## Facts

- Consumer Data Systems, Inc. (CDS), an Oregon corporation, had minority shareholders (including Paul H. Stringer and Timothy D. Schubert) and a controlling majority that included the board of directors.
- The controlling shareholders formed a new corporation, Car Data Systems, Inc. (Car Data).
- The controlling shareholders transferred their CDS shares to Car Data in exchange for Car Data shares, giving Car Data control of CDS.
- Car Data then caused CDS to approve a merger between CDS and Car Data over minority shareholder objections.
- The merger was structured as a cash-out, eliminating minority shareholders in exchange for a small per-share cash payment that plaintiffs alleged was unfair and known by the controllers to be unfair.
- Plaintiffs refused the offered price and sued alleging, among other claims, breach of fiduciary duty and other wrongful conduct connected to the transaction.
- Oregon statutes (ORS 60.551–60.594) authorized cash-out mergers and provided dissenting shareholders an appraisal procedure to obtain “fair value” through a judicial appraisal.

## Issues

1. Whether Oregon’s merger appraisal statutes (ORS 60.551–60.594) provide the exclusive remedy for dissenting shareholders in a cash-out merger.
2. Whether minority shareholders may maintain separate claims (direct or derivative), including breach of fiduciary duty and related misconduct, arising from the merger’s structure and execution.

## Decision

- The Oregon Supreme Court reversed the Court of Appeals and the trial court.
- The court held that the statutory appraisal remedy is not categorically exclusive in cash-out mergers.
- The court ruled that minority shareholders may pursue independent claims based on alleged wrongdoing such as fiduciary breaches, self-dealing, misrepresentation, or similar misconduct connected to the merger.
- The case was remanded for further proceedings because dismissal on appraisal-exclusivity grounds was error.

## Legal Principles

- Statutory appraisal is primarily a valuation mechanism to determine “fair value” of shares and does not, by itself, address all forms of misconduct in merger transactions.
- Absent clear legislative language, courts will not presume that appraisal statutes abolish established common-law and equitable remedies for corporate wrongdoing.
- Controlling shareholders and directors owe fiduciary duties to minority shareholders; transactions that eliminate minority ownership while controllers retain benefits may trigger duties of loyalty and fairness.
- Appraisal may be appropriate when the dispute is only about price in an otherwise valid merger, but separate claims are available when plaintiffs allege that the merger process or consideration was tainted by wrongdoing.

## Conclusion

The court held that Oregon’s appraisal procedure for dissenting shareholders does not bar minority shareholders from pursuing fiduciary-duty and related claims attacking alleged misconduct in a cash-out merger, and it reinstated plaintiffs’ non-appraisal claims for adjudication on the merits.


Stringer v. Car Data Sys., Inc., 314 Or. 576, 841 P.2d 1183 (Or. 1992)