Fried Frank, The Appraisal Landscape: Key Points, Open Issues, and Practice Points

 2017年のデラウェア州最高裁による株式買取請求権に関する2つの事件(DFC GloblとDell)に関する法律事務所のメモランダムです。著者の一人であるScott Luftglass氏とは、Davis Polk時代に一緒に働いたことがあります。典型的な訴訟弁護士で、訴訟弁護士は、事務屋よりも緻密だと感じました。今回の記事もよく纏まっています。

via Harvard

Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., 2017 Del. LEXIS 518 (Del. Dec. 14, 2017)

By instructing the court to “take into account all relevant factors” in determining fair value, the statute requires the Court of Chancery to give fair consideration to “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court.” Given that “[e]very company is different; every merger is different,” the appraisal endeavor is “by design, a flexible process.”

This Court has relied on the statutory requirement that the Court of Chancery consider “all relevant factors” to reject requests for the adoption of a presumption that the deal price reflects fair value if certain preconditions are met, [*40] such as when the merger is the product of arm’s-length negotiation and a robust, non-conflicted market check, and where bidders had full information and few, if any, barriers to bid for the deal.

… Further, the Court of Chancery’s analysis ignored the efficient market hypothesis long endorsed by this Court. It teaches that the price produced by an efficient market is generally a more reliable assessment of fair value than the view of a single analyst, especially an expert witness who caters her valuation to the litigation imperatives of a wellheeled client.

… Fair value entails at minimum a price some buyer is willing to pay—not a price at which no class of buyers in the market would pay.

When an asset has few, or no, buyers at the price selected, that is not a sign that the asset is stronger than believed—it is a sign that it is weaker. This fact should give pause to law-trained judges who might attempt to outguess all of these interested economic players with an actual stake in a company’s future. This is especially so here, where the Company worked hard to tell its story over a long time and was the opposite of a standoffish, defensively entrenched target as it approached the sale process free of many deal-protection devices that may prevent selling companies [*73] from attracting the highest bid. Dell was a willing seller, ready to pay for credible buyers to do due diligence, and had a CEO and founder who offered his voting power freely to any topping bidder.

(footnotes omitted)

via Wachtell Lipton

DFC Global Decided

The respondent argues that we should establish, by judicial gloss, a presumption that in certain cases involving arm’s-length mergers, the price of the transaction giving rise to appraisal rights is the best estimate of fair value. We decline to engage in that act of creation, which in our view has no basis in the statutory text, which gives the Court of Chancery in the first instance the discretion to “determine the fair value of the shares” by taking into account “all relevant factors.”

… [W]e do not share DFC’s confidence in our ability to craft, on a general basis, the precise pre-conditions that would be necessary to invoke a presumption of that kind. We also see little need to do so, given the proven record of our Court of Chancery in exercising its discretion to give the deal price predominant, and indeed exclusive weight, when it determines, based on the precise facts before it that led to the transaction, that the deal price is the most reliable evidence of fair value. …

… Although there is no presumption in favor of the deal price, under the conditions found by the Court of Chancery, economic principles suggest that the best evidence of fair value was the deal price, as it resulted from an open process, informed by robust public information, and easy access to deeper, non-public information, in which many parties with an incentive to make a profit had a chance to bid. . .

株式買取請求権と取引価格

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.

DFC Globalの件では、既に、amicus breifを紹介しておりますが、引用されているもののうち後者のamicus briefは、次のような書き出しです。こちらのbriefも錚々たる教授陣です。私は、独立当事者間の株式買取請求権の公正な価格が、取引価格に縛られないと思っているので、後者のbriefに親近感を覚えます。

Appellant urges the Court to adopt a rule of law in appraisal proceedings that presumptively requires the Court of Chancery to defer exclusively to the transaction price unless that price does not result from an arm’s-length process. Amici disagree: Doing so would be a trifecta of bad law, bad economics, and bad policy.

via Brian JM Quinn

Sheppard Mullin, Delaware Supreme Court Confirms that Dilution Claims Typically Are Derivative and Are Extinguished After a Merger

Stockholder claims alleging wrongful dilution are typically considered to be derivative in nature. Several decisions out of Delaware, however, have created exceptions to this general rule allowing stockholders to sue directly (rather than derivatively on behalf of the corporation) where, for example, a controlling stockholder authorizes a “disloyal expropriation” which reduces the economic value and voting power of the non-conflicted stockholders. See, e.g., Gentile v. Rossette, 906 A.2d 91, 100 (Del. 2006); Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007); Feldman v. Cutaia, 951 A.2d. 727 (Del. 2008). In El Paso Pipeline GP Company, L.L.C. v. Brinckerhoff, No. 103, 2016, 2016 Del. LEXIS 653 (Del. Dec. 20, 2016), the Delaware Supreme Court declined to add to these exceptions and reaffirmed the general rule that dilution claims must be brought derivatively. As a result, a derivative plaintiff losses his or her standing to pursue a dilution claim if the entity is acquired through a merger.

Annual Review of Key Delaware Corporate and Commercial Decisions 2016

Francis G.X.Pileggi writes:

Delaware Supreme Court

  • Hazout v. Tsang

  • Genuine Parts Co. v. Cepec.

  • OptimisCorp v. Waite.

  • El Paso Pipeline GP Co., LLC v. Brinckerhoff

Delaware Court of Chancery

  • Marino v. Patriot Rail Company LLC.

  • In Re Trulia Inc. Stockholder Litigation.

  • Amalgamated Bank v. Yahoo! Inc.

  • Obeid v. Hogan

  • Medicalgorithmics S.A. v. AMI Monitoring, Inc.

  • Bizzarri v. Suburban Waste Services, Inc.

  • Larkin v. Shah.

Morris James:

  • In re Trulia, Inc. Stockholders Litigation, 129 A.3d 884 (Del. Ch. 2016)

  • Singh v. Attenborough, 137 A.3d 151 (Del. 2016) (ORDER); In re Volcano Corp. Stockholder Litigation, 143 A.3d 727 (Del. Ch. 2016); Larkin v. Shah, 2016 WL 4485447 (Del. Ch. Aug. 25, 2016)

  • Amalgamated Bank v. Yahoo!, Inc., 132 A.3d 752 (Del. Ch. 2016)

  • Hazout v. Tsang, 134 A.3d 274 (Del. 2016)

  • Sandys v. Pincus, 2016 WL 7094027 (Del. Dec. 5, 2016)

  • In re Appraisal of Dell, Inc., 2016 WL 3186538 (Del. Ch. May 31, 2016)

  • In re Books-A-Million Stockholder Litigation, 2016 WL 5874974 (Del. Ch. Oct. 10, 2016)

  • In re Wal-Mart Stores, Inc. Derivative Litigation, 2016 WL 2908344 (Del. Ch. May 13, 2016)

  • El Paso Pipeline GP Company LLC v. Brinckerhoff, 2016 WL 7380418 (Del. Dec. 20, 2016)

via Francis G.X.Pileggi

Professors Weigh In On DFC Global Appeal

〔2017年1月1日追記〕

The Law Professors admit that they “have no financial interest or direct personal interest in this case.” Mot. ¶ 1. Rather, they are interlopers desperately seeking a forum in which they can pursue their academic fantasy by suggesting that this Court rewrite Delaware’s judicial appraisal statute, 8 Del. C. § 262(h), and effectively overrule settled law concerning the Chancery Court’s broad discretion in determining the fair value of dissenting stockholders’ shares in an appraisal action.

〔2017年1月9日追記〕

via Lowenstein Sandler, Lowenstein Sandler

MFW-M&F-Swomley

Francis Pileggi writes:

A recent Delaware Supreme Court decision, in a one-page Order, affirmed a decision by the Court of Chancery that appears to have been the first application of a deferential standard announced by Delaware’s high court in the case of Kahn v. M & F Worldwide Corp., Del. Supr., No. 334, 2013 (March 14, 2014), highlighted on these pages. The one-page en banc Order of affirmance was entered in the matter of Swomley v. Schlecht, et al., [SynQor], No. 180, 2015, Order (Del. Nov. 19, 2015).