XXXXXXXX XXXXXX (TA 8368)
XXXXXX XXXXXX BUTOWSKY XXXXXXX
XXXXXX & XXXX
000 XXXX 00XX XXXXXX
XXX XXXX, XXX XXXX 00000
TELEPHONE: (000) 000-0000
ATTORNEYS FOR PLAINTIFF
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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HIGH RIVER LIMITED PARTNERSHIP, :
A DELAWARE LIMITED PARTNERSHIP,
ON ITS OWN BEHALF AND DERIVATIVELY :
ON BEHALF OF XXXXXX REAL ESTATE
FUND IX LTD., XXXXXX REAL FUND XI, :
LTD. XXXXXX REAL ESTATE FUND
XV, LTD., XXXXXX REAL ESTATE FUND :
XXIV, LTD. AND XXXXXX REAL ESTATE
FUND XXV, LTD., :
PLAINTIFF, :
:
- AGAINST - COMPLAINT AND
: JURY DEMAND
XXXXXX PARTNERS L.P., XXXXXX
INVESTORS, INC., XXXXXX :
PACIFIC INVESTORS FUND 1972, LTD.,
XXXXXX REAL ESTATE FUND V, LTD., :
XXXXXX REAL ESTATE FUND IX, LTD.,
XXXXXX REAL ESTATE FUND X, LTD., :
XXXXXX REAL ESTATE FUND XI, LTD.,
XXXXXX REAL ESTATE FUND XIV, LTD., :
XXXXXX REAL ESTATE FUND XV, LTD.,
XXXXXX REAL ESTATE FUND XX, L.P., :
XXXXXX REAL ESTATE FUND XXIV, L.P.,
XXXXXX REAL ESTATE FUND XXV, L.P., :
XXXXXX X. XXXXXX AND XXXXXX X.
XXXXXX, :
DEFENDANTS. :
-----------------------------------X
Plaintiff, High River Limited Partnership ("High
River"), by its attorneys, Xxxxxx Xxxxxx Butowsky Xxxxxxx Xxxxxx & Xxxx hereby
alleges, upon personal knowledge as to its own acts and upon information and
belief as to all other matters, as follows:
NATURE OF THE ACTION
1. Plaintiff High River has commenced tender offers for units of ten
California limited partnerships (the "California Limited Partnerships" or the
"Partnerships"), as described below. On August 10, 1995, High River filed an
action in this Court, pursuant to Rule 14d-5 of the Securities Exchange Act of
1934, to compel the general partner of those partnerships, XxXxxx Partners,
L.P., ("XxXxxx Partners" or the "General Partner"), and the remaining defendants
(all of which are affiliated with or controlled by defendant Xxxxxx X. XxXxxx)
to comply with the specific provisions of Rule 14d-5 which require it to
promptly provide the tender offeror with a list of the unit holders and their
addresses or to promptly mail copies of High River's tender offers to the
limited partners. On August 10, 1995, this Court (Xxx. Xxxxx X. Xxxxxxx, X.)
found that Defendants had failed to comply with Rule 14d-5 and that the unit
holders of the partnerships were being irreparably harmed. Accordingly, Judge
Xxxxxxx issued a injunction (the "August 10 Injunction") directing the
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defendants to comply with the tender offer rules and either provide High River
with a list of the unit holders and their addresses or mail High River's tender
offer materials.
2. Despite this Court's August 10 Injunction, Defendants have continued, in
violation of the spirit, if not the letter of this Court's August 10 Injunction,
to block High River's tender offers. On October 6, 1995, High River's tender
offers expired and High River accepted for payment all units properly tendered
pursuant to the offers. Defendants, however, continue to seek to delay and block
High River from obtaining units in the Partnerships. Most recently, on October
30, 1995, High River's transfer agent, XXX Xxxxxxxx, received a letter from
Defendants which purported to outline several alleged deficiencies in High
River's transfer documents.
3. Defendants wish to avoid having a limited partner such as High River
because of its ability to monitor XxXxxx Partners and hold them accountable. For
the past several years, XxXxxx Partners has been operating all of the
Partnerships for its own benefit, but at the limited partners' expense. XxXxxx
Partners' improper conduct includes, but is not limited to:
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o paying itself and entities owned and
controlled by it exorbitant fees and so-
called reimbursements of general and
administrative expenses while permitting the
Partnerships to sustain staggering continued
losses so that the Partnerships' current
value is now a fraction of its original
value;
o trafficking in control of the Partnerships for its own
benefit, by selling and repurchasing its general partnership
interests, at great profit, without regard to the substantial
detriment suffered by the Partnerships and their limited
partners;
o taking control of the general partnership interest
in some of the partnerships in violation of the
California partnership law; and
o managing the Partnerships so as to
extend indefinitely the fat fee
arrangements enjoyed by the General
Partner and its affiliates.
4. After having soaked the Partnerships of over $12 million dollars in fees
in 1994 alone, XxXxxx Partners desires to continue its lucrative, but unlawful
arrangement. Defendants, having failed to derail High River's tender offer, now
seek to block High River from completing the transfers of limited partner
interest and from obtaining admission as a limited partner. Defendants
motivation is clear. A motivated, well-financed investor with a large stake in
the Partnership, such as High River, can challenge Defendants' abusive conduct
and effectively hold them accountable to the limited partners. Defendants' forms
14d-9 filed with the Securities and Exchange Commission (the
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"SEC") offer various pretenses for opposing the tender offers, but never
disclose Defendants' intention to resist High River's admission into the
partnership without a good faith basis. Accordingly, High River has been forced
to seek an injunction compelling Defendants to approve the transfer of ownership
from the tendering unit holders to High River.
5. Certain of the Partnerships that were formed prior to mid-1984 (the
"Pre-1984 Partnerships") were statutorily dissolved in the early 1990's by
reason of a failed attempt to transfer their general partner interests. As a
result of this dissolution, the Pre-1984 Partnerships terminated and XxXxxx
Partners is today acting as if it were the general partner of a lawfully
constituted entity, when, in fact, it has no such authority. In so doing, the
General Partner is maintaining an extremely lucrative and wasteful position at
the expense of the Pre-1984 Partnerships, without any lawful basis.
6. Prior to commencing its tender offer, High River, purchased units of
limited partnership interest in XxXxxx Real Estate Fund IX, Ltd., XxXxxx Real
Estate Fund, XI, Ltd, XxXxxx Real Estate Fund XV, Ltd. (collectively "XxXxxx,
IX, IX and XV"), XxXxxx Real Estate Fund XXIV, L.P. and XxXxxx Real Estate Fund
XXV, L.P. High River has been admitted as a limited partner in each of these
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partnerships. Accordingly, with respect to each of these partnerships, High
River brings derivative claims seeking an accounting from the XxXxxx Partners
for the fees that it earned while it unlawfully acted as the general partner of
XxXxxx XX, XI and XV and it seeks an order requiring XxXxxx Partners to disgorge
the excessive fees that it has earned since XxXxxx IX, XI and XV dissolved. High
River also brings derivative claims against XxXxxx Partners for breach of its
fiduciary duty to each of the partnerships in which High River has been
admitted.
JURISDICTION AND VENUE
7. Jurisdiction of this Court is conferred by Section 27 of the Securities
Exchange Act of 1934 (15 U.S.C. ss. 78aa) and 28 U.S.C. ss. 1367, the
Supplemental Jurisdiction statute.
8. Venue is appropriate in this jurisdiction pursuant to 28 U.S.C. ss. 1391
and 15 U.S.C. ss. 78aa because the improper actions of defendants, in violation
of federal securities laws, took place and will have a substantial impact within
this district.
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PARTIES
9. Plaintiff High River is a limited partnership organized pursuant to the
laws of Delaware, and is located in New York, c/o Riverdale Investors Corp.,
Inc., 000 Xxxxx Xxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxx 00000. High River is an
entity controlled by Xxxx X. Xxxxx.
10. Defendant XxXxxx Partners is a Delaware Limited Partnership, with
offices in Dallas, Texas. XxXxxx Partners is in the business of real estate
management, and is general partner of all of the California Limited Partnerships
defendants, as described below.
11. Defendant XxXxxx Investors, Inc. ("XxXxxx Investors") is a Delaware
Corporation which is the general partner of XxXxxx Partners.
12. Defendant Xxxxxx X. XxXxxx ("XxXxxx") is the Chairman of the Board and
sole limited partner of the XxXxxx Partners. XxXxxx is also Chairman of XxXxxx
Investors.
13. Defendant Xxxxxx X. XxXxxx is Co-Chairman of the Board of XxXxxx
Investors and is XxXxxx'x wife. Xxxxxx X. XxXxxx, along with XxXxxx, XxXxxx
Partners and XxXxxx Investors shall be referred to collectively as the
"Management Defendants".
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14. The defendants XxXxxx Pacific Investor Fund 1972 ("XxXxxx Pacific"),
XxXxxx Real Estate Fund V, Ltd. ("XxXxxx V"), XxXxxx Real Estate Fund IX, Ltd.
("XxXxxx IX"), XxXxxx Real Estate Fund X, Ltd. ("XxXxxx X"), XxXxxx Real Estate
Fund XI, Ltd. ("XxXxxx XI"), XxXxxx Real Estate Fund XIV, Ltd. ("XxXxxx XIV"),
XxXxxx Real Estate Fund XV, Ltd. ("XxXxxx XV"), XxXxxx Real Estate Fund XX, L.P.
("XxXxxx XX"), XxXxxx Real Estate Fund XXIV, L.P. ("XxXxxx XXIV"), and XxXxxx
Real Estate Fund XXV, L.P. ("XxXxxx XXV") purport to be limited partnerships
organized under California Law. As described below, however, High River contends
that many of these Partnerships have, in fact, dissolved.
15. XxXxxx Partners and any other persons constituting management of the
Partnerships are controlled by XxXxxx. Accordingly, any demand on XxXxxx
Partners or other persons constituting management of the Partnerships to bring
this action on behalf of the Partnership would be futile.
THE HISTORY OF THE PARTNERSHIPS
16. The California Limited Partnerships were formed between 1971 and 1985
for the purpose of investing,
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holding, managing and disposing of real estate and real- estate related
investments.
17. Most of the California Limited Partnerships were founded by Xxxxxx X.
XxXxxx, who is a member of the California bar and has been actively involved in
the management of real estate for at least 25 years. XxXxxx and The Xxxxxx X.
XxXxxx Corporation ("Ramco"), a corporation XxXxxx controlled, acted as the
general partner for most of the Partnerships that XxXxxx founded.
18. In 1986, XxXxxx sold his general partnership interests in the seven
California Limited Partnerships that he had founded to Southmark. As part of the
sale of the assets of the Partnerships, XxXxxx received substantial
compensation, and remained a co-general partner in most of the Partnerships,
along with Southmark. XxXxxx also received an indemnification from Southmark,
insulating him from liability for claims brought against the general partners
for mismanagement of the Partnerships.
19. A mere three years after XxXxxx sold his general partnership interests
to it, Xxxxxxxxx filed for bankruptcy protection. After having received
substantial compensation for his general partnership interests from Southmark in
1986, XxXxxx approached Southmark to repurchase the general
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partnership interests in 1990, proposing to pay only a small fraction of what
Xxxxxxxxx had paid for them.
20. XxXxxx'x attempts to repurchase the general partnership interests
should be viewed against the backdrop of a $5.4 million claim for
indemnification that he had brought against Southmark in 1989, that apparently
arose out of claims against XxXxxx and Southmark by third parties. Thus, XxXxxx
had substantial leverage in exercising control from Southmark. Indeed, when
XxXxxx attempted to repurchase the general partnership interests from Southmark,
he agreed to settle his claims for indemnification as part of the deal.
21. Under California law, limited partnerships formed prior to July 1,
1984, such as many of the California Limited Partnerships named as defendants in
this action, are governed by the California Uniform Limited Partnership Act.
Cal. Corp. ss. 15501 (1995) et seq. (the "Old Act") California limited
partnerships formed on or after July 1, 1984 are governed by the California
Revised Limited Partnership Act. Cal. Corp. ss. 15611 (1993) et seq. (the "New
Act")
22. The Old Act provides that if a limited partnership's original general
partners transfer their interest, without first admitting a successor general
partner, the partnership dissolves.
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The Old Act in section 15520.5 states:
The retirement, death or insanity of a general partner
dissolves the partnership, UNLESS THE BUSINESS IS CONTINUED BY
THE REMAINING GENERAL PARTNERS
(a) Under a right so to do stated in the certificate, or
(b) With the consent of all members.
Old Act ss. 15520.5 (emphasis added).
23. Subsection 15509(1) of the Old Act states, in part, that: "without the
written consent or ratification of the specific act by all of the limited
partners, a general partner or all the general partners have no authority to . .
. (e) Admit a person as a general partner . . ." Old Act ss. 15509(1) (emphasis
added).
24. The amended partnership agreements and proxy statements for each of the
Pre-1984 Partnerships indicate that their existing general partners conveyed
their general partner interest, and, as a result, ceased to be general partners
of the Pre-1984 Partnerships, prior to the purported admission of XxXxxx
Partners (which in any event was not unanimously elected) as the new general
partner, resulting in dissolution under the Old Act. Neither the partnership
agreements (or any provision therein), nor any action taken by the new general
partner could resurrect the Pre-1984 Partnerships once they had, as here,
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dissolved under California law.
25. XxXxxx nevertheless took control of the partnership assets of XxXxxx
XX, XI and XV, as well as the other Pre-1984 Partnerships and began behaving as
if the Pre-1984 Partnership had not dissolved and as if XxXxxx Partners, which
was wholly under his control, was the lawfully appointed general partner. When
XxXxxx took control of the partnerships, he not only greatly increased his own
compensation from the majority of the Partnerships, as described above, but he
also imposed ostensible amendments to the partnership agreements, varying in
specifics from partnership to partnership, and purported to insulate himself
from liability for misconduct as a general partner.
26. XxXxxx, therefore, through his sales and alleged repurchases of the
general partner's interests in the various Partnerships, trafficked in control
of the Partnerships, and in the case of the Pre-1984 partnerships, including
XxXxxx XX, XI and XV, took control of the assets of these partnerships
unlawfully, for his own personal gain and without regard to the detriment that
he caused to the Partnerships and the limited partners.
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27. Since approximately 1991-1992, XxXxxx Partners has operated the
Partnerships as its own personal piggy bank, through an unconscionable
compensation and "reimbursement" scheme, and an incestuous web of self-dealing
with affiliated entities.
EXCESSIVE FEES
28. XxXxxx Partner has paid its affiliates enormous property management
fees -- in amounts wholly disproportionate with the services actually performed.
At the same time, XxXxxx Partner has caused the Partnerships to reimburse its
affiliates for certain general and administrative expenses and has received
certain other distributions in the form of both cash and other consideration. As
a result, much of the property management and other fees represent pure profit.
All the while the limited partners suffered with a thankless, losing investment.
29. The property management fees, expenses resulting from payment of
general and administrative expenses and other distributions paid to XxXxxx
Partners or its affiliates from each Partnership for the fiscal year ended
December 31, 1994, and the distributions to limited partners for the same year
are compared below:
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o The General Partner took $66,285 in general and administrative
expenses and $72,765 in property management fees from XxXxxx
Pacific. The limited partners of XxXxxx Pacific have not
received distributions since 1990.
o The General Partner took $30,000 in general and administrative
expenses and $193,145 in property management fees from XxXxxx
X. The same year the limited partners of XxXxxx X received
distributions of $570,008.
o The General Partner took $719,703 in general and
administrative expenses and $915,989 in property
management fees from XxXxxx XX. The General
Partner also received $973,023 as a "Contingent
Management Incentive Distribution." Distributions
to the limited partners of XxXxxx XX have been
suspended since 1986 and will remain suspended for
the foreseeable future.
o The General Partner took $609,197 in general and
administrative expenses and $868,408 in property
management fees from XxXxxx X. The General
Partner also received $634,802 as a "Contingent
Management Incentive Distribution." Distributions
to the limited partners of XxXxxx X have been
suspended since 1986 and will remain suspended for
the foreseeable future.
o The General Partner took $434,577 in general and
administrative expenses and $671,785 in property
management fees from XxXxxx XX. The General
Partner also received $769,448 as a "Contingent
Management Incentive Distribution." Distributions
to the limited partners of XxXxxx XI have been
suspended since 1986 and will remain suspended for
the foreseeable future.
o The General Partner took $346,327 in general and
administrative expenses and $441,082 in property
management fees from XxXxxx XXX. The General
Partner also received $573,908 as a "Contingent
Management Incentive Distribution." Distributions
to the limited partners of XxXxxx XXX have been
suspended since 1986 and will remain suspended for
the foreseeable future.
o The General Partner took $236,077 in general and
administrative expenses and $376,559 in property
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management fees from XxXxxx XV. The General Partner also
received $508,862 as a "Contingent Management Incentive
Distribution." The same year the limited partners received
distributions of $499,993.
o The General Partner took $199,786 in general and
administrative expenses and $57,289 in property management
fees from XxXxxx XX. The General Partner also received a
$167,194 "Asset Management Fee." The same year the limited
partners received distributions of $249,933.
o The General Partner took $291,507 in general and
administrative expenses and $235,662 in property management
fees from XxXxxx XXIV. The General Partner also received a
$316,808 "Asset Management Fee." No distributions have been
paid to the limited partners since 1991 and none are
anticipated in 1995.
o The General Partner took $269,869 in general and
administrative expenses and $534,044 in property management
fees from XxXxxx XXV. The General Partner also received a
$626,282 "Asset Management Fee." The same year the limited
partners were paid $400,207.
30. In total, the General Partner and its affiliates received approximately
$12 million in cash and other consideration as property management fees,
"reimbursements" for general and administrative expenses, and other
distributions in 1994. By contrast, the limited partners, the owners of the
enterprises, received approximately only $1.7 million during the same year.
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THE GENERAL PARTNER'S PERPETUATION
OF THE EXCESSIVE FEE ARRANGEMENTS
31. Upon taking the general partners' interest in the Partnerships, XxXxxx
coupled his unconscionable boost of the Partnerships' payment obligations to him
with an extension of the dates for the sale of the Partnerships' assets. The
purpose stated by XxXxxx Partners for extending the time period was to allow the
real estate market and the performance of the Partnership's investment to
improve. It is apparent, however, that XxXxxx Partners intends to prolong for as
long as possible the excessive and unlawful compensation, fees and reimbursement
schemes that XxXxxx Partners and its affiliated entitles are enjoying at the
Partnerships' expense, and at the expense of the limited partners.
32. XxXxxx Partner's plans for the Partnerships are apparent from the
latest "10-K" filings that it has filed with the Securities Exchange Commission
(the "SEC"), which describe an intention to continue to operate the Partnerships
indefinitely, and only consider sale of some or all of their assets at some
indefinite time in the future. The Partnership's most recent 10-Ks therefore
demonstrate that XxXxxx Partners intends to extend for as long as possible the
gravy-train provided by its unconscionable 23 compensation and reimbursement
schemes.
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RESISTANCE TO HIGH RIVER'S TENDER OFFERS.
33. On August 4, 1995, High River commenced a series of tender offers for
up to 45% of the units of the California Limited Partnerships (the "Tender
Offers"). In connection with the Tender Offer, High River requested by
telecopied letter of August 3, 1995, that XxXxxx Partners comply with Rule 14d-5
of the Securities Exchange Act of 1934 (the "Act"), which requires that pursuant
to a request by a tender offeror, that the subject company (here, the
Partnerships) must either mail the tender offer materials to the limited
partners, or supply the offeror with a list of the limited partners and their
addresses.
34. High River received no response to its request until four business days
later, and three days after the Tender Offers were filed with the S.E.C., when
it received two telecopied letters from New York Counsel Skadden, Arps, Slate,
Xxxxxxx & Xxxx ("Xxxxxxx Xxxx").
35. One of the letters, dated August 8, 1995 (but received on August 9),
signed by defendants Xxxxxx X. XxXxxx and Xxxxxx X. XxXxxx, demanded that High
River and Xxxx X. Xxxxx sign a certificate stating that they had not received
any confidential information relating to the Partnerships from an unnamed former
lawyer of the McNeils. The accompanying letter signed by Xxxxxxx X. Xxxx of
Xxxxxxx Xxxx, indicated that the General
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Partner would not supply the limited partner list, nor would it begin to mail
the Tender Offers to any limited partners, until it received the signed
certificate that had been attached to the letter from the McNeils. High River,
through its counsel, responded on the same day by stating that there was no
basis for defendants' claims that it had obtained confidential information and
that, in any event, there was no excuse for the defendants' refusal to honor
their 14d-5 obligation.
36. On August 10, 1995, Judge Xxxxxxx issued an injunction directing
Defendants to either provide High River with a list of the unit holders and
their addresses or to mail High River's tender offer materials. Defendants chose
to mail. In granting High River's injunction, the Court found that Defendants
were irreparably harming their limited partners by attempting to block access to
information regarding High River's tender offers.
37. On August 17, 1995, High River wrote to XxXxxx Partners forwarding
copies of its proposed transfer documents. Unlike almost all other public held
entities, the Partnerships do not have an independent transfer agent. Instead
XxXxxx Partners, or its designee, act as transfer agent. As such, XxXxxx
Partners owes its limited partners the highest fiduciary obligations with
respect to the transfer process. Accordingly, High River sought to confirm that
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Defendants would take the necessary ministerial actions necessary to complete
the transfer of units obtained in the tender offer to High River and to insure
Defendants' cooperation in the transfer process. (Exhibit A).
38. On approximately August 22, 1995 High River amended its tender offer
and forwarded it to the Partnership for mailing. Shortly thereafter, on
approximately August 24, 1995, the parties entered a standstill agreement and
began to negotiate a friendly transaction. While the negotiations were being
conducted, High River learned that Defendants failed to timely mail High River's
amended tender offer materials and thereby ignored the clear direction of this
Court. It was not until after the negotiations broke off in late September that
Defendants mailed the amended offers. Defendants thereby again flagrantly
violated Rule 14d-5, ignored the directive of Judge Xxxxxxx's order and
materially delayed and damaged High River's offers.
39. Defendants further damaged delayed and disrupted High River's tender
offers by (a) communicating with unit holders in violation of the standstill
agreement to discourage them from tendering units; (b) misleading unit holders
concerning the purported existence of alternatives to High River's tender
offers, such as their own tender offer and an increase in distributions
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to partners; and, (c) in clear violationof the SEC's rules, mailing withdrawal
forms to unit holders without making the necessary disclosures and filings with
the SEC.
40. On October 30, 1995, three weeks after the expiration of High River's
tender offers, High River's transfer agent, XXX Xxxxxxxx, received a letter from
Defendants that raised several alleged concerns regarding High River's transfer
documentation (Exhibit B). This letter was High River's first indication that
Defendants intended to abuse the transfer process. Defendants' bad faith was
manifest by their failure to respond to High River's August 17 letter, and
Defendants' abuse of the transfer process was a serious breach of fiduciary
duty.
41. The October 30 letter was only Defendants' latest attempt to prevent
High River from increasing its stake in the Partnerships. Viewed in the context
of the Partnership's history, however, it is not surprising that Defendants
resisted High River's attempt to gain a significant foothold in the
Partnerships. Defendants fear that any large investor who they do not control
might challenge their fee arrangement and other management policies and make
them accountable to unit holders.
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FIRST CLAIM FOR RELIEF
VIOLATIONS OF SECTION 14D AND 14E OF THE EXCHANGE
ACT AND THE REGULATIONS PROMULGATED THEREUNDER
42. High River repeats and realleges the allegations of the preceding
paragraphs as if fully set forth herein.
43. In violation of Sections 14(d) and 14(e) of the Securities Exchange Act
of 1934, 15 U.S.C. 7, and the regulations promulgated thereunder, Defendants
form 14d-9 failed to fully and accurately disclose Defendants intentions to
wrongfully resist High River's admission into the limited partnerships.
44. Defendants also mailed withdrawal forms to limited partners of the
Partnerships without making the necessary disclosures and filings with the
Securities and Exchange Commission.
45. High River has no adequate remedy at law.
SECOND CLAIM FOR RELIEF
BREACH OF CONTRACT - THIRD PARTY BENEFICIARY
46. High River repeats and realleges the allegations of the preceding
paragraphs as if fully set forth herein.
47. High River has received assignments of interest from unit holders
tendering their units to High River. As an assignee,
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High River has the right to enforce the terms of the agreements governing the
Partnerships against XxXxxx.
48. XxXxxx has breached the terms of the partnership agreements and the
underlying duty of good faith and fair dealing that is implied in all contracts
by refusing, without justification or excuse, to admit High River as a limited
partner.
49. High River has no adequate remedy at law.
THIRD CLAIM FOR RELIEF
BREACH OF FIDUCIARY DUTY WITH RESPECT TO XXXXXX XX,
XXXXXX XX, XXXXXX XV, XXXXXX XXIV AND XXXXXX XXV
50. High River repeats and realleges the previous allegations as if fully
set forth herein.
51. At all times relevant, the Management Defendants owed a fiduciary duty
to the Partnerships and to the limited partners. This duty includes the duty of
care, loyalty, good faith, fair dealing, honesty and candor in the management of
the Partnerships.
52. The Management Defendants have breached and continue to breach their
fiduciary duties to the Partnerships by wasting the Partnership's assets and
causing the Partnerships to enter into a variety of one-sided sweetheart deals
designed to serve only the interest of the Management
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Defendants at the expense of the limited partners.
53. As a direct and proximate result of the Management Defendants' breaches
of fiduciary duty, XxXxxx XX, XxXxxx XX, XxXxxx XV, XxXxxx XXIV and XxXxxx XXV
(collectively, the "Derivative Partnerships") have been damaged in an amount to
be determined at trial.
FOURTH CLAIM FOR RELIEF
BREACH OF CONTRACT WITH RESPECT TO XXXXXX XX,
XXXXXX XX, XXXXXX XX, XXXXXX XXIV AND XXXXXX XXV
54. High River repeats and realleges the allegations of the preceding
paragraphs as if fully set forth herein.
55. Each of the Partnerships is governed by a partnership agreement that
constitutes a contract by the limited partners of the respective partnerships
and XxXxxx Partners.
56. The governing partnership agreements contain numerous provisions
designed to protect the limited partners from overreaching and self-dealing by
XxXxxx Partners and its affiliates.
57. The Management Defendants have breached the partnership agreements and
as a direct and proximate result of those breaches,
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High River and the Derivative Partnerships have been damaged in an amount to be
determined at trial.
FIFTH CLAIM FOR RELIEF
ACCOUNTING WITH RESPECT TO XXXXXX XX, XI AND XV
58. High River repeats and realleges the allegations of the proceeding
paragraph as if fully set forth herein.
59. The Management Defendants took control of the assets of XxXxxx XX, XI
and XV after the Pre-1984 Partnerships had dissolved and XxXxxx Partners behaved
as if it were a lawfully appointed general partner of XxXxxx XX, XI and XV.
60. Because XxXxxx Partners had no authority to act as a general partner,
High River is entitled to an accounting of the fees the Management Defendants
removed from XxXxxx IX, XI and XV. XxXxxx Partners and its affiliates must also
disgorge the profits received from XxXxxx IX, XI and XV that were greater than
the fair value of the services that they rendered while acting as a general
partner.
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WHEREFORE High River demands judgment:
1. Granting preliminary and permanent injunctive relief compelling
defendants to admit High River as a limited partner in each of the ten
Partnerships and to transfer the tendered units of interest in the Partnerships
to High River;
2. Awarding High River damages in an amount to be determined at trial;
3. Ordering the Management Defendants to discharge their fiduciary duties
to the Derivative Partnerships;
4. Ordering the Management Defendants to account to XxXxxx IX, XI and XV
and to disgorge profits in excess of the reasonable value of services rendered
to those partnerships;
5. Awarding damages to the Derivative Partnerships in an amount to be
determined at trial; and
6. Awarding High River and the Derivative Partnerships the cost of this
suit, including reasonable attorneys fees and such other and further relief as
the Court deems just and proper.
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JURY DEMAND
High River and the Derivative Partnerships hereby demand a jury trial.
Dated: New York, New York
November 7, 1995
XXXXXX XXXXXX BUTOWSKY XXXXXXX
SHALOV & XXXX
By:___________________________
Xxxxxxxx Xxxxxx (TA 8368)
Xxxxxx X. Xxx (HK 4730)
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Attorneys for Plaintiff
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