The law firm of Wolf Haldenstein Adler Freeman & Herz LLP announced that a securities class action lawsuit was commenced in the United States District Court for the Middle District of Florida against CNL Hotels & Resorts Inc. (f/k/a CNL Hospitality Properties, Inc.) ('CNL'), CNL Hotel Development Company, CNL Hospitality Corp. ('Advisor'), CNL Financial Group, Inc.; CNL Real Estate Group, Inc., Five Arrows Realty Securities II, LLC, CNL Hospitality Partners, L.P.; RFS Partnership, L.P., James M. Seneff, Jr., Robert A. Bourne, Thomas J. Hutchison III, John A. Griswold, Charles E. Adams, Lawrence A. Dustin, Craig M. McAllaster, and Robert E. Parsons, Jr., on behalf of: (a) a class of all persons who were entitled to vote on the proxy statement filed with the SEC by CNL dated May 7, 2004, as amended or supplemented ('Proxy'), the ('Proxy Class'); and, (b) a class of all persons who purchased or otherwise acquired CNL securities pursuant to the CNL's Prospectuses and Registration Statements, between August 16, 2001 and August 16, 2004, inclusive (the 'Class Period'), who suffered damages as a result of the actions complained of. ('Purchaser Class') (Proxy Class and Purchaser Class collectively referred to as the 'Class.) Defendants are involved in the ownership and operation of hotel and resort properties.
The Complaint charged defendants with violations of the federal securities laws, including Sections 11, 12 and 15 of the Securities Act of 1933, and Sections 14(a) and 20 of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. In addition, by virtue of the defendants' conduct, the Complaint alleges that defendants have also breached their fiduciary duties owed to the proposed Class.
Additional cases were filed on behalf of investors. On October 18, 2004, motions were made to consolidate the various cases, and appoint lead plaintiff and lead counsel. On November 10, 2004, the court consolidated the cases, and on December 21, 2004, the court appointed Wolf Haldenstein Co-Lead Counsel. Plaintiffs filed a consolidated amended complaint on December 23, 2004, and on February 11, 2005, Defendants filed motions to dismiss. On May 9, 2005, the Court granted in part and denied in part Defendants' motions to dismiss. On May 31, 2005, Plaintiffs filed a consolidated first amended complaint. On July 22, 2005, Defendants filed a motion to dismiss the consolidated first amended complaint. At the end of September 2005, the Court granted in part and denied in part Defendants' motions to dismiss the consolidated first amended complaint.
On April 24, 2006, the Court granted preliminary approval of the settlement of the lawsuit. The Court will held a final hearing on July 26, 2006 to determine whether the proposed Settlement should be approved by the Court as fair, reasonable, and adequate, and to consider the fee and expense application of plaintiffs' counsel. The Settlement and fee application were approved.
The Proxy Class claims were settled by virtue of (a) CHR's entering into an Amended Merger Agreement, subject to shareholder approval, which significantly reduces the amount that CHR will pay to acquire its Advisor, CNL Hospitality Corp., compared to the Original Merger Agreement approved by CHR stockholders pursuant to the June 2004 Proxy; (b) CHR's entering into certain Advisor Fee Reduction Agreements, which significantly certain historic, current, and future advisory fees that CHR pays its Advisor before the merger; and (c) the adoption of certain corporate governance provisions by the CHR Board of Directors. Those Settling Defendants who were directors of CHR during the negotiation and execution of the Amended Merger Agreement and the Advisor Fee Reduction Agreements (the 'New Agreements') have acknowledged that this Action was among the material factors taken into account in connection with the terms of the New Agreements. Plaintiffs believe that the net amount that CHR paid in merger consideration and for advisory fees as a result of the New Agreements id approximately $200,000,000 less than CHR would have paid under the terms of the Original Merger Agreement and the prior advisory fee structure had the Original Merger Agreement become effective on a timely basis.
In addition to the Proxy Class Claims, The Purchaser Class claims were settled by Settling Defendants' payment of $35,000,000 payable in three annual installments (January 2007 to January 2009) to be deposited in a settlement fund account to be administered by plaintiffs' counsel. The monies in the settlement fund account, after payment of fees and expenses, wwere distributed pursuant to a Plan of Allocation to all eligible members of the Purchaser Class.
A copy of the Class Notice is available by clicking on the link on the right.
If you wish to discuss this action or have any questions, please contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, by telephone at (800) 575-0735 (Lawrence P. Kolker, Esq.)