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Sandler
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analysis of recent developments in appraisal rights
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Table Is Set in Dell Case for Another Look at Arbitrage
By
Steven M. Hecht on May 13th,
2015
On Monday the Delaware
Chancery Court heard challenges by Dell to the entitlement of various
dissenting shareholders to pursue their appraisal claims. Dell’s
challenges included failures by shareholders to timely and accurately
assert their appraisal rights, and a lack of continuous ownership of
Dell stock based on purported changes in the nominal ownership of such
stock. The court has yet to rule on these arguments. But perhaps the
most closely watched challenge was the one not heard yesterday:
namely, Dell’s challenge to T. Rowe Price’s appraisal claim based on
the apparently recent revelation that T. Rowe voted “for” the merger,
as we
previously posted. The court indicated that it would take up that
issue after Dell proceeds with the targeted discovery that it advised
the court it intends to pursue in respect of T. Rowe’s vote.
Also in the course of that
hearing, Vice Chancellor Laster heard argument from an individual
dissenting shareholder defending his entitlement to proceed and
invoking historical case law to support his position. As an amusing
aside, the chancery judge commented that he appreciated hearing
citations to court cases going back more than 10 years, validating the
fact that appraisal rights are an historical phenomenon dating back to
Delaware’s corporations law from the 19th century and were not simply
invented in 2007 — when the Transkaryotic case was decided —
as some people, particularly in New York, seem to believe. This was a
not-so-subtle swipe at the critics of appraisal arbitrage, who have
derided the Delaware courts, and more recently the Delaware state
assembly, for failing to limit or eliminate the emerging practice of
appraisal arbitrage, as we have repeatedly posted about in recent
months.
Based on this
Reuters piece summarizing the May 11 hearing and Dell’s
brewing challenging to T. Rowe’s ability to proceed, it appears that
T. Rowe may try to justify its entitlement to proceed by invoking the
arbitrage cases to suggest that there were enough appraisal-eligible
shares to allow it proceed, although it clearly faces an uphill
battle. Ordinarily, if a shareholder votes “for” the transaction,
it’s game over for its appraisal claim.
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