==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
AMENDMENT NO. 5
TO
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
and
AMENDMENT NO. 8
TO
SCHEDULE 13D
under the Securities Exchange Act of 1934
ARV ASSISTED LIVING, INC.
(Name of Subject Company)
EMERITUS CORPORATION
and
EMAC CORP.
(Bidder)
Common Stock, No Par Value Per Share
(Including the Preferred Share Purchase Rights)
(Title of Class of Securities)
-----------
00204C107
(CUSIP Number)
Raymond R. Brandstrom
Emeritus Corporation
3131 Elliot Avenue
Suite 500
Seattle, Washington 98121
Telephone: (206) 298-2909
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on Behalf of Bidder)
Copies to:
Phillip R. Mills, Esq. Michael Stansbury, Esq.
Davis Polk & Wardwell Perkins Coie
450 Lexington Avenue 1201 Third Avenue
New York, New York 10017 Suite 4000
Telephone: (212) 450-4000 Seattle, Washington 98101
Telephone: (206) 583-8888
-----------
December 19, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
==============================================================================
CUSIP No. 00204C107
- -------------------
1 NAMES OF REPORTING PERSONS
Emeritus Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
WA
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
1,077,200
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [X]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
6.8%
10 TYPE OF REPORTING PERSON
CO
CUSIP No. 00204C107
- -------------------
1 NAMES OF REPORTING PERSONS
EMAC Corp.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DE
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
1,077,200
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [X]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
6.8%
10 TYPE OF REPORTING PERSON
CO
This Amendment No. 5 amends and supplements the Tender Offer
Statement on Schedule 14D-1 (the "Statement"), filed December 19, 1997 by
Emeritus Corporation, a Washington corporation ("Emeritus"), and EMAC Corp., a
Delaware corporation (the "Bidder") and a wholly owned subsidiary of Emeritus,
as amended by Amendments No. 1, 2, 3 and 4, relating to the Bidder's offer to
purchase all outstanding shares of Common Stock, no par value per share, of
ARV Assisted Living, Inc., a California corporation ("ARV"), at $17.50 per
share, net to the seller in cash, upon terms and subject to the conditions set
forth in the Offer to Purchase and the related Letter of Transmittal, copies
of which are attached as Exhibits (a)(1) and (a)(2) to the Statement. This
Amendment No. 5 constitutes Amendment No. 8 to the Report on Schedule 13D
filed October 14, 1997 by Emeritus, as amended. Capitalized terms not
separately defined herein shall have the meanings specified in the Statement.
Item 10. Additional Information.
(e) On January 12, 1998, a U.S. District Court Judge for the
Central District of California issued a stay (the "Stay") of the action
brought by ARV in U.S. District Court seeking to prevent Emeritus from
proceeding with its $17.50 per share cash tender offer for all shares of ARV,
and from soliciting proxies from ARV shareholders to replace ARV's current
board of directors. The Court ordered that the stay will remain in effect
pending final resolution of the state court action brought by Emeritus against
ARV and may be lifted only on the following conditions: (i) either side may
petition the Court to lift the stay after a decision in the state court case
becomes final; (ii) either side may petition to lift the stay if any
significant development occurs affecting the federal action; and (iii) any
petition to lift the stay must include the history and current status of all
related legal proceedings in courts and administrative agencies. The Court's
Minute Order and Order Removing the Case From Active Caseload, each dated
January 12, 1998, are attached hereto as Exhibits (g)(7) and (g)(8).
On January 13, 1998, prior to receiving notice of the Stay of
the federal action, Emeritus filed in U.S. District Court its
Opposition to Plaintiff's Motion For Preliminary Injunction.
On January 14, 1998, Emeritus issued the press release attached
hereto as Exhibit (a)(11). The information set forth in the press release is
incorporated herein by reference.
Item 11. Material to be Filed as Exhibits
(a)(11) Press Release, dated January 14, 1998.
(g)(7) Minute Order entered on January 12, 1998 in ARV Assisted
Living, Inc. v. Emeritus Corporation and EMAC Corporation, United States
District Court for the Central District of California, Southern Division, Case
No. SA-CV-98-9-LHM (EEx).
(g)(8) Order Removing the Case From Active Caseload entered on
January 12, 1998 in ARV Assisted Living, Inc. v. Emeritus Corporation and EMAC
Corporation, United States District Court for the Central District of
California, Southern Division, Case No. SA-CV-98-9-LHM (EEx).
(g)(9) Emeritus' Opposition to Motion for Preliminary
Injunction filed on January 13, 1998 in ARV Assisted Living, Inc. v. Emeritus
Corporation and EMAC Corporation, United States District Court for the Central
District of California, Southern Division, Case No. SA-CV-98-9-LHM (EEx).
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 14, 1998
EMERITUS CORPORATION
By: /s/ Raymond R. Brandstrom
-----------------------------------
Name: Raymond R. Brandstrom
Title: President
EMAC CORP.
By: /s/ Raymond R. Brandstrom
-----------------------------------
Name: Raymond R. Brandstrom
Title: President
Exhibit (a)(11)
Contacts: Kelly J. Price
Chief Financial Officer
(206) 298-2909
or
Roy Winnick or Mark Semer
Kekst and Company
(212) 521-4842 or 4802
EMERITUS CORPORATION OBTAINS STAY OF ARV FEDERAL
COURT ACTION SEEKING TO BLOCK EMERITUS TENDER OFFER
SEATTLE, January 14, 1998 -- Emeritus Corporation (Amex: ESC) today
reported that on January 12, 1998 a U.S. District Court Judge in the
Central District of California issued a stay of the action brought by ARV
Assisted Living, Inc. seeking to prevent Emeritus from proceeding with
its $17.50 per share cash tender offer for all shares of ARV, and from
soliciting proxies from ARV shareholders to replace ARV's current board
of directors. The Court ordered that the stay will remain in effect
pending final resolution of the state court action brought by Emeritus
against ARV and may only be lifted on certain conditions. In the state
court action, Emeritus has filed a motion for preliminary injunction
seeking, among other things, the rescission of the recent redemption by
ARV of its 6 3/4% Convertible Notes due 2007, and to prevent the
operation of the ARV poison pill. As previously reported, that motion
is scheduled to be heard on January 23, 1998, prior to the January 28 ARV
Annual Meeting.
Emeritus stated: "We are pleased that ARV was not successful in its most
recent attempt to prevent us from presenting our $17.50 per share cash
offer to ARV shareholders. In light of the Court's order, we urge ARV to
sit down and negotiate with us. In addition, we urge ARV shareholders to
sign, date and mail the blue Emeritus proxy cards to us in advance of the
January 28 ARV Annual Meeting."
As previously announced, Emeritus and EMAC Corp., its wholly-owned
subsidiary, on December 19, 1997 commenced a cash tender offer of $17.50
per share for all outstanding shares of ARV. The tender offer and
withdrawal rights expire at 5:00 p.m., New York City time, on January 30,
1998 unless the offer is extended or withdrawn. On December 22, 1997,
Emeritus released its proxy materials to ARV shareholders.
Emeritus is a senior housing services company focused on operating
residential-style assisted-living communities. These communities provide
a residential housing alternative for senior citizens who need help with
the activities of daily living. Emeritus currently holds interests in
117 communities representing capacity for more than11,000 residents in
25 states and Canada (including a minority interest in Alert Care Corp.).
Emeritus' common stock is traded on the American Stock Exchange under
the symbol "ESC."
# # #
Exhibit (g)(7)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
-----------------------
Case No. SA CV - 98 - 9 - LHM (EEx) Date January 12, 1998
-------------------------- ----------------
Title ARV Assisted Living, Inc. v. Emeritus Corporation
-------------------------------------------------
==============================================================================
DOCKET ENTRY
==============================================================================
PRESENT:
HON. Linda H. McLaughlin , JUDGE
-----------------------------------
Debra Beard None Present
----------------- -------------------
Deputy Clerk Court Reporter
ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:
None Present None Present
PROCEEDINGS: ORDER RE STAY OF PROCEEDINGS
IN CHAMBERS
(1) The Court has received and considered all papers submitted by the
parties in response to its Order to Show Cause Re Stay issued by
minute order dated 1/7/98. Further, the Court has read and
considered the entire file in this matter. In addition, the
Court has read and considered the Complaint filed in Orange
County Superior Court Case No. 787788, Emeritus Corporation v.
ARV Assisted Living, Inc., etc., et al. (the "state case").
(2) Action Stayed: The Court stays all proceedings in the instant action
pending final resolution of the state case and reserves
jurisdiction on the following conditions:
(i) Either side may petition the Court to lift the stay after a
decision in the state case becomes final;
(ii) Either side may petition to lift the stay if any significant
development occurs affecting the federal action;
(iii) Any petition to lift this stay must include the history and
current status of all related legal proceedings in courts and
administrative agencies.
(3) Plaintiff ARV Assisted Living, Inc., ("ARV") filed the instant
action on 1/6/98 seeking injunctive and declaratory relief against
Defendants Emeritus Corporation ("Emeritus") and EMAC Corporation.
(4) Emeritus had previously filed, on 12/9/97, the state case, seeking
injunctive and declaratory relief against ARV and the individual
members of ARV's Board of Directors.
(5) Based on the principles annunciated in Colorado River Water
Conservation District v. United States, 424 U.S. 800 (1976), as
well as the arguments raised by Emeritus in its Response to the
Court's Order to Show Cause, the Court defers to the current
state proceeding between these two parties, and stays this action
pending the final outcome of the state case.
(6) Formal order accompanies this minute order.
copies to:
Kenneth R. Heitz, et al.
IRELLA & MANELLA LLP
1800 Avenue of the Stars Ste 900
Los Angeles, CA 90067-4276
Wayne W. Smith, et al.
GIBBON, DUNN & CRUTCHER
4 Park Plaza, Ste 1400
Irvine, CA 92614-8557
Michael P. Carroll, et al.
DAVIS POLK & WARDWELL
450 Lexington Avenue
New York, NY 10017
Exhibit (g)(8)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
ARV ASSISTED LIVING, INC., a ) No. SACV 98 - 9 - LHM (EEx)
California corporation, )
)
Plaintiff, ) ORDER REMOVING CASE FROM
)
v. ) ACTIVE CASELOAD
)
EMERITUS CORPORATION, a Washington )
corporation, and EMAC CORPORATION, )
a Delaware Corporation, )
)
Defendants )
________________________________________)
IT IS HEREBY ORDERED that this action is removed from this Court's
active caseload pursuant to the Minute Order dated January 12, 1998.
This Court retains full jurisdiction over this action and this Order
shall not prejudice any party to this action.
DATED: 1/12/98 /s/ Linda H. McLaughlin
-------------- ---------------------------------
LINDA H. McLAUGHLIN
UNITED STATES DISTRICT JUDGE
copies to:
Kenneth R. Heitz, et al.
IRELLA & MANELLA LLP
1800 Avenue of the Stars Ste 900
Los Angeles, CA 90067-4276
Wayne W. Smith, et al.
GIBBON, DUNN & CRUTCHER
4 Park Plaza, Ste 1400
Irvine, CA 92614-8557
Michael P. Carroll, et al.
DAVIS POLK & WARDWELL
450 Lexington Avenue
New York, NY 10017
Exhibit (g)(9)
GIBSON, DUNN & CRUTCHER LLP
WAYNE W. SMITH, SBN 054593
JOSEPH P. BUSCH, III, SBN 070340
4 Park Plaza, Suite 1400
Irvine, California 92614-8557
(714) 451-3800
DAVIS POLK & WARDWELL
MICHAEL P. CARROLL
JAMES H.R. WINDELS
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
Attorneys for Defendants Emeritus
Corporation and EMAC Corporation
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
SANTA ANA DIVISION
ARV ASSISTED LIVING, INC., a California | CASE NO. SA-CV-98-8-LHM (EEX)
corporation, |
Plaintiff, | OPPOSITION TO PLAINTIFF'S MOTION
v. | FOR PRELIMINARY INJUNCTION
EMERITUS CORPORTION, a Washington |
corporation, and EMAC CORPORATION, a |
Delaware Corporation |
Defendants. |
__________________________________________|
Defendants Emeritus Corporation and EMAC Corporation
(collectively, "Emeritus") respectfully submit this oppositon to plaintiff ARV
Assisted Living's motion for preliminary injunction.
TABLE OF CONTENTS
-----------------
Page
----
1. Preliminary Statement................................................ 2
2. Background........................................................... 3
A. Emeritus' July 10, 1997 Proposal and the First
Prometheus Transaction......................................... 4
B. ARV Implements Its Poison Pill................................. 5
C. Emeritus' October 12, 1997 Proposal and the Second
Prometheus Transaction......................................... 6
D. ARV's Redemption of the Convertible Notes...................... 7
E. Emeritus' Complaint, $17.50 Tender Offer, and Proxy
Statement...................................................... 8
F. ARV's Rejection of Emeritus' $17.50 Offer and Commencement
of the Instant Action; Emeritus' Schedule 13D-1 Amendments..... 9
3. PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION SHOULD BE
DENIED............................................................... 10
4. Plaintiff Cannot Clearly Establish Its Probable Success
on the Merits........................................................ 10
A. Plaintiff Cannot Clearly Establish the Probable
Success on the Merits of Its Claims under the
Federal Securities Laws........................................ 10
1. Alleged Omissions Concerning ARV's Leases................ 11
2. Alleged Omission Concerning Time Frame for
Rescinding Redemption of the Notes....................... 13
3. Alleged Omission of Facts Concerning Emeritus'
Financing................................................ 15
4. Alleged Omission of Facts Concerning Emeritus'
Intentions to Follow Through With Its $17.50
Cash Offer............................................... 17
B. ARV Cannot Clearly Establish the Probable Merits of
Its Claim Under California's Unfair Competition
Act............................................................ 18
C. ARV Cannot Clearly Establish Its Probable Success on
the Merits of Its Claim that Emeritus Has Breached
or Will Breach Its Fiduciary Duties............................ 21
1. As a Minority Shareholder of ARV, Emeritus
Owes No Fiduciary Duties................................. 21
2. ARV Cannot Allege any Current Breach of Fiduciary
Duty..................................................... 22
3. ARV Has Otherwise Failed To State a Breach of
Fiduciary Duty Claim..................................... 23
5. Plaintiff Cannot Clearly Establish Irreparable Harm.................. 24
6. The Balance of Hardships Favors Denial of Injunctive
Relief............................................................... 25
7. CONCLUSION........................................................... 26
TABLE OF AUTHORITIES
--------------------
Page(s)
-------
CASES
Acri v. Varian Assoc., Inc., 114 F.3d 999 (9th Cir. 1997).................. 17
Algrant v. Evergreen Valley Nurseries Ltd., 126 F.3d 178 (3d Cir. 1997).... 19
Associated Gen. Contractors v. Coalition for Econ. Equity, 950 F.2d
1401 (9th Cir. 1991)..................................................... 10
Bank of the West v. Superior Ct., 2 Cal. App. 4th 1254, 10 Cal. Rptr.
2d 538 (Cal. 1992)....................................................... 19
Beverly Hills Fed.. Savings. & Loan Ass'n v. Fed. Home Loan Bank Bd.,
371 F. Supp. 306 (C.D. Cal. 1973)......................................21,22
Blasias Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988).......... 23
Capital Realty Investors Tax Exempt Fund Ltd. v. Dominium Tax Exempt
Fund, L.L.P., 944 F. Supp. 250 (S.D.N.Y. 1996)........................... 24
Cel- Tech Communications Inc. v. Los Angeles Cellular Phone Co., 59
Cal. App. 4th 436, 69 Cal. Rptr. 2d 207 (1997)........................... 19
Committee of Cent. Amer. Refugees v. INS, 795 F.2d 1434 (9th Cir.
1986)...............................................................10,18,25
Consolidated Gold Fields, PLC v. Anglo Am. Corp., 713 F. Supp. 1457
(S.D.N.Y. 1989)........................................................14,15
Graham v. Medical Mut. of Ohio, 130 F.3d 293 (7th Cir. 1997)............... 10
Hajmm Co. v. House of Raeform Farms, Inc., 403 S.E.2d 483 (N.C 1991)....... 19
Hilton Hotels Corp. v. ITT Corp., 978 F. Supp. 1342 (D. Nev. 1997)......... 23
IU Int'l Corp. v. NX Acquisition Corp., 840 F.2d 220 (4th Cir. 1988)....... 18
MacFadden Holdings, Inc. v. JC Acquisition Corp., 802 F.2d 62 (2d Cir.
1986).................................................................... 11
Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S. Ct. 616 (1970)........ 11
Morris v. Gilbert, 649 F. Supp. 1491 (E.D.N.Y. 1986)....................... 19
Newmont Mining Co. v. Pickens, 831 F.2d 1448 (9th Cir. 1987)............... 16
Onabanc Corp. v. Holtzman, 956 F. Supp. 250 (N.D.N.Y. 1997)................ 24
Perera v. Chiron Corp., No. C-95-20725, 1996 WL 251936 (N.D. Cal.
May 8, 1996)...........................................................19,20
Polaroid Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988)....................14,15
Rendish v. City of Tacoma, 123 F.3d 1216 (9th Cir. 1997).................10,25
Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 95 S. Ct. 2069 (1975)...11,13, 24
Russell v. Dean Witter Reynolds, Inc., 510 A.2d 972 (Conn. 1986)........... 19
Seibert v. Sperry Rand Corp., 586 F.2d 949 (2d Cir. 1978).................. 15
Shearson Lehman Bros. v. Greenberg, [1992-93 Transfer Binder] Fed. Sec.
L. Rep. (CCH)Paragraph 97,409 (C.D. Cal. Mar. 15, 1993), aff'd, 60
F.3d 834 (9th Cir. 1995)................................................. 20
Smith v. Cooper, 846 F.2d 325 (5th Cir. 1988).............................. 19
Spinner Corp. v. Princeville Development Corp., 849 F.2d 388 (9th Cir.
1988).................................................................... 19
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 96 S. Ct. 2126 (1976).... 11
Treadway Cos., Inc., 638 F.2d at 380....................................... 12
Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 111 S. Ct. 2749
(1991)................................................................13, 17
STATUTES
California Business & Professions Code Section 17200...................... 18
17 C.F.R. Section 240.14d-100...........................................16,17
Fed. R. Evid. 802......................................................... 17
F.T.C., Section 17200..................................................... 19
15 U.S.C. Section 45(a)................................................... 18
28 U.S.C. Section 1367(c)(3).............................................. 17
1. PRELIMINARY STATEMENT.
This lawsuit is the most recent in a series of tactics employed
by ARV to prevent Emeritus from presenting an offer to ARV's shareholders to
purchase their shares for $17.50 in cash. As the facts developed in
connection with Emeritus' state action against ARV show, ARV's board of
directors has enacted a series of increasingly severe and illegal measures over
the last six months to solidify its control over ARV and to prevent Emeritus
from presenting its offer to ARV's shareholders. This case is a final attempt
by ARV to disempower and disenfranchise its own shareholders and interfere
with their right to determine the future of the company.
ARV's request that this Court enjoin Emeritus' tender offer
unless Emeritus removes the conditions to its offer constitutes an
unprecedented and unwarranted intrusion into the substantive terms of a
business transaction, and should be denied. In short, it should be up to ARV's
shareholders, not this Court, to decide whether in fact the conditions to
Emeritus' offer are too onerous or unreasonable. If ARV is able to convince
its shareholders that this is the case, then ARV should prevail in the proxy
contest. However, so long as all material facts about Emeritus' offer are
disclosed -- which, as described below, has occurred here -- principles of
corporate democracy require that the vote proceed free of interference.
ARV cannot make a clear showing of likelihood of success on the
merits under either of its principal legal theories -- that Emeritus has
failed to disclose material facts under the federal securities laws or that
Emeritus will breach fiduciary duty to ARV's shareholders -- and therefore
its motion for a preliminary injunction should be denied.
First, with respect to the securities laws, ARV's claims are
based either on complete speculation about future events or on the alleged
omission of facts which are in actuality properly disclosed. For example,
ARV's theory that Emeritus is intending to perform an eleventh hour "bait and
switch" and change the form of consideration in its offer from cash to stock is
unsupported by any evidence. On the other hand, the existence of the "change
of control" provisions in ARV's leases and the conditions to Emeritus' offer
are fully disclosed and have received even greater emphasis in supplemented
disclosure materials recently filed by Emeritus concerning its offer. Case
law establishes that so long as all the material facts and risks are
disclosed, it is up to ARV's shareholders to weigh the magnitude of these
risks and decide how they want to vote their shares.
With respect to ARV's breach of fiduciary duty claims, these
claims are both entirely unsupported by the record and premature. There is no
evidence at all to support ARV's conspiracy theory that Emeritus will withdraw
its offer after its director nominees are elected and thereby cause
devastating harm to one its competitors. Emeritus has stated publicly that it
is fully intending on consummating its $17.50 cash offer and buying ARV's
shares at a substantial premium to their market value. If Emeritus' nominees
are elected, they will then owe fiduciary duties to ARV's shareholders, which
can be enforced as appropriate after the election occurs. There is no need
for this Court's involvement now, when there is no evidence that any of the
contingencies that ARV has alleged will actually occur.
2. BACKGROUND.
Unfortunately, Emeritus cannot cite this Court to any of the
evidence that ARV has designated as "confidential" in the state court
proceedings. Emeritus received ARV's Reply in Support of Ex Parte Application
for Leave to Conduct Expedited Discovery (the "Ex Parte Reply"), and
immediately attempted to negotiate a resolution of the designation of
documents as "confidential" as proposed by ARV at page 8 of the Ex Parte
Reply. Declaration of Joseph P. Busch, III, in Opposition to Plaintiff's
Motion for Preliminary Injunction, Paragraph Paragraph 3, 4 (the "2nd Busch
Decl."). However, it appears that counsel for ARV in this action was not
familiar with ARV's document production and designation in the state court
action, and had to confer with counsel for ARV in the state court action
before committing to an agreement. Id. As of the finalization of this brief,
the results of that "conference" between counsel for ARV has not been
communicated to Emeritus. 2nd Busch Decl., Paragraph 5.
ARV designated as confidential all presentations to the ARV
board by its financial advisor, Salomon Brothers, regarding Emeritus'
proposals, all communications with shareholders, all communications with
public relations firms and proxy solicitors, and all minutes of meetings of
the ARV board. 2nd Busch Decl., Paragraph 6. Emeritus cannot cite to that
evidence or to the deposition testimony taken in the state court proceedings
without being in violation of the state court protective order.
Emeritus acted quickly to meet and confer with counsel for ARV,
and was prepared to accept ARV's proposal. ARV has reneged on what it
committed it would do to this Court. Because Emeritus has been severely
prejudiced by ARV's delaying tactics on this vital issue, Emeritus requests
that this Court not permit ARV to use any of the state court discovery in its
reply papers; or, alternatively, if ARV is permitted to use that state court
discovery, that Emeritus be permitted to file a supplemental brief.
A. Emeritus' July 10, 1997 Proposal and the First Prometheus
Transaction.(1)
- ------------
(1) The facts set forth in this background are also found in Emeritus'
response to this Court's order to show cause as to why this matter should
not be stayed pending the resolution of the state court actions involving
ARV (the "Emeritus OSC Resp."). The exhibits filed in support of the
Emeritus OSC Resp. are voluminous, and it would not serve the interests
of the Court to refile those exhibits. Accordingly, exhibits filed with
the Declaration of Joseph P. Busch, III, in Support of Response of
Defendants to OSC re: Stay of this Action (the "1st Busch Decl.") will be
referenced as "Emeritus OSC Resp., Ex.__." "New" exhibits appended to
the 2nd Busch Decl. will be lettered consecutively from the 1st Busch
Decl.
On July 10, 1997, Emeritus sent a letter to ARV's Board
proposing that Emeritus acquire the outstanding common stock of ARV for a
minimum of $14 per share -- a price representing a significant premium over
the stock's then current market value of $10.25. Emeritus OSC Resp., Ex. A.
Emeritus did not receive any response to its proposal.
On July 14, 1997, ARV announced that it had entered into a
series of agreements with Prometheus, an affiliate of the investment bank
Lazard Freres & Co. (the "First Prometheus Transaction"). Emeritus OSC Resp.,
Ex. B at 24. In the First Prometheus Transaction, ARV agreed to sell up to
49.9% of its stock to Prometheus at $14 per share. Id. at 25. In return,
Prometheus agreed to vote its stock in support of the reelection of ARV's
Board, and ARV's directors and senior officers, who owned approximately 20% of
the outstanding shares of ARV, agreed to vote their shares, subject to certain
conditions, in support of Prometheus' board nominees. Id. at 25-27, 56. The
First Prometheus Transaction also granted Prometheus' board representatives
veto power over virtually any material activity by the Board. Id.
By the massive stock sale contemplated by the First Prometheus
Transaction, ARV sought to radically alter the ownership structure of ARV to
the detriment of its public shareholders, including Emeritus. Before the
First Prometheus Transaction, ARV had been 80% owned by public, disinterested
shareholders, with the remaining 20% owned by certain of its directors and
senior officers. Had the First Prometheus Transaction been fully consummated,
Prometheus and the ARV insiders would have together owned near to 60% of ARV
and the public shareholders less than 40%. This realignment, in conjunction
with the mutual commitments by the ARV insiders and Prometheus to support each
other's Board nominees, would have rendered the public shareholders (including
Emeritus) powerless to influence the management of ARV and vulnerable to being
permanently squeezed out of the company without receiving any control premium.
On July 21, 1997, Prometheus purchased the first 16% block of
ARV stock at $14 per share. Emeritus OSC Resp., Ex. B at 24. Under the terms
of the First Prometheus Transaction, ARV's shareholders would be permitted to
vote whether or not to approve the First Prometheus Transaction, and if they
voted in favor, then Prometheus would purchase a second block of nearly 3.1
million newly issued shares (21% of the outstanding shares) with ARV
possessing the right to sell Prometheus the remaining shares (up to 49.9% in
total) thereafter. Id.at 25. On August 22, 1997, ARV filed proxy
solicitation materials with the Securities and Exchange Commission (the "SEC")
stating that the First Prometheus Transaction would be voted on at the
company's annual meeting on October 14, 1997, at which time ARV's Board would
also stand for reelection. Emeritus OSC Resp., Ex. B.
B. ARV Implements Its Poison Pill.
Also on July 14, 1997, ARV announced that it was implementing a
"shareholder rights plan" -- (the "Poison Pill").. Under the terms of ARV's
Poison Pill, if any shareholder -- other than Prometheus which, despite owning
16% of ARV's shares, was specifically exempted from the Poision Pill --
acquires 10% or more of ARV's stock, all other existing shareholders are
immediately given the right to buy additional shares at half price. Emeritus
OSC Resp., Exs. b at 28, C at 15-16. The effect of this half price sale is to
vastly increase the number of outstanding shares and make an acquisition of
ARV prohibitively expensive. Notably, this Poision Pill was implemented only
four days after Emeritus' initial proposal.
C. Emeritus' October 12, 1997 Proposal and the Second Prometheus
Transaction.
On October 12, 1997, after voicing its strong opposition to the
First Prometheus Transaction (Emeritus OSC Resp., Exs. D, E), Emeritus made a
second proposal to the ARV Board to purchase all of the outstanding shares of
ARV for $16.50 per share in cash -- a price 18% higher than the price at which
Prometheus had purchased its ARV stock. Emeritus OSC Resp., Ex. F. On
October 13, 1997, ARV's Board met and summarily rejected the $16.50 offer.
Emeritus OSC Resp., Ex. G.
The reaction of ARV's shareholders to ARV's rejection of
Emeritus' $16.50 offer was decidedly negative. In response to the October 12
offer, the price rose; when the rejection of the offer was announced, the
price of the stock dropped by nearly $1.00. Emeritus OSC Resp., Ex. H. The
price continued to drop until October 29. Id. In addition, Gary Davidson,
chairman of ARV, resigned from the company directly after it rejected
Emeritus' offer. Emeritus has alleged in its complaint in the state court
action that Mr. Davidson resigned in protest over the extent of control
Prometheus was wielding over ARV and because he believed that ARV should have
given greater consideration to Emeritus' $16.50 offer.
On October 29, 1997, instead of heeding the market's response
and exploring a transaction with Emeritus, ARV entered into a revised series
of agreements with Prometheus. Emeritus OSC Resp., Ex. I. Under these
agreements (the "Second Prometheus Transaction"), Prometheus retained the 16%
block of ARV's stock, the right to three seats on ARV's board and the option
of acquiring up to 49.9% of ARV over a three-year period. Emeritus OSC Resp.,
Ex. J. The parties also continued their mutual commitments to support each
other's Board nominees. Id. The principal change from the first transaction
was that instead of committing to purchase additional common stock outright,
Prometheus bought $60 million worth of convertible notes from ARV (the
"Notes"). Under the terms of the Notes (Emeritus OSC Resp., Ex. K), ARV was
permitted to redeem the Notes for common stock at a premium of more than 23%,
which would give Prometheus approximately 4.3 million additional shares (or an
additional 23% of ARV's stock) at approximately $14 per share. This $14 per
share effective price was well below the then current market value of ARV's
stock. Emeritus OSC Resp., Ex. H. Because all stock owned by Prometheus was
contractually obligated to vote in support of ARV's Board, the redemption
provision gave ARV the ability to guarantee that 39% of ARV's stock (the
original 16% block plus the additional 23%) would be ready to vote in support
of the existing Board.
Most significantly, ARV announced that the Second Prometheus
Transaction would not be subject to shareholder approval and instead would be
imposed involuntarily on its shareholders. Emeritus OSC Resp., Exs. 1, J. At
this time, ARV also announced that its annual meeting would be rescheduled for
January 8, 1998. Id. The only avenue left for ARV's shareholders to object
to the Prometheus Transactions was to unseat the Board at the upcoming annual
meeting in a vote that was being progressively padded in the existing Board's
favor.
D. ARV's Redemption of the Convertible Notes.
Realizing that ARV's Board was now fully entrenched and
completely unwilling to consider its proposals regardless of the views of
shareholders, on November 24, 1997, Emeritus filed preliminary proxy materials
with the SEC indicating its intent to field a slate of candidates to run
against ARV's Board at the January 8th meeting. Emeritus OSC Resp., Ex. L. In
response Emeritus' proxy challenge, ARV's Board met on December 5, 1997 and
voted to redeem the Notes, rescheduled the annual meeting again to January 28,
1998, and rescheduled the record date for the annual meeting to December 18,
1997. Emeritus OSC Resp., Ex. M.
There is no doubt that ARV redeemed the Notes and altered the
record date of the annual meeting for the specific purpose of increasing their
chances of winning reelection. Publicly available documents show that, on
August 19, 1997, the current members of the ARV board and Prometheus owned
3,488,199 of ARV's outstanding common stock, or 29.8%. Emeritus OSC Resp.,
Ex. B. As of the record date for the upcoming annual meeting of shareholders,
the current members of the ARV board and Prometheus own 8,717,751 shares of
the 15,848,498 shares eligible to vote, or 55% of the outstanding stock. 2nd
Busch Decl., Ex. N, at 4, 34. Clearly, out of fear of Emeritus' proxy
solicitation, ARV decided to stack the deck against its own shareholders, and
sold effective control of the company at a below market price.
E. Emeritus' Complaint, $17.50 Tender Offer, and Proxy
Statement.
On December 9, 1997, Emeritus filed a complaint in Orange
County Superior Court, alleging primarily that ARV's board members had
breached their fiduciary duties to Emeritus by purposefully manipulating the
shareholder vote, and that they were aided and abetted in this breach by
Prometheus. Emeritus' complaint seeks, among other things, the rescission of
the redemption of the Notes (or, in the alternative, an order directing that
Prometheus' new 23% block should not be allowed to vote), and a finding that
ARV has sold control of itself to Prometheus.
On December 19, 1997, Emeritus announced that it would commence
a tender offer to purchase the outstanding shares of ARV for $17.50 per share
in cash. Declaration of Elizabeth A. Camacho in Support of Plaintiff ARV
Assisted Living, Inc., Motion for Preliminary Injunction (the "Camacho
Decl."), Ex. C. In connection with its tender offer, Emeritus filed its
Schedule 14D-1 with the SEC. Emeritus disclosed, among other things:
(1) that its offer is conditioned on the rescission of the
redemption of the Notes issued to Prometheus, id. at 174;.
(2) that it is currently involved in litigation in California
state court to obtain this rescission, id. at 172;
(3) that its offer is conditioned on the transfer or assignment
of leases on terms satisfactory to Emeritus, id. at 215;
(4) that it has obtained a letter from NorthStar Capital
Partners Inc. ("NorthStar") stating that NorthStar was "highly confident" of
its ability to provide the necessary financing to the tender offer, id. at
190;
(5) that it has negotiated with various other financial
entities the terms of commitment letters for a possible financing structure
and proposed merger, but that these letters were not executed, id. at 190;
(6) that it intends to continue to seek to negotiate with ARV
with respect to the acquisition of the company and that, if such negotiations
result in a definitive merger agreement, the consideration to be received by
ARV's shareholders could include securities, cash, or any combination thereof,
id. at 171; and
(7) that its tender offer is for $17.50 for all shares,
assuming satisfaction of the conditions of the offer, id. at 171.
A few days later, on December 22, 1997, Emeritus mailed its
proxy materials to ARV's shareholders. In this material, Emeritus disclosed
that it had commenced litigation against ARV in California state court
seeking, among other things, an order directing the current board of ARV to
rescind the redemption of the Notes. Camacho Decl., Ex. D. at 267. Emeritus
further disclosed that the redemption of these Notes was a condition of the
$17.50 tender offer,as was its ability to obtain financing on satisfactory
terms. Id. at 268. Finally, Emeritus' proxy material directed shareholders
to other conditions set forth in its publically available Schedule 14D-1
filing. Id. at 269.
F. ARV'S REJECTION OF EMERITUS' $17.50 OFFER AND COMMENCEMENT OF
THE INSTANT ACTION; EMERITUS' SCHEDULE 13D-1 AMENDMENTS.
On January 5, 1997, ARV announced that it was recommending to
its shareholders that they reject Emeritus' $17.50 offer and continue to
support the Prometheus Transactions. On January 7, 1998 -- nearly three weeks
after Emeritus filed its proxy material and its tender offer material -- ARV
instituted this action in federal court. On January 8 -- just two weeks
before a hearing on the merits of Emeritus' request for a preliminary
injunction in state court -- ARV filed its own motion for a preliminary
injunction. On January 9, 1998, Emeritus filed Amendment No. 2 to the
Schedule 14D-1 Form in connection with its tender offer to include reference to
ARV's federal action, and attached a copy of ARV's complaint as an exhibit.
2nd Busch Decl., Exh. O. On January 12, 1998, Emeritus again amended its
Schedule 14D-1. This most recent amendment discloses the fact that ARV has
filed the instant preliminary injunction motion, and states that shareholders
"should consider ARV's views as expressed in ARV's Brief when deciding whether
or not to tender their shares pursuant to the Offer to Purchase and in deciding
how to vote at the forthcoming annual meeting." 2nd Busch Decl., Ex. P. A
copy of ARV's legal memorandum in support of its preliminary injunction motion
was attached as an exhibit.
3. PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION SHOULD BE
DENIED.
In the Ninth Circuit, "traditional criteria for granting a
preliminary injunction include: (1) a strong likelihood of success on the
merits; (2) the possibility of irreparable harm to the plaintiff; (3) a
balance of hardships favoring the plaintiff; and (4) the advancement of the
public interest." Rendish v. City of Tacoma, 123 F.3d 1216, 1219 (9th Cir.
1997). As a general rule, a moving party can only satisfy its burden by
demonstrating "either a combination of probable success on the merits and the
possibility of irreparable injury or that serious questions are raised and the
balance of hardships tips in his favor." Associated Gen. Contractors v.
Coalition for Econ. Equity, 950 F.2d 1401, 1410 (9th Cir. 1991).
When a plaintiff seeks affirmative, mandatory relief -- as
opposed to an injunction preserving the status quo -- its burden of proof is
particularly high. The Ninth Circuit has held that where "a plaintiff seeks a
mandatory preliminary injunction that goes beyond maintaining the status quo
pendent lite, 'courts should be extremely cautious' about issuing a preliminary
injunction and should not grant relief unless the facts and law clearly favor
the plaintiff." Committee of Cent. Amer. Refugees v. INS, 795 F.2d 1434, 1441
(9th Cir. 1986) (quoting Martin v. Int'l Olympic Committee, 740 F.2d 670, 675
(9th Cir. 1980)).
Here, where ARV seeks an order directing that Emeritus make
additional disclosures or change the conditions of its tender offer, the
proposed relief would alter the status quo and constitute a mandatory
preliminary injunction. See Graham v. Medical Mut. of Ohio, 130 F.3d 293, 295
(7th Cir. 1997). ARV therefore has the heightened burden of showing that both
the facts and the law clearly favor its position.
4. PLAINTIFF CANNOT CLEARLY ESTABLISH ITS PROBABLE SUCCESS ON
THE MERITS.
A. Plaintiff Cannot Clearly Establish the Probable Success on
the Merits of Its Claims under the Federal Securities Laws.
Sections 14(a) and 14(e) of the Securities Exchange Act of 1934
make it unlawful to make any misrepresentation or omission of a material fact
in the context of, respectively, proxy contests and tender offers. Their
purpose is the same -- to ensure that complete and truthful information is
provided to shareholders so that they may exercise their voting rights in an
informed manner. See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 381, 90
S. Ct. 616, 620 (1970); Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 58, 95 S.
Ct. 2069, 2075 (1975). The Supreme Court has made clear that the disclosure
provisions are not intended "to provide a weapon for management to discourage
takeover bids." Rondeau, 422 U.S. at 58, 95 S. Ct. at 2076. The
determination of what information is "material" is essentially the same under
both provisions, see MacFadden Holdings, Inc. v. JC Acquisition Corp., 802
F.2d 62, 69 n.3 (2d Cir. 1986): "An omitted fact is material if there is a
substantial likelihood that a reasonable shareholder would consider it
important" in deciding how to vote or in deciding whether to tender his or her
shares. TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct.
2126, 2132 (1976). The Supreme Court has explained that, "[p]ut another way,
there must be a substantial likelihood that the disclosure of the omitted fact
would have been viewed by a reasonable investor as having significantly
altered the `total mix' of information made available." Id., 96 S. Ct. at
2132.
ARV has failed to show a clear likelihood of success on the
merits of its claims under sections 14(a) and 14(e). The purported omissions
are non-actionable because: (i) Emeritus has, in fact, made the disclosures
which ARV alleges it has not; (ii) the information which ARV alleges should be
disclosed is false; or (iii) the information which ARV alleges should be
disclosed is immaterial. Moreover, since the filing of ARV's injunction
motion, Emeritus has amended its disclosure materials and urged ARV's
shareholders, consistent with the purpose of the securities laws, to consider
ARV's contentions in deciding how to vote their shares.
1. Alleged Omissions Concerning ARV's Leases.
ARV makes two principal argument concerning the alleged
non-disclosure of the "change of control" provisions of its leases: first,
that Emeritus has failed to disclose the existence of the provisions; and
second, that Emeritus intends to trigger the change of control provisions so
as to cause ARV to default on its leases. Emeritus could then, ARV argues,
back out of the tender offer and "negotiate for itself ARV's most profitable
leases." Pl.'s Br. at 28.
First, these claims have been rendered moot by Emeritus'
January 12, 1998 disclosure that directs ARV's shareholder's to review ARV's
publically filed brief. Treadway Cos., Inc., 638 F.2d at 380 (deficiencies in
Schedule 13D cured by subsequent filing). Shareholders are now aware of the
lease provisions, and can evaluate them in determining how to vote their
shares. ARV's allegation is particularly ironic because, until the filing of
ARV's Complaint, ARV itself had not publicly disclosed the terms of the
leases. Consistent with its refusal to negotiate or share any information
with Emeritus, ARV had not made Emeritus aware of those lease terms. Under
the circumstances, Emeritus cannot possibly be liable for its failure to
disclose information of which it was reasonably unaware.(2)
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(2) Perhaps recognizing that without actually reviewing the leases the Court
cannot assess their materiality, ARV has provided the Court with the
first page of the 18 leases as well as the change of control provision
that it claims are included in each lease. See Decl. of Graham P.
Espley-Jones Paragraph 6 and Exs. A, B. However, neither Emeritus nor
the Court can hope to assess definatively the leases' materiality with
reference only to these out-of-context excerpts. For example, from the
excerpts provided, it could conceivably be the case that ARV is already
in default of the leases given that the recent Prometheus Transactions --
which have made Prometheus a major stockholder and a dominating force on
ARV's board of directors -- may be interptreted to be a "change . . . in
the . . . entity or entities which ultimately exert effective control
over the management and affairs of the tenant." See Decl. of
Epsley-Jones, Ex. A at 25-26. Were the provision already triggered,
Emeritus would obviously have nothing to disclose. Moreover, assuming
that the change in control provision has not been triggered, absent
knowledge of the actual monetary terms of the lease, it is impossible to
discern whether the lessor would, in its discretion, invoke the provision
in the first instance (less likely, for example, if the rents are at or
above market rate) or, if triggered, whether the defaults would result in
liability of $10 or of $10,000,000 -- factors plainly relevant to the
materiality of the condition. Moreover, by providing these selected
samples, ARV does not negate the possibility that the leases also might
contain some waiver provision such that Emeritus could, upon negotiating
with the lessors, avoid any default.
Second, Emeritus has freely disclosed that its tender offer is
conditioned on its being permitted to evaluate such leases, and its being
satisfied as to the terms of any transfer or assignment of any lease that
might occur as a result of a change of control. In its Schedule 14D-1,
Emeritus made clear that it "shall not be required to accept payment or . . .
pay for, and may delay the acceptance for payment of or . . . the payment for,
any tendered Shares, and may terminate the offer , if, in the sole judgment of
[Emeritus] . . . any of the following events shall occur or shall be
determined by the purchaser to have occurred: (g) any . . . contract, lease,
or consent of any person, entity, or Governmental entity shall not have been
obtained, transferred, assigned on terms satisfactory to the purchaser in its
sole discretion." Camacho Decl., Ex. C at 215 (emphasis supplied). Emeritus
has thus disclosed all that it is able to concerning ARV's leases -- namely,
that any renegotiation of the leases that might occur as a result of Emeritus'
tender offer must occur on terms satisfactory to Emeritus.
Third, ARV has no evidence at all to support its allegation
that Emeritus is intending to trigger the "change of control" provisions, back
out of the tender offer, and thereby cripple one of its competitors. Emeritus
is fully intending to consummate its offer of $17.50 in cash. Emeritus'
director nominees are running for election with the express mandate,
consistent with their fiduciary duties, to carry out this program; and ARV has
no evidence to the contrary. See Virginia Bankshares, Inc. v. Sandberg, 501
U.S. 1083, 1095-96, 111 S.Ct. 2749, 2760 (1991) (speculation as to motive,
without independent evidence of falsity, cannot sustain a Section 14(a)
disclosure claim).
Finally, if ARV's position were accepted, it would render any
company with leases or other contracts (for example, credit agreements)
containing "change of control" provisions invulnerable to acquisition.
Clearly, that is not the purpose of sections 14(a) or 14(e). See Rondeau,
supra.
2. Alleged Omission Concerning Time Frame for Rescinding
Redemption of the Notes.
ARV contends that, although Emeritus disclosed that its offer
is conditioned on the California state court's rescission of the redemption of
the Notes issued to Prometheus, it did not disclose the material fact that
"the redemption of the Notes most likely will not occur for at least two
years." Pl.'s Br. at 29. This argument fails for at least three reasons.
First, as a result of Emeritus' January 12, 1998 amendment to
its Schedule 13D-1, shareholders have been made aware of the fact that, at
least according to some predictions, the appellate process could take two
years.
Second, ARV's argument simply assumes that if the state court
orders rescission, ARV or Prometheus will appeal that decision. However, not
only is such an assumption completely unsupported by any evidence, it is also
one that is unwarranted in the absence of an evaluation of the state court's
opinion and of the availability of non-frivolous arguments that could be made
on appeal.(3)
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(3) To the extent that ARV has determined in advance that it will, in fact,
appeal such judgment, its intentions have never been disclosed to
Emeritus.
Finally, implicit in ARV's argument is its view that its own
shareholders do not appreciate that resolution of legal disputes can, in
theory, include an appeal. In taking this position, ARV further evidences its
paternalism and distrust of its shareholders' ability to make an informed
decision. As ARV acknowledges, Emeritus expressly (and in bold print) has
disclosed to ARV's shareholders that the consummation of the tender offer is
contingent upon the recission of the redemption of the Notes issued to
Prometheus. Camacho Decl., Ex. C at 174. Emeritus has further described that
it is seeking the rescission of the redemption (and of ARV's Poison Pill) in
California state court. Id. at 172. And finally, Emeritus has also disclosed
that "[i]f Emeritus is unsuccessful in having the redemption rescinded, [it]
may elect to reduce the Offer Price to take in to account the purchase of
approximately an additional 800,000 shares." Id. None of these statements
are rendered false or misleading by Emeritus' failure to disclose to
shareholders the fact - widely known to the public -- that the losing party to
the litigation has the right of appeal and that the appeal, if taken, might
take additional time. See Consolidated Gold Fields, PLC v. Anglo Am. Corp.,
713 F. Supp. 1457, 1470 (S.D.N.Y. 1989) ("[I]t is sufficient if the company
provides information as to material facts in a format from which a reasonable
investor could reach his own conclusions as to the risks of the
transaction.").
Indeed, no located case holds that a party who disclosed the
existence of pending litigation without also predicting the duration of any
subsequent appeal has violated the securities laws. The only case cited by
ARV in support of its novel theory of nondisclosure, Polaroid Corp. v. Disney,
862 F.2d 987 (3d Cir. 1988), is easily distinguished. In Polaroid, the Third
Circuit found that the target of a tender offer had established the likely
success of its argument that the tender offeror had violated Section 14(e) by
stating that it could lawfully consummate its tender offer in compliance with
the Federal Reserve Board's margin regulations, issued pursuant to Section 7
of the Exchange Act. Although the regulation would plainly have been violated
if fewer than 90% of outstanding shares were tendered (a probable result), the
offeror contended that its statement was not misleading because it planned to
avoid the violation entirely either by challenging the regulation in court,
entering into a friendly merger with Polaroid, or negotiating an alternative
method of financing. In this context, the court found that a reasonable
shareholder would find material the fact that the offeror could only avoid
violating the regulation after the considerable delay of first instituting and
then winning a lawsuit or by completely renegotiating its financing. Id. at
1005-06.
In this case, in stark contrast, there is no certain risk of
delay: Emeritus has already instituted its lawsuit, and the state court is
due to hear oral argument before the shareholder meeting even occurs.
Moreover, unlike Polaroid's shareholders, ARV's shareholders were told that
consummation of the tender offer was conditioned on prevailing in the state
court action. Emeritus was not also required to assume that ARV's
shareholders are so out of touch with the modern judicial system as to require
being instructed that parties to a litigation have the right of appeal. See
Seibert v. Sperry Rand Corp., 586 F.2d 949, 951 (2d Cir. 1978) (no requirement
to disclose information already in the public domain). ARV is therefore
unable to establish a clear likelihood of success on the merits of this claim.
3. Alleged Omission of Facts Concerning Emeritus'
Financing.
ARV alleges that Emeritus violated the 1934 Act by failing to
disclose (1) that NorthStar, the entity that is "highly confident" in its
ability to provide the necessary financing for Emeritus' tender offer, is
unreliable because it has never previously arranged financing for a hostile
tender offer and (2) the identities of the parties with whom Emeritus has had
discussions concerning a possible financing structure for its tender offer,
but with whom Emeritus has never executed firm commitment letters. Both
arguments are easily disposed of.
First, ARV's allegations regarding NorthStar's competence have
been rendered moot by Emeritus' January 12, 1998 disclosure. Second, ARV has
pointed to no specific fact suggesting that NorthStar will be unreliable as a
source of financing. Simply because NorthStar's name is less recognizable
than other financial institutions' or that NorthStar may not have financed a
hostile tender offer do not in and of themselves create material risks that
need be independently disclosed. Emeritus has a good faith belif that
NorthStar will be able to arrange the necessary financing, and has no
obligation to suggest otherwise to ARV's shareholders. See Consolidated Gold
Fields, PLC, 713 F. Supp. at 1470 ("[A] company is not required to speculate
about future events which . . . the company is convinced will not occur").
Emeritus also has no obligation to disclose the identity of
parties with whom Emeritus has had discussions concerning possible financing.
Certainly, Item 4 to Schedule 14D-1 requires a party to disclose "the source
and total amount of funds or other consideration for the purchase of the
maximum number of securities for which the tender offer is being made." 17
C.F.R. Section 240.14d-100. However, Emeritus has not suggested in its
tender offer that these unidentified parties are sources of funding; rather,
it has made abundantly clear that these negotiations concern only possible
financing. The incomplete nature of these negotiations is highlighted by the
fact that, as Emeritus has disclosed, it has not entered into any formal
commitment letters with these parties, nor does it intend to do so until the
California state court litigation is resolved.
As the Ninth Circuit has made clear, "[n]othing in the history
of [the Williams Act] or the regulations indicates that all information must
be provided at the outset of the offer." Newmont Mining Co. v. Pickens, 831
F.2d 1448, 1450 (9th Cir. 1987). Here, the shareholders have been presented
with only accurate information concerning Emeritus' ability to finance its
tender offer, including the fact that its offer is backed by a highly
confident letter from NorthStar and by the fact that the terms for a possible
financing structure have been negotiated with other financial sources. The
shareholders, in the exercise of their informed judgment, are free to accept or
reject these terms.(4)
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(4) Pursuant to long-standing SEC policy, shareholder must also be given at
least five full days to consider any material changes in financing terms
that are required to be disclosed in Schedule 14D-1. See Securities
Exchange Act of 1934, Release No. 34-23421, n. 70, 1986 SEC Lexis 1179 at
*42 (July 11, 1986). Such a material change would, of course, include
the disclosure of the identity of any party with whom Emeritus had
executed firm commitment letters. This is thus no possibility that, once
Emeritus negotiates firm financing, the shareholders will be deprived of
sufficient time in which to evaluate the source and terms of such
financing.
4. Alleged Omission of Facts Concerning Emeritus' Intentions
to Follow Through With Its $17.50 Cash Offer.
Finally, ARV claims that Emeritus "has failed to disclose that
it has no intention of consummating its Tender Offer, but rather is using the
offer as a ruse to gain control of ARV's board of directors and, once in
power, plans to reduce the purchase price of the tender offer and substitute
shares for cash." Pl.'s Br. at 31; see also 17 C.F.R. Section 240.14d-100,
Item 5
This argument must be resoundingly rejected. As the Supreme
Court has made abundantly clear, the psychological motivation of a disclosing
person cannot alone state a claim for a violation of section 14(a). See
Virginia Bankshares, 501 U.S. at 1095-96, 111 S.Ct. at 2760 (noting that "the
temptation to rest an otherwise nonexistent 14(a) action on psychological
enquiry alone would threaten . . . strike suits and attrition by discovery").
Rather, the challenged statement itself must be shown to be false or
misleading.
In reality, nothing about Emeritus' expressed intention to
carry through with a $17.50 tender offer is misleading or false. Indeed,
ARV's suggestion to the contrary is completely undermined by the fact that
Emeritus has candidly stated that it intends to continue to seek to negotiate
with ARV about the possibility of acquiring ARV, and that should such
negotiations result in a friendly merger, the consideration offered to
shareholders could change to stock or some combination of stock and cash.
Camacho Decl., Ex C at 171.
The "evidence" that ARV relies on to support its conspiratorial
suggestion that Emeritus' tender offer is a mere ruse cannot be taken
seriously. First, ARV points to the fact that Emeritus' initial proposal to
ARV involved a stock for stock merger. Pl.'s Br. at 31. However, ARV cannot
suggest that Emeritus' intentions in July of 1997 may be assumed to reflect
Emeritus' current business strategy, especially where Emeritus has changed its
proposals on several occasions in light of ARV's complete refusal to
negotiate. Second, ARV points to the fact that in October of 1997, Emeritus'
investment bankers were drafting contingent stock for stock transactions even
after Emeritus had proposed a "vague" all cash deal as evidence of Emeritus'
preference for a stock for stock tender offer. Pl.s Br. at 32. This fact
shows only that Emeritus has prepared itself for numerous possible scenarios
and that, as least as of October, Emeritus may have been willing to consider a
stock for stock deal under certain circumstances. Camacho Decl., Ex C at 171.
Indeed, Emeritus continues to make clear to ARV's shareholders that, in the
event a friendly merger is negotiated, it may still be willing to consider a
stock for stock deal.
Finally, there is the charge made by Howard Phanstiel, current
CEO and Chairman of ARV's Board, that he has "been informed by some of our
shareholders and advisors that, even after it announced the purported $17.50
cash offer, Emeritus continued to tell people associated with ARV that a stock
for stock transaction is Emeritus' best option."(5) Decl. of Howard Phanstiel
Paragraph 4. This kind of generalized accusation in which the parties to the
alleged comment are not even identified manifestly does not constitute the
clear factual showing needed to justify an injunction in this case. Committee
of Cent. Am. Refugees, 795 F.2d at 1441. To conclude otherwise would be
particularly inequitable given that the anonymity of the alleged remark
prevents Emeritus from vigorously refuting it.
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(5) Emeritus has also objected to this "testimony" on the ground of Hearsay,
Fed. R. Evid. 802.
In short, the law is clear that "[a] bidder need only disclose
what exists." IU Int'l Corp. v. NX Acquisition Corp., 840 F.2d 220, 222 (4th
Cir. 1988). What presently "exists"-- and the only thing shown by the record
to exist -- is Emeritus' plan to purchase all tendered shares for $17.50. ARV
has not clearly established that Emeritus' intentions are otherwise, and thus,
its claim must be rejected.
B. ARV Cannot Clearly Establish the Probable Merits
of Its Claim Under California's Unfair Competition Act.(6)
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(6) ARV has not established the probable merit of its federal claims under
the 1934 Securities Exchange Act of 1934 because, among other reasons,
the record establishes that Emeritus has disclosed to ARV's shareholders
all material facts known to it. Accordingly, it is likely that, on
Emeritus' motion, this Court will dismiss for failure to state a claim
ARV's federal claims prior to any trial on the merits. It is also likely
that, in the exercise of its discretion, this Court will decline to
exercise supplemental jurisdiction over ARV's state law claims. See 28
U.S.C. Section 1367(c)(3). As the Ninth Circuit has recently reiterated,
"state law claims `should' be dismissed if federal claims are dismissed
before trial." Acri v. Varian Assoc., Inc., 114 F.3d 999, 1000 (9th Cir.
1997) (en banc) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 726,
86 S. Ct. 1130, 1139 (1966)).
ARV argues that by soliciting votes in the upcoming proxy
contest in conjunction with making a $17.50 cash tender offer, Emeritus has
violated California Business & Professions Code Section 17200, also known as
the Unfair Competition Act. However, ARV cannot establish the probable, let
alone likely, success of a claim brought under Section 17200 because Section
17200 does not apply to claims relating to securities.
California, like most states, has adopted a "baby FTC act," a
local version of Section 5 of the Federal Trade Commission Act, see 15 U.S.C.
Section 45(a), the federal statute that proscribes unfair methods of
competition and deceptive and misleading practices. Section 17200,
California's baby FTC act (see Bank of the West v. Superior Ct., 2 Cal. App.
4th 1254, 1264, 10 Cal. Rptr. 2d 538, 544 (Cal. 1992)), prohibits generally
"unfair competition" -- a term defined to include any "unlawful, unfair or
fraudulent business act or practice." Like Section 5 of the FTC, Section
17200 was enacted to provide consumers with the same measure of protection
against unfair business practices that, under the common law tort of unfair
competition, was available to the competitors of the allegedly unfair party.
Bank of the West, 2 Cal. App. 4th at 1263-64,10 Cal. Rptr. 2d at 551.
Because the broad purpose of these baby FTC acts is to protect
consumers, almost every court to have considered the question has held that
these statutes do not apply to claims stemming from securities-related claims
because such claims can already be brought under federal and state securities
laws. As the North Carolina Supreme Court explained in declining to apply its
own baby FTC act to securities claims:
[T]o extend the Act to securities transactions would create
overlapping supervision, enforcement, and liability in this
area, which is already pervasively regulated by state and
federal statutes and agencies. [T]here is enough legislative
apparatus already in place to govern securities transactions
without also applying the Act.
Hajmm Co. v. House of Raeform Farms, Inc., 403 S.E.2d 483, 493 (N.C 1991); see
also Spinner Corp. v. Princeville Development Corp., 849 F.2d 388, 391 (9th
Cir. 1988) (to provide plaintiffs with remedies under both state blue sky law
and Hawaii's baby FTC would be "inconsistent with a coherent legislative
intent"); Smith v. Cooper, 846 F.2d 325, 328 (5th Cir. 1988) (Louisiana law).
Courts finding baby FTC acts inapplicable to securities claims have also
pointed out that the FTC Act itself -- which most state courts, including
California's, see Cel- Tech Communications Inc. v. Los Angeles Cellular Phone
Co., 59 Cal. App. 4th 436, __,69 Cal. Rptr. 2d 207, 224 (1997), look to in
interpreting their own baby FTC act -- has been repeatedly held not to apply
to securities claims. See Algrant v. Evergreen Valley Nurseries Ltd., 126
F.3d 178 (3d Cir. 1997); Russell v. Dean Witter Reynolds, Inc., 510 A.2d 972,
977 (Conn. 1986); Morris v. Gilbert, 649 F. Supp. 1491 (E.D.N.Y. 1986).
Courts in the Ninth Circuit have followed these cases in
interpreting the applicability of Section 17200 to securities claims. In
Perera v. Chiron Corp., No. C-95-20725, 1996 WL 251936, at *5 (N.D. Cal. May
8, 1996), the district court considered a motion to dismiss a class action
complaint alleging violations of both Section 14 of the 1934 Act and Section
17200 of the California Business and Professional Code. In dismissing the
Section 17200 claims, the court explained that "although no California court
has expressly stated that Section 17200 is inapplicable to securities
transactions, the Ninth Circuit recently affirmed a district court's dismissal
of a Section 17200 claim on these exact grounds." Id. (citing Shearson
Lehman Bros. v. Greenberg, [1992-93 Transfer Binder] Fed. Sec. L. Rep.
(CCH)Paragraph 97,409 (C.D. Cal. Mar. 15, 1993) (Section 17200 is "not
applicable to securities transactions" and is "completely preempted by federal
law"), aff'd, 60 F.3d 834 (9th Cir. 1995)). The court also observed that its
finding that section 17200 did not apply to conduct covered under the federal
securities laws was "in accordance with numerous cases interpreting `little
FTC' acts similar to California's Section 17200." Id.
The essence of ARV's Section 17200 claim against Emeritus is
that Emeritus is engaging in unfair competition by attempting to elect its own
slate of directors without first waiving every condition to its $17.50 per
share tender offer. Pl.'s Br. at 24. However, because claims relating to the
fairness of proxy contests and tender offers -- already extensively regulated
under the 1934 Act and under California's General Corporation Law -- are not
actionable under Section 17200, ARV cannot demonstrate the likely success of
such a claim.(7)
- ------------
(7) Even if section 17200 does apply to securities claims, ARV still cannot
show that Emeritus has engaged in any unfair, deceptive, or unlawful
practice.
C. ARV Cannot Clearly Establish Its Probable Success on the
Merits of Its Claim that Emeritus Has Breached or Will Breach
Its Fiduciary Duties.
ARV's argument that it is entitled to mandatory injunctive
relief because it suspects that Emeritus might someday breach a fiduciary duty
it would owe to ARV's shareholders is meritless. ARV claims that, if the day
ever comes when Emeritus votes its proxies as instructed by a majority of
ARV's shareholders, that very act will "crippl[e] ARV and its shareholders," at
least in the event that Emeritus fails to close its $17.50 cash tender offer.
Pl.'s Br. at 16. This hypothetical and paternalistic argument is contrary to
law, fact and common sense. ARV turns corporate fiduciary law on its head,
espousing a rule of law which, if correct, would allow corporate board members
across California -- by the simple act of voting themselves golden parachutes
- -- to entrench themselves so completely that not even a majority of
shareholders could vote them out of office. In the same vein, ARV asserts
fiduciary duties that do not exist and predicts breaches that are already
enjoined by California law. If Emeritus ever does succeed in becoming a
controlling shareholder of ARV and breaches a fiduciary duty owed to
shareholders, then, and only then, will ARV have a claim ripe for
adjudication.
1. As a Minority Shareholder of ARV, Emeritus Owes No
Fiduciary Duties
Notwithstanding ARV's astounding misstatement that "[t]here is
no doubt that Emeritus is a controlling shareholder," the fact remains that
Emeritus controls less than 10% of ARV's shares, and is not a member of any
voting group. 2nd Busch Decl., Ex. N at 36.(8) Indeed, Emeritus cannot
control more than 10% of ARV without triggering ARV's Poison Pill. For a
variety of reasons, it is far from clear whether Emeritus' proxy solicitation
will succeed or whether Emeritus will ever command sufficient influence over
ARV such that Emeritus would owe the duties of a fiduciary to ARV's
shareholders.
- ------------
(8) Emeritus owns just over 1 million shares of the more than 15.8 reflected
in ARV's proxy materials, or less than 6.3%.
ARV argues, however, that the possibility that Emeritus could
eventually receive the proxies of a majority of ARV's shareholders currently
renders Emeritus a "controlling shareholder." Pl.'s Br. at 19-20. Under this
remarkable rule, since any proxy solicitation could theoretically succeed in
garnering a majority of outstanding shares, any entity issuing proxy materials
- -- including ARV itself -- would qualify as a "controlling shareholder."
The only case cited for this bizarre proposition is Beverly
Hills Fed.. Savings. & Loan Ass'n v. Fed. Home Loan Bank Bd., 371 F. Supp. 306
(C.D. Cal. 1973). Not surprisingly, the case does not support the notion that
Emeritus is a controlling shareholder of ARV. As the case title suggests,
Beverly Hills Federal Savings involved a savings and loan association, not a
corporation. For this reason, the "proxies" described in the district court's
opinion are more similar to a voting trust than to the ministerial proxies of
a corporate election: "the depositors and borrowers of the Association, as a
matter of routine, . . . had signed proxies appointing Mr. Webb . . . . At
all times while the proxies were in effect, the Webb group was able to and did
exercise thereby effective control of the Association." Id. at 309-10.
Clearly, Emeritus does not and never could exercise effective control of ARV
by virtue of holding the valid proxies of a majority of ARV's shareholders.
The proxies being solicited by Emeritus grant only the ministerial authority
to vote shares as directed by the shareholder. The proxies do not grant
Emeritus either the discretion to vote shares as it pleases or any managerial
control over ARV. Similarly, it cannot be alleged that the proxies solicited
by Emeritus, even if "transferred" to another entity, could effect a change in
control of ARV. Cf. id.. at 314 (analogizing the transfer of Beverly Hills
Federal Savings Association proxies to the sale of control of a corporation).
Beverly Hills Federal. Savings is simply not apposite to this case.
Because Emeritus owes no fiduciary duty to ARV's shareholders,
ARV has failed even to state a claim for breach of fiduciary duty, let alone
establish the probable success of such claim.(9)
- ------------
(9) It is particularly ironic that ARV urges that Emeritus is a controlling
shareholder based on Emeritus' owernship of less than 10% of ARV's stock
when ARV is simulataneously disputing in state court Emeritus' claim that
Prometheus, owner of almost 40% of ARV's shares, is a controlling
shareholder.
2. ARV Cannot Allege any Current Breach of Fiduciary Duty.
Not only is Emeritus not yet a fiduciary, it has also not yet
committed any breach. To disguise the fact that there is no ripe breach of
fiduciary claim to bring, ARV offers its self-serving suspicions that Emeritus
will one day violate fiduciary duties, and it asks this Court to speculate
regarding what Emeritus might do if it comes to control ARV and if Emeritus
elects to violate California law. However, until this unlikely pairing of
events both come to pass, ARV cannot prevail on any breach of fiduciary duty
claim.
3. ARV Has Otherwise Failed To State a Breach of Fiduciary
Duty Claim.
ARV argues that, by becoming a controlling shareholder,
Emeritus will necessarily trigger certain events which will cause harm to ARV
and that, by triggering these harmful events, Emeritus will -- at the very
moment it prevails in the election -- breach its fiduciary duties. The two
principal harms that ARV refers to are, first, the increase in rent that may
result when the change of control provisions in ARV's leases are triggered
and, second, the payment of "golden parachute" severance packages to a number
of management employees. Not only is this argument without any legal support;
but, as has been characteristic of ARV's positions, it is one that privileges
board entrenchment at the expense of the shareholders' exercise of their right
to vote.
First, ARV's current management, who clearly are determined to
resist any change in control, are the very ones responsible for entering into
the leases and employment agreements which contain the change of control
provisions. Any rule which would allow a board to entrench itself against any
takeover by enacting change of control provisions, and then filing breach of
fiduciary duty claims against its contenders -- even when those contenders are
supported by a majority of its own shareholders -- would fly in the face of
basic principles of corporate democracy . See Hilton Hotels Corp. v. ITT
Corp., 978 F. Supp. 1342, 1447 (D. Nev. 1997) ("[A board has power over the
management and assets of the corporation, but that power that is not
unbridled. That power is limited by the right of shareholders to vote for the
members of the board."); Blasias Indus., Inc. v. Atlas Corp., 564 A.2d 651,
659 (Del. Ch. 1988) (noting that "shareholder franchise is the ideological
underpinning on which directorial power rests.").
Second, even were ARV's contentions not contrary to well
established corporate law, the actual harm that ARV suggests will result from
the triggering of the change of control provisions is highly speculative and
greatly overstated. While stating only in conclusory terms that the "change
of control" provisions might result in new, disadvantageous lease terms, ARV
presents no evidence that this will in fact occur. Without having an
opportunity to review the leases in their entirety (which ARV has denied to
Emeritus), it is impossible to determine whether a "change of control"
mandates a renegotiation of the lease.
With respect to the golden parachutes, ARV's dire predictions
are also unfounded. Again, absent factual support, ARV ruminates that many of
the employees with golden parachutes "may be unable to resist the huge
windfall of one to three years salary that they would be entitled to receive."
Moreover, such an exodus would give Emeritus "the rare opportunity to hire some
of ARV's best employees." Pl.'s Br. at 21. This is all mere speculation and,
with Emeritus' recent supplemental disclosures, ARV's shareholders are now on
notice that the risk may exist and are free to evaluate it in deciding how to
vote their shares. Moreover, no located case holds that the victor in a proxy
contest could properly be held responsible for triggering the golden
parachutes of the board members he or she had just unseated. ARV's breach of
fiduciary claims must be rejected.
5. PLAINTIFF CANNOT CLEARLY ESTABLISH IRREPARABLE HARM.
Contrary to ARV's contentions, if there is a time for this
Court to consider equitable relief in this case, it is after the election of
ARV's new board takes place. As set forth above, all material facts
concerning Emeritus' offer have been disclosed, and it is now up to ARV's
shareholders to decide whether or not to vote for Emeritus' director nominees.
Nothing irreparable will occur until after the election takes place, at which
time this Court would still have the ability to order any appropriate relief.
Preliminarily, Emeritus' disclosure of ARV's complaint and
legal memorandum in support of the instant injunction motion has provided
ARV's shareholders with much, if not all, of the information ARV claims to be
material. Accordingly, there is no basis for injunctive relief under the
Exchange Act. See Capital Realty Investors Tax Exempt Fund Ltd. v. Dominium
Tax Exempt Fund, L.L.P., 944 F. Supp. 250, 259 (S.D.N.Y. 1996) (purpose of
injunctive relief under Section 14(a) is "to ensure that investors are
provided in a timely fashion with the accurate information necessary to the
intelligent exercise of the corporate franchise").
Furthermore, it is well established that a party cannot
establish irreparable harm under the disclosure provisions of the Securities
Exchange Act by merely establishing the materiality of an omission. Rondeau,
422 U.S. at 64-65, 95 S Ct. at 2078-79 (1975). Rather, "courts must judge an
application for equitable relief according to traditional principles which
require a separate showing of irreparable harm," Onabanc Corp. v. Holtzman,
956 F. Supp. 250,256 (N.D.N.Y. 1997) -- a showing that ARV attempts to
satisfy with only conclusory assertions.
For example, the "harm to ARV's corporate governance" to which
ARV refers presumably means only that the current board runs the risk of
losing the election. Such a self-serving allegation of harm plainly cannot
satisfy the heavy burden ARV bears in establishing its entitlement to
mandatory injunctive relief. "Shareholders [sic] problems of proof" is another
harm ARV alleges. Yet, not only is the meaning of this phrase indecipherable,
but it has presented no evidence whatever that this "problem of proof" is
likely to occur.
Finally, ARV argues that it will be irreparably harmed if the
change of control provisions in the leases and in the golden parachutes are
triggered. However, for the reasons discussed supra, any conclusion that the
Board's own entrenching mechanisms may, when effectively triggered, entitle
the Board to use an injunction to prevent a challenge to its incumbency by
proxy contest or tender offer, would subvert basic principles of corporate
law.
6. THE BALANCE OF HARDSHIPS FAVORS DENIAL OF INJUNCTIVE RELIEF.
This Court should also deny the requested injunctive relief
because the injunctive relief would impose a great burden on Emeritus.
Courts in the Ninth Circuit evaluating preliminary injunctions
are permitted to consider the hardships to both parties in the event that an
injunction is granted or denied. Rendish, 123 F.3d at 1219. Moreover, where
an injunction is mandatory, courts should weigh carefully the harm to the
defendant, and should be `extremely cautious' about issuing the preliminary
injunction. Committee of Cent. Am. Refugees, 795 F.2d at 1441 (9th Cir.
1986).
A court order that had the effect of directing Emeritus to
waive all of its financing conditions to its tender offer would be
unprecedented and it would cause enormous harm to Emeritus. All tender offers
include conditions. For many of the same reasons that few individuals would
agree to pay for a house without first determining if it is structurally sound,
checking for hidden costs and making certain that adequate financing is in
place, so too the would-be acquirors of corporations routinely include
analogous conditions to their tender offers. ARV's claim that an
unconditional offer "imposes no burden on Emeritus," coming as it is from a
sophisticated business entity, is disingenuous. The purpose of offers to
purchase is not to eliminate conditions of sale, but to disclose them, so that
investors -- not the boards of target companies -- can decide if those
investors should tender their shares. To direct Emeritus to abandon its offer
or invest hundreds of millions of dollars without, for example, some assurance
that ARV's shareholder rights plan will not render its investment useless,
clearly reduces Emeritus to a Hobson's choice benefitting no one but ARV's
current Board.
7. CONCLUSION.
For the foregoing reasons, Emeritus respectfully requests that
ARV's motion for injunctive and declaratory relief be denied in all respects.
DATED: January 13, 1998
GIBSON, DUNN & CRUTCHER LLP
WAYNE W. SMITH, SBN 054593
JOSEPH P. BUSCH, III, SBN 070340
DAVIS POLK & WARDWELL
MICHAEL P. CARROLL
JAMES H.R. WINDELS
By: /s/ Joseph P. Busch, III
---------------------------------------
Joseph P. Busch, III
Attorneys for Defendants Emeritus Corporation
and EMAC Corporation
