Delaware’s latest decision on the combined pursuit of appraisal and fiduciary duty claims continues the Delaware tradition of welcoming the litigation of those claims jointly up until the time an election between the two must be made. Vice Chancellor Laster’s recent Opinion in In re Columbia Pipeline Group, Inc. Merger Litigation, C.A. No. 2018-0484-JTL (May 15, 2024) bears that out following years of litigation asserting both types of claims.
The Opinion reiterated long-standing Delaware law that a stockholder seeking appraisal can simultaneously pursue breach of fiduciary duty claims:
TransCanada contends that by “electing” to seek appraisal, the appraisal petitioners foreclosed their ability to participate in any equitable remedy [citing Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1190–91 (Del. 1988)]. The Delaware Supreme Court rejected that argument thirty-six years ago. The justices held that a stockholder who has also sought appraisal can “proceed simultaneously with its statutory and equitable claims for relief.” “What the [appraisal petitioner] may not do, however, is recover duplicative judgments or obtain double recovery.” To make the litigation process more straightforward, the Delaware Supreme Court instructed trial courts to prioritize the breach of fiduciary duty claim because that remedy was likely to be broader and render the appraisal action moot.
Columbia Pipeline, at 77.
In addition, the Court further clarified that appraisal petitioners remain eligible to elect (or decline) the equitable remedies made available to them in a fiduciary duty class action:
The Appraisal Decision determined that the fair value of Columbia for purposes of the appraisal statute was the deal price of $25.50 per share. The damages for the Sales Process Claim and the Disclosure Claim are greater than $25.50 per share. In a consolidated action, the rulings on the fiduciary duty claims would have rendered the Appraisal Action moot, and the appraisal petitioners could have elected to receive the equitable remedy. The same result applies in this case.
Columbia Pipeline, at 78.
Delaware’s preferred sequence – having the fiduciary duty claim litigated first – was flipped in Columbia Pipeline, as the appraisal trial proceeded first, and yet the Court still held that the (later-determined) fiduciary duty remedy was available to appraising stockholders long after the appraisal trial and fair-value determination had been made. The sequencing in Columbia Pipeline of the appraisal trial being decided prior to the adjudication of the fiduciary duty claim was not the Court’s intended plan but resulted from the fiduciary duty claims only first being filed when trial in the appraisal case was already imminent. Id. at 84.
The holding affirms that shareholders are required to decide which claim they’re electing only once the remedy from the breach of fiduciary duty claim is finally adjudicated. In Columbia Pipeline the fiduciary duty claim was adjudicated following trial; we’re not aware of any authority directly addressing the question of how a settlement of the fiduciary duty claim, short of judicial determination, might impact this result. In any event, what remains clear is that the appraising stockholder is entitled to the benefit of electing the potentially broader equitable remedies resulting from the fiduciary duty claim, with the limitation on this principle being that once a stockholder has elected its remedy, it cannot continue to pursue the other claim.