## Facts

- Ford Holdings, Inc. was incorporated in 1989; Ford Motor Company owned all common stock directly or indirectly.
- From 1990 to 1995, Ford Holdings issued multiple series of nonconvertible preferred stock, including (1) flexible rate auction preferred series and (2) cumulative preferred series.
- Ford Holdings merged with a wholly owned subsidiary in a transaction that cashed out the preferred stock.
- Preferred holders received the security’s liquidation value, any contractually specified merger premium, and accumulated and unpaid dividends.
- Certain preferred holders sought appraisal under DGCL § 262, contending “fair value” exceeded the cash paid.
- The dispute centered on whether the certificates of designation fixed the merger payout so that it also constituted “fair value” for appraisal purposes.
- The case proceeded on cross-motions for summary judgment.

## Issues

1. Whether a preferred stock certificate of designation may validly fix merger consideration such that the specified amount constitutes “fair value” in a DGCL § 262 appraisal.
2. Whether the series-specific certificates of designation for Ford Holdings’ preferred stock clearly limited merger consideration to liquidation value (plus any premium and unpaid dividends), thereby restricting appraisal relief.

## Decision

- The Court of Chancery held that properly expressed certificate terms for preferred stock may establish merger consideration and, when they do, that contract amount constitutes “fair value” under DGCL § 262.
- The court found that some preferred series were clearly limited by their governing documents, while other series were not.
- The court granted Ford Holdings’ summary judgment motion in part and denied it in part, permitting appraisal to proceed for series lacking clear limiting language.

## Legal Principles

- Preferred stock rights are primarily contractual; courts interpret certificates of designation using contract principles.
- “Fair value” in appraisal cannot exceed the value of the rights the security actually confers; clear contractual caps on merger payouts can therefore define appraisal “fair value.”
- To restrict merger consideration (and thus appraisal value), the limitation must be clearly and expressly stated in the governing certificate language; ambiguous drafting will not be treated as a comprehensive cap.

## Conclusion

The court ruled that appraisal “fair value” for preferred stock may be set by clear certificate language fixing merger consideration, but series with ambiguous or insufficiently explicit terms are not contractually capped and may pursue a statutory appraisal to determine fair value.


In re Appraisal of Ford Holdings, Inc. Preferred Stock, 698 A.2d 973 (Del. Ch. 1997)