RETURN DATE: March 10, 1998
GEOFFREY MILLER and JORDANA MILLER, : SUPERIOR COURT
on behalf of themselves and all others
similarly situated, : J.D. OF NEW HAVEN
Plaintiffs, : AT NEW HAVEN
v. :
ECHLIN, INC., TREVOR O. JONES, :
LARRY McCURDY, JOHN F. CREAMER,
MILTON P. DEVANE, JOHN E. ECHLIN, JR., :
DONALD C. JENSEN, WILLIAM P. NUSBAUM,
JEROME G. RIVARD and :
RICHARD E. DAUCH,
Defendants. : FEBRUARY 18, 1998
CLASS ACTION COMPLAINT
Plaintiffs, by their attorneys, allege upon information and belief,
except with respect to their ownership of Echlin, Inc. ("Echlin" or the
"Company") common stock, and their suitability to serve as class
representatives, which are alleged upon personal knowledge, as follows:
PARTIES
1. Plaintiffs Geoffrey and Jordana Miller, are the owners of shares of
defendant Echlin.
2. Defendant Echlin is a corporation organized and existing under the
laws of the State of Connecticut. Echlin maintains its principal offices at 100
Double Beach Road, Branford, Connecticut 06405. Echlin is a manufacturer of auto
parts and tools.
3. Defendant Trevor O. Jones ("Jones") is Chairman of the Board of
defendant Echlin.
4. Defendant Larry McCurdy ("McCurdy") is President, Chief Executive
Officer and a Director of defendant Echlin.
5. Defendants John F. Creamer, Milton P. Devane, John E. Echlin, Jr.,
Donald C. Jensen, William P. Nusbaum, Jerome G. Rivard and Richard E. Dauch are
Directors of defendant Echlin.
6. The foregoing individual directors of Echlin (collectively, the
"Director Defendants"), owe fiduciary duties to Echlin and its shareholders.
CLASS ACTION ALLEGATIONS
7. Plaintiffs bring this action on their own behalf and as a class
action on behalf of all shareholders of defendant Echlin (except defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the defendants) or their successors in interest, who have
been or will be adversely affected by the conduct of defendants alleged herein.
8. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is brought
is so numerous that joinder of all class members is impracticable. As of
December 31, 1997, there were more than 63 million shares of defendant Echlin's
common stock outstanding owned by tens of thousands of shareholders of record
scattered throughout the United States.
(b) There are questions of law and fact which are common to members of
the class and which predominate over any questions affecting any individual
members. The common questions include, inter-alia, the following:
(i) Whether the Director Defendants have breached their fiduciary
duties owed by them to plaintiffs and members of the class, and/or have aided
and abetted in such breach, by failing to act in such a way as to maximize
shareholder value of Echlin;
(ii) Whether the Director Defendants have wrongfully failed and
refused to seek a purchaser of Echlin at the highest possible price and,
instead, have sought to chill potential offers;
(iii) Whether plaintiffs and the other members of the
class will be irreparably damaged by the conduct complained of herein; and
(iv) Whether defendants have breached or aided and abetted the
breaches of the fiduciary and other common law duties owed by them to plaintiffs
and the other members of the class.
9. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The claims
of plaintffs are typical of the claims of the other members of the class and
plaintiffs have the same interest as the other members of the class.
Accordingly, plaintiffs are adequate representatives of the class and will
fairly and adequately protect the interests of the class.
10. Plaintiffs anticipate that there will not be any difficulty in the
management of this litigation.
11. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action.
FACTUAL BACKGROUND
12. On February 17, 1998, SPX Corp. ("SPX"), a rival auto parts and
tools manufacturer, announced a stock-and-cash offer for the Company valued at
$48 a share, i.e., a 23% premium over Echlin's closing price on Friday, February
13, 1998. SPX filed a Proxy Statement with the Securities and Exchange
Commission on February 17, 1998, pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (the "Proxy Statement"). SPX is offering a fixed ratio of
0.4796 of its shares for each Echlin share. The offer consists of stock
currently valued at $36 a share and $12 a share in cash. SPX announced that it
was taking these steps after being unable to reach a friendly deal with the
Company for a year or so.
13. Echlin refused to comment on the deal in an apparent continuation
of a long-held position of refusing to entertain the advances of SPX. The Proxy
Statement details in its "Background" section how SPX has attempted, since as
early as February 1997, to have defendants consider a possible combination of
the two companies. The Proxy Statement details how meetings were held in
November 1997 and a letter was sent to the Company's Board on December 12, 1997,
detailing the "strategic rationale" and the benefits of a combination of the two
companies. On December 17, 1997, defendant McCurdy responded by letter to the
December 12, 1997 letter from SPX, wherein he stated that the Company had no
interest in further discussions with SPX. Separate letters to each individual
Board member on December 18, 1997, met with the same rejection by defendant
McCurdy on December 23, 1997.
14. On January 6, 1998, SPX notified the Company that it was filing a
Premerger Notification and report form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 ("HSR Act"), seeking to acquire up to 100% of the
Company's voting securities (the "HSR Filing").
15. On January 8, 1998, McCurdy wrote to SPX acknowledging receipt of
notice of the HSR Filing and advising SPX that the Company and its advisors
stood ready to aggressively defend its shareholders' interests.
16. The Director Defendants, however, fearing that the result of any
such transaction would mean their ouster from the board, took no action to
advance the proposed deal even though it would provide shareholders with a
premium of 23% and with the opportunity to perhaps increase the price offered by
SPX.
17. Defendants, by refusing to give adequate consideration to the
proposed offer of $48 a share by SPX, are denying plaintiffs and other class
members of the possibility of receiving the fair value of Echlin' assets and
business in exchange for their shares.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
18. Defendants, acting in concert, have violated their fiduciary duties
owed to the public shareholders of Echlin and put their own personal interests
ahead of the interests of the Echlin public shareholders and are using their
control positions as officers and directors of Echlin for the purpose of
retaining their positions and perquisites as board members at the expense of
Echlin's public shareholders.
19. The Director Defendants apparently failed to (1) seriously evaluate
the benefits to the Company's shareholders of the SPX offer; (2) undertake an
adequate evaluation of Echlin's worth as a potential acquisition candidate; (3)
take adequate steps to enhance Echlin's value and/or attractiveness as an
acquisition candidate; (4) effectively expose Echlin to the marketplace in an
effort to create an active and open auction for Echlin; or (5) act independently
so that the interests of public shareholders would be protected. Instead,
defendants have sought to chill potential offers for Echlin.
20. While the Director Defendants of Echlin should negotiate with SPX
to achieve the highest possible price for Echlin shareholders and seek out other
possible purchasers of the assets of Echlin or its stock in a manner designed to
obtain the highest possible price for Echlin's shareholders, or seek to enhance
the value of Echlin for all its current shareholders, they have instead resolved
to ignore the overtures of SPX in order to protect the positions of the current
board of directors and the compensation, prestige and perquisites that flow
therefrom.
21. These tactics pursued by the defendants are, and will continue to
be, wrongful, unfair and harmful to Echlin' public shareholders, and are an
attempt by certain defendants to aggrandize their personal positions, interests
and finances at the expense of and to the detriment of the Echlin public
stockholders. These maneuvers by the defendants will deny members of the class
their right to share appropriately in the true value of Echlin' valuable assets,
future earnings and profitable businesses.
22. In contemplating, planning and/or effecting the foregoing specified
acts and in pursuing the course of conduct described herein, defendants are not
acting in good faith toward plaintiffs and the class, and have breached, and are
breaching, their fiduciary duties to the plaintiffs and the class.
23. Because the Director Defendants (and those acting in concert with
them) dominate and control the business and corporate affairs of Echlin and
because they are in possession of private corporate information concerning
Echlin' businesses and future prospects, there exists an imbalance and disparity
of knowledge and economic power between the defendants and the public
shareholders of Echlin which makes it inherently unfair to Echlin's public
shareholders.
24. By reason of the foregoing acts, practices and course of conduct,
the Director Defendants have failed to use the required care and diligence in
the exercise of their fiduciary obligations owed to Echlin and its public
shareholders
25. As a result of the actions of the defendants, plaintiff and the
class have been and will be damaged in that they will not receive the fair value
of Echlin' assets and business in exchange for their shares, and have been and
will be prevented from obtaining a fair price for their shares of Echlin common
stock.
26. Unless enjoined by this Court, the Director Defendants will
continue to breach their fiduciary duties owed to plaintiffs and the class, all
to the irreparable harm of the class.
Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment as follows:
(a) Declaring that this action may be maintained as a class
action;
(b) Declaring that the actions of the defendants are unfair,
unjust and inequitable to plaintiff and the other members of the class;
(c) Enjoining preliminarily and permanently the defendants
from taking any action which does not seek to maximize the shareholder value of
Echlin;
(d) Requiring defendants to compensate plaintiffs and the
members of the class for all losses and damages suffered and to be suffered by
them as a result of the acts complained of herein, together with pre-judgment
and post-judgment interest;
(e) Awarding plaintiffs the costs and disbursements of this
action, including reasonable attorneys', accountants' and experts' fees; and
(f) Granting such other and further relief as may be just and
proper.
THE PLAINTIFFS
BY /s/ J. Daniel Sagarin
----------------------------------
J. Daniel Sagarin
Elias A. Alexiades
HARRIS BEACH & WILCOX, LLP
147 N. Broad Street
Milford, Connecticut 06460
(203) 877-8000
Juris No. 413597
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
270 Madison Avenue
New York, New York 10016
(212) 545-4600
Chimicles, Jacobsen & Tikellis
One Rodney Square
Wilmington, DE 19899
(302) 656-2500
RETURN DATE: March 10, 1998
GEOFFREY MILLER and JORDANA MILLER, : SUPERIOR COURT
on behalf of themselves and all others
similarly situated, : J.D. OF NEW HAVEN
Plaintiffs, : AT NEW HAVEN
:
v.
:
ECHLIN, INC., TREVOR O. JONES,
LARRY McCURDY, JOHN F. CREAMER, :
MILTON P. DEVANE, JOHN E. ECHLIN, JR.,
DONALD C. JENSEN, WILLIAM P. NUSBAUM, :
JEROME G. RIVARD and
RICHARD E. DAUCH, :
Defendants. : FEBRUARY 18, 1998
STATEMENT OF AMOUNT IN DEMAND
The amount, legal interest or property in demand is greater than
$15,000.00, exclusive of interest and costs. Plaintiff claims other relief in
addition to money damages.
THE PLAINTIFFS
BY /s/ J. Daniel Sagarin
--------------------------------
J. Daniel Sagarin
Elias A. Alexiades
HARRIS BEACH & WILCOX, LLP
147 N. Broad Street
Milford, Connecticut 06460
(203) 877-8000
Juris No. 413597
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
270 Madison Avenue
New York, New York 10016
(212) 545-4600
Chimicles, Jacobsen & Tikellis
One Rodney Square
Wilmington, DE 19899
(302) 656-2500