Appraisal litigation has been a topic at the forefront of the minds of many legal practitioners over the past few years. Recently, amendments to Section 262 of Delaware’s General Corporation Law went into effect that were effectuated to eliminate de minimis appraisal claims while also allowing companies to make a pre-judgment payment to dissenting stockholders to reduce interest costs in connection with appraisal litigation. The Delaware Court of Chancery authored several opinions concerning appraisal arbitrage and the technical requirements of Section 262. There have even been unique appraisal cases where the court discussed the circumstances surrounding the proposed settlement of only factions of the appraisal class.
The In re Appraisal of Dell litigation presented an atypical circumstance where settlement terms agreed to between the company and a group of appraisal petitioners were not offered to the other stockholders in the appraisal class. The appraisal petitioners settling their action were comprised of a variety of financial institutions, including certain funds affiliated with T. Rowe Price & Associates Inc. (the settling petitioners). The settling petitioners’ appraisal actions had previously been dismissed for separate technical reasons. In its July 13, 2015, decision, the Court of Chancery held that a portion of the settling petitioners did not satisfy the continuous holder requirement of Section 262. Instead, the court found that the record holder of the shares did change between the time of the appraisal petition and the effective date of the merger. The court, noting that the change in record holder status was not knowingly perpetrated by the beneficial holders, reluctantly granted summary judgment in favor of the defendant and dismissed the appraisal claims of nearly one million shares of Dell common stock. Subsequently, on May 11, 2016, the Court of Chancery held that the record demonstrated that the remaining settling petitioners’ shares were voted in favor of the Dell merger, in contravention of the express requirement under Section 262 that an appraisal petitioner has not consented to the merger. As a result, the court granted the defendant’s motion for summary judgment and dismissed the remaining settling petitioners’ appraisal claims.
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