Opinion ID: 768509
Heading Depth: 2
Heading Rank: 2

Heading: The Valuation Proceeding

Text: 6 Shortly after the Corporation filed its appraisal petition, 6 the Dissenters filed a counterclaim alleging that the merger was invalid due to the grant of fraudulent stock options and the dissemination of misleading proxy materials. The Corporation thereafter moved for dismissal of the counterclaim, which was granted on February 24, 1993. The court found that the counterclaim, which was not compulsory since it had no logical relationship to the appraisal action, was outside the limited scope of the valuation proceeding and dismissed it without prejudice. The court further noted that the fraud claim may be filed again within the applicable statute of limitations period . . . . The Dissenters did not appeal Judge Howard's dismissal of their counterclaims. 7 On June 28, 1994, Judge Howard found that the stock had been significantly undervalued. Each share was found to be worth $111,893, over six times the amount the Corporation had paid frozen-out shareholders. By court order, the Corporation paid Popp $4,050,514; Humbird and Northern received $376,792; and Washington was compensated in the amount of $191,193. 7 he Corporation appealed, and the Dissenters cross-appealed; the Minnesota Court of Appeals upheld the decision for the most part, remanding only for reconsideration of the accrual date for prejudgment interest. See American Sharecom, Inc. v. LDB Int'l Corp., No. C9-94-2419, 1995 WL 321540 (Minn. Ct. App. May 30, 1995) (Sharecom I). 8 Approximately five months after Judge Howard handed down his decision, Rochester Telephone Corporation, a telecommunications firm based in New York, announced that it was purchasing American Sharecom, Inc. for approximately $190 million in Rochester Telephone stock. 8 The Dissenters claim this sale aroused their suspicions, and after some investigation, they concluded that ASI had allegedly defrauded the court during the appraisal proceeding. As a result, on December 16, 1994, the Dissenters moved the Minnesota Court of Appeals to remand the appraisal action to the state court for reconsideration on account of the discovery of new evidence. In the year following the motion to reopen, the Dissenters allegedly found even more evidence of fraud both during the years leading up to the merger and during the valuation proceeding. Meanwhile, on August 23, 1995, a Satisfaction of Judgment was entered in the amount of $5,013,327.84 (plus interest) on the valuation proceeding. 9 On February 6, 1996, Judge Howard agreed to reopen the valuation proceeding to hear the Dissenters' allegations of fraud occurring during the proceeding itself. However, six months later, the Minnesota Court of Appeals held in American Sharecom, Inc. v. LDB Int'l Corp., 553 N.W.2d 433 (Minn. Ct. App. 1996) (Sharecom II), that Judge Howard had no jurisdiction to vacate the satisfied judgment on the basis of fraud and newly discovered evidence. The court explicitly noted, however, that the Dissenters had another available remedy in the form of a separate common law fraud action. See Sharecom II, 553 N.W.2d at 434.