ALLENSON v ZELL/CHILMARK FUND - Legal Case Documents


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ALLENSON v ZELL/CHILMARK FUND

Keywords & Phrases

CaseNo: C.A. No. 18,045, CourtCode: CC, CourtName: IN THE COURT OF CHANCERY OF THIL STATE OF DELAWARE, Plaintiff: ALLENSON, State: DE Delaware, UniqueCaseRef: DE>CC>00018045, Midway, Facts, Del, Motion, Shareholders, Delaware, Merger, Dismiss, Minority, Complaint, Investment, Limitations, Stockholders, Equity, Zell/chilmark, Allegations, Unfair, Appraisal Action, Corporate Opportunity, Fiduciary Duty, Supr, Airlines Corporation, Agreement, Zellkhilmark, Midway Disclosure, Directors, Equity Group Investments, Michael, Statute, Zellichilmark, Supplemental Motion, Minority Stockholders, Discovery, Depositions, Contract, Connection, Air Partners, Zelvchilmark , ContentID: 120240312

Case Documents

DEFENDANTS REPLY BRIEF IN FURTHER SUPPORT OF MOTION TO DISMISS
[ see first page and extracted highlights below ] ItemID: 102378

PLAINTIFFS BRIEF IN OPPOSITION TO DEFENDANTS MOTION TO DISMISS AND AMENDED AND SUPPLEMENTAL MOTION TO DISMISS
[ see first page and extracted highlights below ] ItemID: 102379

OPENING BRIEF IN SUPPORT OF MOTION TO DISMISS
[ see first page and extracted highlights below ] ItemID: 102380

COMPLAINT (REDACTED VERSION
[ see first page and extracted highlights below ] ItemID: 101111

Total Documents: 4 documents , 94 pages

Price: $ 34.95

IVESLCD01 KGI0001

1 . DEFENDANTS REPLY BRIEF IN FURTHER SUPPORT OF MOTION TO DISMISS

EXTRACTED KEY WORDS

MIDWAY
COURT
DEL
DELAWARE
SUPR
FACTS
MOTION
INVESTMENT
COMPLAINT
DEFENDANTS
SHAREHOLDERS
CORPORATE OPPORTUNITY
STATUTE
DISMISS
LIMITATIONS
ZELL/CHILMARK
FIDUCIARY DUTY
AGREEMENT
MIDWAY DISCLOSURE
CONTRACT
CONNECTION
CHANDLER
DICTIONARV
MERGER AGREEMENT
STOCKHOLDERS
TOLLING DOCTRINE
AMENDED MOTION
CHANCERY
PARTNERS

         IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
                         1p\7 AND FOR NEW CASTLE COUNTY

JIM ALLENSON; B&W INVESTMENT;
H. BARRY BAKER, M.D.; MICHAEL
BLONSTEIN; EDWARD M. BURKE;
HOWARD W. CARROLL TRUST; IRA
C A R R O L L ;   E A R L   C A R R O L L ;
MICHAEL. CAVANAUGH; CHICAGO
AIR PARTNERS; JEFF FINE; SUE GIN;
JEROME GOLD; MICHAEL H. GOLD;
R O B E R T   J.  G O L D ;   F R A N C E S
GOLDBERG; GARY GREENBAUM;
HOUSTON AIRPARTNERS; NATHAN
JACOBSON; STUART KAUFMAN;
JAMES KRAINSON; MARK KUGLER;
R1CHARD   L E V I N E ;   M E L V I N
LEVINSON; MICHAEL LEVINSON,
BRIAN OLDS; DONALD RUTZ;
KENNETH  SAIN; KENNETH  SAIN;
JR.; MARK SUMMERS; DEBRA
SUSSKIND; TSP PARTNERSHIP;
WALLY WEBER; and HARVEY
WEINDENFELD;

                       Plaintiffs,
        V.

ZELL/CHILMARK FUND, L.P.;
MIDWAY AIRLINES CORPORATION;
E Q U I T Y   G R O U P   TNVESTMENTS
L.L.C.; SAMUEL ZELL; JERRY
JACOBS; ROD DAMMEYER,  SHELI
R O S E N B E R G ;   A N D   J O H N
SELVAGGIO,
                        Defendants.

              DEFENDANTS' REPLY BRIEF IN FURTHER SUPPORT OF
              DEFENDANTS' MOTION TO DISMISS AND THE AMENDED
                   AND SUPPLEMENTAL  MOTION TO DISMISS



OF COUNSEL:
                                 Gregory V. Varallo
David. J. Bradford               Richard P. Rollo
John J. Hamill                   Richards, Layton & Finger, P.A
Jenner & Bock                    One Rodney Square
One IBM Plaza                    P.O. Box 551

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DEFENDANTS' REPLY BRIEF IN FURTHER SUPPORT OF

DEFENDANTS' MOTION TO DISMISS AND THE AMENDED

PLAINTIFFS' CLAIMS AGAINST Z/C AND EGI ARE BARRED BY MIDWAY'S CERTIFICATE OF INCORPORATION.

THE STATUTE OF LIMITATIONS BARS PLAINTIFFS' COMPLAINT 14

The Statute Of Limitations Has Not Been Tolled.

The Midway Disclosure `Was Incorporated Ey Reference Into The

Adams v. Jankouskas, Del.

Supr., 452 A.2d

No. 16564, Chandler, C..._....

Emerald Partners v. Berlin, Del.

Corporate And Commercial Practice In The Delaware Coumf Chancery

"; the Opening Brief In Support Of Defendants' Motion To Dismiss % cited herein as "OB at -";

The relevant facts are contained in the Opening Brief and the Amended Motion,

an essential condition of Z/C's 1994 investment in Midway.

agreement or contract with the Corporation.

shareholders," such that "general rules of contract interpretation apply to its terms."

neither Z/C nor EG14 may be subject to liability to Plaintiffs for a breach of fiduciary duty

for actions taken "in connection with any agreement or contract with the Corporation."

Midway were parties to the Merger Agreement.

Webster's luopedic Unabridged Dictionarv Of The English Language 96;

directors and adopted unanimously by its stockholders").

Plaintiffs' corporate opportunity claims against Z/C.7 Am. Mot.

and neither Zell/Chilmark nor any Related Person shall be

2 . PLAINTIFFS BRIEF IN OPPOSITION TO DEFENDANTS MOTION TO DISMISS AND AMENDED AND SUPPLEMENTAL MOTION TO DISMISS

EXTRACTED KEY WORDS

DEFENDANTS
COURT
MIDWAY
MOTION
SHAREHOLDERS
DISMISS
MINORITY
EQUITY
ALLEGATIONS
STOCKHOLDERS
FACTS
DELAWARE
DEL
COMPLAINT
ZELL/CHILMARK
DIRECTORS
FIDUCIARY DUTY
EQUITY GROUP INVESTMENTS
LIMITATIONS
SUPPLEMENTAL MOTION
APPRAISAL ACTION
CORPORATE OPPORTUNITY
DISCOVERY
DEPOSITIONS
ZELLKHILMARK
AIR PARTNERS
ZELVCHILMARK
AGREEMENT
MIDWAY AIRLINES CORPORATION

                   IN THE COURT OF CHANCERY OF  THIl STATE OF DELAWARE
                                        IN AND FOR NEW CASTLE COUNTY

Jim Allenson; B&W Investment;
H. Barry Baker, M.D.; Michael                         1
Blonstein; Edward M. Burke;
Howard W. Carroll Trust; Ira                          i
Carroll; Earl Carroll; Michael                        1
Cavanaugh; Chicago Air Partners;
Jeff Fine; Sue Gin; Jerome Gold;                      i
Michael H. Gold; Robert J. Gold;
Frances Goldberg; Gary Greenbaum;                     i
Houston Air Partners; Nathan
Jacobson; Stuart Kaufman; James                       i
Krainson; Mark Kugler; Richard
Levine; Melvin Levmson; Michael                       I
Levinson; Brian Olds; Donald Rutz;
Kenneth Sain; Kenneth Sain, Jr.;                      i
Mark Summers; Debra Susskind;
TSP Partnership; Wally Weber; and                     i
Harvey Weindenfeld,                                   1                                            
                              Plaintiffs,             1
                                                                                                   
         V.                                                    CA. No. 18045                   .   
                                                      )
Zell/Chilmark  Fund, L.P.;
Midway Airlines Corporation;
Equity Group Investments L.L.C.;
Samuel Zell; Jerry Jacobs; Rod Dammeyer;
Sheli Rosenberg; and John Selvaggio,

                              Defendants.

               PLAINTIFFS' BRIEF IN OPPOSITION TO DEFENDANTS' MOTION
     TO DISMISS AND AMENDED AND SUPPLEMENTAL MOTION TO DISMISS'

                                                      BOUCHARD   MARGULES  & FRIEDLANDER
                                                      222 Delaware Avenue, Suite 1102
                                                      Wilmington, Delaware 19801
                                                      (302)  573-3500
                                                      and
                                                      PATZIK, FRANK  & SAMOTNY LTD.
                                                      150 South  Wacker Drive, Suite 900
                                                      Chicago, Illinois 60606
                                                      (312) 551-8300
Dated: September  18,200O
                                                      Attorneys for Plaintiffs

IN THE COURT OF CHANCERY OF THIl STATE OF DELAWARE

Cavanaugh; Chicago Air Partners;

PLAINTIFFS' BRIEF IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS AND AMENDED AND SUPPLEMENTAL

Plaintiffs' claims against ZelVChilmark Fund, L.P. As a matter of convenience for the Court,

The Court should also note Defendant's supplemental motion does not address Plaintiffs'

Plaintiffs are former minority stockholders in Midway Airlines Corporation ("Midway"

taken in February 2000 in that proceeding, Plaintiffs learned, for the first time, of the

when they first obtained evidence of defendants' breaches of fiduciary duty from depositions

ZellKhilmark Fund, L.P., through its agent, Equity Group Investments L.L.C.

Zell/Chilmark unilaterally determined to freeze out the minority shareholders or the Board

On June 10, 1997, Plaintiffs filed a petition for appraisal pursuant to 8 Del.

witness valuation related discovery) in that case did not begin in earnest until February

Appraisal Action from uncovering the facts underlying defendants' breach of fiduciary duty

laches or Delaware's three-year statute of limitations.

Cohen wrote Mr. Varallo advising him that in keeping with the original agreement,

transaction or matter that may be a corporate opportunity for both

3 . OPENING BRIEF IN SUPPORT OF MOTION TO DISMISS

EXTRACTED KEY WORDS

MIDWAY
DEFENDANTS
FACTS
MERGER
COURT
UNFAIR
DELAWARE
MOTION
DISMISS
DEL
AIRLINES CORPORATION
APPRAISAL ACTION
LIMITATIONS
INVESTMENT
MICHAEL
COMPLAINT
MINORITY STOCKHOLDERS
UNFAIR DEALING
MIDWAY DISCLOSURE
HOUSTON AIR PARTNERS
GOLD
PROCEEDING
APPRAISAL PETITION
PREJUDICE
ALLEGATIONS
MARK KUGLER
KENNETH SAIN
ZELL/CHILMARK FUND
GROUP INVESTMENTS

                   IN THE COURT OF CXIANCERY OF THE STATE OF DELAWARE
                               IN AND FOR NEW CASTLE COUNTY

JIM ALLENSON; B&W INVESTMENT;
H. BARRY BAKER, M.D.; MICHAEL
BLONSTEIN; EDWARD M. BURKE;
HOWARD W. CARROLL TRUST; IRA                          C.A. No. 18045
CARROLL; EARL CARROLL; MICHAEL
CAVANAUGH; CHICAGO AIR
PARTNERS; JEFF FINE; SUE GIN;
JEROME GOLD; MICHAEL H. GOLD;
ROBERT J. GOLD; FRANCES
GOLDBERG; GARY GREENBAUM;
HOUSTON AIR PARTNERS; NATHAN
JACOB SON; STUART KAUFMAN;
JAMES KRAINSON; MARK KUGLER;
RICHARD LEVINE;  MELVlN
LEVINSON; MICHAEL LEVWSON;
BRIAN OLD&  DONALD RUTZ;
KENNETH  SAIN; KENNETH  SAIN, JR.;
MARK SUMMERS; DEBRA SUSSKIND;
TSP PARTNERSHIP; WALLY WEBER;
and HARVEY WEINDENFELD;

                         Plaintiffs,

          V.

ZELL/CHILMARK  FUND, L.P.; MIDWAY
AIRLINES CORPORATION; EQUITY
GROUP INVESTMENTS L.L.C.;
SAMUEL ZELL; JERRY JACOBS; ROD
DAMMEYER, SHELI ROSENBERG; AND
JOHN SELVAGGIO,

                         Defendants.


         OPENING BRIEF IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS

                                               Gregory V. Varallo
                                               Dominick T. Gattuso
                                               Richards, Layton & Finger, P.A.
                                               One Rodney Square
                                               P.O. Box 551
                                               Wilmington, Delaware 19899
Dated: June 1, 2000                            (302) 658-6541
                                                Attorneys for Defendants

IN THE COURT OF CXIANCERY OF THE STATE OF DELAWARE

CARROLL; EARL CARROLL; MICHAEL CAVANAUGH; CHICAGO AIR PARTNERS; JEFF FINE; SUE GIN; JEROME

LEVINSON; MICHAEL LEVWSON; BRIAN OLD& DONALD RUTZ; KENNETH SAIN; KENNETH SAIN, JR.; MARK

ZELL/CHILMARK FUND, L.P.; MIDWAY AIRLINES CORPORATION; EQUITY GROUP INVESTMENTS L.L.C.;

OPENING BRIEF IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS

OF LIMITATIONS OR LACHES

Merger Was Unfair To The Minority Stockholders More Than Three Years

Because Plaintiffs' Dilatory Tactics Have Unfairly Prejudiced Defendants On

MIDWAY AIRLINES CORPORATION.

-ill-NATURE AND STAGE OF THE PROCEEDING

plaintiffs in the Appraisal Action moved the Court to set trial of that action.

Merger - - plaintiffs in the Appraisal Action brought this case for supposed "unfair dealing"

This is the brief in support of all defendants' motion to dismiss.

-l-STATEMENT OF FACTS

investment by the ZellKhilmark Fund,

(Midway Disclosure at 2).

' The Complaint references, but does not attach, the Disclosure Statement.

4 . COMPLAINT (REDACTED VERSION)

EXTRACTED KEY WORDS

SHAREHOLDERS
MINORITY
PLAINTIFFS
MERGER
INVESTMENT
ZELLICHILMARK
DEFENDANT
ZELLKHILMARK
REDACTEDJ
TRANSACTION
MAJORITY
NEGOTIATE
STOCK
EQUITY
DEBT
SHARES
CONSENT
DUTIES
STOCKHOLDERS
PURCHASE
GOODAERO
ZELL/CHILMARK
MIDWAY AIRLINES
RESPONSIBILITIES
BREACHES
DELAWARE
INDEPENDENCE
OPERATING
CAPITALIZATION

                                                                          i  _-  i    `* (`7, !I m 
                                                                          i.;         .,     i
                                                                                  r.;,           
                IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
                                  IN AND FOR NEW CASTLE COUNTY                                     

Jim Allenson; B&W Investment;
H. Barry Baker, M.D.; Michael               i
Blonstein; Edward M. Burke;                 )
Howard W. Carroll Trust; Ira                1
Carroll; Earl Carroll; Michael              1                    REDACTED VERSION
Cavanaugh; Chicago Air Partners;            1
Jeff Fine; Sue Gin; Jerome Gold;            1
Michael H. Gold; Robert J. Gold;            1
Frances Goldberg; Gary Greenbaum;           1
Houston Air Partners; Nathan
Jacobson; Stuart Kaufman; James             ;
Krainson; Mark Kugler; Richard              )
Levine; Melvin Levmson; Michael             1
Levmson; Brian Olds; Donald Rutz;
Kenneth Sain; Kenneth Sain, Jr.;            i
Mark Summers; Debra Susskind;               )
TSP Partnership; Wally Weber; and           )
Harvey Weindenfeld,



         Y


Zell/Chilmark Fund, L.P.;
Midway Airlines Corporation;
Equity Group Investments L.L.C.;            i
Samuel Zell; Jerry Jacobs; Rod Dammeyer; )
Sheli Rosenberg; and John Selvaggio,        1

                             Defendants.    ;


                                            COMPLAINT


         Plaintiffs, through their undersigned counsel, allege for -their complaint as follows:

                                                 Introduction

          1.       On January 17, 1997, the Board of Directors of Midway Airlines Corporation

(the "Board"), a Delaware Corporation ("Midway" or "the Company"), approved, by

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Plaintiffs, through their undersigned counsel, allege for -their complaint as follows:

On January 17, 1997, the Board of Directors of Midway Airlines Corporation

company's 90+% shareholder, defendant ZelliChilmark Fund, L.P..

the terms of the transaction, the minority shareholders, including plaintiffs here, were

only I# for each share of their common stock.

the transaction, to investigate its fairness and to protect the minority's interests.

ignored the economic reality that the deal fashioned by ZellKhilmark was not a

it utterly failed to meet its duties and responsibilities to the

Delaware law required it to negotiate with Zell/Chilmark to maximize the minority's

It abdicated all of its responsibilities to ZelliChilmark

Midway's Board had significant leverage in dealing with the majority

would have imperilled ZelKhilmark's substantial investment in the company.

difficulties were simply the result of debt choking an otherwise profitable operating core.

Less than 11 months after the Merger,

ZelliChilmark sold 84% of its equity interest into the public market for $23 million in an

As of the time of the Merger, Midway was the major airline operating out of Raleigh-Durham.

Plaintiffs were, at all relevant times, minority stockholders in Midway Airlines

Board's consent to the Merger,

lacked independence as they were tied to ZelliChilmark in one way or another.

essentially the same capital structure and management instituted after its purchase.

The note purchasers also were to receive warrants to purchase additional shares at $01 per

shareholders about the negotiations or the GoodAero proposals.

Robitaille aided and abetted those breaches.

to investigate alternative capitalization opportunities; abdicating their responsibilities to


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