaint, Defendants
deny each and every allegation contained therein.
2. In answer to paragraph 2 of the Complaint, Defendants
deny each and every allegation contained therein.
3. In answer to paragraph 3 of the Complaint, Defendants
deny each and every allegation contained therein.
4. In answer to paragraph 4 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to the
truth of the allegations contained in such paragraph, and on that basis deny
each and every allegation contained therein.
5. In answer to paragraph 5 of the Complaint, Defendants
admit Mr. Foley is a resident of California, and serves as the Chairman of the
Board of Directors and as the CEO of both Fidelity and CKE Restaurants, Inc.
("CKE"). Defendants admit that as of March 31, 1995, Mr. Foley, Folco
Development Corporation and the estate of William P. Foley held, in aggregate,
2,380,093 shares of Fidelity common stock, and 335,454 Fidelity options.
Defendants further admit that Mr. Foley is President of Bogner Regis, Inc., the
general partner of Cannae Limited Partnership. Except as so admitted,
Defendants deny each and every allegation contained in Paragraph 5.
6. In answer to paragraph 6 of the Complaint, Defendants
admit that Fidelity is a corporation organized under the laws of the State of
Delaware with its principal place of business located in Irvine, California,
and is, amongst other things, engaged in the business of issuing title
insurance policies and other title related services through its subsidiaries.
Additionally, Defendants admit that between July 13, 1995 and December 21,
1995, Fidelity purchased 449,089 shares of Giant stock. Defendants further
admit that as of May 18, 1995, Fidelity owned 2.7% of the shares of CKE.
Except as so admitted, Defendants deny each and every allegation contained in
paragraph 6.
7. In answer to paragraph 7 of the Complaint, Defendants
admit each and every allegation contained therein.
Page 10 of 35 Pages
<PAGE> 3
8. In answer to paragraph 8 of the Complaint, Defendants
admit that Mr. William Davenport ("Mr. Davenport") has acted as Mr. Foley's
stockbroker on certain transactions. Except as so admitted, Defendants are
without sufficient knowledge or information to form a belief as to the truth of
the allegations contained in such paragraph, and on that basis deny each and
every allegation contained therein.
9. In answer to paragraph 9 of the Complaint, Defendants
admit that Robert Martyn ("Mr. Martyn") is a securities broker formerly with
Kemper Securities, and currently with Burns Pauli Mahoney Co. Defendants are
without sufficient knowledge or information to form a belief as to whether Mr.
Martyn is a citizen of the State of Missouri or whether he holds himself out as
an investment expert in the food service industry. Except as so admitted,
Defendants deny each and every allegation contained in paragraph 9.
10. In answer to paragraph 10 of the Complaint, Defendants
admit each and every allegation contained therein.
11. In answer to paragraph 11 of the Complaint, Defendants
admit each and every allegation contained therein.
12. In answer to paragraph 12 of the Complaint, Defendants
admit each and every allegation contained therein.
13. In answer to paragraph 13 of the Complaint, Defendants
admit that they have in the past purchased shares of US Facilities Corporation
("US Facilities") and have solicited proxies from other US Facilities
shareholders. Defendants further admit that a Delaware court overturned the
results of the US Facilities proxy contest. Except as so admitted, Defendants
deny each and every allegation contained in paragraph 13.
14. In answer to paragraph 14 of the Complaint, Defendants
admit that in or about June 1995, Mr. Davenport, Mr. Foley and Mr. Sugarman met
at the Lakeview Cafe in Thousand Oaks, California to discuss a possible
business relationship between Rally's Hamburgers, Inc. ("Rally's) and CKE.
Except as so admitted, Defendants deny each and every allegation contained in
paragraph 14.
15. In answer to paragraph 15 of the Complaint, Defendants
admit that at the June 1995 meeting between Mr. Davenport, Mr. Foley and Mr.
Sugarman, Mr. Sugarman stated that he had also had discussions with Checkers,
Inc. regarding a possible business relationship with Rally's. Except as so
admitted, Defendants deny each and every allegation contained in paragraph 15.
16. In answer to paragraph 16 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to Rally's
or Giant's standard business practices regarding the dissemination of
information, and on that basis deny the allegations contained in the first
sentence of
Page 11 of 35 Pages
<PAGE> 4
paragraph 16. With respect to the remaining allegations contained in paragraph
16, Defendants deny each and every allegation contained therein.
17. In answer to paragraph 17 of the Complaint, Defendants
deny each and every allegation contained therein.
18. In answer to paragraph 18 of the Complaint, Defendants
deny each and every allegation contained therein.
19. In answer to paragraph 19 of the Complaint, Defendants
deny each and every allegation contained therein.
20. In answer to paragraph 20 of the Complaint, Defendants
admit that in or about August 1995, Mr. Foley and C. Thomas Thompson ("Mr.
Thompson") met with Mr. Sugarman, and Rally's CFO and CEO. Except as so
admitted, Defendants deny each and every allegation contained in paragraph 20.
21. In answer to paragraph 21 of the Complaint, Defendants
deny each and every allegation contained therein.
22. In answer to paragraph 22 of the Complaint, Defendants
admit that Mr. Foley told Mr. Sugarman he was interested in testing the "Carl's
Jr. Jr." concept in Bakersfield. Except as so admitted, Defendants deny each
and every allegation contained in paragraph 22.
23. In answer to paragraph 23 of the Complaint, Defendants
admit that Mr. Foley told Mr. Sugarman CKE would consider purchasing shares of
Rally's stock owned by Giant. Except as so admitted, Defendants deny each and
every allegation contained in paragraph 23.
24. In answer to paragraph 24 of the Complaint, Defendants
deny each and every allegation contained therein.
25. In answer to paragraph 25 of the Complaint, Defendants
admit that Mr. Foley asked Mr. Sugarman if he was interested in participating
in a transaction involving a company named "Summit Restaurants", and that Mr.
Sugarman declined to participate. Except as so admitted, Defendants deny each
and every allegation contained in paragraph 25.
26. In answer to paragraph 26 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to whether
Mr. Sugarman tried to contact Mr. Foley on three separate occasions, and on
that basis deny the allegations contained in the second sentence of paragraph
26. With respect to the remaining allegations contained in paragraph 26,
Defendants deny each and every allegation contained therein.
27. In answer to paragraph 27 of the Complaint, Defendants
admit that Gary Nelson called the CFO of Giant to inform her that Fidelity had
filed a Schedule 13D pursuant to Section 13(d) of the Securities Exchange Act,
stating that
Page 12 of 35 Pages
<PAGE> 5
Fidelity had acquired an 8.6% beneficial interest in Giant's outstanding common
stock. Defendants further admit that Mr. Nelson and Fidelity's General Counsel
spoke on the telephone with the CFO of Giant on or about December 8, 1995.
Except as so admitted, Defendants deny each and every allegation contained in
paragraph 27.
28. In answer to paragraph 28 of the Complaint, Defendants
deny each and every allegation contained therein.
29. In answer to paragraph 29 of the Complaint, Defendants
deny each and every allegation contained therein.
30. In answer to paragraph 30 of the Complaint, Defendants
admit that Mr. Thompson told Mr. Sugarman that he wished to meet Rally's CEO,
CFO, and operations personnel, to tour Rally's headquarters and to visit some
Rally's drive-thru restaurants. Except as so admitted, Defendants deny each
and every allegation contained in paragraph 30.
31. In answer to paragraph 31 of the Complaint, Defendants
deny each and every allegation contained therein.
32. In answer to paragraph 32 of the Complaint, Defendants
admit that on or about December 15, 1995, they received, by facsimile, a
proposed confidentiality agreement. Defendants further admit that Mr. Foley
did not call Mr. Sugarman on December 16 or 17, 1995 and that Mr. Foley was
unreachable on December 16 and 17, 1995. Except as so admitted, Defendants
deny each and every allegation contained in paragraph 32.
33. In answer to paragraph 33 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to the
truth of the allegations contained in such paragraph, and on that basis deny
each and every allegation contained therein.
34. In answer to paragraph 34 of the Complaint, Defendants
deny each and every allegation contained therein.
35. In answer to paragraph 35 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to the
truth of the allegations contained in such paragraph, and on that basis deny
each and every allegation contained therein.
36. In answer to paragraph 36 of the Complaint, Defendants
deny each and every allegation contained therein.
37. In answer to paragraph 37 of the Complaint, Defendants
deny each and every allegation contained therein.
38. In answer to paragraph 38 of the Complaint, Defendants
deny each and every allegation contained therein.
Page 13 of 35 Pages
<PAGE> 6
39. In answer to paragraph 39 of the Complaint, Defendants
admit that once their ownership of Giant stock exceeded 5%, they were required
under Section 13(d) of the Securities Exchange Act to file a Schedule 13D.
Except as so admitted, Defendants deny each and every allegation contained in
paragraph 39.
40. In answer to paragraph 40 of the Complaint, Defendants
admit that their Schedule 13D identifies Mr. Foley, Fidelity and a subsidiary
of Fidelity as members of Defendants' group of investors in Giant stock.
Defendants further admit that their Schedule 13D does not mention Mr. Davenport
or Mr. Martin. Except as so admitted, Defendants deny each and every
allegation contained in paragraph 40.
41. In answer to paragraph 41 of the Complaint, Defendants
deny each and every allegation contained therein.
42. In answer to paragraph 42 of the Complaint, Defendants
admit that they filed Amendment No. 1 to their Schedule 13D on or about
December 21, 1995. Except as so admitted, Defendants deny each and every
allegation contained in paragraph 42.
43. In answer to paragraph 43 of the Complaint, Defendants
admit that Amendment No. 1 to their Schedule 13D states that Messrs. Davenport
and Martin acted as brokers with respect to Defendants' purchase of Giant
shares. Except as so admitted, Defendants deny each and every allegation
contained in paragraph 43.
44. In answer to paragraph 44 of the Complaint, Defendants
admit that Amendment No. 1 to their Schedule 13D states that CKE received
information from Giant and Rally's which was not relied upon by Fidelity in its
purchase of Giant shares. Except as so admitted, Defendants deny each and
every allegation contained in paragraph 44.
45. In answer to paragraph 45 of the Complaint, Defendants
admit that Amendment No. 1 to their Schedule 13D states that CKE was not asked
to enter into a confidentiality agreement at the time it or its representatives
were given information from Giant and Rally's. Except as so admitted,
Defendants deny each and every allegation contained in paragraph 45.
46. In answer to paragraph 46 of the Complaint, Defendants
deny each and every allegation contained therein.
47. In answer to paragraph 47 of the Complaint, Defendants
admit that Amendment No. 1 to their Schedule 13D states that Giant contacted
Mr. Foley seeking to arrange discussions between CKE and Rally's to explore the
possibility of a transaction. Except as so admitted, Defendants deny each and
every allegation contained in paragraph 47.
Page 14 of 35 Pages
<PAGE> 7
ANSWER TO FIRST CAUSE OF ACTION
48. In answer to paragraph 48 of the Complaint, Defendants
incorporate by reference paragraphs 1 through 47 of this Answer.
49. In answer to paragraph 49 of the Complaint, Defendants
admit that their Schedule 13D did not mention the alleged facts averred in
paragraph 49 subparts (b), (c) and (f). Except as so admitted, Defendants deny
each and every allegation contained in paragraph 49.
50. In answer to paragraph 50 of the Complaint, Defendants
deny each and every allegation contained therein.
ANSWER TO SECOND CAUSE OF ACTION
51. In answer to paragraph 51 of the Complaint, Defendants
incorporate paragraphs 1 through 50 of this Answer.
52. In answer to paragraph 52 of the Complaint, Defendants
deny each and every allegation contained therein.
53. In answer to paragraph 53 of the Complaint, Defendants
deny each and every allegation contained therein.
54. In answer to paragraph 54 of the Complaint, Defendants
deny each and every allegation contained therein.
55. In answer to paragraph 55 of the Complaint, Defendants
deny each and every allegation contained therein.
56. In answer to paragraph 56 of the Complaint, Defendants
deny each and every allegation contained therein.
57. In answer to paragraph 57 of the Complaint, Defendants
deny each and every allegation contained therein.
58. In answer to paragraph 58 of the Complaint, Defendants
deny each and every allegation contained therein.
59. In answer to paragraph 59 of the Complaint, Defendants
deny each and every allegation contained therein.
ANSWER TO THIRD CAUSE OF ACTION
60. In answer to paragraph 60 of the Complaint, Defendant
incorporates by reference paragraphs 1 through 59 of this Answer.
61. In answer to paragraph 61 of the Complaint, Defendants
deny each and every allegation contained therein.
62. In answer to paragraph 62 of the Complaint, Defendants
deny each and every allegation contained therein.
Page 15 of 35 Pages
<PAGE> 8
63. In answer to paragraph 63 of the Complaint, Defendants
are without sufficient knowledge or information to form a belief as to the
truth of the allegations contained in such paragraph, and on that basis deny
each and every allegation contained therein.
64. In answer to paragraph 64 of the Complaint, Defendants
deny each and every allegation contained therein.
65. In answer to paragraph 65 of the Complaint, Defendants
deny each and every allegation contained therein.
66. In answer to paragraph 66 of the Complaint, Defendants
deny each and every allegation contained therein.
67. In answer to paragraph 67 of the Complaint, Defendants
deny each and every allegation contained therein.
ANSWER TO FOURTH CAUSE OF ACTION
68. In answer to paragraph 68 of the Complaint, Defendants
incorporates by reference paragraphs 1 through 67 of this Answer.
69. In answer to paragraph 69 of the Complaint, Defendants
deny each and every allegation contained therein.
70. In answer to paragraph 70 of the Complaint, Defendants
deny each and every allegation contained therein.
71. In answer to paragraph 71 of the Complaint, Defendants
deny each and every allegation contained therein.
72. In answer to paragraph 72 of the Complaint, Defendants
deny each and every allegation contained therein.
73. In answer to paragraph 73 of the Complaint, Defendants
deny each and every allegation contained therein.
74. In answer to paragraph 74 of the Complaint, Defendants
deny each and every allegation contained therein.
ANSWER TO FIFTH CAUSE OF ACTION
75. In answer to paragraph 75 of the Complaint, Defendants
incorporate by reference paragraphs 1 through 74 of this Answer.
76. In answer to paragraph 76 of the Complaint, Defendants
deny each and every allegation contained therein.
77. In answer to paragraph 77 of the Complaint, Defendants
deny each and every allegation contained therein.
78. In answer to paragraph 78 of the Complaint, Defendants
deny each and every allegation contained therein.
Page 16 of 35 Pages
<PAGE> 9
79. In answer to paragraph 79 of the Complaint, Defendants
deny each and every allegation contained therein.
80. In answer to paragraph 80 of the Complaint, Defendants
deny each and every allegation contained therein.
AFFIRMATIVE DEFENSES
As separate and distinct affirmative defenses to Plaintiff's
alleged causes of action, and each of them, Defendants allege as follows:
FIRST AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
81. The Complaint, and each purported cause of action
therein, fails to set forth facts sufficient to state a cause of action upon
which any relief can be granted.
SECOND AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
82. The Complaint, and each purported cause of action
therein, is barred, in whole or in part, by the doctrine of laches.
THIRD AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
83. Defendants are informed and believe, and on that basis
allege, that the Complaint, and some or all of the purported causes of action
therein, is barred, in whole or in part, by the doctrine of unclean hands.
FOURTH AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
84. The Complaint, and each purported cause of action
therein, is barred, in whole or in part, by Plaintiff's own conduct, actions,
and inactions that constitute an estoppel of the purported claims for relief
and of any relief sought in the Complaint.
FIFTH AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
85. The Complaint, and each purported cause of action
therein, is barred, in whole or in part, by Plaintiff's own conduct, actions,
and inactions that constitute a waiver of the purported claims for relief and
of any relief sought in the Complaint.
Page 17 of 35 Pages
<PAGE> 10
SIXTH AFFIRMATIVE DEFENSE
(As to All Alleged Causes of Action)
86. Defendants join in and incorporate by reference each
affirmative defense alleged by the other defendants in this action to the
extent that such affirmative defenses apply to Defendants.
SEVENTH AFFIRMATIVE DEFENSE
(As to the Second Cause of Action)
87. Plaintiff's alleged cause of action is barred by the
Statute of Frauds.
Page 18 of 35 Pages
<PAGE> 11
COUNTERCLAIMS
Counterclaim plaintiffs Fidelity National Financial, Inc.
("Fidelity") and William P. Foley, II ("Mr. Foley") aver as follows:
JURISDICTION AND VENUE
88. This Court has jurisdiction over each of the
counterclaims pursuant to 28 U.S.C. Section 1367(a) in that the counterclaims
arise from a common nucleus of operative facts and are so intertwined with
Plaintiff's purported federal claim for relief that the counterclaims form part
of the same case or controversy under Article III of the United States
Constitution.
89. Venue is proper in the Central District of California
pursuant to 18 U.S.C. Section 1391(b) and (c) in that at least one
counterclaim defendant resides in this District, all of the counterclaim
defendants transact their affairs and do business in this District, and,
further, because a substantial part of the events giving rise to the
counterclaims occurred in this District.
THE PARTIES
90. Counterclaim plaintiff Fidelity National Financial,
Inc. ("Fidelity") is a corporation duly organized and validly existing under
the laws of the State of Delaware, and qualified to do and doing business in
the State of California. Fidelity's principal place of business is located at
17911 Von Karman Avenue, Suite 300, Irvine, California 92714.
91. Counterclaim plaintiff William P. Foley, II serves as
Chairman of Fidelity's Board of Directors and as its Chief Executive Officer.
Mr. Foley resides in Orange County and is a citizen of the State of California.
92. Counterclaim defendant Giant Group, Ltd. ("Giant") is a
corporation duly organized and validly existing under the laws of the State of
Delaware, and qualified to do and doing business in the State of California.
Giant's principal place of business is located at 150 El Camino Drive, Suite
303, Beverly Hills, California 90212. Giant is a holding company that
controls, among other things, Rally's Hamburgers, Inc. ("Rally's"). Rally's is
a publicly held company that owns and franchises double drive-thru hamburger
restaurants.
93. Counterclaim defendants Burt Sugarman, Terry
Christensen, David Gotterer, and Robert Wynn (collectively, "Giant Directors")
are, and at all relevant times herein were, members of Giant's Board of
Directors. Mr. Sugarman serves as Chairman of Giant's Board of Directors and
also acts as its Chief Executive Officer. Mr. Sugarman holds over 20% of
Giant's common stock and has options to purchase an additional 21%.
Page 19 of 35 Pages
<PAGE> 12
SUMMARY OF THE COUNTERCLAIMS
94. The counterclaims in this action arise from a campaign
carefully designed and orchestrated by Giant's Chairman and Directors to keep
control of Giant and its valuable assets solely in the hands of Mr. Sugarman,
and simultaneously to prevent Fidelity -- or anyone else (except Mr. Sugarman)
- -- from buying any more Giant stock, all for no legitimate or rational business
purpose, and all at the expense of Giant and its shareholders.
95. Immediately after learning that Fidelity had acquired
more than 5% of Giant's stock, and as part of their showstopper strategy,
Giant's Directors crafted, and unanimously adopted, a blatantly discriminatory
"Stockholders Rights Plan" (the "Poison Pill"), ostensibly to prevent any
shareholder (or group) from acquiring 15% or more of Giant's common stock.
Although Giant has publicly announced the Poison Pill, Giant has refused to
make a copy of the Poison Pill available to the public. According to Giant's
press release, the Poison Pill treats all shareholders who own the same class
and series of stock equally, except, that is, for Giant's Chairman Mr.
Sugarman. Although Mr. Sugarman controls Giant and owns over 20% of its
common stock, the Poison Pill grants him (but no one else) the right to
purchase even more stock -- up to nearly 50% of the company. However, on
information and belief, in view of his legacy of wasteful spending and
mismanagement of Giant, Mr. Sugarman is worried that his presently strong
equity position at Giant is insufficient to ensure his sustained control of
Giant. Examples of Mr. Sugarman's and Giant's Directors' wasteful spending,
mismanagement, and self dealing are numerous, and include the following:
a. Although Giant has a mere thirteen employees,
no business operations, and consistently loses money, Mr. Sugarman draws a
salary from Giant of approximately $1.9 million to support his opulent
lifestyle.
b. On information and belief, Mr. Sugarman caused
Giant to acquire for his use a lavish Gulfstream-2 jet, for which Giant retains
two pilots on a stand-by basis. Mr. Sugarman has used this jet to fly himself
and his wife Mary Hart (host of the television program Entertainment Tonight)
to one of their vacation homes in Montana at Giant's expense.
c. Using his influential position at Rally's
Hamburgers, Inc. (which Giant controls), Mr. Sugarman arranged to have his
wife, Mary Hart, elected to Rally's Board of Directors.
d. Perhaps most strikingly, in 1993 Mr. Sugarman
caused Rally's to commit to a bond indenture that -- for no rational business
purpose, and solely to propagate Mr. Sugarman in his position at Giant --
requires Rally's to repurchase $85 million in outstanding notes for 101% of
their face value, plus accrued interest, should anyone other than Mr. Sugarman
become the beneficial owner of more than 35% of GIANT'S voting stock.
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e. Lastly, for no other reason than to prevent
Fidelity and Mr. Foley from acquiring a large block of Giant stock, and to
further tighten Mr. Sugarman's grip on Giant, on January 5, 1995 Giant's
Directors caused Giant to purchase more than 400,000 shares of Giant stock,
which was trading at just twenty-five cents below its fifty-two week high
(thereby increasing Mr. Sugarman's percentage ownership of Giant and,
importantly, removing votes from shareholders which would likely vote against
Mr. Sugarman and the Giant Directors). On information and belief, prior to
January 5, 1995, Giant had purchased shares of its own stock on only one
previous occasion.
96. In the context of Mr. Sugarman's systematic treatment
of Giant as his personal property, the provisions of the Giant Poison Pill make
transparently clear that Giant's Directors had no purpose in adopting the
Poison Pill other than to entrench themselves and to shore up Mr. Sugarman's
control over Giant, thereby making Giant a permanent hostage to Mr. Sugarman.
Giant's Directors adopted the Poison Pill even though they had no authority to
do so, and even though the disparate treatment of shareholders serves no
rational or legitimate corporate purpose.
97. As yet another component of Mr. Sugarman's frantic
attempt to ward off additional purchases of stock by Fidelity, Giant filed the
instant, and unmeritorious, lawsuit (the "Complaint") claiming, inter alia,
that Fidelity had violated its disclosure obligations under the Williams Act.
On information and belief, in filing this lawsuit, Giant seeks to enlist the
Court as its ally in a battle that properly is waged in the marketplace, where
Mr. Sugarman apparently feels ill-equipped to prevail.
98. Moreover, on the heels of filing its lawsuit, Giant and
one of its Directors, Mr. Christensen, prepared and issued to the media several
blatantly defamatory press releases that accused Fidelity and Mr. Foley of
attempting to "loot" Giant and conspiring to violate the securities laws.
99. Fidelity and Mr. Foley seek a declaratory judgment:
a. that the Poison Pill is invalid,
b. that Giant's Directors breached their fiduciary
duties by adopting the Poison Pill; and
c. that Giant lacked the authority to adopt the
Poison Pill.
100. Fidelity and Mr. Foley also seek a preliminary and
permanent injunction:
a. directing counterclaim defendants to rescind,
or in the alternative to redeem, the Poison Pill;
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b. ordering that counterclaim defendants not take
any action in furtherance of the Poison Pill; and
c. directing that Giant disclose all of the terms
of the Poison Pill;
d. enjoining counterclaim defendants from engaging
in any transactions involving the issuance of voting securities of Giant.
e. directing Giant to disgorge the more than
400,000 shares of Giant stock that it purchased on or about January 5, 1996.
101. Fidelity and Mr. Foley lastly seek special, actual, and
punitive damages for the defamatory statements contained in the press releases.
THE WILLIAMS ACT
102. The Williams Act, along with the regulations
promulgated thereunder by the Securities and Exchange Commission ("SEC"),
govern the disclosures made by Fidelity and Mr. Foley in connection with their
purchases of Giant stock. The purpose of the Williams Act is to protect
shareholders through a policy of neutrality between management and potential
acquirors so that shareholders are free to make appropriate decisions in
connection with tender offers, exchange offers, proxy votes and the like. In
passing the Williams Act, Congress deliberately avoided tipping the balance in
favor of management or potential acquirors. The Williams Act is not a weapon
for management to discourage takeover bids or prevent large accumulations of
stock, which could create the potential for such attempts. The Williams Act
endeavors to have market forces -- rather than corporate artifices -- determine
the outcome of struggles for corporate control. The Williams Act ensures
investor autonomy, and neutrality between management and potential acquirors,
because Congress recognized that substantial harm could befall shareholders
when management, acting in its self-interest, erects barriers to prevent
changes in corporate control.
BACKGROUND OF FIDELITY'S ACQUISITION OF GIANT STOCK
103. In July 1995, Fidelity and Mr. Foley began acquiring
shares of Giant stock. By December 1995, Fidelity and Mr. Foley had acquired a
beneficial interest in more than five percent of Giant's common stock, at which
time they filed a 13D disclosure statement with the SEC as required by the
Williams Act. In their disclosure statement, Fidelity indicated that its
purpose for acquiring Giant stock was "to acquire a significant equity position
in [Giant]." The disclosure statement also advised that, "Fidelity does not
consider itself a passive investor and should not be regarded as such."
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GIANT DIRECTORS' CONFLICTS OF INTEREST
104. As set forth more fully below, the Giant Directors have
inherent conflicts of interest arising from the generous benefits they receive,
directly and indirectly, from Giant, as well as the direct and indirect
benefits received by their immediate families and a small coterie of their
business associates. By reason of such conflicts, the Giant Directors have an
inherent interest and desire, singly and as a group, to perpetuate themselves
in office, and therefore to oppose any change in control at Giant.
105. Among the evidences of the Giant Directors' inherent
conflicts of interest and self-dealing are the following:
a. Counterclaim defendant Mr. Sugarman, who is
Chief Executive Officer and President of Giant, receives in those capacities an
annual compensation package worth approximately $1.9 million as well as
valuable stock options, even though Giant has only thirteen employees, no
business operations, and consistently loses money. On information and belief,
Mr. Sugarman caused Giant to acquire for his use a lavish Gulfstream-2 jet, for
which Giant retains two pilots on a stand-by basis. Mr. Sugarman has used this
jet to fly himself and his wife to one of their vacation homes in Montana at
Giant's expense. On information and belief, Mr. Sugarman successfully arranged
to have his wife, Mary Hart, elected to the Board of Directors of Rally's
Hamburgers, Inc. (which Giant controls), from which she derives benefit.
b. On information and belief, Giant has awarded,
and continues to award, Mr. Christensen's law firm, at which Mr. Christensen
is a name partner, valuable legal business that directly and indirectly
benefits Mr. Christensen personally.
c. On information and belief, Messrs. Sugarman and
Christensen arranged to have Patricia L. Glaser, also a name partner at Mr.
Christensen's law firm, elected to the Board of Directors of Rally's
Hamburgers, Inc., from which she derives benefit.
d. Counterclaim defendant David Gotterer, a member
of Giant's Board, was also elected to the Board of Directors of Rally's
Hamburgers, Inc., from which he derives benefit.
106. Because of their wasteful spending and mismanagement of
Giant and Rally's, the Giant Directors were, and are, fearful that acquisition
of Giant stock by Fidelity and Mr. Foley could result in a change in Giant's
voting control, which, in turn, could jeopardize the lucrative benefits that
the Giant Directors as well as their families and business associates receive
directly and indirectly from Giant.
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<PAGE> 16
GIANT DIRECTORS BREACH THEIR
FIDUCIARY DUTIES BY ADOPTING THE POISON PILL
107. Because Mr. Sugarman owns more than 20% of Giant's
stock, there is no threat occasioned by Fidelity's ownership of more than 15%
of Giant's stock. Nevertheless, on or about January 4, 1996, the Giant Board
held a meeting at which they took an action designed to erect a barrier to
insulate Giant -- and Mr. Sugarman in particular -- from any change in control.
Through this action, Giant's Board attempted to impose its will on Giant's
shareholders by adopting a "Stockholders Rights Plan," which impermissibly
confers special favor to Mr. Sugarman, but not to other shareholders who own
the same series and class of Giant common stock.
108. To prevent a comprehensive challenge of the Poison
Pill, Giant has kept secret its actual provisions, instead choosing to
selectively announce them in a press release issued on January 4, 1996.
Giant's failure to disclose all of the terms of the Poison Pill is a violation
of its Schedule 8A requirements under the Securities Exchange Act of 1934.
109. According to Giant's press release, pursuant to the
Poison Pill, the Giant Board of Directors declared, among other things, that a
dividend of preferred stock purchase rights ("Rights") would be distributed to
shareholders who own stock as of January 16, 1996 (at a rate of one purchase
Right per share of common stock). Each Right is the equivalent in voting and
dividend rights to 1000 shares of common stock.
110. According to Giant's press release, by its terms, the
Poison Pill is triggered, or "flips-in," when any person (except Mr. Sugarman)
acquires voting control of 15% or more of the outstanding common stock of
Giant. Once triggered, the Poison Pill provides that all Rights holders --
except the shareholder(s) who has acquired 15% or more of Giant's stock -- may
exercise their Rights and purchase additional shares of common stock to be
issued by Giant. The Board of Directors of Giant may redeem the Rights at
anytime for $0.01 per Right before the flip-in trigger occurs.
111. At bottom, the Poison Pill adopted by the Giant
Directors makes any acquisition of 15% or more of Giant's shares prohibitively
expensive to any prospective acquirors, except Mr. Sugarman. The Poison Pill
imposes a severe financial penalty on a potential acquiror, and it dramatically
dilutes a potential acquiror's voting power and equity interest in Giant. As a
result, the adoption of the Poison Pill has the effect of deterring any attempt
to change corporate control of Giant, except those that are approved in advance
by the Giant Directors. In effect, the Giant Directors have granted to
themselves de facto veto power over any proposals that involve a change in
corporate management or control, at the shareholders' expense. By adopting the
Poison Pill, the Giant Directors have entrenched themselves and the present
Giant officers in their positions,
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<PAGE> 17
and, as a practical matter, have deprived Giant's disinterested shareholders of
the opportunity to consider, and approve, any proposal by Fidelity that would
involve a change in corporate management.
112. The Poison Pill places a formidable obstacle in the
path of Fidelity -- or anyone else -- seeking to acquire 15% or more of Giant's
stock. Because Mr. Sugarman currently owns more than 20% of Giant's stock, and
has options to purchase an additional 20%, there is no clear-cut, special logic
inhering in Giant's adoption of a 15% trigger. Likewise, there is no threat to
Giant occasioned by Fidelity's acquisition of greater than 15% of Giant's
stock. Consequently, the 15% trigger cannot be attributable to any rational
business purpose; rather, it is an arbitrary number, the quintessential purpose
of which is to entrench Mr. Sugarman.
113. Giant justifies its Poison Pill as a means of
protecting smaller shareholders from others who accumulate more than 15% of the
company's stock. But Giant's real, and illicit purpose for adopting the Poison
Pill is made evident by the fact that the Poison Pill allows Mr. Sugarman, and
only Mr. Sugarman, to acquire even more than his current over 20% interest --
up to almost 50% of the company -- at a steep discount from its current market
price. Moreover, on or about January 5, 1996, Giant purchased more than
400,000 of its shares, which were trading just twenty-five cents below their
fifty-two week high. By purchasing the stock, Giant not only reduced the
number of outstanding shares, thereby significantly increasing Mr. Sugarman's
percentage ownership of Giant, but also rid itself of shareholder votes that
would likely have been against Sugarman and the other Directors. On
information and belief, prior to January 5, 1996, Giant had on only one
occasion purchased its own stock. In view of the foregoing, Giant can point to
no rational or legitimate reason why it adopted the Poison Pill.
114. On information and belief, as Giant's Directors knew
well, the Poison Pill was adopted with the specific intent and purpose of
thwarting further purchases of stock by Fidelity and Mr. Foley. However, the
Poison Pill's special and disparate treatment of Mr. Sugarman, makes clear
that its only purpose was to entrench Mr. Sugarman at the expense of other
shareholders. Such action has no legitimate business purpose, and serves only
to tip the balance of corporate control in favor of Mr. Sugarman and the other
Giant Directors.
DEFAMATION OF FIDELITY AND MR. FOLEY
115. As an honest and successful businessman, Mr. Foley has
earned the high esteem of his peers and associates in the business community.
Mr. Foley graduated from the United States Military Academy in West Point, New
York with a Bachelor of Science degree, and served his country as an Air Force
Captain. Through hard work, and with the respect he earned from his
colleagues, Mr. Foley built a tiny Arizona storefront operation into the
nation's fourth-largest title insurance company with
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<PAGE> 18
over 4,700 employees in forty-eight states. His efforts won him plaudits from
industry analysts who described Fidelity one of the nation's best-run title
companies. In 1993, Mr. Foley was elected Chairman and CEO of Carl Karcher
Enterprises, Inc. (operator of the Carl's Jr. restaurant chain), at which he
engineered a turn around to a four-year slide. Mr. Foley is a member of the
board of directors and the Foundation Board of the University of California at
Irvine. In 1995, Mr. Foley was the recipient of the distinguished Human
Relations Award for Orange County awarded by the American Jewish Committee.
Past recipients of this award have included former President Ronald W. Reagan.
Mr. Foley's success and good name have allowed him to occupy, and enjoy, a
position of prominence and high standing in the community. Likewise, Fidelity
has earned, enjoys, and benefits from its good reputation.
116. When the Giant Directors learned that Fidelity and Mr.
Foley had acquired more than a 5% beneficial interest in Giant, the Giant
Directors became worried that their legacy of wasteful spending and corporate
mismanagement would lead to a shareholder vote expelling them from office. In
an effort to entrench themselves at Giant and preserve the spoils of their
offices, the Giant Directors endeavored to dissuade Fidelity and Mr. Foley from
acquiring additional Giant stock. To this end, and to divert shareholder
attention away from their own mismanagement, Giant filed the instant lawsuit on
December 19, 1995. Also that day, in its zeal to announce and describe to the
media the averments it made in the Complaint, Giant -- with the full knowledge
and cooperation of Mr. Christensen -- prepared and issued a press release.
That press release, attached hereto as Exhibit A, identified Mr. Christensen as
Giant's corporate contact. In the press release, Mr. Christensen made the
following blatantly false and defamatory statements that explicitly and
implicitly accused Fidelity and Mr. Foley of acting illegally, dishonestly,
and unprofessionally in their business dealings: "Terry Christensen, a
director of Giant stated, 'We were shocked to learn that Mr. Foley and Fidelity
were buying Giant stock while Mr. Foley and his officers were constantly asking
about the profit and loss projections, cash positions and business plans of
both Giant and Rally's.' Christensen further stated, 'When we learned that Mr.
Foley's stockbrokers were utilizing confidential and insider information to buy
Giant stock for a group of investors acting with Mr. Foley, we felt that this
lawsuit was absolutely necessary.' Christensen stated, 'The directors of Giant
do not oppose legitimate actions by its stockholders, but we have a duty to
prevent flagrant violations of the securities laws.'"
117. Giant and Mr. Christensen did not stop there.
Evidencing their malicious intent, Giant, with the full knowledge and
cooperation of Mr. Christensen, prepared and issued another press release on
January 4, 1996. That press release, attached hereto as Exhibit B, again
identified Mr. Christensen as Giant's corporate contact. In the press release,
Mr. Christensen made the following blatantly false and defamatory statements
that explicitly and implicitly accused Mr. Foley of acting illegally,
Page 26 of 35 Pages
<PAGE> 19
dishonestly, and unprofessionally in their business dealings: "Terry
Christensen, a director of Giant, stated, 'Giant will not stand idly by while
these individuals attempt to loot Giant and Rally's to the detriment of these
companies and their shareholders.'"
118. Giant and Mr. Christensen further defamed Fidelity and
Mr. Foley by issuing press releases to the media that summarized the averments
made in the Complaint and First Amended Complaint. In doing so, Giant induced
the media to publish the allegations, and implicitly represented that the
averments made therein were true and correct, i.e., that Fidelity and Mr. Foley
had violated federal securities laws, traded stock on material, nonpublic,
confidential and inside information, etc. None of the media to whom the press
releases were issued are participants to this action, or are in any way
connected to these proceedings.
119. The following statements contained in the December 19,
1995 press release, which purport to summarize averments made in the Complaint,
are blatantly false and defamatory in that they implicitly state that Fidelity
and Mr. Foley acted illegally, dishonestly, and unprofessionally in their
business dealings:
a. "William P. Foley II, and two of his brokers
. . . were accused of violating the Federal Securities Laws and trading on
nonpublic, confidential and inside information as part of a takeover bid for
Rally's Hamburgers, Inc. . . ."
b. "In the lawsuit, Giant alleges that Mr. Foley
and his group of investors violated the disclosure requirements of Section
13(d) of the Securities Exchange Act of 1934 by secretly forming a group to buy
shares in Giant and by filing a false 13D which failed to identify all of the
members of their group, understated the true extent of their holdings of Giant,
and failed to disclose the true purpose of their investment in Giant -- to
obtain control of Rally's and Giant."
c. "Giant's complaint asserts that, beginning in
the Summer of 1995, Mr. Foley obtained nonpublic confidential and inside
information from Rally's and Giant . . . . Although Mr. Foley and his
companies had agreed to keep this information confidential and not to trade in
Giant's or Rally's stock based on this information, Mr. Foley, Fidelity, Mr.
Davenport, Mr. Martin and some of their clients immediately, and secretly,
began to amass stock in Giant in order to gain control of Giant and Rally's."
120. Likewise, the following statements contained in the
January 4, 1996 press release, which purport to summarize the averments made in
the First Amended Complaint, are blatantly false and defamatory in that they
implicitly state that Fidelity and Mr. Foley acted illegally, dishonestly, and
unprofessionally in their business dealings:
a. "Separately, Giant Group said it amended its
lawsuit against William P. Foley II, chairman of CKE Restaurants
Page 27 of 35 Pages
<PAGE> 20
Inc. and Fidelity National Financial Inc., who it charges with improperly
trying to gain control of Giant and Rally's."
b. "The lawsuit charges Foley and two stockbrokers
with violating securities laws in an attempt to take control of the companies."
c. "In the lawsuit, filed in federal court in Los
Angeles, Giant alleges that Foley and others violated SEC disclosure
requirements by 'secretly forming a group to buy shares in Giant.' Giant said
Foley and the group failed to identify all of the members of the group,
understated the extent of their holdings in Giant and failed to disclose the
true purpose of their investment, which is to gain control of Rally's and
Giant."
d. "The complaint was amended to say that Foley
and the others have attempted to expand their takeover group by soliciting the
aid of a shareholder in another fast-food chain."
e. "Giant said that Foley intends to 'loot Giant,
purchase substantial assets of Rally's and use the remaining cash to aid in the
acquisition' of another fast-food chain."
FIRST CAUSE OF ACTION
(FOR DECLARATORY RELIEF
AGAINST ALL COUNTERCLAIM DEFENDANTS)
121. Counterclaim plaintiffs repeat, re-aver and incorporate
by this reference paragraphs 88 through 120 above, as though fully set forth
herein.
122. The Poison Pill is inherently invalid in that it
impermissibly discriminates among shares and shareholders of the same class and
series and serves no rational corporate purpose. Moreover, Fidelity is
informed and believes and thereon avers that Giant's articles and bylaws bar
the adoption of the Poison Pill, and, therefore its adoption was an act of
ultra vires. Likewise, in adopting the Poison Pill, in setting its trigger at
15%, and by failing to redeem the Poison Pill, Giant's directors have breached
- -- and continue to breach -- their fiduciary duties. Hence, the Poison Pill is
invalid as applied.
123. Giant's Directors have fiduciary duties, and a duty of
loyalty to Fidelity as well as other Giant shareholders. Those duties are
enhanced in the present factual context.
124. Among such duties, Giant's Directors have a duty not to
subvert the rights of shareholders to acquire stock or to vote -- on an equal
footing with shareholders who own the same class and series of stock. The
actions of the Giant Directors, as set forth above, were taken in bad faith and
were intended solely to subvert the rights of Fidelity, as contemplated by the
Williams Act, and other applicable law. Such actions are contrary to the
interests of Giant and its shareholders. They are intended to entrench Giant's
present management --
Page 28 of 35 Pages
<PAGE> 21
particularly Mr. Sugarman -- by making Fidelity's acquisition of 15% or more of
Giant stock practically impossible, all for the purpose, and no other, of
depriving Giant's disinterested shareholders of the opportunity to consider,
and approve, a proposal by Fidelity that would involve a change in present
management. Thus, Giant's Directors have breached their fiduciary duties
through their adoption of the Poison Pill.
125. Giant's Directors had no reasonable ground for
believing that Fidelity's acquisition of more than 15% of Giant's stock posed
any danger to Giant. Because Mr. Sugarman's interest in Giant, including
options, amounts to almost 50% of the company, the adoption of the 15% trigger
cannot be attributable to any rational business purpose; it is an arbitrary
number, the quintessential purpose of which is to entrench Mr. Sugarman in his
position at Giant. Thus, the Giant Directors' adoption of the 15% threshold
constitutes a second, separate and independent breach of their fiduciary duty.
126. Knowing full well that the Poison Pill is inherently
invalid and invalid as applied, the Giant Directors' continuing failure to
rescind or, alternatively to redeem the Poison Pill constitutes a third,
separate and independent breach of their fiduciary duty.
127. Specifically, the actions taken by the Giant Directors:
a. frustrate the full purpose and objectives of
Congress in enacting the Williams Act by giving intransigent management the
ability to preclude purchases of stock on a discriminatory basis;
b. impermissibly tilt the balance between
management and potential acquirors;
c. establish a series of corporate artifices in an
attempt to entrench Mr. Sugarman and to ward off further purchases of Giant
stock by Fidelity;
d. discourage shareholders from voting their
shares at a referendum by permitting a discriminatory Poison Pill to be
adopted;
128. By adopting the Poison Pill, Giant's Directors have
deprived Fidelity of its rights under the Williams Act, among other laws. The
actions of Giant and its Directors have injured and continue to injure
Fidelity, which has no adequate remedy at law. Unless the Poison Pill is
declared invalid, Fidelity will be irreparably injured because it will be
denied its full voting rights and lose equity interest in Giant. In addition,
Fidelity will be irreparably injured in that Mr. Sugarman will hold a decided
and unlawful advantage in exercising voting rights, forcing Fidelity to
terminate its efforts to acquire more shares in, and ultimately control of
Giant, a unique business. Similarly, Giant's other shareholders will be
irreparably harmed
Page 29 of 35 Pages
<PAGE> 22
because they will be denied the opportunity to consider, and approve,
alternatives proposed by Fidelity to Giant's present management.
SECOND CAUSE OF ACTION
(FOR BREACH OF FIDUCIARY DUTY
AGAINST THE GIANT DIRECTORS)
129. Counterclaim plaintiffs repeat, re-aver and incorporate
by this reference paragraphs 88 through 128 above, as though fully set forth
herein.
130. Giant's Directors have fiduciary duties, and a duty of
loyalty to Fidelity as well as other Giant shareholders. Those duties are
enhanced in the present factual context.
131. Among such duties, Giant's Directors have a duty not to
subvert the rights of shareholders to acquire stock or vote -- on an equal
footing with shareholders who own the same class and series of stock. The
actions of the Giant Directors, as set forth above, were taken in bad faith and
were intended solely to subvert the rights of Fidelity, as contemplated by the
Williams Act, and other applicable law. Such actions are contrary to the
interests of Giant and its shareholders. They are intended to entrench Giant's
present management -- particularly Mr. Sugarman -- by making Fidelity's
acquisition of fifteen percent or more of Giant stock practically impossible,
all for the purpose, and no other, of depriving Giant's disinterested
shareholders of the opportunity to consider, and approve, a proposal by
Fidelity that would involve a change in present management. Thus, Giant's
Directors have breached their fiduciary duties through their adoption of the
Poison Pill.
132. Giant's Directors had no reasonable ground for
believing that Fidelity's acquisition of more than 15% of Giant's stock posed
any danger to Giant. Because Mr. Sugarman's interest in Giant, including
options, amounts to almost 50% of the company, the adoption of the 15% trigger
cannot be attributable to any rational business purpose; it is an arbitrary
number, the quintessential purpose of which is to entrench Mr. Sugarman in his
position at Giant. Thus, the Giant Directors' adoption of the 15% threshold
constitutes a second, separate and independent breach of their fiduciary duty.
133. Knowing full well that the Poison Pill is inherently
invalid and invalid as applied, the Giant Directors' continuing failure to
redeem the Poison Pill constitutes a third, separate and independent breach of
their fiduciary duty.
134. Specifically, the actions taken by the Giant Directors:
a. frustrate the full purpose and objectives of
Congress in enacting the Williams Act by giving intransigent management the
ability to preclude purchases of stock on a discriminatory basis;
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b. impermissibly tilt the balance between
management and potential acquirors;
c. establish a series of corporate artifices in an
attempt to entrench Mr. Sugarman and to ward off further purchases of Giant
stock by Fidelity;
d. discourage shareholders from voting their
shares at a referendum by permitting a discriminatory Poison Pill to be
adopted;
135. By adopting the Poison Pill, Giant's Directors have
deprived Fidelity of its rights under the Williams Act, among other laws. The
actions of Giant and its Directors have injured and continue to injure
Fidelity, which has no adequate remedy at law. Unless the Poison Pill is
declared invalid, Fidelity will be irreparably injured because it will be
denied its full voting rights and lose equity interest in Giant. In addition,
Fidelity will be irreparably injured in that Mr. Sugarman will hold a decided
and unlawful advantage in exercising voting rights, forcing Fidelity to
terminate its efforts to acquire more shares in, and ultimately control of
Giant, a unique business. Similarly, Giant's other shareholders will be
irreparably harmed because they will be denied the opportunity to consider, and
approve, alternatives proposed by Fidelity to Giant's present management.
THIRD CAUSE OF ACTION
(FOR LIBEL PER SE AGAINST
GIANT AND MR. CHRISTENSEN)
136. Counterclaim Plaintiffs repeat, re-aver and incorporate
by this reference paragraphs 88 through 135 above, as though fully set forth
herein.
137. On information and belief, Giant and Mr. Christensen
intentionally and maliciously made blatantly false, unprivileged and defamatory
statements in press releases concerning Fidelity and Mr. Foley, in a drastic
effort to force Fidelity and Mr. Foley to stop making further purchases of
Giant stock. With Mr. Christensen's knowledge and cooperation, Giant issued
defamatory press releases to the media, which republished some or all of the
defamatory statements to mass audiences. On information and belief, at the
time Giant issued the press releases, both Giant and Mr. Christensen knew that
statements contained therein concerning Fidelity and Mr. Foley were blatantly
false and defamatory. Indeed, such statements have the natural and probable
effect in the minds of average people of accusing Fidelity and Mr. Foley of
acting illegally, dishonestly, and unprofessionally in their business dealings.
138. As a direct and proximate cause of such defamatory
statements, Fidelity and Mr. Foley's good names and professional reputations
have been injured, and they have suffered financial damage.
Page 31 of 35 Pages
<PAGE> 24
FOURTH CAUSE OF ACTION
(FOR SLANDER PER SE AGAINST
GIANT AND MR. CHRISTENSEN)
139. Counterclaim Plaintiffs repeat, re-aver and incorporate
by this reference paragraphs 88 through 138 above, as though fully set forth
herein.
140. On information and belief, Mr. Christensen
intentionally and maliciously made blatantly false, unprivileged and defamatory
oral statements, in person and over the telephone, concerning Fidelity and Mr.
Foley, in a drastic effort to force Fidelity and Mr. Foley to stop making
further purchases of Giant stock. On information and belief, Mr. Christensen
made these statements to private individuals and to members of the media so
that they would be republished to mass audiences. On information and belief,
Mr. Christensen knew at the time he made such defamatory statements that they
were blatantly false and defamatory. On information and belief, Mr.
Christensen's defamatory statements were widely published, and had the natural
and probable effect in the minds of average people of accusing Fidelity and Mr.
Foley of acting illegally, dishonestly, and unprofessionally in their business
dealings.
141. As a direct and proximate cause of such defamatory
statements, Fidelity and Mr. Foley's good names and professional reputations
have been injured, and they have suffered financial damage.
WHEREFORE, Fidelity and Mr. Foley pray for judgment as follows:
1. That the Complaint be dismissed as against Defendants
with prejudice;
2. That Plaintiff take nothing by way of this action;
ON COUNTERCLAIM PLAINTIFFS' FIRST AND SECOND CAUSES OF ACTION
I. For a declaration:
a. that the Poison Pill is invalid; and
b. that the Giant Directors have breached and
continue to breach their fiduciary duties, including the duty of loyalty,
through their adoption of the Poison Pill.
1. For an order:
a. directing Giant and its Directors fully
to disclose each and every provision of the Poison Pill.
b. directing that Giant and its Directors rescind,
or in the alternative to redeem, the Poison Pill;
Page 32 of 35 Pages
<PAGE> 25
c. enjoining counterclaim defendants from taking
any action in furtherance of the Poison Pill;
d. directing Giant to disgorge the more than
400,000 shares of Giant stock it purchased on or about January 5, 1996.
e. enjoining Giant or its Directors from engaging
in any transactions involving the issuance of Giant's voting securities;
2. For Fidelity and Foley's attorneys' fees and costs; and
3. For such other and further relief as this Court may
deem just and proper.
ON COUNTERCLAIM PLAINTIFFS' THIRD AND FOURTH CAUSES OF ACTION
4. For presumed, special damages in an amount to be
determined at trial;
5. For actual damages in an amount to be determined at
trial;
Page 33 of 35 Pages
<PAGE> 26
6. For punitive damages in an amount to be determined at
trial;
7. For Fidelity and Foley's attorneys' fees and costs;
8. For such other and further relief as this Court may
deem just and proper.
DATED: January 16, 1996 MILBANK, TWEED, HADLEY & McCLOY
C. Stephen Howard
Jeffery D. McFarland
Scott Vick
Cheri L. Wood
By: /s/ C. Stephen Howard
--------------------------------
C. Stephen Howard
Attorneys for defendants and
counterclaim plaintiffs
FIDELITY NATIONAL FINANCIAL, INC.
and WILLIAM P. FOLEY, II
Page 34 of 35 Pages
<PAGE> 27
DEMAND FOR JURY TRIAL
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure
and Local Rule 3.4.10, counterclaim plaintiffs hereby demand a trial by jury of
all issues triable of right by jury in Giant's First Amended Complaint and
counterclaim plaintiffs' Counterclaims.
DATED: January 16, 1996 MILBANK, TWEED, HADLEY & McCLOY
C. Stephen Howard
Jeffery D. McFarland
Scott Vick
Cheri L. Wood
By: /s/ C. Stephen Howard
--------------------------------
C. Stephen Howard
Attorneys for defendants and
counterclaim plaintiffs
FIDELITY NATIONAL FINANCIAL, INC.
and WILLIAM P. FOLEY, II
Page 35 of 35 Pages
