Market Evidence in Corporate Law

Abstract

Market prices are frequently given little or no weight in resolving valuation disputes in corporate law. Under Delaware corporate law, for example, market prices can never be the sole determinant of value in appraisal proceedings and, at most, are one factor to be considered.1 Similarly, corporate managers who negotiate corporate control transactions at significant premiums under Delaware law face significant potential liability for damages because courts dismiss the premium received as irrelevant. Other jurisdictions, with rare exceptions, have followed the same approach.3 I argue here that courts should rely more heavily on market prices when resolving valuation disputes than has occurred to date. Part I of this Article discusses why market prices are superior to other methods of valuation when market prices are available and addresses the various justifications that have been advanced for limiting reliance on market prices. Part I also briefly discusses other types of market evidence. Part II surveys some of the leading cases in corporate law to illustrate how adjudication of these cases would have been improved and simplified had courts interpreted the relevant market evidence properly. Part II also extends the analysis outside corporate law to the Winstar litigation-the damage claims filed by over one hundred sav-