Appraisal Litigation, Cash-Out Mergers, Mergers and Acquisitions, Fiduciary Duties, Duty of Disclosure, Corporate Governance, Merger Litigation
In recent years, Delaware has served as the hot bed for the dramatic increase in merger appraisal litigation and the proliferation of “appraisal arbitrage” whereby opportunistic shareholders buy into companies following merger announcements and challenge announced deal prices as an investment strategy. While this has not always proved profitable, it has increased scrutiny over the Delaware appraisal regime and the ability for shareholders to avail themselves of the opportunity for a judicial valuation of their shares. Furthermore, it has highlighted information asymmetries in which controlling shareholders, particularly those seeking to cash out their minority shareholders, are incentivized to underpay or mislead minority shareholders who might be reluctant to seek appraisal. This raises questions regarding the accessibility of the appraisal remedy and how closely appraisal should mirror class actions which allow for broader representation with lower barriers to entry. This Note argues that current trends in merger and appraisal litigation, particularly those which have significantly heightened scrutiny over pre- and post-closing disclosure claims, present an opportunity to reexamine quasi-appraisal as a collective form of redress in appraisal actions. This Note calls for the expansion of the quasi-appraisal remedy to provide greater access to appraisal valuations in the most extreme examples of minority shareholder manipulation, which would provide a more equitable form of recovery and discourage manipulation of minority shareholders.
Zachary A. Paiva, Note, Quasi-Appraisal: Appraising Breach of Duty of Disclosure Claims Following “Cash-Out” Mergers in Delaware, 23 FORDHAM J. CORP. & FIN. L. 339 (2017).