Opinion ID: 1536001
Heading Depth: 1
Heading Rank: 13

Heading: court of chancery independently appraised shares

Text: The Respondents contend that the Court of Chancery failed to discharge its statutory obligation to function as an independent appraiser. The record does not support that argument. In its appraisal opinion, the Court of Chancery stated: The Court is mindful that $85 per share is more than double the Merger price. The Court is also aware of its role under § 262, which is to determine fair value independently. In discharging that institutional function as an independent appraiser, the Court should, where possible, test the soundness of its valuation conclusion against whatever reliable corroborative evidence the record contains. On that score the record falls far short of perfection. Limited corroborative evidence is available, however, in the form of Sheshunoff's 1993 fair market valuation, (i) adjusted by Clarke to exclude Sheshunoff's minority discount and (ii) updated by Clarke to reflect value data as of November 17, 1993, the date of the Merger. [42] In discharging its statutory mandate, the Court of Chancery has the discretion to select one of the parties' valuation models as its general framework or to fashion its own. [43] The Court of Chancery's role as an independent appraiser does not necessitate a judicial determination that is completely separate and apart from the valuations performed by the parties' expert witnesses who testify at trial. It must, however, carefully consider whether the evidence supports the valuation conclusions advanced by the parties' respective experts. Thereafter, although not required to do so, it is entirely proper for the Court of Chancery to adopt any one expert's model, methodology, and mathematical calculations, in toto, if that valuation is supported by credible evidence and withstands a critical judicial analysis on the record. [44] In this case, the Court of Chancery carefully evaluated the valuation testimony and evidence proffered by the parties' experts. It determined that Reilly's capital market approach is legally impermissible, but even if valid, was improperly applied, thereby requiring the rejection of the values Reilly derived by that method. The Court of Chancery found that both Clarke's and Reilly's DCF analyses were improperly applied, thereby requiring the rejection of the values both experts derived by that approach. The Court of Chancery concluded that Clarke's comparative acquisition approach was a legally valid method to value MGB and that the credible record evidence supported Clarke's $85 per share determination of MGB's fair value as of the Merger date. In making its independent appraisal valuation, the Court of Chancery could have relied entirely upon Clarke's comparative acquisitions approach. Instead, it critically tested Clarke's comparative acquisition approach by using its own judicial expertise to make corrective adjustments to Sheshunoff's legally improper valuation determination and found corroboration for Clarke's result. The determination of value in a statutory appraisal proceeding is accorded a high level of deference on appeal. [45] In the absence of legal error, this Court reviews appraisal valuations pursuant to the abuse of discretion standard. [46] The Court of Chancery abuses its discretion when either its factual findings do not have record support or its valuation is not the result of an orderly and logical deductive process. [47] In this case, the findings of fact upon which the Court of Chancery predicated its decision are supported by the record. The analysis that preceded the Court of Chancery's valuation of MGB's shares exemplifies an orderly and logical deductive process. Consequently, the portion of the Court of Chancery's judgment that concluded that $85 per share was the fair value of MGB stock on the date of the Merger is affirmed. Appraisal actions are highly complicated matters that the Court of Chancery is uniquely qualified to adjudicate in an equitable manner. Since Weinberger, [48] this Court has eschewed choosing any one method of appraisal to the exclusion of all others. [49] Today, we reinforce the substance of this philosophy and support methods that allow the Court of Chancery to perform its statutory role as appraiser, based on a solid foundation of record evidence, independent of the positions of the parties. [50]