Cotchett, Pitre, Simon & McCarthy Announce Class Action Against Patriot American Hospitality, Inc.

Business Editors/Legal Writers

BURLINGAME, Calif.--(BUSINESS WIRE)--Feb. 14, 2003

The following was released today by Cotchett, Pitre, Simon & McCarthy:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Northern District of California, on behalf of all former shareholders of California Jockey Club and Bay Meadows Operating Company who, as a result of the July 1, 1997 merger between California Jockey Club, Bay Meadows Operating Company and Patriot American Hospitality, Inc., became shareholders in the successor companies, Patriot American Hospitality, Inc. and Patriot American Hospitality Operating Company, subsequently called Wyndham International, Inc. The proposed class period is from June 2, 1997 to May 7, 1999.

The lawsuit is one of nine lawsuits alleging securities fraud, filed in the Northern District of California or the Northern District of Texas. The first action was filed on May 7, 1999. In October 1999, the Judicial Panel on Multidistrict Litigation ("JPML") ordered the transfer of cases filed in other districts to the Northern District of California for coordinated pretrial proceedings. The cases are known as In Re: Patriot American Hospitality, Inc., Securities Litigation, MDL No. 1300 VRW. The cases were assigned to the Honorable Vaughn R. Walker, Unites States District Judge.

Prior to transfer and consolidation of these cases, several groups of plaintiffs filed motions for appointment as lead plaintiff and for appointment of their attorneys as lead counsel. The Court, however, stayed the proceedings pending the JPML's final transfer order, which was issued on October 22, 1999.

After inter-district transfer, the Court consolidated the nine pending cases into two actions for pretrial purposes: (1) the "Merger Action," brought by plaintiffs who obtained Patriot shares when California Jockey Club and Bay Meadows Operating Company ("Bay Meadows") merged with Patriot on July 1, 1997, and (2) the "Open Market Action," brought by plaintiffs who purchased and/or sold Patriot shares on the open market. Plaintiffs in the Merger Action filed a First Amended Consolidated Complaint on September 15, 2000. Defendants filed motions to dismiss, which were granted with leave to amend. Plaintiffs in the Merger Action then filed a Second Amended Complaint, a copy of which is available for viewing online at the Securities Class Action Clearinghouse (http://securities.stanford.edu).

Plaintiffs' Second Amended Consolidated Complaint in the Merger Action alleges causes of action under: (1) section 10(b) of the Securities Exchange Act of 1934, (2) section 14(a) of the Securities Exchange Act of 1934, (3) section 11 of the Securities Act of 1933, and (4) section 12(2) of the Securities Act of 1933. The named defendants are Patriot American Hospitality, Inc., Wyndham International, Inc., PAH GP, Inc., PAH LP, Inc., Patriot American Hospitality Partnership, LP, and Wyndham International Operating Partnership, L.P. (collectively the "Patriot Defendants") and UBS PaineWebber Inc. ("PaineWebber"). The claims are based on alleged false statements and misleading omissions contained in a Joint Proxy Statement and Prospectus ("Proxy") issued to Bay Meadows and Patriot shareholders on June 2, 1997, seeking approval of the merger. Plaintiffs allege that the Patriot Defendants targeted Bay Meadows because of its unique paired-share corporate structure, which Patriot wanted in order to both own and derive operating revenues from its hotels, with substantial tax benefits. Plaintiffs allege that the Proxy concealed material information about Patriot's hotel expansion plans, intended debt financing, and unconventional debt instruments used to finance such expansion.

On September 3, 2002, the Court entered its order on defendants' motions to dismiss the Second Amended Consolidated Complaint filed in the Merger Action. The Court dismissed all claims against PaineWebber, and dismissed all claims brought under sections 10(b) and 14(a) of the Securities Exchange Act of 1934 against the Patriot Defendants. However, the Court denied the Patriot Defendants' motion to dismiss certain claims brought under sections 11 and 12(2) of the Securities Act of 1933. The Court held that plaintiffs adequately pled a claim based on allegations that the Patriot Defendants failed to disclose in the Proxy their present intent to increase Patriot's debt, at an exorbitant rate, following the Bay Meadows' merger. Plaintiffs allege that, while the Proxy generally described a $1.2 billion credit facility to help fund Patriot's expansion plans, and certain commitments already made, Patriot intended to amass debt at a much higher rate and by the end of 1998, Patriot had amassed over $3.8 billion in debt (more than tripling the level of debt announced to plaintiffs at the time of the merger). The Court also held that plaintiffs adequately pled a claim based on allegations that the Patriot Defendants failed to disclose in the Proxy their present intent to use high-risk forward equity contracts, instead of conventional debt financing, to fund the expansion. Plaintiffs allege that Patriot received funds from at least three forward equity contracts - a $95 million contract with UBS, a $125 million contract with NationsBanc Montgomery Securities, and a $139 million contract with PaineWebber - which required Patriot to sell stock to the lenders at a set price and, in return for the money lent, Patriot agreed to repay from equity pegged at a price in the future, i.e., Patriot bet that its stock price would keep increasing so the loans could be covered. Plaintiffs allege that, in late 1998, Patriot began to default on the loans, requiring it to sell off assets and causing its stock price to plunge.

Plaintiffs allege that, because of the concealment of such information, the merger was approved effective July 1, 1997, and Bay Meadows' shareholders exchanged their shares for the same number of shares in the new Patriot entities. Plaintiffs allege that, at the time of the merger on July 1, 1997, their Bay Meadows' shares were worth and were trading at approximately $44 per share and that the true value of the Patriot shares they obtained, based on the value as of May 1999, after the Patriot Defendants' allegedly true intentions and resulting conduct began to be revealed, was less than $10 per share. In addition, Patriot has renounced its REIT status and become a C-corporation, terminated its lease for the Bay Meadows racetrack facilities, and sold off its interests in the racetrack.

By order dated January 29, 2003, after certain lead plaintiff motions had been renewed, the Court directed that this notice be published in accordance with 15 U.S.C. section 78u-4(a)(3)(A). Accordingly, please take notice that if you are a member of the class described above in the Merger Action, you may, not later than sixty days from February 14, 2003, move the Court to serve as lead plaintiff of the class. The Court has directed each prospective lead plaintiff to obtain a model spreadsheet from the Court's website or the courtroom deputy, and to complete and submit such spreadsheet to the Court, along with a declaration verifying the accuracy of the information and the basis for the actual (true) values per share for the transactions stated, and otherwise complying with the requirements of Civil LR 7-5. Finally, in the case of organized groups vying for appointment of lead plaintiff, the Court has directed that a spreadsheet be completed both by the group and each individual member of the group.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, you may contact Cotchett, Pitre, Simon & McCarthy, 840 Malcolm Road, Suite 200, Burlingame, California 94010 or visit the website at www.cpsmlaw.com.