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Cavalier Oil Corp. v. Harnett

Delaware Supreme Court
564 A.2d 1137 (1989)

Written by Abby Roughton, JD

Facts

William Harnett (defendant) owned 1,250 shares of stock in EPIC Mortgage Servicing, Inc. (EMSI), which represented a 1.5 percent interest in EMSI. In November 1984, EMSI merged into Cavalier Oil Corporation (Cavalier) (plaintiff). Harnett opposed the merger. Cavalier offered Harnett $93,950 for Harnett’s EMSI shares, but Harnett rejected Cavalier’s offer. Cavalier commenced an appraisal action in the Delaware Court of Chancery under 8 Del. C. § 262 to determine the fair value of Harnett’s shares. Cavalier argued that the vice-chancellor should take the de minimis nature of Harnett’s 1.5 percent interest into account in the valuation. The vice-chancellor rejected that argument and concluded that the purpose of a § 262 appraisal action was to value EMSI as a whole rather than to value any specific fraction of EMSI’s shares owned by Harnett. The court ultimately valued Harnett’s shares at $347,000. Cavalier appealed to the Delaware Supreme Court, asserting that the court had improperly refused to apply a discount in valuing Harnett’s EMSI shares.

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