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

Case 1:04-cv-00725-RPM

Document 45-19

Filed 07/21/2005

Page 1 of 4

Case 1:04-cv-00725-RPM

Document 45-19

Filed 07/21/2005

Page 2 of 4

, ARTER&HADDEN,J
ATTORNEYS AI L^W

10WBrEDrnSa..{ Slib 2tO0 C.ilDbq Obio 4321t3422 .httbe611&r.tl53 lt.i^& 4t4221!419

March 19,2002

w'ibrr Did Di:r (6l.) trei2u EDtl: Dm.&ir.r@'!'nd&n.h

Mr. Patrick Meyers E. VicPresident Goneml & Counsel TheQuizno's Corporation 1415 Larrimer Street Dnver, 80202 CO
Re;

I/]A CERTIFIED MAIL

('Westchestef) Insureri Westchester Insurancc Fire Company "Company') Policy Holdr: Tle Quizno'sCorporation f'Quiao'e" or ihe Policy: MatragementhotectionlasurancePolicy PolicyNo.: DON 648451 ClaimNo.: X390L9630918

DearMr. Meyers: this letter responds your Februqy 26, 2002 letter iD whioh On behalf of Westchester to you argued:(i) that the demands the dissentingsharcholders Quiano's constituteclaims of of polioy ("Policy"), and(b) that tbe allegatiolls allegingWrongful Acts undrthe above-refrenced iD the Sehesla lawsuit do not ariseout of thc circumstaaces describedin QuizDo'sJanuaryt 1999notice letter to Royal. For lhe reasons discussed below, Westchester believesno coverage is availablefor the demands the dissentiog by shareholde$ underthe Policy and that th9 matlers alleged in the Sebestalawsuit are based upon, aise out of or arc attributable to a fact, circumstance situationwhich wasthe subjectofthe prior lotice to Royal. or A. Dissenter's RightsNotices

Wesichester reviewcdthe disse er's lights noticsandbcli.ves that only two ofthe has noticesconstitutea Claim !trder thePolicy. As statedin our lebrury 5th letter,the term "Claim ' 'l written demandagainst aoy Insurcd for is defiled in the Policy, amongofier things, as monctary damages other rBliei" Only two of the noticosmeot this dcf,nitiol: (l) IQistie or Holford's January22, 2002 demandfor paymentof 100 shares;and (2) Bruce and Suzanne Newmar's Jarlary 10, 2002demand paynent of 175sha&s. The remaini4 noticessiDply for

07300338

Case 1:04-cv-00725-RPM

Document 45-19

Filed 07/21/2005

Page 3 of 4

ARTER&}IADDE}IP
Mr. PatrickE. Meyers MaJcb19,2002 Poge 2

provide Doticeof th9 shaleholder'sjDl$lion ,o demand palaneDt lbe mergerjr effectualed, if but do not demand paymentor seekaoy otherreliel my With reipect to thc two ieferqrceddemand letters, neitherallegetlEt euizno's cort|mitted any Wrongi.ti Act - cottlary to the statements your Febluary26e letter. Iosuring ClalrseC ib statesthat Westchester shall pay on behaf of Quiano'sLoss fiom a Securities Claims ..for any "Wrongful Act" as ,,arlyero!, misstatement, Wrongfirl Acts." The Policy de6ne5 misleadi! statemenf, omission,neglector breach acL ofduty actully or allegedlyconrndtted atteftpted', or by Quiz|o's. The dissntitrgshareholde! demands not allegeany ..Wrolgful Acts" of ar1y do kind by Quizno's and are legally distinct iom any olaiq for wongdoing. your statement lhat 'the DissentingSharholdeG contendthat euizno's corunitted enors and omissioosin valuiDg thcir shares"is simply nol true. An exarnillstion ofthe shareholders demands bearsthis out. Colorado courts have coDsistndy recognizedlhat a statutory dissenters'rights or appraisalproceedingdoes Itot involve an inquiry itto vhether aoy rrrongdoing occurrd' but merely stablishes fair value ofthe subjectsecurities.For example,otreColoradoappellate the court rccently slated: "[t]hc trial cou 's task in an appraisalaciion i6 to detemine the '.fair value" ofplaintifPs shares." PuebloBanco+oration Lindoe.Tnc-, p.3d 492,495 (Colo. CL v. 37 App. 2001), sja also M Lifc Ins. Co. v. Saren & Walbck rns Agencv_ Jnc.,2001 Colo. App. LEXIS 166 (Colo.Ct, App. Feb. l, 2001);WCM hdus. V. Trusices Ha$td Wilson 1985 of Re'ocabfTrust,948 P.2d 36 (Colo. Ct, AW.1997). Courtsir otherjudsdicdorEhavegirnilrrly held. Ses Cede& Co. v- Techrfcolor.Inc., 542 A.2d 1182(Del. f988x.ls]tatutory appraisalis limited to "tle paymentof lair value of the shares...by suniving or Iesulting corpolation.. lhe lcitation omittd] A deteftination of fai! value does not involve aD inquiry into claims of wongdoingin lhemager,);Kdemian v. r 3dishCn' ?92F.2d6t 4, 630(?u Oi. tgSO) (unae(a dissenters'rights statutg '[t]he appraisalrcmedy caEot substitule for a suit for breach of fiduciary duty or otler tofis."). Accordinglt We,s&hester doe.s believe the sharcholdcrdemandsallece Wroneftl not as rcquired under Insuring ClauseI.C., and thereforeno coverageis afford-ea Or,'ose Acts for dgmands underthe Policy. B. Endorsement 6 No.

You argue that Endorsement No. 6 does not apply to th6 Sehcsre lawsuit, appaFntly bcause lr-anea.tion issuein the curretrtlitigation is different tha! the 1999 hadsacrion the at oom$unicatedto Royal. As cxplahed before,that Endo6erint appliesio any Claim bared upon, arising out of or athibutable!o any fact. circumstance situation\r,hich has been the or subjectofplior notice to Quizno'sformo D&O in6urer. Our Februaryj lefter identifiesseteral

07300339

Case 1:04-cv-00725-RPM

Document 45-19

Filed 07/21/2005

Page 4 of 4

O *"**HADDEN,i
E. Mr Patrick Meyers March 2002 19,
Page 3

positionthat the Schadens' facforslbal suplort Westchester's 2001 acquisitionactivities and the cunent Lawsuit arc basedupon or alise out of the same facts, circumstances situations or previously reported to Royal, Your Fbruary26 letter does not set fort! any pelsuasive infomalion or argument the coDtrary. to With regard!o your argument Exclusio[ A.l2 doe6not apply to the Clair! sincethe ihat transaction was a mcrger,not a stockrepurhasc, Westchester continues believe that suohan to argumefi exalb forn over substance, is trot $elLfoutded. lo aoy event, Westchester ald continuesto believc that colemgefor any ircrcasedshar price is inconsisteot with thc puDose andintent ofthe Policy, asxplained our February letter. i'l 5'

We note that the defense invoicesyou havesubmittedlo Westchester datestill do nol to exceed $250,000retention. Oncethey do, Westchestei rview thosefee statements the will for rcasonableness, necessityand whctherOey were incurredi! the defenseof tle &bcda lawsuil positionwith respect and will provide Westchosler's thereto. PleaseFovide us with an update on the litigation at you! earlistconvenieoce, well as a summaryof the insureds' defense as sraregy, Westchestcr co inues to rserve8U of its righh aad defenscsmdr th. Policy aod availableat law with rcspeclto lhis matter,and recognizes that lhc insuredssimilarly resere thcir rights. Sincarely,

Dar A. Bailey
KennethD. Milbauer
2?0t36.1

07300340