Litigation

Chancery Rejects Appraisal Demand of Beneficial Holder

By Francis G. X. Pileggi, Esq.

Dirienzo v. Steel Partners Holdings, L.P., No. 4507-CC ( Del. Ch., Dec. 8, 2009), read opinion here. This Court of Chancery decision addressed the requirement that a party seeking an appraisal pursuant to Section 262 of Title 8 of the Delaware Code be a "record holder". In this litigation, the Court determined that the party seeking appraisal was not a record holder as required by DGCL Section 262(a), nor was there an express or implied waiver by the company of this requirement. The Court also rejected an estoppel argument that the plaintiff made based in part on the company's silence because it was determined that the company had no duty to speak at the relevant times.

After limited discovery related only to the plaintiff's entitlement to proceed, as contemplated by Section 262(g), the parties filed cross motions for summary judgment. The Court explained that the record holder is the party who owns the shares as recorded on the company's books. The Court determined that not even the plaintiff's broker in this case was the record holder, rather Cede & Company, a central security depository was determined to be the record holder. The Court cited case law at footnotes 14 to 17 for the Delaware law that even if the record holder is known, appraisal demands by a beneficial owner are invalid. Thus the company's motion for summary judgment was granted based on the finding that the plaintiff did not satisfy the record holder requirement for an appraisal.

Full post as published by Delaware Corporate and Commercial Litigation Blog on December 14, 2009 (boomark / email).