Free Motion for Summary Judgment - District Court of Colorado - Colorado

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 1 of 9

Case 1:04-cv-00725-RPM i
lt

Document 45-24

Filed 07/21/2005

Page 2 of 9

. l

DISTRICT COURT CITY AND COUNTY OT DEIT{VE& COLORADO Ptitionf,: Tffi QITIZ|IO'g CORDORATION, Crlorado I corporation Rsponde0ts: WILLIAM S. FAGAfl,441.
Co[rhooE I

COTJRT ONLY USE

Case Numbcr: 02cv 2598

I'INI'INGS OF FACT. CONCLUSIONS Otr LAW. ANI) ORDER T'ORENTRY OF JUDGMENT

THIS MATTERwasheardoversll or partof 24daysbegimingon May 5, 2003and Ky ending January 20M. Petitiorcrwasreprsented Parl F. l,ewisandChsly Culp on 7, by will Itr ofMoye/GilesLt.P andby Frcderick Cohen A. ofPipr RuddkLLF- Petitiooer be refrred hrein8s'Quizlo's". TheFagan lo wre by rspondnts reprsertd JayS.Horcvdtzof Horowilz,Wakead Forbes.TheSandston wero by rspordeots lepreseotd Jeftey A, Chase 8ndN, RiedN{fieterofJacobs ChEs FriakKliflhopf& Ke[ey, P.C. TheShnkiq/crootrls respondents rcpresedted Edwad H. Vr'asnulh wef,e by ofsoitlL Gantrell & Rus8ll.Thse "dissqrt6r." Vadousrpork(8rlortdthe grou!6msybecollectively responder refded as to proccdings; recordofalosingargul!dts Jmuary6, 2004ed thorading oflhis o[drotr the oo JqruEry 2004lvrekpton thedigitalrecording 7, dwic.e. 155 I haveconridered testimony fte ofthe monywibr6ses, ofthe approximatEly all the e'
PRELIMINAXY MATTERS l. of It should olady be that undrstood a[ fitldi|lgsoffact ard conclusious law madehereinarebased whatI 6rd to be. prepordrsoc thadmfusible, 6odibl, of on eviderc. Dlsuasivo

OOeE3a

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 3 of 9

tho crdibilityI haveappliad in 2. Sirc I satasthefactfiadeton this case, sssssiog q 4'3:16 same standards th*juors ue rEquired prcnittedto applyasstfoflh i! or including: for ad . . . means ofknowledgs, strsrgthof memory opportunitis of. observation; reasombllrgssuueasonableness . . the or in . or tstimotry; consistorcy laokofoonsistercy . . testimotry; the or oontsdictd . . motives; . whethr . . tetimolyhasbeeo or suppoltcd olherevid,mc&;. bias,prejudice int(rst ifatt)'; by uponthewitng8$ stmd;andall otherfrots . . . rnameror demesdot whiohaffccltbe andcircumstances by eltown theevidence credibilityof thewitnesses. ofxperB to As penaittedby CII4h 3:16 I laye applied tlt6e sarc standards thc tstimony ofptoof. Thtis a questiorhercasto which- ifaly - partyhrs theburden 3. vensinc frst dayofbiel whentherwosdi$cussion the ThrhasbcenteNion about issu this presnt in conceflring whichpartygotto talk firsr 6Dd whatordtthcpadisshould andargument the Because is a civil procdio& overallg@Lgl of Foof is theirevidence. thi8 "prpordranae of based thstgumnts on ofthe evideN,"esnotdabovo.I arnp$uade4 prtitl{tstatutqthotno ofthe in counsl cass atrd citcq aswell asimplications thelsnguage partyto this plocding "tho" burdo ofploof, in thtrsditiotrslstlse As wassuc,cinctly has affirned564A2d I137(Del.1989): statfd.ta C6,alier Coro, Henett.l988WI- 15816, An v, be In e ordinary litigatioq thDatterDright r$olved by applying Ifth Coudhasfoundthlt trsditionalburdn ofprooflules, a neidrcrsidehasadequately established. . . value. . .' it couldrule that lhe partyhaviry thcburden ofproof HowEvr agaiust The spproach notpermissible a [st tutoryl eppraisal. ststute ilr is dircts thecrud "rhe appraise" fiir valueofthe that thc dissenting shardnldershares, 4. Thforegoitrg consistent whatocctrsin thiskind of case:anind@rdrrt with is of determination thefindrof ftct of ore"fsir valud' of thethars stockhldby thedissenting by is but partyhasa positiooto advstrc9, a court'sdtmination slEreholdrs, starting zero. Each at padyhass burden ofprsuEsiotr, is also it its own- Thus,while it couldbe saidthateach a{.cu!al ssythat!o partyhasa "burden to ofproof," FRAMEWORK STATTITORY bya As prEviously and 5. notedthis is a'ltissetrieG'rights"caso is govmcd scheorc statutory schme foundat C.R.S.1973$7-13-101, tcg. Tte pqrtofthe statutory 9l

0or83z

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 4 of 9

outlined deaLing withjudiciat apprai$sl shars found C.n-S. of 1973 The is at $?-13-301. reuredy tur Actis fundame|rtaly th e$itabl.
As wasstdedit Pueblo BankCortorutionv. Lindoe.Inc.,53P.3d353(Colo. 2003): . . . Themodm dissnl rightsstatute xist8 FotectniDotity to s' sharelrolders oppressive fiom by coaducr drnajoaity.. . , lne disredr8'dghtsshtutesrves theprimaryassuratlc thrt as ninority share,holdens beproperly composatd the will for itrvolustatry ofthcir investneots,. , Thepurpore . oftbc 1os6 dirsdfqs'rigbtsstrtutewouldbcstbefirlfflled duough on interprettion of'fair value"whicho6urs mioorityshaftholders arecompcosated whatthyhavelost,thatis, tlei fur proportlanate ownership hterdt irro going.oncelr, (Enphasis supplied.)(Citatiol8omittd.)
7. l0l(4) a8:

"&i| Ar note4 I alr rquird dte@oine value,"defuditr C,Ls. 1973$?-13. to tie dare ... Thovalueof thesturee i(|sediatly befor efrective ofthe coryoratg objects, E{'tion whic.h dissrltr to cxcludiog lhe snyappreciatioa dprciation anticipation of oftbe corpocah ia actio! e,xcpt thof,tdt cxclusiotr wouldbilequihble. to lhat

Approrinstely a yearagotheColomdo suptr@e gsveAcdtrdrsguidrnc 8. cou y, in al4rlicatioD ofthe term"frir value." kr Pueblo Comorqtion Lt doe.Iac..&W, Bath Justic Nce wrotefor lhemajority; Wehold thattbetin "hir value,"for thepurpose ofColorrdo'e dissentr8' stahrte, the maDs di$ntingshsrholdeF' pmpodionate intlest thecorporafion valued s goiagconcsln. as in Thehial courtmus deiermircthevalucofthe corporate entityand a[ocatthedissnting his shoeholder proportiooate ownership intqest of&at valuq withoutapplyiag ma*et$ility dircouotat 8 thesharc*pldcr level. 9. Wl|atdoes meall?I wouldaBlogizcto a movie. Thelifc of&e corporatioa thb is the.entire fiom titlo io trdcrdits.A ddrmin8tion fibn of"fsir valud'.howe\rr, rcquires n to takea still photogE h of oDe insant in [rc oovie hre, $apshotasofDcn$6 2t,2001, a thedatethemerger completed. was must Thatstil pholograph bofrom thcactuslfrtn itslf,ad not some posed publicityshot.

0Or83e

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 5 of 9

makingmy 10. What-Lirloe did notdo is tBllma! a facdndrhow !o go about determiDation Dot of"feir value". Othe,r minolity discounlrj!4@ dos tell mes,hstfa$org than 'I mayuse- or not use- in makingmy dte|rnimtiotr, howI should wcighthtn It sems and clarthatI mustexercise Gvidoc aonsiddng and disc'ntioo, $,ighing oftbe conJlioting sll multiplefaotors makiq ny decision. in In reviewing oase I foutrd0ut my dilqnrnawls Dole newotr9, Iwas ll, the l8w struckby anopinionlhat is nowmoretha! 50years citedasauthority a case ia refenedto by old oneofthe parfies an ealier briefin this case.T1l,dc,6a Austin Cllv Stores ia v. Comoanv is Afo. 1). 89 Pa.D. & c. 57(Phil.Ct ofcoqun Plaas, Alessedrori 1953).In thatopidon Judge wrotg in talkiry aboutoomputation fair valueandrhedifrc'r tisiq oomputing it: of in by [Thcdiffioulty] is erDhasizcd tie differences thetestimony of emircd exFrts itr secudty analyris made dwiagthelo8lhy proccedings before c.ourt detrmiration. rcw for the pertiD,nt Another obsgvstion deals s.ith theweidt of valuejudgmcrtb Eafie!8offis type. No malherraticel in computation aritbmetic or valueca beascriM to anypstiaular lme.qt whenadded othr8 !rcperly be saidto but Eay io constifute fair l"lu of atrygivNr the scurity.Hnce! must w oonsider 0reess[tial all th.t at elemnts migbt!ffd thesecurity issu ariv at a conclusion atrd bosed suchcoruideration. oir $orneof thefactors mus be considered rndering an in tlDt inteligot decisior,Ip: rs8etvalue; ma*t vtlue; mlrkct pric6 of compqabl companiosi ratio; marttpriceandcamitrgs manageomnt its policios; ad dividends; valuatiotr of eamings; assts; rsrves various for codingencis; liabilities;future tax pediotionsoffutunebusingsg earnings; evots, et ctrts" The and list seerns yet all facion mustbecolsidrd and intmimble hd givx, thebr'opet trcigbtin ordftlat ajust resulttDightbe attailed. Wemustdefirc theterm'fir value"itr ib pres,Et e)d, co sothatwe maylrow whatit iEthatwe sek-Thd is to say,whatis to be valued?Gnra[y sharcholders spakiry dissentbg thg beingforcedto giveupfusetareofa goiagcoacern. Seeo,lso O'Conlor Appeal" A.2d 394(Pa.1973). 304 12. Theabove discussion be of"essential elmna" should considfed to tbat "fair Gstablish valud' tuconsiste0t Colorado wiih Coporo!j9J,-!&-y. lset. Ia E@_E& Waters.765 P.zd 597(Colo.App. 1988), tudgeMtzgerwrot,6. tic oo[d;

+

0or.834

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 6 of 9

. . . A prope,r detrnination offail valuedspods uponthe parficular ciromrtances ofthc corpoiation involvrd. Thccotrt mustooDsidr lglevad valuefrcto$ including sll ms*et vstu, invstment eamings or valu9,andnetasset value. [Otatioqs omittEd.lAjudicisl d,terBin offat vslueis not suscaptible tior to analysis anyprecise by matherusticsl foreula. lcitation omittd.l Crtain approschs valuatiod lot preseat to e m8y reliable measu9ofvoluein a portiqrlaicas.lcitrtiotr omifed,] Thewcightio bassigned each valuefactordrpends uponthe to fsctsaadcitouo8taDgs ofeachcas, thecourtmaypropcly sld docide assign to litde or no wightto I factorit dctrmines!o be uffeliable. lcitation omitted.l ANALYSISAIYDDETERMINATION OF VALI'X, 13. As mted i! Quizlro's Position valuatiolis anart,mt 8 scieoc. stalt I St4mnt, my aaalysis sayirylhatI amnot goitg to oudiq speciffc by I any calorlations aade to arive at my rsul8. Nor a{nI going!o ncss&ilyrefrenco exhibits tstimony. or Withatipof specific myhat to thoattomeys Saodstone Sh{Lidcloods groups,Idonot led to do so. My for ald &rdiogsard colclusions, loted above, balodoDmy reviewofgll thqviddc& pmprly as are submitted this cas, in including differeot the mc0rodologis diff(dt attd ar&optionr ofihe exprts, o(coptasnoted blow. I havalsocongidfed trkdhto accouot dottrtDitaliotr my and oftbe dedibility oflbe witnes33 theweightto begivenalt evidcoc atd submittd tisl. & 8t M Life Insurance Cornpa4, Saoqs& Wolloch e. Inflrance Aeeacr.Ittc..,l0P.3d6 (Colo.Atp, 2001). 14, Ther&@ counrmar*d oase that bcforeit wasa "classia battlof erpcds." "Theyah't sn To quoteAl Jolso!, mthitr' yel" As vas discussed duringclosingargu@trts, while th(ci! some,thiog authority albeittllitr -- thatsuggest shouldjust ajudgein my situatioo decide wbichexpert's opiaioahlikesthebestad go\t/ithit, I rejcc appEoar,h thst as antithetical whatI amsupposdto do hre. to 15, Moreov(, norc imlo rntly, in thiscase find flawsh g!! ofth a(prts' atrd I opllions, to a Sresl,er l6ser exted. As I consquenca, if I ]reted io jwt aocpt or one sven expett'sanalysis, couldnot do soia goodconscienc. Eny I In cver!!thecrdibilityof o(prt witnsses this b/peofprcccding for thefacdtrderto detendn. V,C.M,In&lsdes. Inc, r. in is fru$ea of ,llson.948 P.2d36 (Colo.App. 191); M Life Insurance Coneanv Sor,ew v, & Vallack htsurqnce Aoencv. Inc,. sLorq, 16. This leads a! examination to prircipal xpsrs: ofthe ophionsofth tbr A. Mt Prokuoek.In his cloEitrg argEldqcounrclfor Saldstotro the used tertrr"ootrflioted clotilgof'to dedcfibe relstionship and ihe btwen Atrthotry Mr. Plokupd.. I coocur ard Mth that Quizno'r!Tuckr '.iaccstuous.', dscriptiorl although night have I uredtle word Wbcerrer -5.

oo1835

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 7 of 9

patinsofrpguladtysdghthaveatt8ohed thc $8.50prshar8 Yaluatiotr is io il coopletelyobvintd lhebiasandnotivdiotr deinouhatod the by formul&ti$ offte Trrc.&r valuatiorfor Qui.ao'8-. or more Anthony this out acaratelyfor the Schadens wae pursuing oash mrgt. who ofMt Blombrg arise aod Similarquestions ssio theactions activities andth Spesiat For Cornrnitt, themostpart,I foud Mr. Prokupek's valuatio!,not credible. tstimony, lhe evidcnca and ofTlrckerAnthony's B. At npfugl@Sodes. Havilg said+h't I also6nd subst{ti8l their ofboth Mr. Hoffcrangndl,lr. Cordeqespci8fly flawsin theanolysir (whicltI do lot beliYa wre selectiotr of"oompdablecompanies," I coqparablo), tht computatiotr ofEBITDA multiplqrthic,h find to ald hgvebed hi8h. W}ile generolly frrmdthetstimo[yof I too thm Mr. Hofttran md Mr. Cords bemoreprsuasive crEdible thst atrd !o of Mr. Prokupelg do not accpt I oftbeir opiliols without eithac resfvstion eitbr.

l,ovine 17, I alsohaverct ircludedin my aulysis anyfrc'torfor theAmaresco, Leicrhhanor TuckrAtrthony on loansor debti! Erriving my conclusiols valu. while dros at loars loansv/erc!9chnilly Dadeto Quiztro's a colpor&tio!, as werepersonol theyfimctionally to RichardSchado his groupto fundthis cash mfger.Theyal6ohadtheeffd of ard out arriicially andinequitably dprcshg potential the valueofQuizno'sstoc,lin tbtioe perioa beforetheefoctive mergec date. '*ick ass"growth I 8. t havcplaced substantial einphasis thepro.rnerger on anticipated Quizno's, leastanticipafrd theSc,tradens. a{nrd numbr stores for The at b'y of opned of Decsnbr21,2001,theprojected generating ss engine ofAFD,lh daisiotr io oash advotiseaggrersively, iaoluding decisions adrrtising ontboSupe[ Bowl broadcast a[ these weremadeor at lastdiscussed s highlvelbg@ Decmbf 2001. what occurred 21, 8t gowth frctorr. theresfte? simplyconfinnstlrcse rmderstood undiscloscd but 19. ThqEmaybc I qustiod post-me(gr gtowthin ofwhetherI haveconsidercd rnrkingmy dccision.In thefirst placg t beliwe I c8nconsidr Quizno'sgrewafterlhe how mqger in valuatirgco!fliotitrgtestimony paniculady detflni[iry thc credibilig of and in witnsse3 or laakof it, in Mr. Schadrl's can cas.lD anyev4 post-oergf, informatioa be coDsidfsd vti& or disprove to pojectioasof valueor growth. fu, Gonsdlws Stmieht t. Anou' PublishercInc..70l A.2d 357(Del. 1997); Mdical. IrE.,63 P-3d80 Hoelev. Zinetics (Utah2002). 20. Havingconsidered ofthe wideoce, g!! hwing weighed ef idoa6 th&t whr is itr it aonflictmd havingapplied propr the evidntiary shndard well asrelyingotrthatEvidnc ns whiohI fnd mostpqsuasive credible! firld tlut thevalueofQuizno'sasa goingooncqr ald I as ofDecnber21,2001was011X,000,000, Assumiog aillion shar 3.2 ofstoct;the "&ir value,' ofeach share dle dateofthe merger thus$32.50.To parapbrase or was counsl flre for Shukie/Crooms gloup,thatis whrE find ralityto be, I

001836

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 8 of 9

TEESAND COSTS 21. I nerdturnto qustionr offcs srd costs oodemplatad C.RS, 1973 as by "shall" ass.d!costB Thatstatulg sa)athatI the suchas against corporatiotia o case $?-113-302. this. I spcificauy thatnoneofihe disslters fnd or acted a$itrarily, vexatiously not ia good Aitb soasto br thNn recoupiru fioEl 0leir cost!. 22. Wilh rcgardto attomey feeqI spcifically thatQuizno'sactd badfaith in find h its insistenc $8-50a slnrewas'fir value"uodra[ thef8ctsaDd that circunstancc. I hcre distinguis[ aszuggested couDsl theFagatr groupbtwcn proposing by for $8.50ar Quizno's thebuy-outpricefor thelegitimate purpose ofeffectuEting mrgtr usingthatnudlbr and to the calculate vsluein a dis8edds'rightscsse.I have frir prwiously coruDoted thrlationshtp on between Tuokq Antlroot Mr. Prokw'k thc Schadls. "kue st tus" ofQuizro's as6 and The coopanyon thevrgeof I growthxplosion oMously howtr !o theSclradeos, thytold but was othrBharboldrs ifanylhitr& ofsubshtrc growthxplosioo: litdg thatpotntial concerdng tley did not tell theothretrsrholdfg actual trot the nuobrofsiotesoptnc4 trcy werE cndid aboutthei! plars for AFD, theyweredot forthcomirywith rgffd to thairplus for morc aggressive advrtising, includingadvfrtisingon theSuper Bowl broadcrs!etc. As an qmple, durioghis cmssexamiaatior Mey6q Quiano's Mrorpotate cormrel, admitted Quiano's th8i hadihe ability on thedaybefor tlrollrgr,thedEy themenger the&y afrerthemecger ad m of qactlyhovt maoystores ddt'r0ine wereaotually opnt. Thevidnc dmotr8tsats a 8rat dispadty betwen aeal" numbt tlr'!rcjcted" nu$ba contained Quizto's that itr ard corporato doquments rcferenced theproxystatcarent. ffnd theproxystatrmcltto hove and il I besnaDgxe.cise obfuscatiot. iD 23, Takenass wholg ard based a prqnnderuce ofthe crediblqadmissible, on evidtf,rc, are !rsua8ive Quizoo'sactiolsv.etmt ir goodfaitb, and6 dissnln thls Nrtided to ettomey fes. II4ISCELLAI{EOUS MATTERS 24. With iegardto pleidingpon attomey's andcost!,dissnte$ rhdl hav45 fes daysftom thedateofthis ordrto subnit a bill ofoosts0nda ststrNrot etlomery fees. for thercaftcr respond. to will Quizno'sshallh8vc30 rtays DisserfEG h&ve days 20 to threaffr reply. If anypartywishes havea hearing anyissu attomey's or costs to oo feec of tbeyshould Eakc tbatrqust thirgubmissions. in . 25. Any heariags suchissues ocputin Courtroom l, whrcI ao movhg on oa will I January 2004. AII finthrplcdingr in this cas 13, shouldcontitnre uB same to the caption, but all courtoom copies shoutd filed in Courhoom Any tlphone be 11, inquiris afrr mad6 Jaqury 13,2004should diledcd to e-ourtomr 1I . 720-8654065. be . Counsl gantedaDentension arE oltif,c until 30 dsysafrrt entranordetr aod judgneot regadingattomoy aodaosts thepurpose filiry post-Aidmotionsfec for of

0$n837

Case 1:04-cv-00725-RPM

Document 45-24

Filed 07/21/2005

Page 9 of 9

27, Counsel dissentrs prepale subdit I ploposd for formordrfor enty of sball and judpenl Suchordeffor entsy ofjudgrnnt sha[be zubnitted within 30 days tom tbedateof tlis oder, ad shallbeapproved to formby couasel all partis.Such as for ordershallincludc rdercdtaspemittedby lsw, aswgll a8attomy"fes @sb. alrd 28. Wiih rcgard sxhibits, ORDEnEDthatall xhibib 8e relasd hial to itis to cousel, v/hoslEll pick tlrcrnupno laler0un.lazwtT 12,2004.Bxhibitsshallbenainabd as followsi Eaah prty shallkeepits adrdtted adibits andoftrcd-but-notadrdficda(hibi8. All exhibitsshdl bmabtdndh theirprqt conditioqhowvr, ovecizedxhibits maybe photographd rduced 8%x I I itrohsize,All erhibitsshdl bedetivred thaclelk the or to to transcribt anyretaird courtrpodetr thei!rcqudt andshallbe available in$adion by or at for Eoysttomey ofrcold. Exhibitshsyb disposd 120dals affroty ofjudgmdt of udessar appesl filed or oth6 post-trial is lelifir granted thef,hibits, whicl atrects 29, I uant to spcificdlynoterhatnoy frdings regnrding Quizro'slctionEh this case arenot in atrywaydirectEd Quiztro's to cousol. I wsntto mskit clsrthatall atlomc,lts fis i.! case p&ofe3sioaally alrpmpriai thezealoue haveaoted ad in represotation oftheir clic[ts. This wasI qualitytrial presnted qualitylawy$. I E ologiz atryoutbursts by for oftemperor iaappropdate levity thafI mayheveitjctedintothecas ary dolays or by occrsio!d my sclrdirle. 30. Finally,Iwad to xpress thrcord in fis ordff my undlng thankrto two on and poplc who hadasmuchro do asanyoae gcttingthistial donein a reasonable md with with way keepiag trainon thetacls, Ms.Eileeo tlrc HeelyrtrdMs,MaryShrwood. Hedy ad Ms. Ms, Sherwood werelgalalsistatb fof compethg muBel in this crse. However, afterfte tial began, dragooned intokoping nxDiDglist ofadnifid exhibitE, I thm a reftleooed xhibits md offered-but-oot-ad6itted exhibits, whichtheydid withprfcctcooprationEarhdaythelawyrs rnd I wtegivda! up.todatelirt ofwhat odibits hadbetr adnitte4 refrnccd andot lot admittd.Aftr theprsNfation ofovidoc8 concluded, HealyandMs, Shrwood put was IvIs. togOlt o&ibits Dotbooks my usewhichconsisrod for trid xhibits. oforly ofthe adrdttd This eadmy reviev of thismatter oy prparatiou atd ofthis ordertlucl! rluch a8ir. Douethis (

oD-

dayofJaNary, 2004,Bncpro turc Jrnury ?,20&t.

BY THECOURT:

RobcrtL. Mccahy, Jr. DistrictCoultJudge

AUcourucl ofrecord fAX mdEgular nail). Oy

-8-

001838