EXHIBIT 99.7
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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:
LISA JORGENSON DONIGER, Custodian for :
Perrin Linda Doniger UTMA/DC, :
LON GROSSMAN and LEE ROSENTHAL, : Index No.
:
Plaintiffs, :
:
-against- :
: CLASS ACTION
CAPITAL CITIES/ABC, INC., WALT DISNEY : COMPLAINT
CO., THOMAS S. MURPHY, ROBERT A. IGER, : 95118819
JOHN B. FAIRCHILD, ROBERT P. BAUMAN, :
NICHOLAS F. BRADY, WARREN E. BUFFETT, :
DANIEL B. BURKE, FRANK T. CARY, :
LEONARD H. GOLDENSON, FRANK S. JONES, :
ANN DIBBLE JORDAN, JOHN H. MULLER, :
JR., WYNDHAM ROBERTSON and M. CABELL :
WOODWARD, JR., : JURY TRIAL DEMANDED
:
Defendants. :
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Plaintiffs, by their attorneys, allege upon
information and belief, except as to paragraph 1 which is
alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiffs are the owners of shares of the
common stock of defendant Capital Cities/ABC, Inc. ("Cap
Cities" or the "Company") and have been the owners
continuously of such shares since prior to the wrongs
complained of herein.
2. Defendant Cap Cities is a corporation duly
existing and organized under the laws of the State of New
York, with its principal offices located at 77 West 66th
Street, New York, New York. The Company owns and operates
television and radio stations, publishes newspapers and trade
publications, and offers cable programming.
3. As of April 28, 1995, there were over 150
million shares of the Company's common stock outstanding held
by almost 9,700 shareholders of record.
4. Defendant Thomas S. Murphy ("Murphy") is and at
all times relevant hereto has been Chairman of the Board,
President and Chief Executive Officer of Cap Cities.
5. Defendant Robert A. Iger ("Iger") is and at all
times relevant hereto was Cap Cities' President and Chief
Operating Officer, and a director of the Company.
6. Defendant John B. Fairchild ("Fairchild") is and
was at all relevant times an Executive Vice President and
Director of Cap Cities.
7. Defendants Robert P. Bauman, Nicholas F. Brady,
Warren E. Buffett, Daniel B. Burke, Frank T. Cary, Leonard H.
Goldenson, Frank S. Jones, Ann Dibble Jordan, John H. Muller,
Jr., Wyndham Robertson and M. Cabell Woodward, Jr. were, at
all relevant times, directors of Cap Cities.
8. The defendants referred to in paragraphs 4 and 5
above are collectively referred to herein as the "Individual
Defendants."
9. Defendant Walt Disney Co. ("Disney") is a
Delaware corporation which is charged herein with aiding and
abetting the breaches of fiduciary duties committed by the
other defendants.
10. By reason of the above Individual Defendants'
positions with the Company as officers and/or directors, said
individuals are in a fiduciary relationship with plaintiffs
and the other public stockholders of Cap Cities, and owe
plaintiffs and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty
and full, candid and adequate disclosure.
Class Action Allegations
11. Plaintiffs bring this action on their own
behalf and as a class action pursuant to CPLR ss. 901 on
behalf of themselves and all Cap Cities securities holders or
their successors in interest, similarly situated (the
"Class"). Excluded from the class are defendants herein and
any person, firm, trust, corporation, or other entity related
to or affiliated with any of the defendants.
12. This action is properly maintainable as a class
action.
13. The class is so numerous that joinder of all
members is impracticable. As of April 28, 1995, there were
approximately 150 million shares of Cap Cities common stock
outstanding held by over 9,700 shareholders of record.
14. There are questions of law and fact which are
common to the class and which predominate over questions
affecting any individual class members. The common questions
include, inter alia, the following:
(a) whether defendants have taken all reasonable
steps to enhance the value of Cap Cities as an
acquisition candidate;
(b) whether certain defendants have conflicts in
seeking to maximize Cap Cities' attractiveness and value
as an acquisition candidate;
(c) whether Cap Cities' independent directors have
taken all reasonable steps to neutralize any conflicts
of interest among the Cap Cities Board;
(d) whether plaintiffs and the other members of the
class will be irreparably damaged if defendants fail to
take all necessary steps to maximize the value of Cap
Cities; and
(e) whether defendants have breached, or aided and
abetted the breach of, fiduciary and other common law
duties owed by them to plaintiffs and the other members
of the class.
15. The plaintiffs are committed to prosecuting
this action and have retained competent counsel experienced
in litigation of this nature. The claims of plaintiffs are
typical of the claims of the other members of the class and
plaintiffs have the same interests 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.
16. Plaintiffs anticipate that there will be no
difficulty in the management of this litigation.
17. Defendants have acted on grounds generally
applicable to the class with respect to the matters
complained of herein, thereby making appropriate the relief
sought herein with respect to the class as a whole.
SUBSTANTIVE ALLEGATIONS
18. Recently, there has been a renewed interest in
the acquisition of broadcasting and cable properties such as
Cap Cities. Westinghouse has recently expressed an interest
in acquiring CBS, Inc. at a premium price of approximately
35% over its recent average trading price. In addition,
recent regulatory activities have resulted in a change of
regulations enhancing the attractiveness of cable
operations such as Cap Cities' "ESPN," "Lifetime" and "A&E"
cable networks.
19. Cap Cities' stock has not had an opportunity
for these changed circumstances to be reflected in the stock
price. In addition, Cap Cities' stock price has come under
recent pressure, and recently declined from a high of
$109-1/2 to $96 per share, as a result of earnings which
barely missed analysts' expectations.
20. On July 31, 1995, Cap Cities announced that its
board had approved a "merger" with Disney wherein each Cap
Cities shareholder would receive one Disney common share and
$65 cash for each Cap Cities common share. On Friday, July
28, 1995, Disney stock closed at $56-7/8 and Cap Cities stock
closed at $96-1/2 per share. The value of the transaction per
each Cap Cities common share is approximately $121-7/8
constituting an approximately 23% premium over the market
price. By comparison, CBS, Inc. may receive a premium of at
least 33% over its market price despite the fact that CBS has
none of the valuable cable properties which Cap Cities owns.
21. There has been no announcement that Cap Cities
was for sale and it does not appear that an independent
committee of the Board was constituted to evaluate and
recommend the transaction. Such a committee is
essential to ensure the fair consideration of the public
stockholders' rights in light of the dominance of Cap Cities'
Board by two major shareholders, Warren Buffett and Thomas
Murphy.
22. Notwithstanding the announcement of definite
merger terms, the consideration to be received by Cap Cities'
stockholders is as yet indefinite and speculative because
under the terms of the merger agreement, Cap Cities
stockholders can elect to receive proportionately more cash
or common stock than provided for in the exchange ratio,
subject to proration if either the stock or cash portion is
oversubscribed and subject to the option of Disney to
increase the cash portion if requested by Cap Cities'
shareholders.
23. The independent director defendants, if any,
have thus far failed to announce their participation in, or
oversight of, discussions with potentially interested
acquirers of Cap Cities and have failed to announce any
active auction or open bidding procedures best calculated to
maximize shareholder value.
24. The defendants have not, in accordance with
their fiduciary duties:
(a) acted independently so that the interests of
Cap Cities' public shareholders would be protected;
(b) adequately ensured that no conflicts of
interest exist or, if such conflicts exist, to ensure
that all conflicts would be resolved in the best
interests of Cap Cities' public shareholders; and
(c) taken all appropriate steps to enhance Cap
Cities' value and attractiveness as a merger
acquisition, restructuring or recapitalization
candidate.
25. Because the individual defendants dominate and
control the business and corporate affairs of Cap Cities, and
are in possession of private corporate information concerning
Cap Cities' assets, businesses and future prospects, there
exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Cap Cities
which makes it inherently unfair for them to pursue any
proposed transaction which will benefit the interests of some
large stockholders disproportionately to the exclusion of
other means of maximizing stockholder value.
26. Unless enjoined by this Court, the defendants
will continue to breach their fiduciary duties owed to
plaintiffs and the other members of the Class, and may
consummate the proposed transaction which will exclude the
Class from its fair proportionate share of Cap Cities'
valuable assets and businesses, and/or benefit them in the
unfair manner complained of herein, all to the irreparable
harm of the Class, as aforesaid.
27. Plaintiffs and the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs demand judgment, as follows:
A. Declaring this to be a proper class action;
B. Ordering defendants to carry out their fiduciary
duties to plaintiffs and the other members of the Class,
including those of due care and candor;
C. Rescinding any transactions effected by the
defendants in an unfair manner and for an unfair price and in
the event such transaction is consummated prior to trial,
awarding rescissory damages;
D. Enjoining the complained of transaction or any
related transactions;
E. Ordering defendants, jointly and severally, to
pay to plaintiffs and the Class all damages suffered and to
be suffered by them as a result of the acts and transactions
alleged herein;
F. Ordering defendants, jointly and severally, to
account to plaintiffs and the Class for all profits realized
and to be realized by them as a result of the transaction
complained of and pending such accounting to hold such
profits in a constructive trust for the benefit of plaintiffs
and the other members of the class;
G. Awarding plaintiffs the costs and disbursements
of the action, including allowance for plaintiffs' reasonable
attorneys' and experts' fees; and
H. Granting such other and further relief as may be
just and proper in the premises.
Dated: July 31, 1995
Yours, etc.
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
SCHIFFRIN & CRAIG, LTD.
Three Bala Plaza East
Suite 500
Bala Cynwyd, Pennsylvania 19004
Telephone: (215) 667-7706
FARUQI & FARUQI
415 Madison Avenue
New York, New York 10017
Telephone: (212) 986-1074
ROBERT C. SUSSER, ESQ.
6 East 43rd Street
Suite 1900
New York, New York 10017
Telephone: (212) 808-0298
Counsel for Plaintiffs