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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.


Forum distribution:

Legal expert's view of currently undefined procedures to assure fair settlements in appraisal cases


Comments such as those presented below were invited in the following report that includes a brief summary of issues by Cornisch F. Hitchcock, a leading legal expert on investor interests, and a link to the motion submitted by the Forum's representative petitioner, Cavan Partners, requesting the needed court definition of standards for appraisal settlements:

Other commentary and records relating to the settlement issues can be found in the "Settlement with former petitioners" section of the Dell project's reference page.


Source: Delaware Business Court Insider, October 19, 2016 commentary

Dismissed Dell Appraisal Claimants Settle With Company

Brett M. McCartney, Delaware Business Court Insider

October 19, 2016

Brett McCartney

Appraisal litigation has been a topic at the forefront of the minds of many legal practitioners over the past few years. Recently, amendments to Section 262 of Delaware's General Corporation Law went into effect that were effectuated to eliminate de minimis appraisal claims while also allowing companies to make a pre-judgment payment to dissenting stockholders to reduce interest costs in connection with appraisal litigation. The Delaware Court of Chancery authored several opinions concerning appraisal arbitrage and the technical requirements of Section 262. There have even been unique appraisal cases where the court discussed the circumstances surrounding the proposed settlement of only factions of the appraisal class.

The In re Appraisal of Dell litigation presented an atypical circumstance where settlement terms agreed to between the company and a group of appraisal petitioners were not offered to the other stockholders in the appraisal class. The appraisal petitioners settling their action were comprised of a variety of financial institutions, including certain funds affiliated with T. Rowe Price & Associates Inc. (the settling petitioners). The settling petitioners' appraisal actions had previously been dismissed for separate technical reasons. In its July 13, 2015, decision, the Court of Chancery held that a portion of the settling petitioners did not satisfy the continuous holder requirement of Section 262. Instead, the court found that the record holder of the shares did change between the time of the appraisal petition and the effective date of the merger. The court, noting that the change in record holder status was not knowingly perpetrated by the beneficial holders, reluctantly granted summary judgment in favor of the defendant and dismissed the appraisal claims of nearly one million shares of Dell common stock. Subsequently, on May 11, 2016, the Court of Chancery held that the record demonstrated that the remaining settling petitioners' shares were voted in favor of the Dell merger, in contravention of the express requirement under Section 262 that an appraisal petitioner has not consented to the merger. As a result, the court granted the defendant's motion for summary judgment and dismissed the remaining settling petitioners' appraisal claims.

Nevertheless, on June 24, 2016, the company and the settling petitioners entered into a settlement agreement whereby the settling petitioners would receive the merger consideration plus a modicum of interest in exchange for releasing their appellate rights. On June 27, the court held a teleconference with counsel for Dell and counsel for the settling petitioners to discuss how this unique settlement would work. During the conference, the settlement consideration was described as the merger consideration and "between 2 and 3 percent interest, but the grand total is 88 cents per share, and its $28 million in the aggregate." For point of reference, the surviving appraisal petitioners in Dell were awarded $17.62 per share, which represented a $3.87 per share increase over the merger consideration of $13.75 per share. The discussion turned to who should receive notice of the settlement. The court explained that appraisal actions, while not class actions, are in the nature of a class action. "And so what that means is someone like me has to watch out for surreptitious buy-offs or taking out the big holder or sweetheart deals, or things like that. And the main way we police against that is just by making sure that other folks have notice and the opportunity to take the same deal."

However, the parties and the court discussed the economics of the offer the settling petitioners accepted in contrast to what the remaining appraisal petitioners could receive. For instance, the settling petitioners' counsel explained that even if the Supreme Court reversed the Court of Chancery's decision and held that the merger consideration was the fair value on the date of the merger, the remaining appraisal petitioners would still have accrued interest accruing at the statutory rate that would exceed the level of consideration represented in this offer. Because of that, the parties and the court discussed whether notifying the other appraisal petitioners of the offer would create undue confusion without providing value over what those appraisal petitioners are already entitled to. Ultimately, the court was concluded that on the facts presented that Dell did not need to extend the offer accepted by the settling petitioners to the other appraisal claimants. The court held that by its calculations, which were consistent with Dell and the settling petitioners, under no set of circumstances would the consideration being provided to the settling petitioners be more favorable to other appraisal claimants than an adverse outcome on appeal, in which the nonsettling petitioners would receive the amount advocated by Dell at trial plus an award of interest at the statutory rate. In order to avoid potential confusion relating to the offer, the court only required that the parties to the settlement agreement promptly inform counsel to the nonsettling appraisal claimants about the conference with the court and the settlement agreement.

This decision lays out a rather unique, and unlikely to be common, set of circumstances most appraisal practitioners will not face. Still, this decision highlights the lack of a bright-line rule regarding appraisal settlements with the court's 2015 decision in Mannix v. PlasmaNetproviding another unique set of circumstances. In Mannix, the court approved, over objection, the settlement of appraisal claims which was conditioned upon the claimants being accredited investors despite the fact that even if the offer was made to all claimants some could not satisfy the accredited investor standard. This most recent decision in Dell and last year's decision in Mannix highlight the nuanced nature of appraisal settlements and should be kept in mind as the amount of appraisal litigation grows. 

Brett M. McCartney ( is a partner at Morris James in Wilmington and a member of its corporate and fiduciary litigation group. He practices primarily in the Delaware Court of Chancery and Delaware Superior Court and focuses on corporate governance and complex commercial litigation, stockholder litigation, fiduciary duties, alternative entity disputes, class action, and derivative litigation.


Copyright 2016. ALM Media Properties, LLC.


This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

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