MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH (68581)
SALLIE A. BLACKMAN (141830)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN (94559)
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
SULLIVAN, HILL, LEWIN
& MARKHAM (71814)
550 West C Street
Suite 1500
San Diego, CA 92101-3540
Telephone: 619/233-4100
BLUMENTHAL & OSTROFF
NORMAN BLUMENTHAL (068687)
1420 Kettner Blvd., 7th Floor
San Diego, CA 92101-2431
Telephone: 619/239-7373
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
JOSEPH M. THORNHILL, On Behalf ) Case No. BC139252
of Himself and All Others )
Similarly Situated )
) CLASS ACTION
Plaintiff, )
)
vs. ) CLASS ACTION COMPLAINT FOR
) BREACH OF FIDUCIARY DUTY,
JOHN E. BRYSON, DON C. ) ABUSE OF CONTROL, UNJUST
FRISBEE, STEVEN B. SAMPLE, ) ENRICHMENT, INTERFERENCE
EDWARD M. CARSON, GEORGE M. ) WITH PROSPECTIVE ECONOMIC
KELLER, FORREST N. SHUMWAY, ) ADVANTAGE AND EQUITABLE
JEWEL PLUMMER COBB, W.F. ) RELIEF AND DAMAGES
KIESCHNICK, WILLIAM B. SIART, )
RALPH P. DAVIDSON, THOMAS L. )
LEE, RICHARD J. STEGEMEIER, ) Plaintiff Demands A
MYRON DuBAIN, WILLIAM F. ) Trial By Jury
MILLER, DANIEL M. TELLEP and )
J.J. PINOLA, )
)
)
Defendants.
Plaintiff, as and for his complaint, alleges as follows
upon information and belief except as to paragraph 4, which is
alleged upon knowledge. Plaintiff's information and belief is
based upon, inter alia, the investigation made by Plaintiff by
and through his counsel.
INTRODUCTION AND OVERVIEW
1. This is a shareholder class action seeking
equitable relief and compensatory damages on behalf of all
shareholders of First Interstate Bancorp ("First Interstate" or
the "Company") against First Interstate's top officers and the
members of the board of Directors of First Interstate, seeking to
remedy violations of state law arising out of these defendants'
actions and conduct undertaken to defeat a highly favorable
acquisition offer for First Interstate stock by Wells Fargo & Co.
("Wells Fargo"). First Interstate's board of Directors has
pursued a course of conduct intended to and having the effect of
making it extremely difficult for any outside party to
successfully acquire First Interstate, even at prices well in
excess of First Interstate stock's historical price range. This
course of conduct has been undertaken by the defendants to secure
and retain their lucrative positions of power, prestige and
profit with respect to First Interstate and to enhance and
aggrandize their own interests at the expense of First
Interstate's other shareholders.
2. On October 18, 1995, Wells Fargo, a highly
successful, profitable and well-capitalized bank, made an offer
to acquire First Interstate at a price far in excess of First
Interstate'S then-market price, by exchanging in a tax-free
exchange .625 shares of Wells Fargo stock for each share of First
Interstate stock, an offer worth $133.50 per share based on the
October 17, 1995 closing price of Wells Fargo stock of $213.62
per share. First Interstate'S stock jumped from $106 per share
to $140 per share upon this announcement, while Wells Fargo's
stock increased to $228.65 per share, making the offer worth
$142.65 per First Interstate share. However, the defendants are
rejecting such offer and have refused to negotiate an acquisition
of the Company at any higher price, even though Wells Fargo has
told First Interstate's board it is willing to negotiate a higher
price and thus to offer a fair and reasonable price for First
Interstate stock, well above the levels at which the stock has
traded historically.
3. In recent years, defendants have consistently
refused to entertain highly favorable acquisition offers or
overtures for First Interstate, thus preventing an acquisition of
the Company at a favorable price for the shareholders.
Defendants have done this to retain their positions of prestige,
power and profit, as they know they will lose those positions in
the event First Interstate is acquired. Defendants' interests in
holding on to their positions of power, prestige and profit as
officers and directors of First Interstate far exceeds their
interests as shareholders in First Interstate, as they
collectively own only about 144,000 of First Interstate'S 75.7
million shares -- a minuscule .001% of its outstanding stock.
PARTIES AND ACTORS
4. Plaintiff Joseph M. Thornhill, a resident of
California and the owner of 100 shares of First Interstate, is
and was at all times relevant hereto a common shareholder of
First Interstate. Plaintiff brings this action on behalf of the
holders of the common stock of First Interstate for injunctive
and other relief in connection with the proposed acquisition of
First Interstate by Wells Fargo.
5. (a) First Interstate is a corporation with its
principal executive offices in Los Angeles, California and which
operates principally in California, as well as several other
western states. First Interstate is a bank holding company.
(b) At December 31, 1994, it owned 16 banks (the
"subsidiary banks") which operated approximately 1,100 banking
offices in 13 states, including California. Ranked according to
assets, the Company was the fourteenth largest commercial banking
organization in the United States at December 31, 1994, having
total deposits of $48.4 billion and total assets of $55.8
billion.
(c) The subsidiary Banks accept checking, savings
and other time deposit accounts and employ these funds
principally by making consumer, real estate and commercial loans
and investing in securities and other interest-bearing assets.
(d) The Company also provides banking-related
financial services and products. These include asset-based
commercial financing, asset management and investment counseling,
bank card operations, mortgage banking, venture capital and
investment products. It engages in these activities both through
non-bank subsidiaries of the Company and through the Subsidiary
Banks and their subsidiaries.
(e) The larger Subsidiary Banks provide
international banking services on a limited basis through the
international departments of their domestic offices. They also
maintain correspondent relationships with major banks throughout
the world.
6. (a) Defendant John E. Bryson ("Bryson") was a
director of First Interstate and Board Chairman and Chief
Executive Officer of SCEcorp and Southern California Edison
Company at all times relevant hereto.
(b) Defendant Don C. Frisbee ("Frisbee") was a
First Interstate director and Chairman Emeritus PacifiCorp at all
times relevant hereto.
(c) Defendant Steven B. Sample ("Sample") was a
First Interstate director and President University of Southern
California at all times relevant hereto.
(d) Defendant Edward M. Carson ("Carson") was
Chairman of the Board of First Interstate at all times relevant
hereto.
(e) Defendant George M. Keller ("Keller") was a
director of First Interstate and the retired Chairman and Chief
Executive Officer of Chevron Corporation at all times relevant
hereto.
(f) Defendant Forrest N. Shumway ("Shumway") was
a director of First Interstate and former Vice-Chairman of the
Board Allied-Signal, Inc. at all times relevant hereto.
(g) Defendant Jewel Plummer Cobb ("Cobb") was a
director of First Interstate and president Emeritus California
State University, Fullerton at all times relevant hereto.
(h) Defendant W.F. Kieschnick ("Kieschnick") was
a director of First Interstate and retired President and Chief
Executive Officer Atlantic Richfield Company at all times
relevant hereto.
(i) Defendant William B. Siart ("Siart") was
President and Chief Executive Officer First Interstate and a
director at all times relevant hereto.
(j) Defendant Ralph P. Davidson ("Davidson") was
a director of First Interstate and former Chairman of The John F.
Kennedy Center for the Performing Arts at all times relevant
hereto.
(k) Defendant Thomas L. Lee ("Lee") was a
director of First Interstate and Chairman and Chief Executive
Officer The Newhall Land and Farming Company at all times
relevant hereto.
(1) Defendant Richard J. Stegemeier
("Stegemeier") was a director of First Interstate and Chairman of
the Board Unocal Corporation at all times relevant hereto.
(m) Defendant Myron DuBain ("DuBain") was a
director of First Interstate and retired Chairman and Chief
Executive Officer Fireman's Fund Corporation at all times
relevant hereto.
(n) Defendant William F. Miller ("Miller") was a
director of First Interstate and President Emeritus SRI
International at all times relevant hereto.
(o) Defendant Daniel M. Tellep ("Tellep") was a
director of First Interstate and Chairman and Chief Executive
Officer Lockheed Corporation at all times relevant hereto.
(p) Defendant J.J. Pinola ("Pinola") was the
retired Chairman and Chief Executive Officer of First Interstate
and a director at all times relevant hereto.
7. Defendants (hereinafter collectively referred to
as the "Individual Defendants") are each members of First
Interstate's Board of DirectorS.
8. The individual Defendants owed and owe First
Interstate's public shareholders fiduciary obligations and were
and are required to: (i) use their ability to manage First
Interstate in a fair, just and equitable manner; (ii) act in
furtherance of the best interests of First Interstate and its
shareholders; (iii) act to maximize shareholder value; (iv)
govern First Interstate in such a manner as to heed the expressed
views of its public shareholders; (v) refrain from abusing their
positions of control, power, prestige and profit; and (vi) not
favor their own interests at the expense of First Interstate and
its shareholders. By reason of their fiduciary relationships,
these defendants owed and owe plaintiff and other members of the
Class the highest obligation of good faith, fair dealing, loyalty
and due care.
9. Wells Fargo is a corporation with its principal
executive offices in San Francisco, California. Wells Fargo is a
huge bank holding company and one of the most well-managed,
profitable and well-capitalized banks in the United States. With
more than 600 branch outlets, 1,900 round-the-clock Wells Fargo
Express ATMs and a popular 24-hour telephone banking service,
Wells Fargo operates one of the largest and busiest consumer
banking businesses in the United States. Besides serving as
banker to some 3.5 million California households, Wells Fargo
provides a full range of banking services to commercial,
agribusiness, real estate and small business customers, mainly in
California. It is one of the nation's leading managers of
personal trust accounts, corporate 401(k) plans and mutual funds,
with approximately $57 billion in assets under its management and
administration.
10. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his capacity as
a director of the Company, and the liability of each arises from
the fact that he has engaged in all or part of the unlawful acts,
plans, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
11. Plaintiff brings this lawsuit on behalf of himself
and all other common shareholders of First Interstate (except
defendants herein and any person, firm, trust, corporation or
other entity related to, controlled by or affiliated with any of
the defendants and any of their successors in interest (the
"Class")
12. This action is properly maintainable as a class
action for the following reasons:
(a) The Class is so numerous that joinder of all
Class members is impracticable. As of January 31, 1995, First
Interstate had over 75 million shares of common stock outstanding
owned by over 20,000 shareholders. Members of the Class are
scattered throughout the United States and are so numerous as to
make it impracticable to bring them all before this Court.
13. There are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common
questions include, inter alia, the following:
(a) Whether the Individual Defendants have
breached their fiduciary duties owed by them to plaintiff and the
other members of the Class;
(b) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to hold a fair
auction of the Company or its assets or to sell the Company on
the favorable terms;
(c) Whether the Individual Defendants have
failed, in violation of their fiduciary duties, to provide for a
sale of First Interstate;
(d) Whether Plaintiff and the other members of
the Class will be irreparably damaged if the Wells Fargo
acquisition iss not completed;
(e) Whether the Individual Defendants have
breached or aided and abetted the breach of the fiduciary and
other common law duties owed by them to Plaintiff and other
members of the Class; and
(f) Whether Plaintiff and other members of the
Class are being and will continue to be injured by the wrongful
conduct alleged herein and, if so, what is the proper remedy
and/or measure of damages.
14. The claims of Plaintiff are typical of the claims
of other members of the Class and plaintiff has no interests that
are adverse or antagonistic to the interests of the Class.
15. Plaintiff is committed to the vigorous prosecution
of this action and has retained competent counsel experienced in
litigation of this nature. Accordingly, plaintiff is an adequate
representative of the Class and will fairly and adequately
protect the interests of the Class.
16. Plaintiff anticipates that there will not be any
difficulty in the management of this litigation as a class
action.
17. For the reasons stated herein, a class action is
superior to any other method available for the fair and efficient
adjudication of this controversy since it would be impractical
and undesirable for each of the members of the Class who has
suffered or will suffer damages to bring separate actions in
various parts of the country. Classwide remedies will assure
uniform standards of conduct for the Individual Defendants and
avoid the risk of inconsistent judgments.
SUBSTANTIVE ALLEGATIONS
18. As pleaded earlier, First Interstate is an
interstate banking corporation. First Interstate's stock
performed poorly in 1994 through mid-1995, due to First
Interstate'S lackluster performance and perceptions that it was
poorly managed. For instance, First Interstate's stock traded at
a high of $85 per share and then fell, falling to a low of $67
per share in December 1994. First Interstate did not reach $85
per share again until mid-1995. After June 1995, First
Interstate's stock performed better, reaching over $100 per share
in late September 1995, due to an increase in the prices in bank
stocks generally and because of rumors that a favorable
acquisition offer for First Interstate would be forthcoming as
part of the wave of bank acquisitions and mergers now sweeping
the United States. However, even with this increase, First
Interstate's stock has been a relatively poor performer when
compared to other bank stocks. Because in recent years First
Interstate has not been viewed to be as well-managed as many
other large banks and thus has not performed as well in terms of
many of its key ratios and measurements of success as other
banks, its stock has not performed well and thus, shareholders in
First Interstate have, in recent years, obtained a below industry
trendline or industry average return. The chart below shows the
price action of First Interstate stock in 1994-1995:
[The hardcopy Complaint filed with the Court contains a
line graph showing the daily common stock price for First
Interstate for the period December 31, 1993 through October 17,
1995. Because the document for which this Complaint is an
Exhibit has been filed with the Securities and Exchange
Commission by electronic transmission, this graph is not
contained herein. The following information summarizes the First
Interstate daily closing stock price, plotted along the graph's
vertical axis, for the dates indicated on the horizontal axis of
the graph:
Date Common Stock Price
December 31, 1993 64 1/8
March 25, 1994 77 7/8
June 17, 1994 75 3/4
September 9, 1994 79 1/4
December 2, 1994 69 3/8
February 24, 1995 81 3/8
May 19, 1995 81
August 11, 1995 87 1/2
October 17, 1995 106]
19. In recent years, certain other large financial
institutions have approached First Interstate with favorable
acquisition inquiries and offers. Some years ago, Bank of
America approached First Interstate about a possible acquisition.
Approximately a year ago, Wells Fargo approached First Interstate
about a possible acquisition of First Interstate at a premium
price. First Interstate's Board and its top management have
rejected and frustrated all of these prior acquisition overtures
and offers, even though those offers would have resulted in First
Interstate shareholders receiving a substantial premium over the
then-market price of First Interstate stock. Defendants have
done this because they know that in the event First Interstate is
acquired by another bank, most or all of the directors of First
Interstate will, either in connection with the acquisition or
shortly thereafter, be removed from the Board of the surviving
bank because their services will not be necessary and they will
be mere surplusage and thus such an acquisition would bring an
end to their positions of power, prestige and profit as directors
of this huge bank. At the same time, top managers at First
Interstate have caused these prior acquisition overtures and
offers to be rejected and/or frustrated, because they also know
that, in the event of an acquisition, they will also lose their
lucrative jobs and their prestigious positions of power, prestige
and profit as officers of a major banking institution. In so
acting, these defendants have been aggrandizing their own
personal positions and interests over that of First Interstate
and its broader shareholder community to whom they owe fiduciary
duties to bring about a sale of First Interstate on favorable
terms to all the shareholders, even if it results in them losing
their lucrative positions.
20. Shortly prior to October 18, 1995, Wells Fargo
approached First Interstate and offered to negotiate an
acquisition of First Interstate for a price far in excess of
First Interstate's current stock price. First Interstate's
Chairman refused this offer and told Wells Fargo that First
Interstate's Board would not negotiate to sell the bank and would
resist any offer by Wells Fargo to buy the bank. On October 18,
1995, Wells Fargo made an unsolicited acquisition offer for First
Interstate offering to exchange .625 shares of its stock for each
share of First Interstate stock, a $133.50 per share offer based
on the October 17, 1995 closing price of Wells Fargo stock of
$213.62 per share. Upon the announcement of this favorable
acquisition offer, First Interstate's stock instantly skyrocketed
from $106 per share to over $140 per share, reflecting the
extremely large premium being offered to First Interstate
shareholders in this tax-free exchange, and the increase in Wells
Fargo's stock price to $228 per share making the offer worth $142
per First Interstate share. Wells Fargo's offer to acquire First
Interstate is approximately three times First Interstate's book
value, which is a high offer compared to recent bank acquisition
prices. The acquisition price is also approximately 12.1 times
First Interstate's estimated 1995 earnings per share of $11.29
per share, which is also reasonable in light of other recent bank
acquisitions, although it is lower than 15 times the estimated
next year's earnings paid in other bank acquisitions.
21. Wells Fargo has privately indicated to First
Interstate's officers and directors that they are willing and
will increase the price of their offer to acquire First
Interstate if First Interstate's Board will cooperate in bringing
about a consensual acquisition. However, First Interstate'S top
officers and its Board are resisting and are going to continue to
resist this acquisition offer so that they can, as they have in
the past, retain themselves in their positions of power, prestige
and profit. For instance, members of First Interstate's Board of
Directors own only a minuscule portion of First Interstate's
outstanding common stock. They actually own only 144,000 shares
of First Interstate's 75.7 million shares of outstanding common
stock, or just .001% of the stock. Thus, whatever interest the
defendants have as shareholders in First Interstate based on
their minuscule holdings of the Company's stock is far outweighed
by their interest in retaining their lucrative positions of
power, prestige and profit as directors and/or officers of the
Company from which they receive lucrative fees, prestige in the
community, large salaries, and other emoluments of office, which
they will lose if First Interstate is acquired.
22. The rejection of the Wells Fargo offer is a breach
of defendants' fiduciary duties, an abuse of control, provides
unjust enrichment to all defendants, is an unfair business
practice and has been perpetrated through tortious interference
with the class members' prospective economic interests and
opportunities and through material misrepresentations and the
failure by defendants to disclose material information to the
members of the Class.
23. Unless defendants are enjoined form refusing to
negotiate a sale of First Interstate, plaintiff and the members
of the Class will continue to suffer injury. Plaintiff and the
members of the Class have no adequate remedy at law.
FIRST CAUSE OF ACTION
BREACH OF FIDUCIARY DUTIES
24. Plaintiff incorporates by reference 1-23 above.
25. The Individual Defendants engaged in the aforesaid
conduct in intentional breach and/or reckless disregard of their
fiduciary duties to plaintiff and the members of the Class.
26. Defendants, at the time they rejected Wells
Fargo's offer, knew that the market price of First Interstate
stock reflected both the intrinsic value of First Interstate and
a premium which resulted from market expectations that Wells
Fargo's efforts to acquire control of First Interstate would
produce greater returns for investors.
27. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
SECOND CAUSE OF ACTION
NEGLIGENT BREACH OF FIDUCIARY DUTIES
28. Plaintiff incorporates by reference 1-23 above.
29. The Individual Defendants engaged in the aforesaid
conduct without exercising the reasonable and ordinary care which
directors and officers owe to their shareholders, and thereby
breached their fiduciary duties to plaintiff and other members of
the Class.
30. Defendants, at the time they rejected Wells
Fargo's offer, knew or should have known, that the market price
of First Interstate stock at the time reflected both the
intrinsic value of First Interstate and a premium which resulted
from market expectations that Wells Fargo's efforts to acquire
control of First Interstate would produce greater returns for
investors.
31. As a proximate result, the plaintiff and other
members of the Class have been substantially injured and request
compensatory damages.
32. Defendants did the things alleged herein without
exercising the reasonable and ordinary care owed by corporate
directors and officers.
THIRD CAUSE OF ACTION
ABUSE OF CONTROL
33. Plaintiff incorporates by reference 1-23 above.
34. The Individual Defendants owed duties as
controlling persons and/or as controlling or dominant directors
to plaintiff and the other members of the Class not to use their
positions of control of First Interstate for their own personal
interests and contrary to the interests of First Interstate's
remaining shareholders.
35. The foregoing conduct by the director defendants
amounted to an abuse of their abilities to control First
Interstate in violation of their obligations to plaintiff and the
other members of the Class.
36. As a proximate result, plaintiff and the other
members of the Class have been damaged and will continue to be
damaged unless defendants are enjoined, and defendants are each
jointly and severally liable to plaintiff and the other members
of the Class for all loss and damage they have suffered resulting
from the matters set forth herein.
FOURTH CAUSE OF ACTION
UNJUST ENRICHMENT
37. Plaintiff incorporates by reference 1-23 above.
38. As a proximate result of the tortious conduct
described above, all of the defendants have been and will be
unjustly enriched at the expense of the members of the Class.
The director defendants will retain control of First Interstate
and their positions of power, prestige and profit. Defendants
have obtained these unjust benefits at the expense of the members
of the Class by rejecting the Wells Fargo offer and refusing to
negotiate a beneficial sale of First Interstate.
FIFTH CAUSE OF ACTION
TORTIOUS INTERFERENCE WITH
PROSPECTIVE ECONOMIC ADVANTAGE
39. Plaintiff incorporates by reference 1-23 above.
40. By reason, inter alia, of Wells Fargo's announced
offer to purchase First Interstate stock at $133+ a share,
plaintiff and the members of the Class had an expectancy that
they could tender their shares and realize at least the $133+ per
share offer. Moreover, all class members had the expectancy of
sharing in any premium that results from acquisition attempts.
41. Defendants knew of these prospective advantages
presented to plaintiff and the members of the Class and
defendants intended to interfere and did interfere with those
advantages when they rejected the Wells Fargo offer.
42. Plaintiff and the members of the Class were
prevented from obtaining the foregoing advantages as a result of
the conduct of all defendants described above.
43. The defendants, and each of them, did the things
alleged in this Complaint with the intent to injure plaintiff and
the members of the Class.
WHEREFORE, plaintiff and members of the Class demand
judgment against defendants as follows:
1. Declaring that this action is properly
maintainable as a class action and certifying plaintiff as the
representative of the Class;
2. Declaring that the defendants have breached and
are breaching their fiduciary and other duties to plaintiff and
other members of the Class;
3. Preliminarily and permanently enjoining the
defendants and their counsel, agents, employees and all persons
acting under, in concert with, or for them, from taking steps to
prevent or frustrate the sale to Wells Fargo or refusing to
proceed with negotiations with Wells Fargo to increase the
offered price;
4. Awarding compensatory damages against defendants
individually and severally in an amount to be determined at
trial, together with prejudgment interest at the maximum rate
allowable by law, arising from the proposed transaction;
5. Awarding plaintiff his costs and disbursements and
reasonable allowances of fees for plaintiff's counsel and experts
and reimbursement of expenses; and
6. Granting plaintiff and the Class such other and
further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: November 16, 1995
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
________________________________
WILLIAM S. LERACH
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
- and -
JEFF S. WESTERMAN
355 South Grand Avenue
Suite 4170
Los Angeles, CA 90071
Telephone: 213/617-9007
SULLIVAN, HILL, LEWIN
& MARKHAM
DAVID MARKHAM
550 West C Street
Suite 1500
San Diego, CA 92101-3540
Telephone: 619/233-4100
BLUMENTHAL & OSTROFF NORMAN
BLUMENTHAL
1420 Kettner Blvd., 7th Floor
San Diego, CA 92101-2431
Telephone: 619/239-7373
Attorneys for Plaintiff