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

Case 1:04-cv-00725-RPM

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Case 1:04-cv-00725-RPM

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DENVER COUNTY, DISTRICT COURT, COLORADO CoutAddress:1437 Bannock Street Denver, CO -830 Phooe Nsmber 720-865 |
Plaintiff: Defendants:

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ThQuizno's Corporation, a Colorado Corporation WilliamS.Fagan; Charls Alber; M, Patricia Alber;CalolA. A. Arm$trong; LeighBock;C, Lyn Crooms; AnnRoberts Crooms; Jo CaryCousino; Martha Cousinoi James Dvorak; A. Fagan C.pital, lrc.; Larua Fagan; Analreas Appleby Lawson: LBT Entepriss, Mary Inc.; Keenan TenyRobinson; Stnrkie; Sandstonc Ventures, LLC; and a/lc/a O. Thomas Sturkie Thomas O. Sturkie M,D. Chesley CulpIII Kcy DeferiantTheQuizno's Corporation Theodoro Hpwonh Altman/Michael Piper Rud[ick 1251 Avenuo oftheArnericas NewYork, NewYork10020-llO4 (212) 835-6060 (212) 83s-600r [email protected] Iu Chesley KoyCulp laonardH. MacPhee Moye,ciles, OKeefqvermeir & Go(ell LLP l22sl7,h st. Dcnvci, 80202 CO (303)292-2900 (307)292.45t0 bud.culp@noyelaw,com; len,[email protected] CulD:#18139; Maclboe: #27753 COURT USEONLY A Case 02{V-2598 No. Division/Courtroom:

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Prepared by: Attomey fot: Narne: Address: Phone No.: FaxNo^: E"Mail: Name:

Addrgs6i Phone No.: FaxNo.: E-Mail: Atty. Ros,#

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Case 1:04-cv-00725-RPM

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JOINTMOTIONTO CONSOLIDATE
Defcndants Quizno'sCorpontion ("Quizno's'), RichardE. Schaden, The RichaidF. Sohaden, Mark L. Bromberg J. Eric Lawrcnceard JohnJ. Todd,pursuant FrederickH. Schaden, to Colo. R. Civ. P,42(a) at l2l $ l-8, move fo consolidate above-caPtiond litigatiot, Civil the Actjon No. 02 CV 2598 (the"Dissentere RightsLitigation"), trto the first-filed Civil Action No. 01 CV 6281(dr"Sebesta Litigation'), for prc-trial purposes, in supportthcreofstateas and follows:

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INTRODUCTION 1. Thoughstyleddifferently,thc Sebesta Liiigation andthe Dissenters Rights Litigation concemtho samehansaction similar questions and oflaw. In the Dissentcrs Righls Litigation, the ullimete jssueis whetherQuizno'sdissenfing sbareholde$ fair recejved valufor thgir lharcs whenQuimo's paidthem $E.50 sharc. In the Sebesta psr Litigation, thc ultimatoissueis whetherQuizno'sald the othcr dcfrndants their dutiesto the shareholdeN whenthcy breached agrood the transaction wbich shareholdeE to in werepaid $8.50per shar. 2, Thepartiesto the cases ovrlapaswell. Therespondents the Dissciiers Rights irl Litigation consistof formerpublic shareholde$ Quizno'swho reccived$8.50pearharc aslhe of fair valueofthgir sharcs.In the Sebcsta puports to rgpleseilta classof Litigation, Sebsta formct shareholdors ofQuiz o's which includos ofthe respondents ihe Dissenters all iD Rights LititatioD. Apart fiom the additiotrofsotnc ofits oftice$ anddirrtors,the dofendant tho in Sebesta Litigation a]!dlhe petitionerin the Dissenters RightsLitigatiotr is the eamqgiz. Quizno's. 3. Both cases in their infancy. Althoughthorewasancarly hearingin the Sebestu are Litigatioo on plaintiffs motionfor a tcmporaiyrestraining ordr,this caseonly rcentlybeoame al issue. The Dissnters fughts Litigation is not at is$ue, Rule 26(axl) disclosures and havenot occundin eilhei case.Finally, all of theparties to the Sebesta Litigatiotr andth petitionerin theDissenters Righ& Litigation agree shouldbe consoijdatod. that thecascs 4. In orderto avoidduplicativediscovery, potentiallyconflicting rulingsor common issus, unncessary and expenses boththeparticsandthc Court,the partieshgrein fot

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Case 1:04-cv-00725-RPM

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respectfullyrequest this motionbe gantd andthat the Se.besla that Litigatioo aodthe Dissgnters Rights LitiBarion consolidaled pre-trial purposes.l be lor CERTIFICATIONOT CONSULTATION is that 5. Pursuant Colo.R. Civ.P. l2l I 1-15(8), undersigned authorized state to tho to panies theSebesta tbe all ofthe to andjoinin thereliefrcquested. Only Litigatio!agree res?ordeDts the DissltersRightsLitigation oppose. in TIIE NATURE OF TRE TRANSACTION IN DISPUTE

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("Quizno's') is a corpomtionorSanized uider the lawsof 6. The Quizno'sCorporation and Coloradowith its principalplaceofbusinessin Denver,colomdo. Quimo's operalos graots sandwich shops franchises qualified pelsons operato to quick serviceItalian-stylesubmarine to called Subs. Classic Quizflo's '1. Until were whoseshares Decer bet 21,2001,Quizno'swasa publiocornpany registered vith thc Secudlies Exchange and and Commission tradedon thq NASDAQ Smallcap Ma*et, SinceQuizno'sinitial publicoffering in 1994 thepublic nn*et hasnot responded performance its codmon stookhasremained very favolably to Quizno'spositivefinatroial and thirlyfaded, providing little tiquidily to Quizro's shaleholders. Quizno'shasbeenunableto beoause utilize its cornmonstockeffectivelyasa sourc linancingfor its business ofthg low of radint volume illiquidityofits commorstock. and 8, As a result,al varioustimgssirce 1999,theCompany'sBoardof Dircciors has variouswaysofenhancingliquidity aadshareholder value. Amongothcr oonsidered mechanisms a self-tender was 2000at $8.00per share offer Quizno'sconmencedin Novembe!, in cash,which closedin December, 2000andrasultedin the aaquisitionof I ,699,439shares (includingshares underlyingcrtainoptionsar1d wanants)ofQuiao's commonstock. In the tenderoffer, Quizno'spublioly stated a sec{nd-step in that llallsaction,that would reDlt the acquisitionof all remaining publicly held shares a going-private was in lransactioE, a dislinct possibility. to 9. On April I l, 2001,a Spial was Comndttee appoinled consid.r sucha secoodsteptrdnsaclion.The SpooialCommittee, Msrk L. Brortbes&J. includidgnameddefcndants Eric LawrenceandJohnJ. Todd,eachof whom is a non'qnnagement directorofQuizoo's, was in appointed responsc an e,ypressioo to ofinteresi by nahed defendant RichardE. Schaden,

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' Sebesta hasrqueted ajury lial. ThoDisseniers Rightslitigation is a tnal to the Court

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President Chief ExecutiveOfficer, andnameddefndant, and tuchatd F. Quizno'sChairman, its BoardofDirectois Schaden, member of Quizno'sVice hesident ard a management (collectively,tho "Schadens") acquirethe outstanding to commonstockofth Company whioh theydid rot aheadyown (approximately 800,000sharcs), I0, As described detail in the ProxyStatemont, SpcialComritlee engaged an in ia the oxtensive analysis, disoussions negolialions atd vith the Schadens during May and June,2001, conceminga potentialtransaction would be benefioialto Quiano'sandits minority that priceproposals stockholders,The SpocialCommittee and trvo difTerent considered rejected (at $8.00&d 98.21per sharererpectively),beforeultiroatelyagreeing madeby the Schadens on a pricof$8.50onJune 6,2001. I l. The telmsofthe transaction who with the Schadens would acttkough a wholly owncdcorpor4tion, FirenzeCorporation, weretentativelyagleeduponor June6, 2001and formally apprcved th6 SpecialCommitte, by with tbe assistance its advisors, by the of and Board(withtheSchadens on Committee abstaining) Junc21,2001.TheSpccial Quizno's unanimously detemincd that the meager the mergeragrement fair to and in thebcst aro ard interestofQuizflo's public sharcholdqs. In leachingthis determinatios Spe.ial Commiltee the (at considercd, amougnunerousotherfactorsdot ilcd in the hoxy Staternent pagesI 4 - I 6) the followins:

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Thefactthattbemerger coBideration a overtheaverage represcntedI 2%prerniutr pricefor lhesix-rnonth closing before period ending May21,2001, date the Quizno'! overthe announced it hadreceived offerfromtheSchadens, a 3l% premium that and an price average for the$ix.month period priorto the6elf-tendgr; and

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Thewrittenopinion oflie Special Tucker Anthony Sutr! Committoe's financial odvisor, ("Tucker Market3 Capital mergor fair, ftom a fimncial Anthony'') theproposed tllat is pointofview,to Quizno's public sharholdrs.
12. Quizno'stheoederedinto the mergcragreemcnt with FirenzeCorp. Codrplelionof the mergerwas subjectto approval holdersofa majority of Quimo's outslanding coflIrnon by stockirnd receiptofa written faimess opinion ftom the financialadvisorretained the Speciai by Committee. 13. On November5, 2001,Quizlro'sliled with the Securities Exchangc Commission and andsedtto its sharehoideE prgxy statgment a the merge!andeachshareholdc/s right explaitring to receive$8.50per shareuponcompletio[ of lhe merger, The prcxy staloment includedthe faimssopinion ofTucker Anthony. lt alsoincludedinfomatio! concerning dissenters' rights required thcDissenters' by tughtsstatute. C.R.S. 7-113-l0l e, seq. $ I 4. ln NovemberandDeoernber met to explorepossible 2001 the SpecialCommittee , altemativs the proposed to mergetthat lveremisedby a sharoholder, FaganCapital,Inc. One possibleallcmativethat wasconsidered a gonditional proposal Fagan by was Capital,Inc. to

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acquireshares Quiano'sfor $10.63per share, the SpecialCommitteg oi oonoluded the that but cordilions to the proposalcouldnot be satisliedandthat it wasnot a firm offer. plaintiffEdward Sebesto a complaint thisCoud 15.On Novembr 2001, 13, C. filed in rnonydamages a TRO to prevntQuizno'sfiom holding it! scheduled seking aI1d shareholders to ofFironze Litigation).In their moeting voton thomerge! Corp.with Quimo's(theSebesta of oppositionpapers, defendadsnotedthdt in the proposed the mergerlhe sharcs Quizno's stockwould be converted the right to rceive$8.50in cashpcr share. Shareholders inio cornmon who theit suohas Sebesta believethat $8.50per share not a fai prioewould b ableto exercise is ard statutoryrights udderColoradolaw to hav6thc fair valueoftheir shaiesappraised paid to

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uem. 16. Novmber 2001, Court On 28, motion, finding theplaintiff ftat the denied Sebesta's any that hadnot satisfied ofthe rcquirements obtaining injunctive relief. Thecourtnotd the for ptaintiffhada "clearmeasure damages" of the between costor benfrt the namely, differoncc per veisus fair market the oilgred, $8.50 sharc, valu ofthc 6hares. 17,Subsequently, Special altematives the arrd considqsd Cornmittee its advisors proposed Fagan by deteImjnd to not Capita.l, AftercEnsideratio!, Speoial hc. Committeo the its of change rcommendation themerger Firenze that Corp.wasfair allditr thebestintrest with publicshareholders. Quizno's was 18.OnDecember 2001, 21, with CoIP. afterthemerger merged Firenzc Quizno's approved a special at on meeting ofthe shareholdrs ofQuizno's thatday. Onoofthe conditions under morger for closing the agieemeDt thatTucker rgvoked, was Arthonyshallrol bave or opinion anymanner modilied changed taimess its in adverse thehoidoas Quizno's to of This was shares. condition sarisfied theclosin8. ar 19.As a rcsultofthe merger, stock ceased bepubliclytmded. to common Quizno's paidits non-dissentirg pershare. accordance Colorado's In wilh sharholdrs 98.50 Quizno's Dissenters' Rights sharcholders informing them $tatuto, Qui4lo'sscntnoticeto lhedissenthg thatthemsrgr been paymnt lheirshares for hod approved thatdissenters demand and could the under Dissenters' fughtsstatute sending demand Quizno's accordance by to in with a payment Colorado's Dissmers' deeanded ftomQuizno's. Rights statute. Each Respondenl 20.ln accordance Colorado's after for with Dissenter6' Rights statule, recivittg dcmdrds paymert rvi0t sent theRespondenb propulycompligd thestatute amount to dr who Quizno's estimatql xhe value plu3 as fair ofthe dissenters' shaxes interest.Quizno's stimated Quizno's pershare. as thefair value $8.50 21,C.RS.$ 7-l l3-301 rernaios lequires if. disseDting th4t shareholder's demand unrerolved, shallfilc a petitionrequesting lhefair va.lue that oflhe shares arcrued and Quizno's interst deteduined theCourt.Thstatute be by states thejurisdictiotr that ofthe courtin which theprocceding commeooed is is'Unaryald exctugive."

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22. An Marc\ lj,2002, Quizno'sfiled its Petitionrequesting this Court detentine that the fair valueofthe Rspondents' shares lhe Respondeds who properly compliedwith the for Dissente$' Rightsstatute(thDissentdsRights Litigation). ANALYS$ separate actions'1''hetr I. Colo. R. Civ. P. 42(a)states a court may coosolidate that actioN involving a commonquestion law or fact arependingbgforcthc aoud." !99 also of (Colo.App.2001) Mortsaee Investrnents Corp.v. Battle Mountaip Com.,2001WL 747569 (fundmentol inquiry in determining whetherconsolidation apgopriate is whetherthe oases is sharccommonquestions law or facl) of 2. It is not neceosary idenlicalparties,evidence witnesses that or exist in ordrto consolidate cases.S!9 Mo(qaqe lnvestments Coro,,2001WL 747569al 14 (similar witieses, documentary evidence padiesale suffcient.); Askewv. Gracce,851 P.2d 199(Colo. App. and 1992). lndeed,ovena diffcrencoin the undolfng transaction doesnot preventconsolidation whereidentiryofpartics andcommonquestions arise. suchasfidueiarydutiesand negligence See Roseffhal FourComers & MileralsCo,,403 v. Oil P.2d758,759(Colo.1965). 3. Hcre,thc trarsactionin disputeis idedticalin bolh oases. 4. Thc Cou hrs deniedSebesta's request iojutrctiverelief, Thergforo,th only lor question lenainitrg in the Sebesta Litigation is whotlrerSebesta the putativeclassareerlitled and to corrpensatory plointiffin the Sbe,str damages. The Litigation believestbat $8.50per shatcis trot fair value for his shd8. ID the Dissenters also RightsUtigation, rhg disscding shareholdoE claimlhat$8,50is inadequale compcnsstion. 5. As notedabovo, partiesto thecases the ovrlapaswell. Therespordqrtsitr the Disseoters RightsLitigation consistof formerpublic shareholders ofQuizro's who rcived is $8.50per sharcasthe fair valueoftheir sharcs.Altbough Sebesta himselfnot a named respondent thc Dissenters punorts to represent classofformer in RightsLitigatior\ Sebesta a shatoholdeE Quiato's which includesall oftbe rcE ordentsin th Dissenters fugbts of Litigation. 6. No party will be prejudicd co0solidation.Tho Disscnte6RightsCaseis not yet by at i6sue. The Sgbesta Litigation hasjust beoolte at issuo,andRulo 26(axl ) disolosure not has will 't occured in eithercase. Indee4 consolidation serveto allevioteanyprejudiceby avoidingduplioativediscovery poterfially confliothg rulings on crmmon issues, and umecessary expense effort by thepartiesandthe Court. and 7. FiLally, a ofthe parties to theSebesta Litigotion and thepetitioner in the Distenlers Rights[.iligation aglee thal the casetshouAbe corrsolidated.Only $e respondents the in Dissenters RightsLitigation oppose this circurnstmcg thereis no reason consolidation.Under iol to cotrsolidale Sebesta the Litigation andthe DisseoteE Rights Litigalion andeyeryleasol to do so,

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CONCLUSION Richard WHEREFoRE, lheforegoing for The reasons, dofendants Quizro'sCorporatior! E.Schaden, Richard Sohadcn, Mark F. Frederick Sohaden, L. Bromber& Eric Lawrerce, H. J. Righs andJoh[ J, Toddrespctful]y request thismotion gantedandthatthisDissentos be that pre-tdal purposes. Litigation consolidated thefirst-filedSebesta be into for Litigation DATEDthis 8thdayof April, 2002.

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The Quizno's Attomey for Defendant Corporation

CERTIFICATEOF SERVICE certifythata trueandcorrect I hereby copyoflbe JOINTMOTIONTO CONSOLIDATE wassewed prepaid theKday of Apnl.2OO2, by-U.S, Mail,postage addressed the to on followins:

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Michael S. Mccarrhy Faege & BensonLLP RepublicPlaza 370 l7'" St.,Ste.2500 Denver,CO 80202 Jeffroy A. Chasc Jacobs Cha6e Frick Kleihkopf& Kelly LLC l7'st-, ste.1500 1050 Denver, CO 80265 JqyHorowitz Horowitz& Wake 3950RepublicPlaza 37017'Street D6nvr,CO 80202

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