Appraisal in Delaware: Possible Improvement From the Bottom Up?

Abstract

We trace the origins of shareholders' rights to judicial appraisal to determine the purpose - to avoid expropriation by majority shareholders. We then trace the meandering path of judicial appraisal in Delaware, which has exhibited a deep distrust of market valuations in favor of broad judicial discretion. While recently the Delaware Supreme Court has begun to attach importance to the deal price arrived at in good faith in mergers, it has continued to ignore the statutory injunction to exclude value added through anticipation or realization of gains through the merger. Instead, too often courts have been swayed or confused by dueling experts to reach values well above deal prices, or occasionally below, without serious consideration of pre-announcement market prices. Only recently has the Chancery Court used an efficiently developed market price to determine value in a manner consistent with the law.