Opinion ID: 2068544
Heading Depth: 2
Heading Rank: 1

Heading: The Claims, Issues, and Standard of Review

Text: Because the plaintiff challenges a short form cash-out merger under Section 253, the starting point for analysis is Glassman, [14] which holds that in a short-form merger there is no entire fairness review and that the exclusive remedy is a statutory appraisal. Glassman cautions, however, that those limited review and exclusive remedy protections are not absolute or unqualified. They are available only absent fraud or illegality. Moreover, [a]lthough fiduciaries are not required to establish entire fairness in a short-form merger, the duty of full disclosure remains.... Where the only choice for the minority stockholders is whether to accept the merger consideration or seek appraisal, they must be given all the factual information that is material to that decision. [15] The question not reached, and therefore not addressed, by Glassman is: what consequence should flow where the fiduciary fails to observe its duty of full disclosure? That is the only issue before us and it is one of first impression. [16] The Court of Chancery held that where minority shareholders who are cashed out in a short form merger are deprived of information material to deciding whether or not to seek appraisal, they are entitled to a quasi-appraisal remedy with the following features. First, the shareholders must be furnished the material information of which they were deprived. Second, the shareholders must then be afforded an opportunity to choose whether or not to participate in an action to determine the fair value of their shares. Third, shareholders who choose to participate must formally opt in to the proceeding and place into escrow a prescribed portion of the merger consideration that they received. Paraphrasing Gilliland, the Court of Chancery identified the purpose of the escrow requirement as to replicate a modicum of the risk that would inhere if the proceeding were an actual appraisal. [17] On appeal, the plaintiff-appellant does not contest the supplemental disclosure requirement of the order awarding the quasi-appraisal remedy, only its opt in and escrow features. The appellant claims that as a matter of law, all minority shareholders should have been treated as members of a class entitled to seek the quasi-appraisal recovery, without being burdened by any precondition or requirement that they opt in or escrow any portion of the merger proceeds paid to them. That, the plaintiff contends, is the only proper application of both Glassman and the short form merger statute, 8 Del. C. § 253. The defendants-appellees, not surprisingly, take the opposite position. They contend that the adjudicated remedy, modeled after the Court of Chancery's earlier Gilliland decision, is the only outcome that properly implements the policies which underlie the Delaware appraisal statute and animate the rulings in Glassman. Because the Court of Chancery has broad discretion to craft an appropriate remedy for a fiduciary violation, [18] the propriety of a court-ordered remedy is ordinarily reviewed for abuse of discretion. Here, however, the appellant claims that the disputed remedy was erroneous as a matter of law, because the trial court erred in formulating or applying legal principles and in granting summary judgment to the defendants. [19] A claim of that kind is one that we review de novo. [20]