Court Opinion

ID: 9005762
Source: CourtListenerOpinion
Date Created: 2022-11-27 13:27:54.350753+00
Date Added: 2024-06-11T17:11:16.647177
License: Public Domain

VAN GRAAFEILAND, Circuit Judge,
concurring in part and dissenting in part:
I concur with my colleagues that the matter must be remanded to the district court for a recomputation of damages. However, I believe that the recomputation they suggest does not go far enough. The district court’s measurement of damages was based upon the market price of GAI’s common stock as of the date of the merger, i.e., the market price prior to the merger. 746 F.Supp. at 267. In Viacom Int’l, Inc. v. Icahn, 946 F.2d 998, 1001 (2d Cir.1991), cert. denied, — U.S. -, 112 S.Ct. 1244, 117 L.Ed.2d 477 (1992), we said:
Determination of a stock’s fair value is dependent on several factors. Market price is one of those factors but it is not the determining one.
The court below should have said the same thing. See Norte & Co. v. Huffines, 288 F.Supp. 855, 858 n. 2 (S.D.N.Y.1968), aff'd in part and remanded in part, 416 F.2d 1189 (2d Cir.1969), cert. denied, 397 U.S. 989, 90 S.Ct. 1121, 25 L.Ed.2d 396 (1970).
Moreover, for those Chenango shareholders who participated in the exchange of stock, the pre-merger price of the GAI stock lost most of its significance. Any shareholder who dissents from a proposed merger and seeks only the cash value of his stock is entitled to have the value determined as of the time of his pre-merger dissent. However, what the participating Chenango shareholders got in exchange for their shares was GAI stock with a post-merger value, i.e., the value of the GAI stock with the Chenango stock merged into *935it. Their damages should be based upon what they received, when they received it.
Any other method of computation gives participating plaintiffs a double recovery: (1) damages based upon an alleged undervaluation of Chenango stock vis-a-vis pre-merger valued GAI stock, and (2) the actual increase in value of the GAI stock resulting from the merger. The pre-merger market price on October 31, 1979, the date the merger was finalized, was $7.75 per share. 746 F.Supp. at 267. In 1985, the GAI stock was valued at $35 a share. Id. at 257. In the face of this almost 500 percent increase in market value, it is difficult to justify a damage award of over $2 million.