March 7, 2017

Appraisal: Big Things May Be Brewing in Delaware

The M&A Law Prof Blog discusses the growth of appraisal litigation in recent years as a result of both appraisal arbitrage & cases like Corwin that make it increasingly difficult to obtain a damages remedy for fiduciary duty claims.  As a result, the stakes in appraisal cases have become higher – and in its review of Chancellor Bouchard’s  DFC Global decision, the Delaware Supreme Court may soon decide how to approach determining “fair value” in appraisal proceedings.

Since the Court’s decision may strongly influence the direction of deal litigation for years to come, it’s attracted a lot of interest – not just from practitioners, but from some of the nation’s top academics.  Here’s an excerpt:

In the last couple of years, at the Chancery Court, chancellors have started moving away from the view that the court will determine fair value without regard to the merger price. Now, in certain circumstances (where the deal price is a product of a competitive or robust sales price) chancellors may consider merger price as one of the relevant factors for purposes of determining fair value.

Now this question has found its way to the Delaware Supreme Court and the parties are lining up on both sides. There are even amici! Two sets of amici have rolled up: on the one side there are law professors arguing that the court should be able to presumptively rely on merger price to determine fair value in an appraisal proceeding unless that price does not result from arm’s length bargaining (DFC Holdings – Bainbridge, et al). On the other are law professors arguing requiring a court to rely on merger price to determine fair value would run counter to the language of the statutory appraisal remedy and also not always reflect fair value (DFC Holdings – Talley, et al).

John Jenkins