IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 

MERION CAPITAL LP and MERION 

CAPITAL II LP, 

Petitioners, 

)

)

)

)

v. 

)

)

)

C.A. No. 8900-VCG 

BMC SOFTWARE, INC., 

Respondent. 

)

)

)

MEMORANDUM OPINION

Date Submitted: October 7, 2014 

Date Decided: January 5, 2015 

Steven T. Margolin, Marie M. Degnan, and Phillip R. Sumpter, of ASHBY & 

GEDDES, Wilmington, Delaware, Attorneys for Petitioners. 

Collins J. Seitz, Jr., David E. Ross, and S. Michael Sirkin, of SEITZ ROSS 

ARONSTAM & MORITZ LLP, Wilmington, Delaware; OF COUNSEL: Yosef J. 

Reimer, P.C., Devora W. Allon, and Ryan D. McEnroe, of KIRKLAND & ELLIS 

LLP, New York, New York, Attorneys for Respondent. 

GLASSCOCK, Vice Chancellor 
 1

 This action, and a similar case in which I am simultaneously issuing a 

memorandum opinion,1 concern an interpretation of the standing requirements 

under the appraisal statute, 8 Del. C. § 262, as amended in 2007. The respondent 

company alleges that the amendment altered those standing requirements, which 

precludes the petitioning stockholders’ standing here. Accordingly, the respondent 

company seeks summary judgment. 

I. BACKGROUND FACTS 

A. The Merger 

This appraisal action stems from a take-private merger between Respondent 

BMC Software, Inc. (“BMC”) and two Delaware corporations formed by a 

consortium of private equity buyers solely for the purpose of taking BMC 

private—Boxer Parent Company Inc. and its wholly owned subsidiary Boxer 

Merger Sub Inc. (collectively, “Boxer”).2

 BMC, also a Delaware corporation, is 

“one of the world’s largest software companies,” providing “IT management 

solutions for large, mid-sized, and small enterprises and public sector organizations 

around the world.”3 On May 6, 2013, BMC and Boxer entered into an Agreement 

 

1

In re Appraisal of Ancestry.com, Inc., C.A. No. 8173-VCG (Del. Ch. Jan. 5, 2015). 

2

 Sirkin Aff. Ex. 2, at 19. The buyer group consists of Bain Capital, LLC, Golden Gate Private 

Equity, Inc., Insight Venture Management, LLC, and Westhorpe Investment Pte Ltd. Id.

3

Id. 
 2

and Plan of Merger (the “Merger Agreement”) whereby Boxer was to acquire 

BMC for $46.25 per share of common stock.4

Petitioners Merion Capital LP and Merion Capital II LP (collectively, 

“Merion”) are self-described “event-driven investment” funds,5 or, in the words of 

the Respondent, “hedge fund[s] that specialize[] in appraisal arbitrage.”6 

“Appraisal arbitrage” is a phrase commonly used to denote an investment strategy 

whereby an investor acquires an equity position in a cash-out merger target with 

the specific intention of exercising the statutory stockholder appraisal right found 

in 8 Del. C. § 262; in the subsequent appraisal action the court awards the appraisal 

petitioners what the court determines to be the fair value of the target, which, if the 

target was undervalued in the transaction, represents a positive return on the 

arbitrage investor’s initial investment. Pursuant to this investment strategy, 

Merion determined that the “consideration offered in the [BMC/Boxer] merger . . . 

[was] considerably below the value of BMC” and began purchasing shares of 

 

4

 Sirkin Aff. Ex. 4, at 2. In the months following the execution of the Merger Agreement, BMC 

and Boxer further negotiated an equity roll-over for a BMC stockholder and a $0.05 increase in 

merger consideration. Id. The parties eventually agreed to the roll-over but not the price 

increase, and executed that change in Amendment No. 1 to the Merger Agreement. Id.

5

 Pet’rs’ Answering Br. in Opp’n to Resp’t’s Mot. for Summ. J. at 6; see also Sirkin Aff. Ex. 8, 

at 15:23–16:8 (“Q. What did [Merion founder] Mr. Barroway tell you about what he envisioned 

the business of Merion to be? A. He said that . . . they’re looking to start an event—he’s a 

former lawyer, and looking to start an event-driven fund and needed someone with analytical 

capability, merger experience, and that one of those strategies of the fund would be pursuing 

appraisal rights.”). 

6

 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 7. 
 3

BMC stock on the public market, through a series of brokers, in July 2013.7

 By 

July 17, 2013, Merion had acquired 7,629,100 shares of BMC common stock and, 

as the beneficial owner of those shares, moved to perfect its right under the 

appraisal statute.8

Because only the record holder of shares can make the statutorily required 

demand for appraisal on the corporation under Section 262,9 a beneficial owner 

seeking appraisal must direct the record holder of its shares to make a demand for 

appraisal on the beneficial owner’s behalf.10 Typically, according to Merion, a 

beneficial owner would accomplish this by directing an intermediary broker to 

direct the record holder to issue the demand; in this instance, however, when 

Merion attempted to direct its broker to pass along its demand request to the record 

owner of its BMC shares, Cede & Co. (“Cede”), the nominee of the Depository 

Trust Company (“DTC”), the broker refused, citing a policy change within the 

 

7

 Sirkin Aff. Ex. 8, at 23:16–20, 212:20–219:12. 

8

Id. at 248:13–252:17. 

9

See 8 Del. C. § 262(a) (“Any stockholder of a corporation of this State who holds shares of 

stock on the date of the making of a demand pursuant to subsection (d) of this section with 

respect to such shares, . . . who has otherwise complied with subsection (d) of this section . . . 

shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s 

shares of stock . . . . As used in this section, the word ‘stockholder’ means a holder of record of 

stock in a corporation . . . .”); id. § 262(d) (“Each stockholder electing to demand the appraisal of 

stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger 

or consolidation, a written demand for appraisal of such stockholder’s shares.”). 

10 The operation of modern securities practice, including the delineation between beneficial 

owners and record holders of stock and the ubiquity of central securities depositories like the 

Depository Trust Company, has been previously chronicled by this Court, and I do not find it 

necessary to replicate that information here. The reader is referred to former Chancellor 

Chandler’s opinion in In re Appraisal of Transkaryotic Therapies, Inc., 2007 WL 1378345, at *2 

(Del. Ch. May 2, 2007), for a thorough discussion of the topic. 
 4

broker company.11 Merion claims that, as a result, the “unexpected news left [it] 

with only one path for ensuring that its appraisal demand would be timely 

submitted—i.e., take the steps necessary to have its holdings in BMC stock 

withdrawn from the fungible mass at DTC/Cede and registered directly with 

BMC’s transfer agent, Computershare.”12 In other words, Merion sought to 

become not only the beneficial owner of its shares but also the record holder, so 

that Merion itself could make the statutorily required appraisal demand on BMC.13 

Over the next few days Merion carried out that task, and on July 19, 2013, 

Computershare confirmed that it had transferred 7,629,100 shares of BMC 

common stock from the fungible bulk at DTC/Cede to Merion, which now held the 

shares in record name on its books.14 On July 22, 2013, Merion delivered its 

formal demand for appraisal of those shares to BMC.15

On the heels of Merion’s appraisal demand, on July 24, 2013, BMC held a 

special meeting of stockholders to vote on the proposed merger of BMC with and 

 

11 Sirkin Aff. Ex. 8, at 277:4–20. 

12 Pet’rs’ Answering Br. in Opp’n to Resp’t’s Mot. for Summ. J. at 12. Merion’s portfolio 

manager, Samuel Johnson, explained that Merion itself could not petition DTC/Cede to make the 

appraisal demand because Merion was not a participant in DTC/Cede, which is why it was 

required to rely on a broker to communicate with DTC/Cede. See Sirkin Aff. Ex. 8, at 278:2–7 

(“[A]s a street name beneficial holder of stock, which is what we were at the time, we cannot go 

directly to Cede & Co. and ask them to sign this [demand] letter. Only participants in DTC are 

allowed to interact with DTC or Cede.”). 

13 Sirkin Aff. Ex. 8, at 278:11–279:4. 

14 See Sirkin Aff. Ex. 10, at 1–2 (stock transfer confirmation). 

15 See Sirkin Aff. Ex. 15 (demands for appraisal). 
 5

into Boxer.16 Holders of BMC common stock as of the June 24, 2013 record date, 

representing 141,454,283 shares, approved the merger by over a two-thirds vote: 

95,033,127 shares were voted for adopting the Merger Agreement while 

46,421,156 shares were not voted for adopting the Merger Agreement.17

 

Subsequently, the take-private merger between Boxer and BMC closed on 

September 10, 2013 with each share of BMC being converted into a right to 

receive $46.25 in cash.18

B. Procedural History 

On September 13, 2013, Merion commenced this action by filing its Verified 

Petition for Appraisal of Stock. In that Petition, Merion represented that it “did not 

vote [its 7,629,100 shares of BMC] in favor of the Merger, [has] not sought to 

exchange [those shares] for payment from BMC Software in connection with the 

Merger, and [has] not withdrawn [its] demand for appraisal of [those shares].”19 

Following stipulated discovery between the parties, BMC filed its Motion for 

Summary Judgment on July 28, 2014. I heard oral argument on this Motion in 

court on October 7, 2014. 

 

16 Sirkin Aff. Ex. 2, at 21. 

17 Sirkin Aff. Ex. 4, at 4. A majority vote was required for BMC to adopt the Merger 

Agreement. Sirkin Aff. Ex. 2, at 22. 

18 Sirkin Aff. Ex. 5, at 2. 

19 Pet. for Appraisal ¶ 5. 
 6

C. The Parties’ Contentions 

The narrow legal issue before this Court arises out of the specific factual 

circumstances surrounding Merion’s appraisal demand. Under the statute, had 

Merion simply been successful in getting its original record holder Cede to make 

the appraisal demand, Merion would have proper standing to file its appraisal 

action.20 However, because Merion withdrew its BMC shares from DTC/Cede and 

itself became the record holder demanding appraisal, BMC claims Merion can no 

longer satisfy the statute’s standing requirements. In support of that contention, 

BMC argues that Section 262 only permits the appraisal of shares not voted in 

favor of the merger and that, consequently, Merion, as the record holder, bears the 

burden of proving that each share it seeks to have appraised was not voted by any 

previous owner in favor of the merger—a burden, if it exists, that Merion 

concededly has not met.21 Conversely, Merion argues that no such burden exists in 

Section 262 and, in fact, has been previously rejected by this Court. Rather, 

 

20 See 8 Del. C. § 262(a); infra note 49; In re Appraisal of Ancestry.com, Inc., C.A. No. 8173-

VCG, at 12–14 (Del. Ch. Jan. 5, 2015) (finding that Transkaryotic remains in force to permit a 

record holder to perfect appraisal rights for beneficial owners as long as the record holder holds 

sufficient shares in fungible bulk not voted in favor of the merger to cover the number of shares 

for which the beneficial owner seeks to have appraised). 

21 Johnson explained in his deposition that, because Merion purchased its shares on the open 

market, it cannot identify the entities from which it purchased its shares. Sirkin Aff. Ex. 8, at 

216:11–14. In addition, because Merion’s shares were transferred from the “fungible mass at 

DTC/Cede,” Merion is not able to say how the specific shares it came to hold on record were 

voted in the transaction; nor did Merion take any additional steps to ensure that those shares were 

not voted in favor of the merger, such as acquiring proxies from the prior owners of the shares. 

Id. at 217:15–219:12. 
 7

Merion argues that, under the appraisal statute, it is only required to show that it

has not voted the shares for which it seeks appraisal in favor of the merger—a 

standard that Merion concededly has met. 

 1. The Appraisal Statute

In Section 262 of the Delaware General Corporation Law, the Delaware 

General Assembly has granted stockholders appraisal rights in certain 

transactions—including, relevantly here, cash-out mergers—so long as the 

standing requirements of the statute are met. Those requirements are set forth in 

Section 262(a), which provides that: 

Any stockholder of a corporation of this State who holds shares of 

stock on the date of the making of a demand pursuant to subsection 

(d) of this section with respect to such shares, who continuously holds 

such shares through the effective date of the merger or consolidation, 

who has otherwise complied with subsection (d) of this section and 

who has neither voted in favor of the merger or consolidation nor 

consented thereto in writing pursuant to § 228 of this title shall be 

entitled to an appraisal by the Court of Chancery of the fair value of 

the stockholder’s shares of stock under the circumstances described in 

subsection (b) and (c) of this section. As used in this section, the 

word “stockholder” means a holder of record of stock in a 

corporation . . . .22

 

Thus, in order for a petitioner to perfect the appraisal remedy according to the plain 

language of Section 262(a), the petitioner need only show that the record holder of 

the stock for which appraisal is sought: (1) held those shares on the date it made a 

statutorily compliant demand for appraisal on the corporation; (2) continuously 

 

22 8 Del C. § 262(a). 
 8

held those shares through the effective date of the merger; (3) has otherwise 

complied with subsection (d) of the statute, concerning the form and timeliness of 

the appraisal demand; and (4) has not voted in favor of or consented to the merger 

with regard to those shares.23

Noticeably absent from this language, or any language in the statute, is an 

explicit requirement that the stockholder seeking appraisal prove that the specific 

shares it seeks to have appraised were not voted in favor of the merger. 

Regardless, BMC argues that this Court should find such a share-tracing 

requirement24 implicit in the statute’s requirements, considering the overall 

purpose of Section 262, references in other subsections of the statute to how 

specific shares were voted, and the policy concern that, without a share-tracing 

requirement, stockholders could have purchased shares voted by their predecessors 

in favor of the merger, resulting in a theoretical possibility that appraisal could be 

sought for more shares than actually dissented in the merger vote. 

 

23 BMC conceded at oral argument that where Section 262(a) refers to a stockholder “who has 

neither voted in favor of the merger or consolidation nor consented thereto in writing,” the 

statute means the stockholder has not voted in favor of the merger or consented to it with respect 

to the shares it seeks to have appraised. See Oral Arg. Tr. 12:13–17 (“THE COURT: Well, 

when it says the stockholder voted, I assume that we all agree that the statute means with respect 

to those shares. MR. REIMER: And I think it means with respect to those shares.”). 

24 I use the term “share-tracing requirement” as a shorthand for the burden that BMC suggests 

the statute imposes on appraisal petitioners; it is somewhat imprecise, as BMC suggests that the 

petitioner could meet the burden in a number of ways, some of which do not involve tracing—

speaking strictly—the voting history of a particular share, such as a post record-date purchaser of 

shares purchasing sufficient proxies to cover the number of shares for which it seeks appraisal. 

See infra note 53. 
 9

According to BMC, the legislative purpose behind Section 262 favors an 

interpretation of the statute that includes a share-tracing requirement. Citing the 

appraisal statute’s origin as a reaction to the common-law rule whereby a single 

dissenting stockholder could prevent a merger,25 BMC explains that “Section 262 

represents ‘a limited legislative remedy . . . intended to provide shareholders, who 

dissent from a merger asserting the inadequacy of the offering price, with an 

independent judicial determination of the fair value of their shares.’”26 From this 

genesis, BMC extrapolates that it was always the General Assembly’s intent that 

“only shares that did not vote in favor of the merger [be] eligible for appraisal 

under the language of Section 262.”27

As further proof of an implicit share-tracing requirement, BMC points to 

Section 262(e), as amended in 2007, which provides that: 

Within 120 days after the effective date of the merger or 

consolidation, any stockholder who has complied with the 

requirements of subsections (a) and (d) of this section hereof, upon 

written request, shall be entitled to receive from the corporation 

surviving the merger or resulting from the consolidation a statement 

setting forth the aggregate number of shares not voted in favor of the 

merger or consolidation and with respect to which demands for 

appraisal have been received and the aggregate number of holders of 

such shares.28

 

25 For a brief history of the appraisal statute, see In re Appraisal of Ancestry.com, Inc., C.A. No. 

8173-VCG, at 6–9 (Del. Ch. Jan. 5, 2015). 

26 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 14 (quoting Ala. By-Products Corp. v. 

Neal, 588 A.2d 255, 256 (Del. 1991)). 

27 Id. at 15. 

28 8 Del. C. § 262(e). 
10

BMC concedes that subsection (e) is designed to be an informational tool “to 

permit dissenting stockholders ‘to learn how many shares might qualify for 

appraisal,’” so that these dissenting stockholders might share the costs of the 

appraisal action.29 Nonetheless, BMC argues that the reference in this subsection 

specifically to “shares not voted in favor of the merger or consolidation and with 

respect to which demands for appraisal have been received” indicates the General 

Assembly’s intent that appraisal only be available for shares that can be shown to 

have not been voted in favor of the merger. In other words, BMC asks this Court 

to interpret the requirements of subsection (a) in light of the reference to specific 

shares in subsection (e), such that “not only does an appraisal petitioner carry the 

burden of showing that it ‘did not vote in favor of the merger,’ § 262(a), it also 

must show the shares for which it seeks appraisal are ‘shares not voted in favor of 

the merger,’ § 262(e).”30 Any other interpretation of the statute, BMC argues, 

would not give effect to the statute’s purpose or all of its provisions, and, 

specifically, would frustrate the informational goal of subsection (e).31 

 

29 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 15 (quoting H.R. 16, 131st Gen. 

Assembly 11, 63 Del. Laws c. 25, § 14 (Del. 1981) (legislative synopsis)); see also Oral Arg. Tr. 

5:21–6:3 (“[Subsection] (e) talks about there having—there needing to be—the information that 

can be obtained, which, of course, the legislature tells us is in order for the party seeking 

appraisal to know with whom they can share the costs and so on, is to let them know how many 

shares might qualify for appraisal is the legislative purpose.”). 

30 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 15–16. 

31 See id. at 16 (“If any stockholder who did not itself vote in favor of the merger could seek 

appraisal for the shares it held at closing, without regard to how those shares were voted, then 

Section 262(e)’s statement of shares requirement would be entirely superfluous, as it would not 
11

 Finally, BMC argues that policy concerns dictate that this Court find an 

implicit share-tracing requirement in Section 262: 

[I]f an appraisal petitioner need only demonstrate that it did not vote 

in favor of the merger itself, . . . nothing would prevent a majority, or 

even all of a corporation’s shares from seeking appraisal, 

notwithstanding the fact that for a transaction to have been approved, 

at least a majority of the shares would have had to have been voted in 

favor of it.32

Theoretically, BMC points out, absent a share-tracing requirement “an appraisal 

arbitrageur, like Merion, [could] purchase[] most or all of a corporation’s shares 

after the record date without securing proxies or revocations of proxies, and then 

[seek] appraisal for those shares even though the record-date holder voted them for 

the merger.”33 Considering the purpose of Section 262 “to provide a remedy to 

minority stockholders who dissented from the merger,” such a possible outcome 

would be absurd, BMC argues, and must be precluded by construing the statute so 

that “only shares not voted in favor of a merger are eligible for appraisal.”34

 2. The Teachings of Transkaryotic

This case is not the first time this Court has visited the conflicts that arise 

when the alleged intent of the appraisal statute collides with the realities of modern 

securities practice. In 2007, then-Chancellor Chandler considered a similar, but 

 

show ‘how many shares might qualify for appraisal.’” (quoting Cordero v. Gulfstream Dev. 

Corp., 56 A.3d 1030, 1035–36 (Del. 2012))). 

32 Id. at 16–17. 

33 Id. at 17. 

34 Id. 
12

factually distinct, situation in In re Appraisal of Transkaryotic Therapies, Inc.35 In 

Transkaryotic, the record holder of stock, Cede, petitioned for appraisal on behalf 

of a group of beneficial owners for over ten million shares of a merger target, 

including over eight million shares that the beneficial owners had acquired after 

the record date but before the effective date of the merger.

36 On a motion for 

partial summary judgment, the Court considered whether “a beneficial shareholder, 

who purchased shares after the record date but before the merger vote, [must]

prove, by documentation that each newly acquired share (i.e., after the record date) 

is a share not voted in favor of the merger by the previous beneficial 

shareholder.”37 Relying on the plain language of Section 262, as it existed at the 

time, the Court answered in the negative, determining that since “only a record 

holder . . . may claim and perfect appraisal rights,” “it necessarily follows that the 

record holder’s actions determine perfection of the right to seek appraisal.”38 Since 

Cede held over 16 million shares that it did not vote in favor of the merger, the 

Court concluded that Cede could, and did, perfect appraisal rights for all of the 

beneficial owners’ 10 million shares.39

 

35 2007 WL 1378345 (Del. Ch. May 2, 2007). 

36 Id. at *1. 

37 Id. at *3. 

38 Id. 

39 Id. at *4. 
13

 In the wake of Transkaryotic, the General Assembly amended Section 262 

to explicitly allow beneficial owners to directly file petitions for appraisal,40

potentially raising questions about the continuing impact of the case.41 Despite this 

fact, and despite that Transkaryotic is factually distinct from this case, both Merion 

and BMC argue that Transkaryotic supports their diametric positions. Merion 

highlights that the Transkaryotic decision rejected imposing a share-tracing 

requirement on Section 262 and underscores the Court’s discussion, en route to 

that holding, of the difficulties of tracing votes to specific shares due to the reality 

of modern securities practice, where most securities are “held in an 

undifferentiated manner known as ‘fungible bulk’” on deposit at central securities 

depositories, such as DTC.42 Conversely, BMC emphasizes the Court’s reliance in 

its holding on Cede’s ability to prove it held an amount of shares that had not been 

voted in favor of the merger greater than the amount being sought for appraisal, 

claiming this as proof that under Transkaryotic, “at a minimum, record holders like 

Merion bear the burden to show that the shares they seek to have appraised were 

not voted in favor of the merger.”43

 

40 See 8 Del. C. § 262(e) (“Notwithstanding subsection (a) of this section, a person who is the 

beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of 

such person may, in such person’s own name, file a petition or request from the corporation the 

statement described in this subsection.”). 

41 But see infra note 49. 

42 Transkaryotic, 2007 WL 1378345, at *2. 

43 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 22. 
14

II. STANDARD OF REVIEW 

 Summary judgment is appropriate only where “the pleadings, depositions, 

answers to interrogatories, and admissions on file, together with the affidavits, if 

any, show that there is no genuine issue as to any material fact and that the moving 

party is entitled to a judgment as a matter of law.”

44 In making that determination, 

the court must “view the facts in the light most favorable to the nonmoving party, 

and the moving party has the burden of demonstrating that there is no material 

question of fact.”45 The parties have agreed that there is no dispute as to the 

material facts of the case, and so the only issue that remains is whether, as a matter 

of law, Merion has met the statutory requirements of Section 262. 

III. ANALYSIS 

Merion is an arbitrageur which seeks to capitalize on what it perceives to be 

an undervalued transaction. Section 262 permits the existence of appraisal 

arbitrage by allowing investors to petition for appraisal of stock purchased after a 

merger is announced.46 The parties dispute whether the arbitrageur here has fully 

 

44 Ch. Ct. R. 56(c). 

45 E.g., Transkaryotic, 2007 WL 137835, at *3 (quoting Elite Cleaning Co. v. Walter Capel and 

Artesian Water Co., 2006 WL 1565161, at *3 (Del Ch. June 2, 2006)). 

46 See 8 Del. C. § 262(a) (“Any stockholder of a corporation of this State who holds shares of 

stock on the date of the making of a demand pursuant to subsection (d) of this section with 

respect to such shares, who continuously holds such shares through the effective date of the 

merger or consolidation . . . shall be entitled to an appraisal by the Court of Chancery of the fair 

value of the stockholder’s shares of stock . . . .” (emphasis added)); cf. Transkaryotic, 2007 WL 

137835, at *5 (“Respondents raise one policy concern that deserves mentioning. They argue that 

this decision will ‘pervert the goals of the appraisal statute by allowing it to be used as an 
15

perfected its right to appraisal under the statute. Specifically, BMC asks this Court 

to determine whether Section 262 requires Merion to demonstrate that each share it 

seeks to have appraised is a share that was never voted in favor of the merger, not 

just by itself, but by any owner. Because I find that the unambiguous language of 

the statute does not give rise to any such share-tracing requirement, and that 

Merion has otherwise complied with the requirements of Section 262, I hold that 

Merion has perfected its right to appraisal. 

A. The Standing Requirements of Section 262 

As mentioned above, in order to properly perfect the appraisal remedy under 

the plain language of Section 262(a), a petitioner need only show that the record 

holder of the stock for which appraisal is sought: (1) “[held such] shares of stock 

on the date of the making of a demand pursuant to subsection (d) of this section 

with respect to such shares;” (2) “continuously [held] such shares through the 

effective date of the merger or consolidation;” (3) “has otherwise complied with 

subsection (d) of this section;” and (4) “has neither voted [such shares] in favor of 

the merger or consolidation nor consented thereto in writing.”47 The statute’s 

requirements are directed to the stockholder—expressly defined as the record 

 

investment tool for arbitrageurs as opposed to a statutory safety net for objecting stockholders.’ 

That is, the result I reach here may, argue respondents, encourage appraisal litigation initiated by 

arbitrageurs who buy into appraisal suits by free-riding on Cede’s votes on behalf of other 

beneficial holders—a disfavored outcome. To the extent that this concern has validity, relief 

more properly lies with the Legislature. Section 262, as currently drafted, dictates the conclusion 

reached here.” (footnotes omitted)).

47 8 Del. C. § 262(a). 
16

holder—and whether it has owned the stock at the appropriate times, whether it 

has made a sufficient demand, and whether it has voted the shares it seeks to have 

appraised in favor of the merger. My interpretation of Section 262(a) as clear in 

that regard is consistent with Transkaryotic. In that case, then-Chancellor 

Chandler determined that Cede did not have to demonstrate that each individual 

share it sought to have appraised was a share it did not vote in favor of the merger, 

but was only required to show that it held a quantity of shares it had not voted in 

favor of the merger equal to or greater than the quantity of shares for which it 

sought appraisal.48 The Court’s focus was on the petitioner/record holder, not on 

the shares—in other words, on whether Cede had sufficient shares it had not voted 

in favor of the merger to satisfy the demand, not whether those specific shares 

were shares Cede had voted in favor of the merger.49

 

48 See Transkaryotic, 2007 WL 137835, at *4 (“It is uncontested that Cede voted 12,882,200 

shares in favor of the merger and 16,838,074 against, abstained, or not voted in connection with 

the merger. It is further uncontested that Cede otherwise properly perfected appraisal rights as to 

all of the 10,972,650 shares that petitioners own and for which appraisal is now sought. Thus, 

because the actions of the beneficial holders are irrelevant in appraisal matters, the inquiry ends 

here. Cede, the record holder, properly perfected appraisal rights under §262. As a result, Cede 

may exercise appraisal rights for all 10,972,650 contested shares.”). 

49 This principle is unaffected by the post-Transkaryotic amendment to Section 262(e) granting 

beneficial owners the right to file appraisal petitions and receive a report of appraisal shares. In 

making this amendment, the General Assembly left the standing requirements of Section 262(a) 

entirely untouched, including notably the statute’s definition of “stockholder” as “a holder of 

record.” 8 Del. C. § 262(a). Therefore, although procedurally a beneficial owner may now 

initiate the legal action, its substantive right to appraisal is still dependent on whether the record

holder has perfected appraisal according to Section 262(a). For a more in-depth discussion of the 

status of Transkaryotic following the 2007 amendment, see In re Appraisal of Ancestry.com, 

Inc., C.A. No. 8173-VCG, at 12–14 (Del. Ch. Jan. 5, 2015). 
17

Contrary to BMC’s position, the meaning of the unambiguous language in 

Section 262(a) does not change in light of a reading of Section 262(e), such that 

the two subsections together imply a limitation that only shares not voted in favor 

of the merger are eligible for appraisal and, consequently, a requirement that the 

petitioner must identify how each share was voted. Subsection (e) of the appraisal 

statute exists to aid those seeking appraisal by, among other things, providing 

similarly situated petitioners with information that may aid in pooling resources 

and granting beneficial owners the ability to file appraisal actions. It is antithetical 

to that intention to interpret the language of subsection (e) to impose, on the statute 

as a whole, an additional hurdle for appraisal petitioners; rather, the effect of the 

language in subsection (e) referencing how individual shares were voted is 

necessarily limited to defining the scope of the petitioner’s informational right, in 

which that language is found. It is true, as BMC argues, that the language chosen 

by the General Assembly may theoretically be ineffective, in light of appraisal 

arbitrage, in facilitating disclosure of the total number of shares for which appraisal 

is sought. At most, this fact indicates that the General Assembly may not have 

picked a fail-safe method to achieve its goals; it may not have fully considered the 

theoretical possibility that shares acquired after the record date not voted in favor 

of the merger by the acquirer may nonetheless have been so voted by the seller, 

leading, hypothetically, to the number of shares for which appraisal is sought 
18

exceeding the number not voted for the merger. This fact does not show that the 

General Assembly meant to impose an additional standing requirement for 

appraisal petitioners, let alone one that is contrary to the plain language of Section 

262(a). Had the General Assembly intended the statute to include a share-tracing 

requirement, I conclude it would have explicitly written that requirement into the 

provision governing standing, subsection (a), rather than utilizing the backhanded 

method of introducing language in subsection (e)—a portion of the statute meant to 

enhance, not limit, rights to appraisal.50

Finally, I do not consider it appropriate to weigh the public policy concern 

raised by BMC, namely that a failure of this Court to read a share-tracing 

requirement into the statute could allow “a majority, or even all of a corporation’s 

shares from seeking appraisal, notwithstanding the fact that for a transaction to 

have been approved, at least a majority of the shares would have had to have been 

voted in favor of it.”51 It is undisputed that such a situation is not present here: 

Merion has sought appraisal for 7,629,100 shares stemming from a transaction 

where 95,033,127 of the total 141,454,283 voting shares voted to approve the 

merger.

52 As a member of the judicial branch, it is inappropriate for me to 

 

50 See Giuricich v. Emtrol Corp., 449 A.2d 232, 238 (Del. 1982) (“[W]here a provision is 

expressly included in one section of a statute, but is omitted from another, it is reasonable to 

assume that the Legislature was aware of the omission and intended it. The courts may not 

engraft upon a statute language which has been clearly excluded therefrom by the Legislature.”). 

51 Opening Br. in Supp. of Resp’t’s Mot. for Summ. J. at 16–17. 

52 Sirkin Aff. Ex. 4, at 4. 
19

presume to rewrite an unambiguous statute to address a problem that has not 

occurred, may not occur, and, in any event, is certainly not before me now.53 It 

may be true that the plain language of Section 262 does not adequately serve all the 

purposes of that statute. It is possible that appraisal arbitrage itself leads to 

unwholesome litigation.54 However, in evaluating my role in alleviating these 

 

53 See, e.g., In re Adoption of Swanson, 623 A.2d 1095, 1099 (Del. 1993) (“It is beyond the 

province of courts to question the policy or wisdom of an otherwise valid law. Instead, each 

judge must take and apply the law as they find it, leaving any changes to the duly elected 

representatives of the people.” (internal citation omitted)); Great Hill Equity Partners IV, LP v. 

SIG Growth Equity Fund I, LLLP, 80 A.3d 155, 160 (Del. Ch. 2013) (“[A]s has long been 

recognized by the Delaware Courts, when the General Assembly has addressed an issue within 

its authority with clarity, there is no policy gap for the court to fill. If a valid statute is not 

ambiguous, the court will apply the plain meaning of the statutory language to the facts before it. 

It would usurp the authority of our elected branches for this court to create a judicial exception to 

the words ‘all . . . privileges’ for pre-merger attorney-client communications regarding the 

merger negotiations. That sort of micro-surgery on a clear statute is not an appropriate act for a 

court to take.” (internal footnotes omitted)). Even assuming, arguendo, that the “over-appraisal” 

concern was before me in this case and I found it necessary to fix that problem, I would still be 

unclear as to the practical framework of the solution. BMC generally argues for a share-tracing 

requirement that would allow only shares not voted in favor of the merger to be appraised, but 

BMC does not champion any specific requirement; rather, BMC suggests that an appraisal 

arbitrageur could satisfy this general burden in various ways, such as by purchasing its shares 

prior to the record date and itself voting the shares, or by securing proxies or revocations of 

proxies for shares acquired after the record date. Opening Br. in Supp. of Resp’t’s Mot. for 

Summ. J. at 26–27. The fact that multiple avenues exist to remedy what Merion sees as a 

problem with the statute—none of which have been vetted by the General Assembly—further 

illustrates that BMC’s concern requires legislative, not judicial, deliberation. 

54 But see Minor Myers & Charles R. Korsmo, Appraisal Arbitrage & the Future of Public 

Company M&A, 92 Wash. U. L. Rev. (forthcoming 2015), available at

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2424935 (arguing that the recent rapid 

growth in appraisal arbitrage should be welcomed as a benefit to stockholders and corporate law 

generally, because empirical evidence suggests “appraisal arbitrage focuses private enforcement 

resources on the transactions that are most likely to deserve scrutiny, and the benefits of this kind 

of appraisal accrue to minority shareholders even when they do not themselves seek appraisal”); 

George S. Geis, An Appraisal Puzzle, 105 Nw. U. L. Rev. 1635, 1661–77 (2011) (suggesting that 

expanded appraisal rights could serve as a “back-end market check on controller abuses,” 

whereby, “if the controller hopes to expropriate value from minority shareholders through a cutrate offer, outside investors will have incentives to purchase the shares and seek appraisal under 
20

concerns through the adjudication of this case, I find former Chancellor Chandler’s 

words in Transkaryotic—wherein over seven years ago he considered whether his 

decision would “pervert the goals of the appraisal statute by allowing it to be used 

as an investment tool for arbitrageurs”—to be particularly apposite: 

To the extent that [these] concern[s] ha[ve] validity, relief more 

properly lies with the Legislature. Section 262, as currently drafted, 

dictates the conclusion reached here. . . . The Legislature, not this 

Court, possesses the power to modify § 262 to avoid the evil[s], if 

[they are] evil[s], that purportedly concern[] [the Respondent].55

B. Application of Standing Requirements 

 Having not found any implicit share-tracing requirement present in the 

statute, I turn to the four explicit standing requirements set forth in Section 262(a). 

It is undisputed that Merion has satisfied all of these requirements. Merion made a 

written demand for appraisal of 7,629,100 shares of BMC common stock on July 

22, 2013, at which time it held all shares for which it sought appraisal. The 

appraisal demand Merion delivered to BMC was timely and sufficiently 

informative. After delivering its demand for appraisal of the 7,629,100 shares of 

BMC common stock that it owned, Merion continued to hold those shares 

throughout the date that the merger of BMC into Boxer became effective, on 

September 10, 2013. Finally, at no point did Merion ever vote any of the shares 

 

Transkaryotic,” but arguing that, in order to curb meritless litigation, the appraisal statute should 

be amended to include an embedded put option). 

55 In re Appraisal of Transkaryotic Therapies, Inc., 2007 WL 137835, at *5 (Del. Ch. May 2, 

2007). 
21

for which it seeks appraisal in favor of the BMC/Boxer merger. Consequently, 

Merion has perfected its right to have its 7,629,100 shares of BMC common stock 

appraised by this Court. 

IV. CONCLUSION 

 For the foregoing reasons, BMC’s Motion for Summary Judgment is denied. 

An appropriate order accompanies this Opinion. 

 
22

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 

MERION CAPITAL LP and MERION 

CAPITAL II LP, 

Petitioners, 

)

)

)

)

v. 

)

)

)

C.A. No. 8900-VCG 

BMC SOFTWARE, INC., 

Respondent. 

)

)

)

)

ORDER

AND NOW, this 5th day of January, 2015, 

The Court having considered the Respondent’s Motion for Summary 

Judgment, and for the reasons set forth in the Memorandum Opinion dated January 

5, 2015, IT IS HEREBY ORDERED that the Respondent’s Motion is DENIED. 

SO ORDERED: 

 

/s/ Sam Glasscock III

Vice Chancellor