You don't see a lot of mergers these days -- unless you mean mergers with the infinite, acquisitions by oblivion, pacts with ferryman Charon. Deal lawyers all over find themselves brushing up on things like the Uniform Commercial Code chapters that concern the calling of notes, foreclosures upon collateral, and the undoing of fraudulent transfers.
So -- to grasp the context of a new decision by the Supreme Court of Delaware -- you'll need to go back with Blawgletter to that happy place a couple years ago when M&A work kept our transactional sisteren and brethren busy, busy, busy.
In 2007, Robert Kanner, the 90-percent owner of Pubco Corporation, decided to buy out the company's minority shareholders through a "short form" merger. Delaware law gave Kanner the right to cash them out simply by telling them, after the fact, that he'd merged Pubco into another corporation, that they'd get $X a share for their Pubco stock, and that they could, if they wanted, demand an "appraisal" should they think Kanner ought to have paid more than $X. The appraisal would judicially fix the price at $X, below it, or above it.
One other thing: Kanner also had to give his now-former co-owners all information "material" to their decision whether to seek the appraisal remedy. But Kanner made a mere pretense of disclosing that stuff, deigning not even to say how he came up with $X. Plus he sent an out-of-date version of the Delaware appraisal statute. Kanner plainly liked secrets.
The Delaware Chancery Court took a different view. It held that Kanner broke his duty to disclose material facts. And it ordered a "quasi-appraisal remedy", which gave the minority shareholders a second shot at opting for appraisal even if they hadn't chosen that route in the first place. But it required them, after receiving the material info Kanner left out, to (a) give notice that they now wanted an appraisal (to "opt in") and (b) put some of the money they got in the short form merger into "escrow" in case the appraisal valued their shares at less than $X apiece.
The Supremes of Delaware affirmed the liability part of the Chancery order but reversed on the remedy side. The Court agreed with the idea of a quasi-appraisal approach but concluded that the minority should not have to opt in or put money in escrow. Berger v. Pubco Corp., No. 509, 2008 (Del. July 9, 2009).
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