Opinion ID: 2634628
Heading Depth: 3
Heading Rank: 2

Heading: Pre-existing Shareholder Claims

Text: The Behrmann Trust filed this compensatory damages action two days before it tendered its shares in PRC and dissented from the asset sale. Because it filed the compensatory damages action before it dissented, the Behrmann Trust argues that the Act does not extinguish or even address preexisting shareholder claims. The Behrmann Trust relies on section 7-113-204(2) for the proposition that a dissenting shareholder retains the right to bring fiduciary claims against directors and officers even after the effective date of the proposed corporate action giving rise to the shareholder's right to dissent. The officers and directors argue that section 7-113-204(2) is plainly written to provide that a dissenting shareholder gives up all the rights of a shareholder but the right to receive payment for the shares. § 7-113-204(2). The court of appeals agreed with the officers and directors in this regard, holding that, although the Behrmann Trust argued that it has an action separate and distinct from the appraisal action, the trust surrendered its shares in PRC two days after it filed [the compensatory damages action] and, thus, lost its right to sue for breach of fiduciary duty through mismanagement of assets, self-dealing, waste, or looting. John R. Behrmann Revocable Trust, 74 P.3d at 374. The court of appeals held, and we agree, that under section 7-113-204(2), the appraisal remedy provided the Behrmann Trust with an exclusive remedy. [10] Section 7-113-204(2) states: A shareholder who demands payment in accordance with subsection (1) of this section retains all rights of a shareholder, except the right to transfer the shares, until the effective date of the proposed corporate action giving rise to the shareholder's exercise of dissenters' rights and has only the right to receive payment for the shares after the effective date of such corporate action. § 7-113-204(2) (emphasis added). After the effective date of the corporate action, the dissenting shareholder's only right is to receive payment for its shares. § 7-113-204(2); Breed, 444 N.Y.S.2d 609, 429 N.E.2d at 129 (When [shareholders] exercise the right under [the appraisal statute] to have their stock appraised in a judicial proceeding, they abandoned their alternative rights as shareholders.). This section, when read together with the exclusivity provision, demonstrates that the General Assembly intended to prevent dissenting shareholders, who invoke the statutory appraisal remedy, from maintaining compensatory claims in addition to the appraisal action. § 7-113-204(2); Robert J. Brown, Jr., Colorado Corporation Law & Practice § 10.3 (1990) (once the corporate action is effectuated, dissenting shareholders no longer have rights as shareholders, but have only the right to obtain payment for their shares.) Thus, even though the Behrmann Trust filed its compensatory damages action two days before it tendered its shares, those pre-existing claims must be dismissed unless they fall within the narrow exception to the statute's exclusivity provision. As discussed above, the Behrmann Trust did not request an equitable remedy against the corporate action as its primary form of relief. Thus, the trial court properly dismissed its compensatory damages action.