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Rights to Payment for Waiving Appeal of Dell Appraisal Decisions
Questions raised about rights of all claimants
Determining the interests of all claimants
In the
Forum’s reports of investor interests in Dell’s settlement with T.
Rowe Price a couple of months ago,[1]
it had been assumed that Dell would provide a copy of their agreement
defining the specific terms they are required to make available to all
other claimants. They have not yet done so.
Questions raised about rights of all claimants
This
unusual challenge raises important questions about what claimants
should expect and about who is obligated to do what, not only in the
this case but in future appraisal cases.
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What are
the terms that Dell is required to offer other claimants?
The only information available about the terms of settlement has been
what was verbally summarized by counsel for Dell and T Rowe Price in
their private conference with the court when they requested approval,[2]
and what was subsequently reported in SEC filings by Dell and T Rowe
Price.[3]
Taken together, these sources provide only a general indication that
Dell paid T Rowe Price $28 million, or approximately $.88 per share,
for a waiver of rights to appeal the court’s determination of the
amount Dell was required to pay the petitioners managed by T Rowe
Price. The settling parties argue that other claimants should be able
to get this extra $.88 per share only if they give up rights to what
the court has determined they are due, so that Dell would give a
claimant only the $13.75 offer price plus the $.88 “settlement”
payment. This position is of course inconsistent with the logic of a
settlement that reportedly accepts a court’s decision instead of
rejecting it, and is clearly not supported by any documentation of the
settlement or by the SEC filings. The limited evidence instead
supports the extra $.88 per share payment in consideration of a
claimant’s agreement to waive appeal of the court’s decision about the
amount Dell must pay that claimant, meaning that Dell would pay the
$.88 per share in addition to whatever amount the court determined was
due.[4]
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Should
an appraisal petitioner be allowed to settle without providing the
written agreement to other petitioners, possibly to all claimants, or
at least to the court?
As indicated, Dell and T Rowe Price have rejected repeated requests
for copies of the agreement, and counsel for T Rowe Price has stated
that the court has not been given a copy.[5]
Dell has been encouraged to reconsider its position, but if they do
not provide the agreement voluntarily we will have to consider asking
the court to compel disclosure.[6]
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Who is
responsible for supporting the interests of non-petitioner claimants?
Whether or not the court’s
Consolidation Order appointing Grant & Eisenhofer as Lead Counsel
should make the firm responsible for the interests of all claimants in
any settlement, the firm has indicated that in this case it will not
be representing any parties other than its directly contracted T Rowe
Price clients in matters relating to this settlement.[7]
Other petitioners have of course formally “appeared” in the case with
counsel and therefore have the ability to be heard by the court, but
non-petitioning claimants in appraisal proceedings have not appeared
and must therefore depend on the petitioners to address their
interests. Delaware courts have referred to this reliance upon
petitioners in appraisal cases as being generally similar to the
reliance upon lead plaintiffs in class actions, but the processes are
not identical and the rules for petitioner responsibilities in
appraisal proceedings are not well defined. Under these circumstances,
the Forum is advising its delegate Cavan petitioner to support the
interests of all claimants not represented by Grant & Eisenhofer in
their rights to consider a fair settlement offer, and in doing so to
test new standards for the conduct of appraisal proceedings.
Determining the interests of all claimants
Anyone
with a claimant interest in the Dell case – or with a broader investor
interest in the fair process of other appraisal cases – is encouraged
to offer advice about what we should be considering.
Cavan
has also engaged a leading expert on investor rights, Cornish F.
Hitchcock of the
Hitchcock Law Firm PLLC,
as special counsel to guide our attention to relevant interests and
regulatory considerations. As many of you know from his activities
with past Forum programs and with the Council of Institutional
Investors, Mr. Hitchcock’s expertise and wisdom can be relied upon to
assure our understanding of the issues that need to be addressed.
I will
of course welcome your questions and comments.
GL –
September 19, 2016
Gary
Lutin
Chairman, The Shareholder Forum
575
Madison Avenue, New York, New York 10022
Tel:
212-605-0335
Email:
gl@shareholderforum.com
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