Court Opinion

ID: 9728803
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:16:50.097568+00
Date Added: 2024-06-11T18:25:52.248234
License: Public Domain

*150QUILLEN, Justice,
concurring:
While I concur in the decision in this case, there are certain points which seem analytically important to me and which by their nature are not emphasized philosophically in the Court’s opinion disposing of the appeal on the merits. With the encouraging tolerance of my colleagues, I therefore take the liberty to note my own impressions on these points in capsule form by way of this concurring opinion.
First, this appraisal case is on appeal and subject to standards of appellate review. The question of whether reversible error exists in a given case is not the same as a question of whether the best possible result has been reached at trial. A review takes place in the context of a specific, and necessarily limiting, evidentiary record, including rulings to which deference must be paid in areas of fact and discretion. But it can be a mistake to read past appellate decisions on evaluation as a bar to future creativity and fresh approaches.
Second, there can be no question that, within a statutory appraisal context, the “entire fairness” and “careful scrutiny” doctrines are applicable. Sterling v. Mayflower Hotel Corp., Del.Supr., 93 A.2d 107, 110 (1952). While the Sterling case was not a statutory appraisal proceeding, it was a valuation case in a stock-for-stock merger and indeed the Court referred to appraisal proceeding precedent in reaching its conclusion. Id., 93 A.2d at 114. The issue in Sterling was stated in terms of “substantial equivalent in value”. Id., 93 A.2d at 110. Thus, the “entire fairness” concept arose in an evaluation context and is particularly applicable to statutory appraisal proceedings. Indeed, perhaps the most effective way for a court “not [to] be indifferent to the purpose of a merger when a freeze-out of minority stockholders on a cash-out basis is alleged to be its sole purpose”1 is to consider such factor as motive evidence on the issue of fair value.
Third, the “proportionate interest in a going concern” or “the intrinsic value of . share[s] in a going concern” standard 2 does not seem to me to be a standard of any substantial evidentiary restriction. As the Court, speaking through then Judge Wolcott (later Chancellor, Justice and Chief Justice), said in Tri-Continental Corporation v. Battye, Del.Supr., 74 A.2d 71, 72 (1950):
“The basic concept of value under the appraisal statute is that the stockholder is entitled to be paid for that which has been taken from him, viz., his proportionate interest in a going concern. By value of the stockholder’s proportionate interest in the corporate enterprise is meant the true or intrinsic value of his stock which has been taken by the merger. In determining what figure represents this true or intrinsic value, the appraiser and the courts must take into consideration all factors and elements which reasonably might enter into the fixing of value. Thus, market value, asset value, dividends, earning prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of merger and which throw any light on future prospects of the merged corporation are not only pertinent to an inquiry as to the value of the dissenting stockholders’ interest, but must be considered by the agency fixing the value.”
While it is true that our Courts have under this standard in given cases rejected market value as the sole measure of the value of stock [Chicago Corporation v. Munds, Del.Ch., 172 A. 452 (1934)] and rejected liquidating value of the stock as the sole measure [Tri-Continental Corporation v. Battye, supra], it is equally true that there is no requirement that the trier of fact give some weight to every factor in every case. See Francis I. duPont & Co. v. Universal City Studios, Inc., Del.Ch., 312 A.2d 344 (1973), aff’d, Del.Supr., 334 A.2d 216 (1975) (reject*151ing market value); David J. Greene & Co. v. Dunhill International, Inc., Del.Ch., 249 A.2d 427 (1968) (rejecting, in an injunction context, historic earnings). It should be thus noted that, since there is no requirement that each factor be weighted in every case, an expert has wide flexibility in valuation approach if he can state why a given factor should be rejected. In the case now on appeal, the Appraiser, by rejecting market value and by assigning weight to earnings value (60%) and asset value (40%), had the opportunity to exercise a factual judgment of wide flexibility. Obviously, if asset value had been given even greater weight, the ultimate valuation would have been closer to a liquidating valuation akin to that sought by the dissenting stockholders in this case. Thus, it is important to bear in mind that the traditional standard is open to a broad range of evidentiary possibilities subject only to normal evidentiary standards of relevancy. In my judgment, counsel and the courts, through the flexibility implicit in the traditional standard, should encourage the legislatively established valuation process to be open to generally accepted techniques of evaluation used in other areas of business and law.
Fourth, we would be remiss in this area of the law if we failed to note the major effort that has been made by the General Assembly and by this Court to promote the adequacy of the statutory appraisal remedy. See 60 Del.Laws, Ch. 371 (1976) and Raab v. Villager Industries, Inc., Del.Supr., 355 A.2d 888 (1976), cert. den., 429 U.S. 853, 97 S.Ct. 147, 50 L.Ed.2d 129 (1976). Again, in the Court’s opinion in this case, the Court rejects the philosophy that shareholders seeking an appraisal can be successfully thwarted by technical resistance inconsistent with the duties of the corporate structure. It is particularly worthy of note that the present law, unlike the law existing at the time this case arose, calls for appraisal proceedings to be tried before the Chancellor or a Vice Chancellor. 8 Del.C. § 262(f). With due respect to the magnificent job that court-appointed appraisers have performed over the years, and with particular respect to the outstanding performance by the Appraiser in this case, the statutory change should generally foster improvement in the proceeding by accelerating the process, by eliminating a level of review, and by assigning to chancery judges (with their judicial and equitable feel for flexibility and its relation to fairness) the trial function. It should be anticipated that, if, in the past, the process has been burdened by too strict an adherence to precedent from different factual contexts than a case at hand, relief has been supplied by a change of the initial forum.
I concur in the decision in the present case because I find: (1) the Appraiser’s rejection of the Davis appraisal was legally proper and factually reasonable; (2) the Appraiser’s conclusion in the mixed question of fact and law that no estoppel effect should be given as a result of the inclusion of the Davis appraisal in the Information Statement sent to stockholders was.correct; (3) the Appraiser’s factual decision to value assets at $456.00 on the basis of the Nichols report was reasonable; (4) the Appraiser’s weighting of earning value and asset value, carefully reviewed by the Vice Chancellor, was within the permissible realm of reasonable judgment. I am somewhat hesitant about the earnings value figure, since in the exercise of independent trial judgment I may have concluded that the five-year averaging approach was inappropriate in this case. But I cannot say, given standards of review, that it constitutes reversible error, especially since the decision is based on a limiting record and expert opinion, including testimony as to the multiplier, which itself was tied to historic earnings. In addition, I have not been persuaded that a different earnings approach would substantially change the result.
In light of the foregoing, I concur with the decision of the Court affirming the decision below.

. See Singer v. Magnavox Co., Del.Supr., 380 A.2d 969, 979 (1977).

. Tri-Continental Corporation v. Battye, Del.Supr., 74 A.2d 71, at 72 and 76 (1950); former 8 Del.C. § 262(b) and (f). See also present 8 Del.C. § 262(f).