Opinion ID: 2068544
Heading Depth: 1
Heading Rank: 4

Heading: The Remedial Alternatives

Text: To repeat, the issue presented here is: in a short form merger where the exclusive remedy is an appraisal, what is the consequence of the controlling stockholder's failure to disclose the facts material to an informed shareholder decision whether or not to elect that exclusive remedy? In the abstract, four possible alternatives present themselves, of which only two are advocated by either side. The remaining two alternatives are advocated by no party. We nonetheless identify and consider them, because to do otherwise would render our analysis truncated and incomplete. The alternatives advocated by each side, respectively, are the two forms of quasi-appraisal remedy earlier described. The defendants argued, and the Court of Chancery agreed, that the appropriate remedy is the quasi-appraisal ordered in Gilliland. Under that remedial structure, fully informed minority shareholders who opt in and place into escrow a portion of the consideration they received may prosecute an action to recover the difference between adjudicated fair value and the merger consideration. The plaintiff advocated the second alternative form of quasi-appraisal remedy  a class action to recover the difference between fair value and the merger consideration, wherein the minority shareholders are automatically treated as members of the class with no obligation to opt in or to escrow any portion of the merger consideration. Under either structure, the only issue being litigated would be the appraised fair value of the corporation on the date of the merger, applying established corporate valuation principles. [21] Of the remaining two remedial alternatives (those advocated by neither side), the first would be a replicated appraisal proceeding that would duplicate the precise sequence of events and requirements of the appraisal statute. Under the replicated appraisal approach, the minority shareholders would receive (in a supplemental disclosure) all information material to making an informed decision whether to elect appraisal. Shareholders who elect appraisal would then make a formal demand for appraisal and remit to the corporation their stock certificates and the entire merger consideration that they received. Thereafter, the corporation would have the opportunity, as contemplated by the appraisal statute, to attempt to reach a settlement with the appraisal claimants. Where no settlement is reached, a formal appraisal action could then be commenced by the dissenting shareholders or by the corporation. Under the fourth alternative (also not advocated by either side), there would be no remedial appraisal proceeding at all. Rather, the consequence of the fiduciary's adjudicated failure to disclose material facts would be to render Glassman inapplicable. As a result, the remedy would be the same as in a long form cash out merger under 8 Del. C. § 251  a shareholder class action for breach of fiduciary duty, where the legality of the merger (and the liability of the controlling stockholder fiduciaries) are determined under the traditional entire fairness review standard. [22]