KEVIN J. YOURMAN (CSB 147159
WEISS & YOURMAN
10940 Wilshire Blvd., 24th Floor
Los Angeles, CA 90024
(310) 208-2800
JOSEPH E. WEISS
WEISS & YOURMAN
319 Fifth Avenue
New York, New York 10016
Tel: (212) 532-4171
NADEEM FARUQI
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
REGINA NEEDLEMAN, on behalf ) Case No. BC152244
herself and all others similarly )
situated, ) CLASS ACTION COMPLAINT FOR
) BREACH OF FIDUCIARY DUTIES
Plaintiff, )
) JURY TRIAL DEMAND
- against - )
)
FALCON CABLE SYSTEMS CO., L.P, )
FALCON CABLE INVESTORS GROUP, )
FALCON HOLDING GROUP, L.P., FALCON )
HOLDING GROUP, INC., STANLEY S. )
ITSKOWITCH, and MARC B. NATHANSON, )
)
Defendants. )
___________________________________)
Plaintiff, by her attorneys, for her complaint
against defendants, alleges upon information and belief, except
for paragraphs 1 and 2 hereof, which are alleged upon knowledge
as follows:
1. Plaintiff brings this action, individually and
as a class action, on behalf of all persons, other than defen-
dants, who own units ("Units") of Falcon Cable Systems Co. L.P.
("Falcon" or the "Partnership") and who are similarly situated,
to enjoin the consummation of the proposed acquisition of all
of the cable systems of Falcon for approximately $247.40 mil-
lion in cash.
2. Plaintiff has been the owner of the Units of
Falcon since prior to the transaction herein complained of and
continuously to date.
3. Defendant Falcon is a California limited part-
nership duly organized and existing under the laws of the State
of California. The Partnership's principal offices are located
at 10900 Wilshire Boulevard, Los Angeles, California 90024.
The Partnership's Units trade on the American Stock Exchange.
4. Defendant Falcon Cable Investors Group ("FCIG")
is a California limited partnership. Falcon Cable Investors is
the general partner of the Partnership (the "General Partner").
5. Defendant Falcon Holding Group L.P. ("FHGLP") is
a California Limited Partnership duly organized and existing
under the laws of the State of California. Falcon Holding is
the general partner of the General Partner.
-2-
6. Defendant Falcon Holding Group, Inc. ("FHGI") is
a California corporation. FHGI was the general partner of the
General Partner prior to FHGLP. The management of FHGLP is
substantially the same as that of FHGI.
7. Defendant Marc B. Nathanson is Chairman of the
Board and CEO of FHGI. Defendant Nathanson also owns close to
29% of Falcon.
8. Defendant Stanley S. Itskowitch is a director of
FHGI.
9. Defendants are in a fiduciary relationship with
plaintiff and the other public Unitholders of Falcon and owe
them the highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action individually on her
own behalf and as a class action on behalf of all Unitholders
of the Partnership (except defendants herein, and any person,
firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in
interest, who are or will be threatened with injury arising
from defendants' actions as more fully described herein (the
"Class").
11. This action is properly maintainable as a class
action.
12. The class of Unitholders for whose benefit this
action is brought is so numerous that joinder of all Class mem-
bers is impracticable. There are approximately 6 million Units
of the Partnership outstanding.
-3-
13. There are questions of law and fact which are
common to the Class and which predominate over questions
affecting any individual Class member. The common questions
include, inter alia, the following:
(a) whether defendants have breached their fiduciary
and other common law duties owed by them to plaintiff and the
members of the Class;
(b) whether the transaction, hereinafter described,
constitutes a breach of the defendants' duty to deal fairly
with plaintiff and the other members of the Class;
(c) whether the defendants have breached their fidu-
ciary duties of due care and loyalty owed by them to plaintiff
and members of the Class and/or have aided and abetted in such
breach, by virtue of their participation and/or acquiescence
and by their other conduct complained of herein;
(d) whether the defendants have wrongfully failed
and refused to seek to protect the interests of all of Falcon's
Unitholders and to adequately explore all alternatives to maxi-
mizing the value of the Units by, among other things, engaging
in a fair appraisal process as described fully below; and
(e) whether plaintiff and the other members of the
Class will be damaged irreparably by defendants' failure to
conduct an active auction of Falcon and failure to engage in a
fair appraisal process.
14. Plaintiff is committed to prosecuting this
action and has retained competent counsel experienced in liti-
gation of this nature. The claims of plaintiff are typical of
-4-
the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Accord-
ingly, plaintiff will fairly and adequately represent the
Class.
15. The prosecution of separate actions by individ-
ual members of the Class would create a risk of inconsistent or
varying adjudications with respect to individual members of the
Class and establish incompatible standards of conduct for the
party opposing the Class.
16. Defendants have acted and are about to act on
grounds generally applicable to the Class, thereby making
appropriate final injunctive relief with respect to the Class
as a whole.
SUBSTANTIVE ALLEGATIONS
17. On June 13, 1996, FHGLP announced that its board
of representatives approved the acquisition of all of the cable
systems of Falcon for approximately $247.40 million in cash
(the "Acquisition"). This represents a potential distribution
to Unitholders of approximately $9.17 per Unit.
18. The Units have traded at between $9 3/8 and
$12 3/8 per Unit since February of 1996. Thus, based on this
trading range, Falcon's Unitholders are not receiving any
premium for their Units.
19. FHGLP's offer was the result of an appraisal
process that was controlled and manipulated by defendants. The
appraisal process provided that the acquisition price would be
-5-
the average of three appraisals of the Partnership. The
appraisals ranged from $4.69 per Unit to $14.00 per Unit.
20. Given the lack of any premium to Falcon's Unit-
holders in connection with the Acquisition, it is evident that
such transaction is structured and timed to allow defendants to
buy out Falcon's Unitholders at a substantially inadequate
price and allow them to take control of Falcon's cable systems
without paying any premium.
21. The consideration to be paid to Class members in
the transaction is unconscionable and unfair and grossly inad-
equate because, among other things, the intrinsic value of Fal-
con's Units is closer to $14.00 -- a figure that is closest to
Falcon executives' own private valuation, regularly updated for
bankers.
22. Under the circumstances, defendants are obli-
gated to explore all alternatives to maximize Unitholder value.
23. The defendants are engaged in unfair dealing to
the detriment of the Class to whom they owe the highest fidu-
ciary duties.
24. The defendants have breached their duty of loy-
alty to Falcon's Unitholders by using their control of Falcon
to manipulate the appraisal process and force plaintiff and the
Class to liquidate their equity interest in Falcon at an unfair
price, and deprive Falcon's public Unitholders of maximum value
to which they are entitled.
25. The terms of the transaction are grossly unfair
to the Class, and the unfairness is compounded by the gross
-6-
disparity between the knowledge and information possessed by
defendants by virtue of their positions of control of Falcon
and that possessed by Falcon's public Unitholders.
26. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. declaring this to be a proper class action;
B. enjoining, preliminarily and permanently, the
Acquisition under the terms presently proposed and requiring
defendants to fulfill their fiduciary obligations by placing
the Partnership up for auction and/or to conduct an independent
appraisal determination;
C. to the extent, if any, that the transaction com-
plained of is consummated prior to the entry of this Court's
final judgment, rescinding the same or awarding rescissory dam-
ages to the Class;
D. directing that defendants account to plaintiff
and the Class for all damages caused to them and account for
all profits and any special benefits obtained by defendants as
a result of their unlawful conduct;
E. awarding to plaintiff the costs and disburse-
ments of this action, including a reasonable allowance for the
fees and expenses of plaintiff's attorneys and experts; and
F. granting such other and further relief as the
Court deems appropriate.
-7-
JURY DEMAND
Plaintiffs demand a trial by jury of all issues so
triable.
Dated: June 18, 1996
KEVIN J. YOURMAN
WEISS & YOURMAN
By: /s/ Kevin J. Yourman
Kevin J. Yourman
10940 Wilshire Blvd., 24th Floor
Los Angeles, CA 90024
(310) 208-2800
JOSEPH H. WEISS
WEISS & YOURMAN
319 Fifth Avenue
New York, New York 10016
Tel: (212) 532-4171
NADEEM FARUQI
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074
Attorneys for Plaintiff
-8-