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Berger v. Pubco Corp.

Delaware Supreme Court
976 A.2d 132 (2009)


Facts

Robert Kanner (defendant) owned over 90 percent of Pubco Corporation’s (defendant) shares. Barbara Berger (plaintiff) was a minority shareholder of Pubco. Kanner decided to effect a statutory short-form merger and cash out Berger at a price of $20 per share. The short-form-merger statute required the board of the parent corporation to provide a notice to minority shareholders that included a copy of the appraisal statute and all information material to shareholders that would affect their decision to seek appraisal. Pubco provided notice to Berger regarding the merger. However, the disclosures provided neither significant detail as to the existing operations and assets of Pubco nor an explanation of how the $20 per share price was set. Berger filed a class-action lawsuit on behalf of Pubco minority shareholders, seeking recovery of the difference between the $20 share price and the fair value of their shares. Pubco and Kanner and Berger filed cross motions for summary judgment in the Delaware Court of Chancery. The court found Pubco had violated its disclosure duty and the minority shareholders were entitled to a quasi-appraisal remedy requiring shareholders to opt in and escrow a portion of their merger proceeds. Berger appealed the imposition of the opt-in and escrow requirements to the Delaware Supreme Court.

Rule of Law

Issue

Holding and Reasoning (Jacobs, J.)

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