## Facts

- Pubco Corp. was a closely held Delaware corporation controlled by Robert H. Kanner, who owned over 90% of the outstanding shares and served as president and sole director.
- Using 8 Del. C. § 253, Kanner executed a short-form merger that cashed out minority stockholders without a minority vote.
- The merger consideration for the minority was set at $20 per share.
- Pubco sent minority stockholders a merger notice describing appraisal rights and enclosing the statutory appraisal provision (8 Del. C. § 262).
- The notice did not provide material information about Pubco’s financial condition, operations, assets, or how the $20 price was determined.
- Barbara Berger, a minority stockholder, filed a class action seeking a quasi-appraisal remedy based on alleged material disclosure violations.

## Issues

1. In a § 253 short-form merger, when is statutory appraisal the minority stockholders’ exclusive remedy?
2. If the controller’s merger notice omits material information relevant to the appraisal decision, are minority stockholders entitled to a class-wide quasi-appraisal remedy?
3. May a court condition quasi-appraisal relief on (a) an affirmative opt-in requirement and (b) an escrow of merger proceeds?

## Decision

- The Delaware Supreme Court affirmed that Pubco and Kanner breached their duty of disclosure by failing to provide material facts needed for an informed decision whether to seek appraisal.
- The court held that the disclosure violation caused the controller to lose the protection of appraisal exclusivity otherwise associated with short-form mergers.
- The court reversed the remedial conditions requiring class members to opt in and to escrow a portion of merger consideration.
- The case was remanded for a class-wide quasi-appraisal proceeding to determine fair value and award any difference from the merger price, without opt-in or escrow requirements.

## Legal Principles

- In a Delaware § 253 short-form merger, statutory appraisal is generally the exclusive remedy if the transaction is free of fraud or illegality and the controller provides full and fair disclosure of material facts relevant to the appraisal election.
- Even without a minority vote, the controller and corporation must disclose material information in the merger notice sufficient for minority stockholders to make an informed appraisal decision.
- A material disclosure failure forfeits the controller’s ability to rely on appraisal exclusivity and permits an equitable, class-wide quasi-appraisal remedy focused on fair-value recovery.
- Quasi-appraisal relief for disclosure violations in short-form mergers may not be conditioned on opt-in participation or escrow requirements that impose appraisal-like burdens on minority stockholders who were denied an informed election.

## Conclusion

The court held that material disclosure violations in a Delaware short-form merger allow minority stockholders to pursue class-wide quasi-appraisal for fair-value damages, and that courts may not restrict that remedy by requiring opt-in participation or escrow of merger proceeds.


Berger v. Pubco Corp., 976 A.2d 132 (Del. 2009)