Exit Liquidity and Majority Rule Appraisals Role in Corporate Law

EXIT, LIQUIDITY, AND MAJORITY RULE: APPRAISAL'S ROLE IN..., 84 Geo. L.J.
84 Geo. L.J. 1
Georgetown Law Journal

November, 1995
EXIT, LIQUIDITY, AND MAJORITY RULE: APPRAISAL'S ROLE IN CORPORATE LAW
Robert B. Thompson a
Copyright (c) 1995 by the Georgetown Law Journal Association; Robert B. Thompson
Allocating rights between majority and minority participants presents a recurring challenge in a variety of collective
organizations. Broad powers given to the majority facilitate an effective collective response and desirable adaptation
to change, free of hold-up behavior by a self-interested minority. Yet unless counterbalanced, an unqualified system of
majority control creates the potential that a selfish majority will appropriate the interests of the minority.
The American political system provides a familiar pattern for working out this conflict, one that can be generally
described as majority rule. The limits on this majority power are likewise well known, beginning with the limited power
of government under our Constitution and the protection of individual rights through a judiciary independent of the
legislative and executive branches. 1 Government power today is not nearly as constricted as at the origin of the Republic,
but our current allocation of public power still reflects this balance of flexible majority control bounded by the minority's
ability to assert specific constitutional rights.
In corporations, the most common collective entity in the private sphere, a parallel allocation must be made. In this
sense, corporate law is properly termed constitutional law. 2 We have adopted for our business entities a *2 system of
majoritarian control that is much less constrained than the system that exists for our public bodies. Corporate powers
are centralized in the board of directors, and a majority shareholder can usually elect the entire membership of the
board. 3 Fiduciary duties enforced by courts provide some open-ended protection for minority shareholders similar
to the protection provided by the Bill of Rights in the public sphere, but this restraint on majority power is limited.
Widespread judicial application of the business judgment rule, by which courts defer to directors' expertise regarding
business decisions, smoothes the way for the exercise of majority power. 4
There are reasons to expect that the majority/minority balance may be struck differently within the corporation than in
public decision-making. If business and money are less central to a sense of self than are political decisions, we may be
more willing to tolerate the possible overreaching of majorities in exchange for more efficient business operations. The
problem of minority shareholders may seem less worrisome to the extent that we can presume that all shareholders share
the same goal-a profitable business-in contrast to the political realm in which voters have more diverse objectives. 5
More likely, our willingness to accept a different balance of majority and minority rights is affected by the shareholder's
ability to exit from a corporation when there is a market for its shares. Within Albert Hirschman's structure of exit, voice,
and loyalty, corporate participants have greater exit opportunities than do political participants. 6 This is not to say *3
that exit does not affect the public realm, for individuals opposed to political decisions can leave the jurisdiction. Recent
history provides several examples of the effect of exit on abusive majority power of national governments. 7 While there
is no market for one's birthright that permits a dissenting citizen to be paid upon exit as in a market for shares, some
public sector markets provide an exit resembling a shareholder's ability to sell shares and leave a corporation. The price
of homes in a given school district, for example, may rise or fall depending upon decisions made by the local school
board. A dissenter leaving a particular district thus has a form of exit for capital invested in real estate. Even viewing
2017 Thomson Reuters. No claim to original U.S. Government Works. 1

EXIT, LIQUIDITY, AND MAJORITY RULE: APPRAISAL'S ROLE IN..., 84 Geo. L.J. 1
these public sector exit options most favorably, however, their cost is considerably higher, such that we might expect
additional constraints on majoritarianism in the public sector than in corporations.
This article addresses the allocation of majority and minority power in the context of appraisal rights, one of the more
intriguing areas of corporate law. Appraisal statutes require the entity to purchase the shares of individual shareholders
if requested by the shareholder after certain fundamental transactions, such as mergers. Absent this statutory remedy,
the entity can retain the minority's investment indefinitely. Minority shareholders desiring liquidity must look to the
market or find purchasers on their own. Corporate theorists lack a coherent explanation for when the statutes should
give shareholders this extra protection against majority power. The puzzle seems all the greater because other commercial
countries, except England, have made little use of this governance rule. 8
The conventional explanation describes appraisal rights as part of a tradeoff implemented at the turn of the century to
facilitate the growth of American business. The nineteenth-century common law required unanimous shareholder consent
before a corporation could make radical changes, such as mergers. Unanimity might suffice for an intimate group of
investors (characteristic of most businesses through the nineteenth century), but it is a significant limit on the adaptability
of larger business and sometimes permits recalcitrant shareholders to frustrate beneficial changes. Legislatures, therefore,
passed statutes authorizing fundamental changes by a supermajority vote, and often included appraisal rights permitting
the minority to exit from these changed enterprises. The focus was on facilitating desirable corporate changes while
providing liquidity to those who *4 chose not to continue in a business fundamentally different from the one in which
they had originally invested.
The appraisal remedy we see today serves an entirely different purpose from the original remedy. Its original liquidity
purpose has almost completely disappeared. A more fungible view of property rights de-emphasized the difference
between owning a share of a corporation in one business and owning shares of a changed business. At the same time,
securities markets provided many investors wider opportunities for liquidity, which decreased the need for appraisal
to provide an exit. In this changed business environment, managers and their lawyers developed new ways to adapt
the enterprise to new circumstances while avoiding appraisal, and legislatures failed to modify the appraisal remedy to
apply to these new contexts. Before long the remedy would be criticized as being both duplicative and incomplete in its
protection of shareholders, and even somewhat random as to the transactions to which it would apply. By the 1960s,
it was left for dead.
Reading court decisions about appraisal from the last ten years, one can hardly recognize this earlier history. The dusty
remedy has been much more frequently litigated, as evidenced by more than 100 appellate cases in the past decade. Yet
the purpose that these recent decisions attribute to appraisal statutes is not the purpose of the original provisions. Now
the remedy serves as a check against opportunism by a majority shareholder in mergers and other transactions in which
the majority forces minority shareholders out of the business and requires them to accept cash for their shares. In earlier
times, policing transactions in which those who controlled the corporation had a conflict of interest was left to the courts
through the use of fiduciary duty or statutes that limited corporate powers. Today, that function is left for appraisal in
many cases. The overwhelming majority of appraisal cases in the last decade reflect this cash-out context: less than one
in ten of the litigated cases illustrate the liquidity/fundamental change concern of the classic appraisal remedy. 9
This new remedy that has grown up within the covering of the traditional appraisal remedy has a different, and
probably theoretically more defensible, purpose than just providing liquidity after certain fundamental changes. Yet the
development of this new remedy within the skin of the old has meant that both legislatures and courts have made the
transition imperfectly. A transaction in which the majority shareholder is forcing the minority shareholders out of the
enterprise at a price chosen by the majority is fundamentally different from the minority's voluntary decision to abandon
the enterprise because of a change proposed by the majority. The valuation standards and procedures that one would
install if the minority were choosing to opt out of the transaction (where the concerns *5 would be about minority
hold-ups of legitimate corporate actions) are often the reverse of the procedures that would be adopted if the majority

were forcing out the minority. This article identifies several traditional statutory provisions appropriate for the liquidity
purpose that simply do not work in the modern opportunism context. These include the following:
-excluding from the fair value calculation any appreciation or depreciation attributable to the
merger transaction;
-requiring minority shareholders seeking appraisal to take four or more separate legal steps to
perfect the remedy (and withdrawing relief if the actions are not perfect);
-excluding appraisal when shares are traded on a public market; and
-making appraisal an exclusive remedy even when the valuation remedy does not include loss from
breaches of fiduciary duty.
When courts stretch the language of an early statute beyond its prior meaning, or when they are required to enforce
unduly harsh provisions, the result is an inelegant and confusing statement of the law and an unintended tilt of the
majority/minority relationship that is at the core of corporate law. The appraisal remedy remains caught between one
function that is no longer needed and another that it is inadequately equipped to perform.
This article is divided into three parts. Part I examines appraisal against the backdrop of other legal, market, and
contractual arrangements that shape today's corporate governance structure. Part II illustrates that appraisal has passed
through two distinct periods in its history. An analysis of cases decided in the last decade shows that the dominant
use of the remedy today is in cash-out transactions. Part III then identifies the statutory provisions dating from the
earlier period that have slowed the transition of this remedy and, in the modern context, block its effective use. Efforts
to modernize the appraisal process should focus on amending the appraisal provisions so that the remedy addresses the
current transactional setting. 10
I. CORPORATE NORMS
A. A LARGELY UNQUALIFIED SYSTEM OF MAJORITARIAN CONTROL
The appraisal remedy should be evaluated as part of the legal, market, *6 and contractual arrangements defining today's
corporations. Norms reflected in the corporations codes of various states emphasize the adaptive nature desired for the
governance structure of the modern business enterprise. 11 The distrust of the corporate form evident in the first general
incorporation statutes of the nineteenth century has given way to enabling statutes. The corporate structure encourages
(and assumes) a division and specialization of functions among participants and provides a hierarchy that facilitates
decision-making. For example, centralized control in the board of directors does not have to be shared with minority
investors. Despite recent proposals by the Securities and Exchange Commission to facilitate individual shareholder
participation, 12 minority shareholders can do almost nothing to affect the governance of the enterprise. The American
Law Institute's corporate governance project accurately summarized American corporate law as a largely unqualified
system of majoritarian control. 13
This majoritarian character is reinforced by the corporation's potential for perpetual duration. Until the majority decides
otherwise, the entity can keep a minority investor's money. This stability permits reliable planning in a way that simply is
not possible if the enterprise must deploy its assets to ensure that it is able to redeem the assets of an investor who wants
to depart. 14 Unrestrained, this combination of centralized control and entity permanence can be a powerful weapon for
oppression of minority shareholders, particularly if there is no public market for the shares of the corporation.
B. MARKETS, CONTRACTS, AND LAWS THAT COUNTER POTENTIAL MAJORITY ABUSE

The majoritarian orientation of corporations law does not mean that investors entrusting their money to those in control
of the enterprise are unprotected. A variety of factors serve to counter actions by the majority that might otherwise
frustrate shareholder expectations. These include:
1. Operation of markets. A developed market for shares can be an investor's most valued protection, offering liquidity
that often is more *7 useful than any legal provision. 15 Other markets protect investors indirectly. Those in control of
the corporation, for example, respond to the product and capital markets without the need for minority shareholders to
take any duplicative monitoring action. Additionally, the market for managerial services can align managers' interests
with those of shareholders, and the market for corporate control presents a hostile takeover as a check on managerial
behavior. 16
2. Private Ordering/Contracts. Minority investors can also protect themselves against majority opportunism by lowering
the initial purchase price to reflect such risks. In addition, minority investors can negotiate for contractual protection
against possible majority abuse such as veto provisions, mandatory compensation, or buyouts. 17 Such changes are more
likely in a close corporation in which bargaining costs are smaller and the interests of minorities are easier to specify. 18
3. Law. Legal constraints on majority rule include shareholder voting requirements, fiduciary duties, and mandatory
disclosure. Shareholders vote for directors, of course, but most corporate action can be taken by directors without
shareholder participation. State statutes, however, require shareholder approval of certain fundamental corporate
changes such as mergers, sales of assets, and amendments to the corporation's articles of incorporation. 19 If those in
control of the corporation lack a majority, voting can be a substantial check on potential abuse. When combined with
the presence of a market for corporate control, voting effectively checks *8 misuse of centralized power or disagreement
about the future direction of the business. Of course, if those in control already have a majority, voting becomes an
empty vessel. 20 Thus, voting in many situations is less substantial in fact than it would appear to be in theory. 21
Nevertheless, those in control of the corporation, even if they have a majority of votes, have a fiduciary duty to act
for the benefit of the shareholders as a whole. Any shareholder may bring a derivative suit in the name of the entity for
violations of that duty if the directors who normally speak for the entity are unlikely to proceed because of self-interest.
These suits provide the most common means by which courts check the misuse of centralized power in a corporation.
More specifically, derivative suits provide a way for minorities to challenge mergers when they believe that the majority
is acting unfairly. The possibility that the plaintiff/minority shareholder is acting for selfish interests to hold up legitimate
majority decisions, however, has always been a part of the debate about fiduciary duties and derivative suits. 22 This
concern about strike or nuisance suits led both to various procedural requirements for derivative suits and to specific
limits on the exercise of appraisal rights. 23
Federal securities law imposes substantial disclosure requirements, primarily on larger corporations whose shares are
widely traded. 24 Disclosure serves to make both voting and markets work more effectively, particularly in cases in which
those with centralized control of a corporation do not own a majority of its shares. Controversy remains over the extent
to which federal disclosure goes beyond support of markets and voting and also supports the other rights available to
shareholders, particularly fiduciary *9 duties and appraisal rights. 25 State law disclosure requirements have less impact
than federal law, but they have grown in recent years and include, for example, the disclosure necessary in a squeeze-out
merger to meet the fiduciary duties of majority shareholders to the minority. 26
C. APPRAISAL'S ROLE AGAINST THE BACKDROP OF MARKETS, CONTRACTS, AND LAW

In addition to the various constraints listed above, all state corporations codes give shareholders a right to require the
corporation to buy them out at fair value upon the occurrence of certain fundamental corporate changes. All states
include mergers as such a triggering event; all but a handful include sale of substantially all of the corporation's assets as
a triggering event; and a majority of states include some changes in the corporation's articles of incorporation as one. 27
These transactions, only a small fraction of any corporation's activities, are thus distinguished from ordinary corporate
transactions in which the shareholders must go along with the majority without an option to exit.
In defining the reach of appraisal, commentators have long understood that this extra remedy should turn on balancing
the relative dangers of oppression by the majority and harassment by the minority and what weight is accorded the
importance of giving considerable leeway for change and growth. 28 This balance necessarily will be affected by the
breadth of maneuver accorded the majority and the other mechanisms available to keep oppression and harassment in
balance. In current use, appraisal only occurs when the majority wishes and usually only when the majority is kicking the
minority out of the enterprise. Mergers occur on terms put forward by directors and approved by majority shareholders.
These groups are given extremely broad latitude in defining the terms of a merger. 29 Earlier in this century, this power
was used principally in the combination *10 of two independent businesses. Today the majority can also define a merger
to be a combination of the corporation with a newly formed shell corporation on terms by which the majority's stock is
to be converted into stock of the new enterprise, and the minority's stock is to be converted into cash. 30 In this situation
the minority is squeezed out: its choice is to accept the price offered or to seek an appraisal. Indeed, this cash-out context
describes the overwhelming number of litigated cases that raise appraisal questions today.
Outside of squeeze-outs, appraisal has limited use today. About half of the states withdraw appraisal when there is a
market for the corporation's stock. 31 For nonmarket companies in these states, and for all corporations in most of
the other states, appraisal may only be available for one of the two parties in a merger transaction. Most states now
withhold appraisal from shareholders of the surviving corporation if there has been no significant change in the business
(often defined as the issuance of twenty percent additional shares). 32 Corporate planners who want to avoid appraisal
rights can do so fairly easily by having the corporation in question act as the purchaser of assets rather than the seller
or by having it be the surviving corporation. If that is not easily accomplished, planners can use a triangular merger,
using a new subsidiary of one corporation as the actual party to the transaction, thereby denying appraisal rights to the
shareholders of the parent corporation. 33
A few states define mergers broadly in such transactions to protect the minority shareholders' appraisal rights. 34 In
addition, courts in some states use the de facto merger doctrine to recharacterize as a merger with appraisal rights a
transaction that looks like a merger but has another name. 35 The leading corporate law jurisdiction, Delaware, explicitly
rejects such a possibility, 36 and other states' courts have been reluctant to use the *11 doctrine to restrict the choice
of corporate planners to avoid appraisal. 37
The dominant use of appraisal in squeeze-outs, and its occasional use in other mergers in which the corporate planners
have not availed themselves of the numerous possibilities to avoid appraisal, ought to determine the appropriate legal
rules for the appraisal remedy. Valuation standards, appraisal procedures, and the reach of the exclusivity of the remedy
should reflect the current transactional setting. Too many of the current rules have been carried over from an earlier
period when appraisal served a different purpose. This carryover prevents the remedy from performing its intended role
in governing majority and minority rights within modern corporations.
II. THE RISE AND FALL AND REINCARNATION OF APPRAISAL

A. APPRAISAL'S FIRST LIFE
1. Facilitating Business Combinations
Statutory appraisal provisions arose at the end of the last century as part of an effort to facilitate the business
combinations of railroads and other businesses that could benefit from large pools of capital. Majority shareholders
received broader authority to make decisions allowing for growth; minority investors who did not want to go along
with these changes could get out and receive the fair value of their shares. While the appraisal remedy could protect
against misuse of majority power to structure self-dealing or other conflict transactions, its dominant use was to
provide shareholders with liquidity, a way out of a transaction that the majority had implemented. Only in appraisal's
reincarnation in recent years did the focus of the remedy shift to policing majority opportunism in conflict transactions.
In the business and legal setting at the time of the first enactment of appraisal statutes, corporate enterprises had much
less freedom than they do today. The general incorporation statutes that had become widespread by the 1880s usually
contained substantial limits on the corporation's duration, its purposes, and its capital, reflecting societal distrust of
corporations. 38 Decision-making within even the earliest corporation permitted those in control to bind the minority,
thus providing the incorporated business a more centralized decision-making apparatus than the consensus *12 model
of the typical partnership. This flexibility, however, did not extend to mergers and consolidations, which required
shareholder unanimity. Such a transformation of the shares was perceived as a taking of a shareholder's property, which
required each owner's consent. 39
Such a regime, in the words of Professor Dodd, assumed static enterprises: [The] statute plainly envisaged the business
corporation as an enterprise of definite scope, capable of obtaining new capital but not, against the opposition of a
single shareholder, of changing its general character. 40 That legal view fit the economy existing prior to appraisal
statutes. Through the 1880s, most manufacturing firms were family owned or otherwise closely held. 41 The New York
Stock Exchange at the time included about a dozen nonrailroad firms. 42 The requirement of unanimity, however,
became a substantial burden to enterprises seeking to adapt *13 to changed circumstances as the Industrial Revolution
accelerated during the late nineteenth century. Any one shareholder could hold up a beneficial change or force the
enterprise to reassemble the financial investors in a new venture with the attendant costs that would drain money from
the evolving business. 43
The balance struck with the introduction of appraisal provided something for three groups: majority shareholders,
minority shareholders, and the public. Courts commonly described the purpose of appraisal statutes as protecting minority
shareholders and concluded that the statutes should be liberally construed for that purpose. 44 In the face of such a
purpose, some saw majority shareholders as having hijacked the remedy, in a process that Bayless Manning described
as perspicacious legislative agents of management playing for the rebound in history. 45 If the chronological focus
is only on appraisal after the merger has been implemented, the purpose, no doubt, is to protect minority shareholders.
Appraisal coupled with authorization of mergers by less than a unanimous vote, however, was clearly a lubricant to
speed the spread of majoritarianism 46 so as to arm the majority for vigorous maneuver 47 to make advantageous
trades free of hold-ups by the minority. 48 The public thus benefitted from a healthy business condition as firms could
more easily adapt to new circumstances. 49
*14 2. The Rapid Aging of the Appraisal Remedy from New and Experimental to Old and Worn-Out
Appraisal statutes took considerably longer to evolve than their current presence in all state corporations statutes
suggests. Indeed, the nearly universal label appended by a recent Ohio decision 50 holds true only for the second half

of the century. As Figure 1 illustrates, the first appraisal statutes appeared at the end of the nineteenth century, but only a
handful of states had such statutes in place by the turn of the century. 51 Appraisal statutes are often presented as having
been enacted in tandem with statutes authorizing consolidation or merger by less than unanimous vote, but there was a
significant difference in the spread of the two statutes. By the turn of the century, a dozen states had statutes authorizing
consolidations for corporations generally, but only five of those states had appraisal statutes. 52
By 1909, half of the states authorized business combinations with less than a unanimous vote, but the number of states
authorizing appraisal lagged considerably behind. 53 Only in the 1920s and 1930s did appraisal statutes spread generally
across the country. 54 The Uniform Business
*15 FIGURE 1: FIRST PROVISIONS AUTHORIZING MERGER

AND APPRAISAL IN A GENERAL INCORPORATION STATUTE
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE

TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
Corporation Act, 55 an ongoing project of the Commissioners on Uniform State Laws throughout the 1910s and 1920s,
only included appraisal in a draft in 1927, just prior to the final adoption by the Commissioners. 56
From the perspective of the late twentieth century, it is tempting to view the adoption of appraisal statutes as evidencing
the metamorphosis of a shareholder's relationship with the corporation from one of an active investor to a fungible dollar
claim. 57 In other words, the majority shareholders *16 can do what they want, including taking the minority's interest,
so long as appraisal assures that the minority receives the right dollar amount. The growth of corporations and markets
during the twentieth century undoubtedly spurred the movement toward viewing shares as fungible, but appraisal was not
a significant part of that process during this first period. Instead, the remedy evolved from being new and untested to old
and worn-out in a short period of time. In 1931, Henry Ballantine, one of the most well-known corporate commentators
of that time and a drafter of the California corporations statute that introduced appraisal in that state, described the
remedy as experimental. 58 Supreme Court Justice Wiley Rutledge, while still an academic writer, described appraisal
in 1937 as a relatively new device. When the results of its use are better known, perhaps it can be extended to more
frequent uses, thus offsetting to some extent the abrogation of the shareholder's former contractual position. 59
Yet by 1949, the statutes were looking somewhat dated and no longer appropriate. Robert Stevens, in the second edition
of his leading hornbook on corporate law, was more critical of the appraisal statutes than he had been in his first edition:
Now, after these appraisal provisions have been in operation for many years, there might well be a reconsideration
of the need for them. 60 Bayless Manning, in perhaps the most biting critique of the remedy, portrayed it as a remedy
that had lost its way. Indeed, it was this topic that provoked Manning's well-known description of corporate statutes
as towering skyscrapers of rusted girders, internally welded together and containing nothing but wind. 61 Manning
suggested that little or no thought had been given to the implications of the remedy on corporate conduct or the corporate
treasury and he concluded that indiscriminate *17 application of the remedy was pernicious. 62
Manning's critique provoked strong responses, but even such supporters as Melvin Eisenberg, later chief reporter
for the American Law Institute's corporate governance project, described appraisal in unflattering terms, calling it a
remedy of desperation. 63 Victor Brudney and Marvin Chirelstein referred to it as a last ditch check on management
improvidence. 64 Professor Ernest Folk, reporter for the important 1967 revision of the Delaware Corporation Code,
described it as of decreasing importance and even predicted its demise. 65

Consistent with such evaluations, appraisal was not frequently used. 66 It was often unavailable for sale of assets, which
had become a preferred method of business combination because of the broader flexibility that the law allowed for sales
in comparison to mergers, consolidations, and other business combinations. 67 Managers were also able to avoid the
reach of the appraisal statutes by structuring triangular mergers or other alternative mechanisms. 68 Efforts to develop
a judicially imposed de facto doctrine to make appraisal available in functionally similar transactions met with little
success. 69 Statutes and judicial interpretations simply failed to keep up with the evolution of business transactions,
leading to Manning's suggestion that the right to appraisal was like a shareholder having an Irish *18 sweepstakes ticket:
not earned, unrelated to their work, usually worth nothing, and once in a great while, a windfall. 70
3. Providing Liquidity, Not a Check on Conflict of Interest
Through this first period the purpose of appraisal was as summarized by the comment to the Uniform Business
Incorporation Act: The majority ought to be able to carry out the policies which seem to them best, but the minority
ought not to have to bear the consequences of the majority's adoption of those rather extraordinary and unexpected
measures. 71 The focus was on the minority's choice to refuse to go along, 72 disassociate, 73 exercise the right to
retire, 74 jump ship, 75 or, in the words of one court, simply to say I want out. 76 The statute was designed to provide
liquidity and thus protect the minority shareholders from a negative act: they could not be forced into a new corporation
against their will. 77 It was an instrument *19 that permitted minority shareholders either to exercise their right to
appraisal or to continue in the changed enterprise. 78
In this period there was less need to police majority misuse of mergers and similar transactions. 79 As William Carney has
pointed out, freeze-out transactions entered the legal literature as early as 1904, 80 but the limits on corporate authority
and the judicial use of fiduciary duty to check self-dealing restricted the majority's ability to implement such a transaction.
Majorities could use mergers to combine with other companies, but they were not permitted to use mergers to cash
minority shareholders out of the enterprise. 81 This limit on the corporation's consolidation power was evident from
the beginning. Professor Noyes's 1902 treatise, discussing some consolidation statutes, stated explicitly: I t is not the
purpose of these provisions to authorize the condemnation of stock in order to quiet opposition. 82 As Elliott Weiss
and others have chronicled, courts resisted any effort to use the consolidation power for this purpose; 83 freeze-outs were
*20 strongly disapproved. 84 Appraisal was not primarily a control, but an escape. 85
4. Procedures Reflecting the Liquidity Purpose
The procedures attendant to the appraisal process and the valuation standard reflected this more limited reach of majority
power and of the appraisal remedy. The amount to which a minority investor was entitled was the value of the shares
on the day before the transaction exclusive of any appreciation or depreciation from the triggering transaction. 86 This
phrasing is consistent with the initial view of appraisal as triggered by a transaction in which a minority shareholder
was choosing to leave or to retire, having disagreed with the majority's choice to change the venture. In that setting,
the complaining minority should get the value of the shares before the transaction was proposed, which was the value
of what had been taken from the shareholder. There would be no need to look at what *21 came after the transaction
because the minority would have made a choice to go in a different direction.
Similarly, the procedures that developed to perfect an appraisal right reflected this transactional setting. The exercise
of appraisal could drain the corporation of cash. To prevent injustice to the entire group, management needed to know

how many shareholders were going to elect this right. 87 State legislatures' decisions to place the procedural burden on
the minority seemed appropriate when the minority had the right to continue in the changed enterprise, but instead chose
to retire.
Finally, appraisal was seldom seen as exclusive in this period. Some worried that it could not serve its intended purpose
for the majority if it were not exclusive, and some states wrote exclusivity into their statutes, 88 but the more common
view was to focus on the cumulative nature of this remedy. It provided shareholders a choice to exit without infringing
on shareholders' existing rights to block self-dealing transactions.
B. THE RENAISSANCE OF APPRAISAL RIGHTS
The appraisal remedy was retrieved from the mothballs when courts and legislatures expanded the scope of majority
power to authorize actions not previously thought possible. Most important was a change permitting those in control
of a corporation to implement a merger that forced minority shareholders out of the corporation in exchange for cash.
A majority shareholder today can form a shell corporation with no shareholder other than itself and no assets other than
the cash to be paid to squeeze out minority shareholders. The boards of directors of the shell corporation and the original
corporation (who may be the very same individuals) then approve the merger of the shell corporation into the original
on terms specifying that the majority shareholder will retain its stock in the original corporation and that the minority
shareholders will receive cash in exchange for their shares. This disparate treatment of shareholders would have seemed
impossible in earlier times because cash was not widely authorized as a permissible consideration in ordinary mergers
until the 1960s. 89 Courts interpreted the new cash merger statutes to permit disparate *22 treatment that forced out
minority shareholders. 90 Because shareholders were being ousted anyway, appraisal served no liquidity function. Rather,
this change shifted the primary use of the remedy to constrain majority overreaching. 91
During this same period, the liquidity purpose for appraisal in other transactions was disappearing because of statutory
changes. About half of the states enacted market exceptions that withdrew appraisal rights for shares traded on a national
securities exchange or when the corporation had more than 2000 shareholders. As Folk described the change: In short,
the theory [behind the stock market exception] is that, if the appraisal remedy provides a judicially created market for
dissenting shareholders, such a device is unnecessary where there is already a substantial trading market. 92 In addition,
states moved to withdraw appraisal rights from shareholders of the surviving corporation if the merger did not result
in any change in the surviving shareholders' shares and did not result in an increase of shares beyond twenty percent or
some other threshold. 93 Professor Folk described this change as a major innovation in corporate law, and indeed, it
marked the effective end of the liquidity function for *23 appraisal. 94
Thus, the stage was set for the use of appraisal as a remedy against opportunistic behavior by majority shareholders
in mergers, but it was another fifteen years or so before appraisal was widely used in that role and even today it has
not reached full maturity as a complete remedy for overreaching by the majority. As Elliott Weiss has noted, while this
expansion of majority power was under way, Delaware courts defined the appraisal remedy in a fashion that lessened
its availability and appeal. 95 The Delaware Supreme Court's 1983 opinion in Weiberger v. UOP, Inc. 96 marked the
enthronement of a revitalized appraisal remedy for use as a check on majority power in cash-out settings. The Weinberger
court abandoned its business purpose test announced just six years before, which had permitted an enhanced judicial
review of mergers based on fiduciary duty. 97 The court in Weinberger revised appraisal to make it more favorable
to plaintiffs and decreed that this revised remedy should be plaintiffs' basic financial remedy. 98 In the decade after
Weinberger, some state courts continued *24 to apply a business purpose test to cash-out mergers, thereby reaffirming
judicial review outside of appraisal as an explicit check on majority action. 99 One federal case actually barred a cash-out
bank merger on the basis that the comptroller lacked the necessary express statutory authority to approve the merger. 100

There has been a strong countermovement toward using appraisal to check apparent conflicts of interests by majority
shareholders. Courts in twelve states have held appraisal to be exclusive, many with an overly optimistic view of what
appraisal can do to protect the interests of minority shareholders. 101
This headlong rush toward appraisal in these non-Delaware cases contrasts starkly with Delaware's reluctance to
embrace the remedy so unconditionally. At least eleven Delaware cases in the last decade apply the fair dealing/fiduciary
duty standard from Weinberger without relegating the plaintiff to appraisal. 102 These cases continue to evidence judicial
concern *25 over possible misuse of majority power in cash-out settings that appraisal does not seem adequate to handle.
More broadly, these cases illustrate the conclusion of the American Law Institute's corporate governance project that
few legal commentators are confident in the ability of current appraisal remedies to respond to a self-dealing context, and
that the exclusive use of appraisal requires characteristics not yet found in most American appraisal statutes. 103 While
some changes are possible through judicial decisions such as Weinberger's modernization of the appraisal remedy, the
baggage of the traditional remedy means that appraisal will not really work until the remedy reflects the current context
in which it is used. Absent that recognition and change in the law of appraisal, relegating plaintiffs to appraisal as an
exclusive remedy will result in an unstated and unexplained tipping in the traditional balance of the interests of majority
and minority shareholders.
C. THE CONTEXT IN WHICH MODERN APPRAISAL APPEARS
Any effort to apply appraisal, by a legislature or court, should begin with a recognition of when appraisal is used and
how that use differs from earlier times. Modern appraisal cases typically arise from a transaction in which a majority
shareholder has structured a merger or other transaction to kick the minority out of the enterprise. There are very few cases
today like early merger cases in which the majority planned an expansion or other fundamental change in the enterprise
and offered the minority the chance to come along, but the minority elected appraisal as a way out of the new venture.
In the decade after Weinberger, there were 103 reported decisions involving appraisal, a substantial increase over the
nineteen state court appraisal cases found by Professor Seligman in the previous decade. 104 Of the eighty identified
transactions involved in those cases, 105 more than eighty percent *26 involved cash-outs; only six arose in transactions
between independent corporations in which shareholders had the opportunity to continue. 106 This is a substantial change
from the early years of appraisal, when most cases appeared to involve unrelated corporations and even those that raised
possible conflicts were not cash-outs. 107
The most frequently recurring context in the decade after Weinberger was that of a majority shareholder in a widely
traded corporation seeking to force out the minority shareholders. Indeed, almost all of the cases arose in widely traded
corporations; only fourteen arose in close corporations. In the most common transactional setting, the cash-out was by
a parent corporation that controlled a subsidiary whose minority shares were widely held.
In addition, there was a significant number of cases in which a third party took over the corporation with a cash-out
as the second step of an acquisition of control from dispersed shareholders. In these transactions, the first step typically
was a tender offer by which the third party acquired at least a majority of the target's shares. When the acquisition of the
initial control in a transaction is at arm's length and the second step merger is at the same price, appraisal is not needed
to serve as a check on majority self-dealing, nor is there any need for liquidity, because cash is available by the terms of
the merger. It is not surprising that challenges to appraisal get short shrift in these cases. Unfortunately, in some of these
cases, courts have made broad statements about the exclusivity of appraisal or have narrowly interpreted the remedy in
a way that is not appropriate when the remedy is used in the more common squeeze-out cases. 108

Given the overwhelming number of cases in which a cash-out generates appraisal litigation, it is not surprising that courts
and commentators see a different focus for appraisal than existed in earlier times. Dan Fischel explicitly set out this new
purpose: appraisal functions as an implied
TABLE 1
APPRAISAL CASES 1984-1994: TOTAL TRANSACTIONS = 84
A. Cash-outs within the existing shareholder group 30
1. By majority shareholder; minority widely held: 14
2. Short form merger; minority widely held: 5
3. By majority shareholder; overall number of shareholders not specified: 4
4. Controlling shareholder, but less than majority; minority widely held: 3
5. Management buyout (MBO); no indication of majority: 4
B. Cash-out by third-party purchaser 21
6. No indication of previous majority shareholder: 5
7. Second step of acquisition of widely held corporation: 13
8. Third party purchaser of widely held corporation after previous majority shareholder had committed to 3
sell:
C. Miscellaneous cash-out 2
9. Cash-out (unspecified): 2
D. Cash-outs in close corporations 11
10. By majority shareholder: 6
11. Short form: 3
12. As second step of acquisition: 2
E. Mergers without cash-outs 16
13. Minority shareholder frozen in or seeking de facto merger treatment: 4
14. Change of jurisdiction: 1
15. Majority shareholder offering shares in parent: 2
16. Two independent companies merging: 6
17. Close corporations: 3
F. Miscellaneous 4
18. Transaction not sufficiently described: 4
*27 contractual term [between minority and majority shareholders] that sets a minimum price at which the firm ... can
be sold in situations where certain groups are more likely to attempt to appropriate wealth from other groups than to
maximize the value of the firm. 109 Some courts now use the remedy as an explicit check on opportunism, 110 yet they
have failed to recognize how the shift in the use of the remedy has left it with procedural and substantive rules that do not
fit the new context. The recognition of the current application of appraisal also suggests that concern over de *28 facto
mergers and the long-running debate over when appraisal is available is somewhat misplaced. Hideki Kanda and Saul
Levmore, like Manning before them, have shown the difficulty in coming up with a theory to explain when appraisal
is available. 111 Those questions generate only a small amount of litigation and are tied to a liquidity purpose that has
receded as a problem in modern corporations. Difficulty in resolving those questions, however, should not distract courts
and legislatures from addressing the cash-out context in which the overwhelming majority of appraisal cases arise.
III. THE UNEASY FIT OF APPRAISAL RULES AND THE CURRENT USE OF THE REMEDY
The reach of the appraisal remedy, the valuation standard for measuring the fair value of dissenters' shares, and the
procedures governing the process should all reflect the purpose of the remedy, the context in which it is now used, and the
other constraints on corporate decisionmakers available in that context. When the purpose is to let the minority leave after
the majority has changed the direction of the enterprise (a liquidity and fundamental change concern), the rules should be
different than if the purpose is to protect the minority from being forced out on terms set by the majority (an opportunism
concern). The liquidity and fundamental change concern was dominant in the early period in which appraisal was used,

but the opportunism concern clearly prevails today. The transformation of appraisal into a remedy for self-dealing 112
does not easily fit with existing appraisal statutes. Courts and legislatures are moving to mold the remedy to fit this new
context, but the hangover from earlier statutes and judicial interpretations has led to an unsupported judicial tilt in favor
of less fettered majority control of corporations.
A. LEGAL RULES DEFINING THE REACH OF APPRAISAL
Several of the more contentious issues regarding appraisal relate to the reach of the remedy. These include the market
exception, the withdrawal of appraisal rights for shareholders of surviving corporations in mergers, and the de facto
merger doctrine. All appear to focus either on providing liquidity after fundamental changes or on letting dispersed
shareholders monitor their managers on important corporate decisions. These concerns are of decreasing importance
as markets have grown to provide liquidity, and other constraints operate to insure that management decisions do not
frustrate investors' expectations in entering the enterprise.
*29 1. Denying Appraisal When Shares Are Widely Traded
The withdrawal of appraisal rights for shares that are widely traded is perhaps the most noticeable change since
Manning's call to scale down the remedy. Two states had market exceptions at the time of Manning's article (including
Connecticut, where Professor Manning had been the principal drafter of the corporations statute). 113 About half of
the states (covering the great majority of publicly held corporations) now withdraw appraisal if the corporation's stock
is traded on a stock exchange or is held by 2000 shareholders. 114 Increasingly, states are expanding the exception to
include NASDAQ stocks as well. 115
This exception clearly derives from the first period of appraisal in which the primary purpose of the remedy was to give
the minority shareholders a way out of a corporation that had taken off in a different direction. Professor Folk's reporter's
notes for the 1967 insertion of the market exception into Delaware's statute explicitly refer to the unnecessary liquidity
purpose for appraisal when markets can better perform that function. 116 Of course, to the extent that this exception turns
on one's confidence in the substitute, a lack of confidence in the market would suggest a broader appraisal remedy. When
the market exception was pulled from the Model Business Corporation Act in 1977, the drafting committee referred to the
inability of demoralized markets to protect dissenting shareholders, 117 echoing the words of the Delaware Supreme
Court of an earlier time that markets do not reflect fair value. 118
Under this view, the debate over the market exception collapses into the larger debate over efficient markets. Yet,
appraisal's reincarnation as a check on majority self-dealing makes resolving this efficiency debate unnecessary. The
more relevant point is that the price in an efficient market will provide no compensation for the self-dealing. As Professor
Fischel has *30 pointed out, if those in control of a corporation propose a transaction that is bad for the corporation
but good for the other transacting entity in which the controllers have a larger interest, the market's reaction will send
the price of the corporation's shares lower, giving no protection against the self-serving behavior. 119
Delaware and a few other states with market exceptions partially respond to this concern by including an exception to
the exception, the kind of double negative that should make any legislator's grammar teacher cringe. Even if there is a
market for the corporation's shares, appraisal rights are reinstated if the shareholders receive cash or illiquid shares. 120
Thus, as Professor Folk noted, Stockholders can be ousted from an equity position (via creditor securities or cash)
only if they remain free to exercise appraisal rights. 121 This suggests a concern about opportunism lurking in what
I have described as a liquidity provision. The exception to the exception is thus a partial counter to Fischel's concern
regarding wealth appropriation. 122 The concern about opportunism, however, is buried deep in the intricacies of the

statute. Moreover, if the concern is opportunism, it is clearly incomplete, because a corporate planner of a company with
listed shares can cash-out minority shareholders via a reverse stock split and thus avoid appraisal. 123
The apparent liquidity focus that the market exception gives to modern appraisal statutes creates confusion that can
effectively hide a reduction of constraints on majority conduct in clear conflict situations. For example, most states with
market exceptions have no exception to the exception. 124 The result is no protection against conflict transactions in
a cash-out merger of a public company. If market exceptions are continued, they should not apply to transactions put
forward by a majority shareholder.
The addition of NASDAQ stocks to the market exception seems driven by liquidity purposes, but there has been
insufficient attention to how *31 much liquidity that market provides in cash-out situations. A NASDAQ stock need
only have two market makers. Those market makers are only obligated to purchase a small portion of shares, so the
amount of shares that the market can absorb at a quoted price is quite limited. Any effort to dispose of a large block by
a shareholder who is dissatisfied with a merger will probably send the quoted prices tumbling. 125 Shareholders in such
companies have no real market for their shares. Relegating them to that market instead of appraisal for a squeeze-out
means that, effectively, they have no remedy. Shareholders of small NASDAQ corporations incorporated in states like
Indiana or Oregon with market exceptions even for cash are at great risk for mergers at one-sided prices. 126 In the guise
of promoting liquidity, legislatures have rearranged the relative rights of majority and minority shareholders.
2. Withdrawing Appraisal from Shareholders of Surviving Corporations (and Some Disappearing Corporations)
During the modern period, most states have withdrawn appraisal from shareholders of surviving corporations in a merger
if there is no substantial change in the enterprise. This threshold is often defined as an increase in the number of shares
beyond twenty percent of the pre-existing number. If the investment of the surviving corporation's shareholders has
not really changed, the law suggests that there is no sufficient reason to provide an exit, with its attendant costs to the
remaining shareholders. This change, first introduced in Delaware in 1967 in what Folk called a major innovation in
American corporate law, 127 was likely another response to Manning's attack on appraisal, its costs to the corporation,
and its misuse by minority shareholders in a traditional merger transaction.
The ALI's Principles of Corporate Governance advances this dilution threshold to forty percent, so that the amount of
change which the minority must accept has become even greater and the statutorily provided liquidity even less. 128 This
is one area in which the ALI project is likely to spur a noticeable change in state corporate law. It is consistent with
the *32 enabling approach of modern state corporations statutes, providing great freedom to those in control of
the corporation. The possibility that a company will expand is a risk that investors take when entering the enterprise,
like the risk arising from most other corporate decisions. No special protection is available to one who disagrees.
Yet this change will have only a minimal impact in practice on the rights enjoyed by minority shareholders, because
shareholders of surviving corporations subject to dilution above twenty percent never get appraisal rights anyway unless
management chooses to provide them. Planners of a business combination desiring to avoid appraisal rights for the
surviving corporation already structure the transaction as a triangular merger, a purchase of assets, or a compulsory
share exchange. 129
Shareholders of the disappearing corporation continue to receive appraisal rights under modern statutes even in
transactions between two previously unrelated companies. This might indicate a continuing liquidity role for appraisal
in those companies, but the focus on disappearing corporations is more consistent with a concern for conflict
transactions. Ronald Gilson's structural approach to corporations suggests reasons to separate surviving corporations
from disappearing corporations when considering protection for minority shareholders. 130 For surviving corporations,
even for transactions that double the size of the company, shareholders can rely on the same checks on management

that apply to every other management decision. 131 For the disappearing company, however, managers will no longer be
subject to the checks of the markets. Appraisal can protect shareholders against self-serving decisions a manager might
make in this final period prior to disappearance. 132 In Delaware, corporate planners can override this apparent concern
for shareholders of the disappearing company by structuring the transaction as a sale of assets rather than as a merger,
because shareholders of disappearing corporations in Delaware do not receive appraisal rights if the change occurs by
a sale of assets. 133
3. De Facto Mergers and the Reach of Appraisal
Claims of de facto merger may arise when the planners of a transaction choose one of the structures discussed above to
avoid appraisal rights. A *33 minority shareholder may assert that the deal is similar to other transactions for which
appraisal is given thus constituting a de facto merger and triggering a right to appraisal.
But as the liquidity purpose of appraisal has receded, shareholder efforts to get courts to find a de facto merger have been
difficult. Delaware's doctrine of independent legal significance enshrines the planner's freedom to choose either a merger,
which provides appraisal rights, or a sale of assets, which denies appraisal rights. 134 Other states accomplish the same
purpose by permitting triangular mergers with no appraisal rights for the surviving parent corporation as an alternative
to a regular merger that would provide appraisal rights. 135 A few courts recognize the possibility of judicial intervention
when planners use the flexibility of enabling statutes to deny appraisal rights to a target corporation. For example, in
an upside down acquisition the smaller company is ostensibly the surviving company and is swallowing the larger
company, but in reality the former shareholders of the larger company will own sufficient shares after the transaction
to control the combined company. Shareholders of the apparent surviving company, now radically transformed and
controlled by the shareholders of the other company, are sometimes given exit rights. 136
In contrast to Delaware's limitation of appraisal, California's statutes broaden the transactions in which appraisal
is available. 137 California defines business reorganization to give equivalent treatment to alternative business means
of accomplishing the same fundamental change. 138 Shareholders of surviving corporations receive liquidity upon
substantial change in their business, independent of any opportunistic possibility. The ALI's corporate governance
project, perhaps influenced by its California reporters, use this broader definition to codify the de facto doctrine in
limited circumstances. 139 The ALI provides liquidity after fundamental changes when the existing shareholders will not
have control of the new corporation. 140
*34 Expansion of remedies, as in the California statute, turns on the need to give shareholders some liquidity after
fundamental corporate changes. These provisions necessarily raise concerns about their possible use by minority
shareholders to make beneficial corporate transactions more expensive, a hold-up possibility parallel to that from the
preappraisal unanimity period. 141 In a closely held corporation in which there is no market check on management,
no liquidity, and more firm-specific expectations about the enterprise, appraisal could continue to perform its first
generation purpose of letting the minority out if the majority changes direction. 142 Even in larger corporations, there may
be some value to letting appraisal serve as a check on important business decisions if the transaction removes a market
check that otherwise would exist. For example, all shareholders should be provided a liquidity option if a corporation
is going private, thereby removing its disclosure obligations under the federal securities laws that previously assisted
shareholders in monitoring their investment.
It is difficult to say if appraisal is performing a liquidity function in California. And it is unlikely that appraisal is
performing this function elsewhere when management can so easily structure a transaction to avoid appraisal rights. But
the possibility of this liquidity purpose in limited circumstances should not keep the remedy from effectively protecting

shareholders in the self-dealing context in which most appraisal cases now arise. A liquidity purpose suggests valuation
standards and procedures different from what might be appropriate in a conflict transaction. Requiring appraisal to
perform two quite different functions may be causing it to perform its conflict job poorly.
The prevailing use of the appraisal remedy in conflict transactions requires a different focus and scope for the remedy.
None of the liquidity issues discussed so far in this Part are as important to the reach of appraisal as expansion of the
remedy to include cash-out techniques that are functionally equivalent to merger for squeeze-out purposes but do not
now trigger appraisal. Reverse stock splits and other amendments to a corporation's articles of incorporation have been
used to cash-out minority shareholders, but they only trigger appraisal rights under statutes in about half of the states. 143
The expansion of appraisal statutes to include amendments to articles of incorporation in fact illustrates the modern shift
to appraisal as a check on conflicts of interest. Too many gaps remain, *35 however, to make this shift meaningful. 144
In the absence of appraisal, it is more likely that a court would find a squeeze-out transaction accomplished through the
amendment process to be a breach of fiduciary duty because otherwise there would be little check on the self-interested
actions of majority shareholders. 145 Shareholders of a corporation incorporated in a state with a more limited appraisal
statute thus may have more protection, but it is risky to rely on courts understanding that connection, or on a litigant's
willingness and ability to take such a case to its conclusion. A recent Washington case illustrates the possibility of judicial
misunderstanding. In China Products North America, Inc. v. Manewal, 146 the court denied appraisal rights in a merger
expressly covered by the statute, reasoning that a merger for the purpose of changing the corporation's domicile to
Delaware was not a fundamental change that should give the minority shareholders an opportunity to get out. 147 In
focusing only on the traditional liquidity function of appraisal, the court did not recognize that changing the state of
incorporation is often the first step in a squeeze-out. 148 A corporation's transfer to Delaware, the most majoritarian-
oriented state in the country, can have a greater adverse effect on minority shareholders than many financial mergers.
B. VALUATION AND PROCEDURES
The most obvious difficulties with an appraisal statute's simultaneous application to the old and new environment are
found in the valuation standards and other appraisal procedures. Very simply, the measure of value and the procedures
that one would install if the minority were choosing to get out are often the reverse of what would be adopted if the
majority were expelling the minority at a price set by the majority.
1. Excluding Appreciation or Depreciation Attributable to the Merger Transaction
Most states define fair value available in appraisal to exclude any appreciation *36 or depreciation attributable to the
merger transaction. 149 This exception fits perfectly well in the traditional context in which the majority wants to change
the direction of the business, the minority objects, and corporate law provides the dissenter with a chance to exit. If the
minority chooses not to go with the new enterprise in the new direction, the minority has no claim to value brought about
by the merger. 150
If, however, the minority does not have a choice and is being forced out, perhaps because of an anticipated increase
in value that will only become visible after the transaction, exclusion can easily become a basis for oppression of the
minority. Early common-law cases recognized this possibility. 151 Because cash-outs were not generally permitted, this
concern did not need to be addressed further, but the common use of cash-outs in the second-generation appraisal cases
required a direct response. In 1982, New York deleted from its statute the exclusion of change in value attributable to
the transaction. 152 The Delaware Supreme Court interpreted its statute to achieve the same result without a statutory

amendment. In Weinberger v. UOP, Inc., it held that the exclusion for change in value arising from the transaction
applied only to
the speculative elements of value that may arise from the accomplishment or expectations of the
merger .... We take this to be a very narrow exception to the appraisal process, designed to eliminate
use of pro forma data and projections of a speculative variety relating to the completion of a merger.
But elements of future value, including the nature of the enterprise, which are known or susceptible
of proof as of the date of merger and not the product of speculation, may be considered. 153
*37 Five years later, in a footnote in Cede & Co. v. Technicolor, Inc., 154 the Delaware Supreme Court defined this
permissible future value to include information and insight not communicated to the market that may not be reflected
in stock prices and that if not included in appraisal would deprive minority investors of part of the true investment
value of their shares. 155 The court was careful to distinguish this information from manipulation of the transaction
or suppression of information, which would generate a separate fiduciary duty claim. Rather, it directed the focus
of appraisal to the majority's insight into their company's future based primarily on bits and pieces of nonmaterial
information that have value as a totality. 156 Recognizing the likely unavailability of this information, the court granted
the appraisal petitioner a seemingly broad mandate for investigation based explicitly on conflict of interest concerns. 157
Thus, Delaware's first-generation statute was made to fit the new use of appraisal, a decision which undoubtedly is correct
but is unlikely to be what the Delaware legislature had in mind when originally enacting the statute. The transformation
was captured by Professor Buxbaum's summation that the common law ... is well on the way to assimilating questions of
fairness of terms and legitimacy of purpose within the appraisal process, albeit by means of an appraisal remedy tailored
to the very point at issue-self-dealing and fairness. 158
The Model Business Corporation Act, most recently revised in 1984, addressed this issue by adding a qualifying
clause immediately after the exclusion: unless exclusion would be inequitable. 159 The comment to that section states
explicitly that the exception to the exclusion is to permit consideration of Weinberger factors, including rescissory
damages. Not only should an appraisal statute permit such consideration, but the changed context in which appraisal
is used today requires it. Unfortunately, the comment does not sufficiently indicate to judges that the purpose of *38
appraisal has changed and leaves open the possibility of incomplete valuation if a cash-out merger is undertaken to
exclude the minority from an anticipated rise in the value of the corporation.
A British Columbia statute affirmatively requires the inclusion of appreciation or depreciation as would be appropriate
in a squeeze-out situation. 160 Remarkably, and perhaps indicative of the confusion that appraisal's conflicting history
generates, this feature has been criticized as a contradictory inclusion in appraisal statutes since the dissenter does not
want the change and is leaving the company. This criticism seems oblivious to the plaintiff's lack of choice in a squeeze-
out context. 161 The phrasing of this statute would be helpful and seemingly essential in jurisdictions such as Oregon,
which have interpreted their appraisal statutes as intending to provide a remedy for even an arbitrary low-ball offer by
majority shareholders in a merger setting. 162
2. Minority Discounts
The context in which appraisal arises clearly affects issues such as whether the value to be paid dissenters should be
reduced because the shares reflect only a minority interest in the business. Such a difference between majority and minority
shares is often visible in real world transactions and sometimes has received judicial recognition. 163 In the appraisal
context, a clear majority of courts have ruled that it would be inappropriate to apply a minority discount. 164 Judicial
discussion of this issue draws *39 on a distinction made during the first life of appraisal, namely, that the remedy should

provide a proportional share of a going concern and not liquidation value, which could be higher or lower. 165 The price
of an individual share on the market may still be less than a proportionate amount of the going concern value of the
enterprise because the individual shares lack control. 166 Modern courts recognize that a majority setting the price in
a cash-out transaction may be tempted to take advantage of a discrepancy between market value and this other value
to squeeze out the minority:
Only in this fashion [by excluding a discount] can minority stockholders be assured that insiders in
control of a company, burdened by conflicting interests, may not purchase the enterprise at a price
less than that obtainable in the marketplace of qualified buyers and avoid paying a full and fair price
to the minority. 167
Courts generally recognize that any other rule would inevitably encourage *40 corporate squeeze-outs, 168 a concern
that is surely correct given the context in which appraisal cases arise today. If the minority were choosing to exit, this
argument would have less force.
3. Procedures
Existing appraisal procedures are aimed at deterring frivolous choices by minority shareholders that will likely impose
substantial costs on corporations seeking to implement beneficial changes. Although appraisal procedures have been
modified in recent years, they still reflect the concern about hold-ups by minority shareholders that so worried Manning
and others. In most states, appraisal requires at least four separate actions by a dissenting shareholder, with the failure
to comply with any one of these leading to the loss of appraisal rights. Shareholders must notify the corporation of their
intent to exercise appraisal rights prior to the meeting at which the merger will be considered. 169 Then the dissenters
must either vote against the merger or abstain. 170 In many states, after notice from the corporation, the dissenters
must file another demand with the corporation and deposit the share certificate with the corporation. 171 Sometimes the
shareholder's demand must include the shareholder's estimate of fair value, 172 and in some states, the dissenters must
initiate the lawsuit for appraisal. 173
If appraisal permits dissenters to drain the corporation's liquidity, which might otherwise go to productive activities, the
corporation needs to know in advance how much of a drag there will be to predict whether the cash drain is going to
prevent the completion of the transaction. 174 Given this concern, some courts have strictly interpreted these procedural
rules, throwing out appraisal when notices arrived minutes or hours after the appointed time, 175 failed to contain the
correct language, 176 *41 or failed to satisfy some other requirement. 177 A Wisconsin court, for example, refused to
accept substantial compliance with three of four shareholder requirements because of its concern that it would drastically
tilt the sensitive equilibrium of interests. 178 Such sensitivity is more appropriate in the classic appraisal setting. It should
be of much less concern when, as in the Wisconsin case, the minority was being forced out of the business, and concerns
of minority abuse of the remedy were not as relevant.
Many procedures seem ill-suited to appraisal serving as a satisfactory remedy in conflict situations. Each dissenter must
file suit, retain an attorney, and bear the expense of litigation. No provision is made for a class action or other means that
would permit shareholders in a common situation to share an attorney and other expenses of litigation easily. 179 Such
limits fit easily into a context in which dissenting shareholders have been given the opportunity to continue in a changed
enterprise but have chosen to make the corporation pay cash for their shares. These same procedures are a burden to
full recovery when the majority has decided to eliminate an entire group of shareholders, and there is a common question
about whether the price is fair.

Other rules, such as the one that prevents dissenters from withdrawing after appraisal starts, reflect a desire to protect the
majority against nuisance suits, a concern that is less likely when the majority has chosen the time, method, and price in an
appraisal action. 180 Appraisal litigation can drag on for a considerable time, and some states, including Delaware, make
no provision for minority shareholders to be paid until the litigation is over. 181 Interest payments have become common
only in recent years, *42 and Delaware still adheres to a standard practice of paying simple rather than compound
interest, 182 which can significantly reduce the minority shareholder's recovery. 183 As the ALI's corporate governance
project has stated, the issues of exclusivity, procedural simplification, and the fairness of the valuation standard (are)
inextricably linked, 184 and procedures remain a heavy weight to the effective use of appraisal. 185
Some modern decisions reflect more leniency than shown in earlier cases, 186 and there are even cases in which
corporations have been disadvantaged by the failure to comply with procedures. 187 But the severity of the requirements
and the interpretations by some courts operate as a significant drag on any real review of majority conflict. In turn, this
leads to a continued willingness by some courts to maintain an avenue, outside of appraisal, in which to provide relief
in conflict of interest situations.
C. RELATION TO OTHER REMEDIES
Nowhere is the conflict between the modern and traditional appraisal remedy more jumbled than in the context of how
appraisal should relate to other legal remedies: Is the appraisal remedy exclusive? Does the appraisal remedy include
compensation for breach of fiduciary duty? What is *43 the relation of the appraisal remedy to federal remedies and
other state remedies?
1. Exclusivity
Some early cases, particularly those involving preferred shareholders, 188 and some early appraisal statutes, such as
California's and Michigan's statutes in 1931, 189 made appraisal an exclusive remedy, but the prevailing view was to
the contrary. In the early period, appraisal was seen as an additional remedy that did not deprive shareholders of their
existing common-law remedies. Throughout this period, even as statutes became more enabling in what they permitted
majorities to do, courts recognized fiduciary limits for the benefit of minority shareholders, particularly in squeeze-out
and other conflict transactions. The Securities and Exchange Commission's 1938 report on reorganizations noted that
California's exclusivity provision allowed misuse of majority power. 190 Professor Ballantine, while generally favoring
exclusivity, noted that unless appraisal is made a more practical and adequate remedy than under present statutes,
sound legislative policy would not make it exclusive. 191
Current statutes provide little guidance on this question. Most statutes say that appraisal is exclusive unless illegality or
fraud is involved. 192 Such exceptions clearly preserve a shareholder's action for a direct misrepresentation that leads to
failure to exercise appraisal rights. Those words, however, mask a long-standing ambiguity about the extent to which
breach of fiduciary duty is included. 193 Illinois' exclusivity statute specifically excepts fiduciary duty from its reach. 194
The commentary to the Model Business Corporation Act observes that its language preserving claims that are unlawful
or fraudulent would also preserve claims based on fiduciary duty as set out in Weinberger. 195
Weinberger launched the modern movement toward greater reliance on appraisal as a check against majority self-
dealing. 196 The Delaware court decreed that the appraisal would be the minority's sole financial remedy in a squeeze-
out merger and changed the valuation standards so that the *44 remedy was better able to function in the squeeze-out

setting. 197 Yet Weinberger left considerable ambiguity about the breadth of the remedy. The court explicitly referred
to contexts in which appraisal would not be satisfactory and included fiduciary duty and self-dealing among them. 198
Indeed, the court explicitly referred to the continuation of the fairness test from Sterling v. Mayflower Hotel Corp., 199
which arose out of a transaction in which appraisal would have been available. 200
In the last decade, courts outside of Delaware have shown a clear willingness to resolve this ambiguity in favor of using
appraisal as the exclusive legal check on majority power. Courts in twelve states have found appraisal to be exclusive. 201
The exclusivity is sometimes explained because the dispute is solely about price, 202 the implication being that because
valuation is at the heart of appraisal, there is no reason not to have appraisal as the exclusive remedy for any claim that
is to be resolved by *45 payment of money. With the acceptance of cash-out mergers as being within the majority's
power and with no judicial review for a business purpose, 203 it is only a short stretch to say that one aspect of majority
power is the ability to force the minority out so long as the majority pays a fair price. Under that view, everything that a
minority might complain about could be resolved for a price and some courts have so interpreted the remedy that way,
finding appraisal the exclusive remedy for plaintiff's loss of economic advantage for alleged self-dealing, 204 or for an
arbitrary low-ball offer by the majority. 205
When a merger occurs in a setting in which the majority is on both sides of the transaction, this approach of letting the
majority shareholders force the minority shareholders out, so long as the majority shareholders pay a fair price, makes
appraisal the exclusive check on conflict of interest. The legal response to conflicts of interest in a corporation has long
been at the heart of corporate law, and, over time, corporate law has provided a variety of different responses. The early
ban on conflict transactions evolved toward judicial review of the fairness of conflict transactions. 206 In recent years,
there has been increased focus on review by an independent internal corporate decision-making body as an alternative
to intensive judicial review. 207 There is no inherent reason why valuation could not emerge as a preferred response to
monitoring conflict transactions. But elsewhere in corporate law, conflicts traditionally have triggered stricter scrutiny
than *46 what is found in the current appraisal process. If appraisal is to perform as a check on conflict, it ought to
have at least a similar amount of protection to that provided elsewhere in corporate law. It is surprisingly that courts
are willing to permit appraisal as the sole check on conflict when the remedy, as it currently exists, imposes so many
procedural steps on plaintiffs and uses promajority valuation standards.
This tie to conflict contexts outside of appraisal is evident in the Delaware exclusivity cases, which have a significantly
different flavor than cases elsewhere. There have been at least eleven Delaware decisions since Weinberger emphasizing
the continued availability of judicial review under the entire fairness test for conflict transactions leading to squeeze-
outs. 208 In the first of these cases, the Delaware Supreme Court noted that the Chancery Court had interpreted
Weinberger's exclusivity too narrowly, 209 and in later opinions the court permitted suits outside of appraisal relating to
other examples of director or majority shareholder misconduct. 210
In part, this willingness to allow a second suit reflects procedural considerations. Appraisal, the Delaware court has said,
is a limited legislative remedy in which the only defendant is the corporation. 211 Claims based on fiduciary duty are
usually brought against directors or majority shareholders, not the corporation. If the plaintiff claims that individual
defendants shuffled money out of the corporation to benefit themselves and reduce the value of the corporation, the
Delaware court has said that individuals are the proper defendants, not the corporation. 212
Apart from this procedural concern, however, these decisions evidence a *47 continuing concern of the Delaware
judiciary that conflict of interest transactions require stricter scrutiny. If there is a conflict of interest, the Delaware
court has recognized that directors lose the protection of the business judgment rule and that plaintiffs are entitled to

judicial review of the transaction under an entire fairness standard. 213 This likely imposes a tougher burden than simply
presenting evidence about valuation in an appraisal proceeding under current appraisal procedures, a difference that is
justified because of the conflict setting itself. In addition, recent Delaware decisions evidence a concern for preserving
rescissory relief as a remedy in conflict situations, relief that is broader than that usually given in appraisal, whether in
Delaware or elsewhere. 214 Until appraisal provides *48 equivalent checks, the broad interpretation of exclusivity and
folding all claims into price effectively shifts the balance of rights of minority and majority shareholders as compared to
traditional approaches to conflict transactions.
2. Appraisal's Valuation as Explicitly Including Recovery for Misuse of Majority Power that Reduces Value
If appraisal is to be effective as an exclusive remedy for conflict of interest concerns arising in a squeeze-out transaction,
the remedy should provide recovery for all alleged majority acts that reduce value (such as money going out of the
corporation to an interested party). The current judicial confusion over such coverage increases the likelihood that the
appraisal remedy will be skewed to undercompensate minority shareholders who have been forced out of corporations.
Given the Delaware Supreme Court's emphasis on appraisal as a limited legislative remedy, the court has recognized
that allegations of fraud and bad-faith have a limited place in a statutory appraisal action. 215 If majority action has the
effect of preventing shareholders from seeking appraisal, such as by making them believe that the corporation was not
worth as much as it really was, there seems little doubt that that action can be raised in a separate cause of action outside
the statutory appraisal proceeding. 216 Less clear is the extent to which approval includes claims based on majority action
that reduce the value of the business prior to the merger, such as self-dealing transactions that transfer wealth from the
corporation to an entity affiliated with the controlling shareholders.
In Cavalier Oil, the Delaware Supreme Court suggested that appraisal value can be increased to include higher earnings
that were lost because of diversion of corporate opportunity claims. Yet the court noted explicitly that this was an unusual
case and not a general rule. 217 In subsequent cases, the court has emphasized that unfair acts may be introduced for
credibility reasons in an appraisal proceeding, but not directly on the valuation question. 218 Outside of Delaware, there
is similar uncertainty. In *49 some states, courts have said that appraisal does not include claims of unfair dealing
by the majority. 219 The California Supreme Court, in contrast, has said, appraisal is as adequate a remedy for a
shareholder who bases his claim of undervaluation on breach of fiduciary duty as to one who argues that his shares were
undervalued due to a good faith dispute of their worth provided that the issue of misconduct may be litigated in an
appraisal proceeding. 220
To the extent that these claims are not included in appraisal, will a plaintiff be able to recover at all? This likelihood
is reduced by a line of cases in which courts have held that suits by minority shareholders alleging breach of fiduciary
duty die with a merger, even a cash-out merger, because derivative suits belong to the corporation and can only be
brought by one who is a shareholder of the surviving corporation or its successor. Shareholders who have been cashed-
out have been stripped of their shareholder status. Some courts have held that these shareholders thereby lose their right
to maintain a derivative suit. 221 Although courts sometimes suggest limits on such holdings when the merger is for
the purpose of depriving the shareholder of standing, courts condition such relief on this being the dominant or only
motive. 222 Given prior judicial experience with the interpretations of business purposes 223 and the judicial difficulty in
*50 separating a wrongful purpose from more benign but permissible purposes, skepticism about the effectiveness of
this doctrine is warranted. Of course, in such a setting it is all the more important that appraisal value reflect any value
to the corporation from the earlier suit. In such a setting, appraisal then becomes a substitute venue for the fiduciary
duty claim, an expansion that does not fit easily into the current Delaware view of appraisal as a simple and limited

legislative proceeding. Under that current view, there would be some temptation to view a claim that has disappeared
as not worth anything in the first place.
The ambiguity and confusion created by the Delaware cases prevent the remedy from providing a full recovery in self-
dealing transactions. This result only creates pressure for courts to provide an alternative remedy via entire fairness to
provide complete valuation not restricted by the limitations inherent in the traditional appraisal remedy. Without this
safety valve, the overall result would be an unstated and unintended tilt toward majoritarianism in squeeze-out situations.
3. Relation to Federal Remedies
The possibility of federal law has traditionally spurred reform of state corporations law. A call for federal incorporation
in the early part of the century led to the Uniform State Incorporation Act. 224 A midcentury project for federal
incorporation produced the first Model Business Corporation Act. 225 For mergers, Rule 10b-5 for a short time became
a vehicle to attack unfair use of majority power in squeeze-out situations when state law was viewed as ineffective. 226
With the Supreme Court's 1977 decision in Santa Fe Industries, Inc. v. Green, 227 the role for federal law has become
more limited, requiring deception or manipulation to trigger federal involvement. 228 Further the Court's 1991 decision
in Virginia Bankshares Inc. v. Sandberg held that even if there is deception in a squeeze-out merger situation, there is no
federal action when the minority has no state law rights that the disclosure could have supported. 229 The court did not
*51 decide whether a federal cause of action would accrue where, unlike the facts in Virginia Bankshares, the minority
shareholders are entitled to appraisal rights, and the minority shareholders allege that the misrepresentation led them
to forgo those rights. 230 Since Virginia Bankshares, lower federal courts have held that forgoing appraisal rights does
make a misrepresentation actionable under federal law. 231 The result is something of a double-or-nothing situation for
minority shareholders. If they have state-provided rights against majority action, they can pursue their state law remedy,
and they will be entitled to a federal law remedy for nondisclosure. 232 But if they have no state law action, the federal
action falls away as well. While that holding is consistent with viewing federal law as only supporting and making effective
state provided rights without establishing new shareholder rights, it makes for an unusual structure in defining majority
and minority rights in a corporation.
When combined with a strict approach to exclusivity the result is that the rich (in remedies) get richer and the poor get
poorer. Under Cede & Co., the plaintiff has a nonappraisal state remedy if fraud prevented the minority shareholders
from pursuing the appraisal remedy. 233 This is the precise situation in which the plaintiff would have a federal remedy
as well. Yet if the majority conduct reduces the value of the corporation in anticipation of a squeeze-out of the minority
shareholders, there may only be appraisal under state law, with perhaps no fiduciary duty issue and perhaps no federal
remedy either. 234 In squeeze-out situations, majority action is not easily separated into issues of fiduciary duty on the one
hand and valuation on the other so as to justify the disparity in the treatment of minority shareholders. But if appraisal
is to be the only legal remedy, unsupported by fiduciary duty or federal causes of action, the valuation standards need
to reflect the current use of majority power in squeeze-out situations. The remnants of the traditional appraisal remedy
do not leave it able to perform fully the task of regulating majority conflicts of interest in squeeze-out transactions.
*52 4. Relation to Other State Remedies
The law's increased willingness to limit minority investors to a cash claim against the corporation in a merger context has
something of a mirror image in the increased availability of a cash buyout at the instigation of a minority shareholder
under an oppression statute. 235 This buyout claim is a judicial exception to the usual corporate norm of entity
permanence. In earlier times, courts were reluctant to interfere in this internal governance, so that after a falling out

among investors, minority shareholders remained stuck with illiquid stock if no market existed for their shares and there
was no shareholders' agreement. 236 In the last decade, there has been an increased willingness of courts to order a
buyout either under the specific language of a statute or pursuant to the court's general equity powers. 237 The common
approach in the oppression and appraisal settings has been to have valuation replace fiduciary duty as a monitor of
corporate governance. 238 There is also a similarity in valuation standards in the two contexts, because both usually
seek to determine fair value. Courts reject minority discounts in both settings based on a similar concern for preventing
majority abuse. 239 What is different is the level of procedural complexity in the two settings. Valuation occurs in the
oppression cases without the complicated steps of appraisal, indicating that such appraisal procedures derive from the
liquidity purpose, not from the concern about majority conflict that characterizes today's appraisal cases. This parallel
judicial experience in balancing majority and minority interests exposes the incompleteness of the current approval
procedures in providing a complete remedy to minority shareholders and reinforces the need for change if appraisal is
to be the exclusive remedy.
CONCLUSION
The appraisal remedy today serves two distinct purposes. The traditional and now little-used purpose is to provide
liquidity for minority *53 shareholders when the majority shareholder has changed the direction of the enterprise in a
fundamental way. The second and currently dominant use is to protect minority shareholders against conflicts of interest
when the majority chooses to force the minority out of the enterprise in a cash-out merger on terms picked by the majority.
The procedures and statutory standards of appraisal still reflect the first context, but the number of transactions in which
appraisal is available for liquidity purposes today is quite limited. It is not offered in many states where there is a public
market for a corporation's shares. It is not offered to surviving corporations when there is not a substantial increase in the
number of outstanding shares. The flexibility given to corporate planners is such that most fundamental changes can be
done without appraisal if the planners so wish. Thus, there are few current situations in which appraisal serves a liquidity
purpose. In essence, the liquidity question is this: when should minority shareholders have a choice to exit even though
they have been offered the opportunity to continue in a changed enterprise? Or put another way, when is a fundamental
change in the company's business not part of the usual risk an investor takes when buying into a business? One continuing
context in which there is justification for liquidity is in a close corporation when the shareholder's interest in the enterprise
is more directly tied to an original expectation that the enterprise will not change radically. Another context is where the
managers of the corporation are in their final period and less susceptible to other constraints or where the company is
going private and thereby removing market protections for shareholders. Congress's recent enactment of appraisal rights
for roll-up transactions of limited partnership interests may illustrate a modern adaption of the traditional liquidity
concern. 240 In cases in which there is no market for a particular kind of investment, liquidity may serve a beneficial
purpose independent of squeeze-outs.
But these few remaining liquidity situations should not distort the use of this remedy in conflict situations. Even in close
corporations most appraisal actions today occur in squeeze-out situations. Similarly, it may be hard to say that appraisal
in a going private or roll-up context is not spurred by concerns over conflict of interest where the overwhelming majority
of appraisal cases occur. Statutory standards and procedures for appraisal should be directed to the conflict of interest
context in squeeze- *54 out situations. Too many of the current rules are carryovers from the earlier period when the
primary risk of abuse in the appraisal proceeding was hold-ups by minority shareholders, which is the opposite of the
risk in a squeeze-out situation in which majority shareholders with conflicts of interest are setting the terms of cash-out
transactions. Judicial interpretations have gone part way toward adapting the remedy to its modern use, but the hangover
from the earlier use leaves a legacy of confusion in which modern courts misunderstand the remedy and inappropriately
shift the balance between majority and minority shareholders. Judges today assume that appraisal was intended as an
exclusive alternative to fiduciary duty when that is not the way appraisal traditionally functioned nor is it the way current

appraisal procedures permit today's remedy to function. The result is greater freedom for majority shareholders to direct
the enterprise and less review of conflict of interest situations inherent in squeeze-out transactions.
Appraisal should not be exclusive until there is a comprehensive legislative treatment of the remedy based on the context
in which it is applied today. This would include: (1) Making appraisal available for all types of transactions by which
squeeze-outs are accomplished (and if market exceptions are continued they should not apply to conflict transactions), (2)
incorporating a valuation standard (such as exclusion of minority discounts and inclusion of appreciation flowing from
a cash-out) that takes into account the possibility of majority self-dealing, and (3) replacing procedures suspicious of
minority claims with those that would facilitate prompt and complete payment of a minority's interest in the corporation.
Footnotes
a George Alexander Madill Professor of Law, Washington University. I received many helpful comments from Dan Keating,
Ronald Mann, Curtis Milhaupt, Elliott Weiss, and Bill Carney (who doubled as a graphics consultant). I received strong
research assistance from Jeannette Valentine of the University of Virginia School of Law, Class of 1995, Brian Davis,
Washington University School of Law, Class of 1996, and Garrett Handley, Washington University School of Law, Class
of 1993.
1 Although corporate law more often borrows from ideas in the political system, there has been occasional traffic in the opposite
direction. For example, a district court recently attempted to use cumulative voting, long a staple in corporate law, as a remedy
for a violation of the Voting Rights Act. See Cane v. Worcester County Md., 847 F. Supp. 369, 374 (D. Md. 1994) (ordering
county to adopt cumulative voting system to remedy Voting Rights Act violation when evidence showed minorities unable to
elect candidate of their choice), rev'd, 35 F.3d 921 (4th Cir.), cert. denied, 115 S. Ct. 1097 (1995). See generally Lani Guinier, No
Two Seats: The Elusive Quest for Political Equality, 77 VA. L. REV. 1413, 1463 (1991) (I adopt a cumulative voting system
because it permits recognition of both the existence and intensity of minority voter preference and allows strategic voting to
enforce reciprocal coalitions.).
2 See Melvin A. Eisenberg, The Legal Roles of Shareholders and Management in Modern Corporate Decision Making, 57 CAL.
L. REV. 1, 4 (1969) (arguing that corporate law is constitutional law in that it regulates manner in which corporations are
constituted, defines rights and duties of those within corporation, and limits corporations' powers). But see Bayless Manning,
The Shareholder's Appraisal Remedy: An Essay for Frank Coker, 72 YALE L.J. 223, 226 (1962) (arguing that we have enough
problems in the corporate field without importing additional nettles from the democratic political process).
3 See DEL. CODE ANN. tit. 8, 141 (1991); REVISED MODEL BUSINESS CORP. ACT 8.01(b) (1985) (All corporate
powers shall be exercised by or under the authority of ... its board.).
4 See, e.g., Shlensky v. Wrigley, 237 N.E.2d 776, 778 (Ill. App. Ct. 1968) (It is ... fundamental in the law of corporations, that
the majority of its stockholders shall control the policy of the corporation ....) (quoting Wheeler v. Pullman Iron & Steel
Co., 32 N.E. 420, 423 (Ill. 1892)).
5 See 1 AMERICAN L. INST., PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND
RECOMMENDATIONS 2.01 (1994) [HEREINAFTER Principles of Corporate Governance] (suggesting that objective
of corporation is conducting business activities with a view to enhancing corporate profit and shareholder gain). The
ALI formulation goes on to permit deviation from this goal to comply with the law, to take account of appropriate
ethical considerations, and to devote a reasonable amount of resources to public welfare, humanitarian, educational, and
philanthropic purposes. See 1 id. See generally Lawrence E. Mitchell Cooperation and Constraint in the Modern Corporation:
An Inquiry into the Causes of Corporate Immorality, 73 TEX. L. REV. 477 (1995) (discussing moral and social responsibilities
of corporation and impact of legal constraints on moral accountability).
6 See ALBERT O. HIRSCHMAN, EXIT, VOICE, AND LOYALTY: RESPONSES TO DECLINE IN FIRMS,
ORGANIZATIONS, AND STATES 4-5 (1970) (describing exit, or ability to leave organization, as being more suited to
corporate than political realm).

7 The effect was more dramatic in Eastern Europe during the early 1990s. More recently, the effect has been mixed in Cuba,
Haiti, and Rwanda.
8 England has had appraisal since 1862, see 25 & 26 Vict., ch.89, 162 (1862) (Eng.), but it has only recently become widely
available in Canada and is seldom used in continental Europe. See ARTHUR K. KUHN, STUDY OF THE LAW OF
CORPORATIONS 137 (1912) (describing appraisal type proceeding in Italian corporate code in 1912); Hideki Kanda &
Saul Levmore, The Appraisal Remedy and the Goals of Corporate Law, 32 UCLA L. REV. 429, 458 n.98 (1985) (contrasting
Japanese appraisal rights with French and German appraisal rights in context of merger or consolidation reviewed by external
auditors).
9 See infra Table 1.
10 See 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, Pt. VII, at 291-99 (calling for major changes in
appraisal rights). The Committee on Corporate Laws of the Section of Business Law of the American Bar Association, the
group that revises the Model Business Corporation Act, currently has a task force considering appraisal rights. See generally
Mary Siegel, Back to the Future: Appraisal Rights in the Twenty-First Century, 32 HARV. J. ON LEGIS. 79 (1995). Professor
Siegel chairs that task force.
11 See CHARLES R. O'KELLEY, JR. & ROBERT B. THOMPSON, CORPORATIONS AND OTHER BUSINESS
ASSOCIATIONS, CASES AND MATERIALS 360 (1992).
12 Regulation of Communications Among Shareholders, Exchange Act Release No. 34-31,326, 57 Fed. Reg. 48,276 (1992) (to be
codified at 17 C.F.R. pts. 240, 249) (revising proxy solicitation rules exempting from regulation communications by persons
who do not seek proxy powers, announcements of how shareholder intends to vote, and reasons for voting decision).
13 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, Pt. VII, at 291.
14 Robert W. Hillman, The Dissatisfied Participant in the Solvent Business Venture: A Consideration of the Relative Permanence
of Partnerships and Close Corporations, 67 MINN. L. REV. 1, 74 (1982) (describing need to set aside funds for dissatisfied
minority shareholders as hinderance to a corporation's ability to attract financing).
15 The traditional Wall Street Rule, that investors who are dissatisfied with a company merely sell their shares rather than
take advantage of some legal right, illustrates the dominance of this choice. The norms of majority rule and entity permanence
in corporate statutes are assumed to operate against the background of a market alternative. Many of the problems of close
corporations arise from the operation of majority norms without this offsetting liquidity.
16 The effect of these markets will be limited when those in control are in a final period or otherwise do not need to respond
to the various markets. See RONALD J. GILSON, THE LAW AND FINANCE OF CORPORATE ACQUISITIONS 579
(1986) (arguing that transactions that present final period problems require additional mechanisms for shareholder protection
due to lack of post-transaction market penalties); Ronald J. Gilson, A Structural Approach to Corporations: The Case Against
Defensive Tactics in Tender Offers, 33 STAN. L. REV. 819, 839 (1981) (arguing that managerial services markets are less likely
to constrain self-dealing than to constrain inefficiency).
17 See, e.g., REVISED MODEL BUSINESS CORP. ACT 7.32 (1985). See generally F. HODGE O'NEAL & ROBERT
THOMPSON, CLOSE CORPORATIONS: LAW AND PRACTICE chs. 3-5 & 7 (3d ed. 1986 & Supp. 1995) (describing
various agreements).
18 The judicial hostility toward contracting around majoritarian norms that existed earlier in this century has dissipated. A well-
known example of this judicial hostility is McQuade v. Stoneham, 189 N.E. 234, 237 (N.Y. 1934) (holding contract requiring
best efforts to retain minority shareholder on board and in management void because such contracts limit ability of directors
to manage corporation). Yet concern for protecting majority rule and avoiding stalemate or related concerns regarding the
perceived death of corporations via dissolution still produces judicial reluctance to enforce some contracts. See O'NEAL
& THOMPSON, supra note 17, 5.06.
19 See, e.g., REVISED MODEL BUSINESS CORP. ACT 10.03, 11.03, 12.02 (1985).

20 The constraint on voting increases if a supermajority vote is required. This was once a common requirement for approval
of mergers and other fundamental corporate changes, but the number of states with such requirements is in a long-running
decline. Only 18 states still require more than a majority vote for approval of mergers or fundamental changes, down from
half just 10 years ago. Prior to 1960, supermajority was the norm in most states. For a discussion of the difference between
majority and supermajority requirements, see William J. Carney, Fundamental Corporate Changes, Minority Shareholders,
and Business Purposes, 1980 AM. B. FOUND. RES. J. 69, 95 n.106.
21 E. Merrick Dodd, Jr., Statutory Developments in Business Corporation Law, 1886-1936, 50 HARV. L. REV. 27, 48 (1936).
22 See, e.g., Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949) (upholding state law requiring minority shareholders
pursuing derivative suit to post bond based on legitimate state interest in limiting potential abuse by minority shareholders).
23 See, e.g., N.J. REV. STAT. 14A:3-6(3) (1994) (requiring that plaintiffs post bond to cover defendant's expenses); DEL. CH.
CT. R. 23.1 (1995) (requiring shareholders to make demand on directors prior to bringing suit). For a directors committee's
ability to recommend dismissal of a suit, see Zapata Corp. v. Maldonado, 430 A.2d 779, 788-89 (Del. 1981) (setting forth
test in Delaware as to whether directors' recommendation for dismissal should be followed). Similar concern about appraisal
underlies Manning's criticism of the doctrine. See generally Manning, supra note 2.
24 See 15 U.S.C. 78l(g) (1994) (security registration requirements applicable to corporation with more than 500 shareholders
and $1 million in assets).
25 See Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1120-21 (1991) (Marshall, Blackmun, Stevens, & Kennedy, JJ.,
dissenting) (asserting that shareholder can show federal cause of action by demonstrating that misrepresentation or omission
deprives her of state law remedy such as appraisal; majority avoids this issue because appraisal not available on facts of case).
26 See, e.g., Weinberger v. UOP, Inc., 457 A.2d 701, 703 (Del. 1983) (stating that majority shareholder's failure to disclose
feasibility study contributed to finding of lack of fair dealing by majority).
27 See 2 MODEL BUSINESS CORP. ACT ANN. 13.01 (3d ed. 1984 & Supp. 1994) (listing various statutes).
28 James Vorenberg, Exclusiveness of the Dissenting Stockholder's Appraisal Right, 77 HARV. L. REV. 1189, 1216-17 (1964).
Vorenberg echoed the question as put by Professor Lattin a generation before. See Norman D. Lattin, A Reappraisal of
Appraisal Statutes, 38 MICH. L. REV. 1165, 1181 (1940) (arguing that appraisal used to balance interests between the
modern corporation with its tremendous powers to make change and the shareholder who is unwilling to keep his stake in
the company where there is radical change).
29 See REVISED MODEL BUSINESS CORP. ACT 11.01 (1985).
30 See Elliott J. Weiss, The Law of Take Out Mergers: A Historical Perspective, 56 N.Y.U. L. REV. 624, 632-63 (1981) (discussing
historical development of cash-merger statutes and acceptance by courts).
31 See infra Part IIIA2.
32 See, e.g., REVISED MODEL BUSINESS CORP. ACT 11.03(g)(3), 13.02(a) (1985).
33 See generally Stephen H. Schulman & Alan Schenk, Shareholders' Voting and Appraisal Rights in Corporate Acquisition
Transactions, 38 BUS. LAW. 1529, 1529-36 (1983) (discussing effect of acquisition's structure on availability of shareholders'
rights).
34 See, e.g., CAL. CORP. CODE 181 (West Supp. 1995) (defining corporate reorganizations as mergers, exchanges of shares,
and sales of assets); see also 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, 7.21 (establishing appraisal
rights not only for business combinations but also for other actions that involuntarily eliminate a shareholder's equity interest).
35 See, e.g., Farris v. Glen Alden Corp., 143 A.2d 25 (Pa. 1958) (finding reorganization of company that benefitted directors
at minority shareholders' expense tantamount to merger, resulting in right of dissent for minority).
36 Hariton v. Arco Elecs., Inc., 188 A.2d 123 (del. 1963) (holding reorganization not de facto merger despite same result).

37 See, e.g., Terry v. Penn Central Corp., 668 F.2d 188, 194 n.7 (3d Cir. 1981) (rejecting de facto merger doctrine under
Pennsylvania law, but leaving open possibility of different result if transaction is structured so smaller corporation is absorbing
much larger enterprise, i.e., a minnow swallowing a whale).
38 See Dodd, supra note 21, at 48 (describing limitations on use of capital in Illinois corporate statute as of 1935); id. at 58-59
(arguing for further federal regulation of giant corporations).
39 There has been considerable debate about whether appraisal was constitutionally required when this additional freedom was
provided to the majority. Given the then-existing broad constitutional protections of property rights and the perceived static
nature of property, a merger arguably deprived a shareholder of property rights in replacing shares of one corporation with
shares of another that was entirely different. See Manning, supra note 2, at 246 (replacing minority shareholders' ownership
position in premerger company with stake in surviving corporation analogous to replacing a horse with a cow). Nevertheless,
some commentators asserted that it was possible to authorize consolidations without appraisal. See Henry W. Ballantine &
Graham L. Sterling, Jr., Upsetting Mergers and Consolidations: Alternative Remedies of Dissenting Shareholders in California,
27 CAL. L. REV. 644, 657 (1939) (No provision for the compensation of dissenters is necessary to the constitutionality of
a consolidation statute ... unless indeed equitable remedies are superseded.). Courts upheld some consolidations or mergers
without appraisal transactions. See, e.g., Meade v. Pacific Gamble Robinson Co., 51 A.2d 313, 317 (Del. Ch. 1947) (stating
that merger statute without appraisal for dissenters would be constitutionally unobjectionable, as statute would be part of
shareholder's contract), aff'd, 58 A.2d 415 (Del. 1948); Mayfield v. Alton Ry., Gas & Elec., 65 N.E. 100, 102 (Ill. 1902) (holding
that dissenting shareholder not entitled to appraisal because purchased stock knowing statute mergers approved by two-thirds
vote).
More recent commentators have offered alternative justifications based on fairness or efficiency. See, e.g., MELVIN A.
EISENBERG, THE STRUCTURE OF THE CORPORATION: A LEGAL ANALYSIS 75 (1976) (disputing appraisal as
constitutional response by state legislatures and contending it reflects instead concern for fairness); Carney, supra note 20,
at 75 n.19 (suggesting that legislatures granted appraisal out of concern for efficiency not fairness). However the reason was
phrased, there was widespread agreement that appraisal was a quid pro quo, giving the minority a remedy in lieu of the
common-law right to defeat the merger. See, e.g., Yanow v. Teal Indus., Inc., 422 A.2d 311, 317 n.6 (Conn. 1979); Salomon
Bros., Inc. v. Interstate Bakeries Corp., 576 A.2d 650, 651 (Del. Ch. 1989); Hariton v. Arco Elecs., Inc., 182 A.2d 22, 25 (Del.
Ch. 1962), aff'd, 188 A.2d 123 (Del. 1963).
40 Dodd, supra note 21, at 31-33 (describing Massachusetts' corporation statute in place in 1886).
41 See HERBERT HOVENKAMP, ENTERPRISE AND AMERICAN LAW, 1836-1937, at 253 (1991); see also Morton J.
Horwitz, Santa Clara Revisited: The Development of Corporate Theory, 88 W. VA. L. REV. 173, 209, 210 (1985) (stating that
railroads constituted only group of large, publicly held companies prior to 1890).
42 JAMES W. HURST, THE LEGITIMACY OF THE BUSINESS CORPORATION IN THE LAW OF THE UNITED
STATES, 1780-1970, at 86 (1970). There were about 60 railroad firms on the exchange in 1886, four express companies, and
nine miscellaneous corporations. Id.
43 See, e.g., Zabriskie v. Hackensack & N.Y. R.R., 18 N.J. Eq. 178, 193 (N.J. Ch. 1867) (stating that purpose of public railroad
incorporated by act of legislature cannot be modified without unanimous shareholder approval); Kean v. Johnson, 9 N.J.
Eq. 401, 408 (N.J. Ch. 1853) (stating that change in basic purpose for which corporation was organized requires unanimous
shareholder approval).
44 See Goldberg v. Arrow Elecs., Inc., 512 F.2d 1258, 1259 (2d Cir.) (finding that purpose of appraisal statute was to maximize
power of minority shareholders), cert. denied, 423 U.S. 835 (1975); Schenck v. Salt Dome Oil Corp., 34 A.2d 249, 252 (Del.
Ch. 1943) (same), rev'd, 41 A.2d 583 (Del. 1945); Bache & Co. v. General Instrument Corp., 198 A.2d 759, 763 (N.J. 1964)
(stating that appraisal statutes should be liberally construed because purpose is to protect minority shareholders); Jaquith &
Co. v. Island Creek Coal Co., 211 A.2d 812, 816 (N.J. Super. Ct. Ch. Div. 1965) (finding that purpose of appraisal statute
was to maximize power of minority shareholders), aff'd, 219 A.2d 514 (N.J. 1966).
Courts sometimes have said that the statute should be strictly construed. Despite the apparent confusion of the terms, such
a phrasing is aimed at the same purpose of protecting minority shareholders in a context in which the particular provision
limits majority actions. See, e.g., In re Rowe, 176 N.Y.S. 753, 754 (1919) (construing appraisal statute strictly to protect
nonconsenting shareholders so that they may not be deprived of its beneficial purpose).

45 Manning, supra note 2, at 229.

46 Id. at 230.
47 HURST, supra note 42, at 25.
48 See Anderson v. International Minerals & Chem. Corp., 67 N.E.2d 573, 576 (N.Y. 1946) (describing ability of minority
shareholders to block transaction advantages to majority under unanimous approval statutes as injustice to majority) (quoting
In re Timmis, 93 N.E. 522, 523 (N.Y. 1910)); Johnson v. Baldwin, 69 S.E.2d 585, 591 (S.C. 1952) (same).
49 See ERNEST L. FOLK, III, THE DELAWARE GENERAL CORPORATION LAW: A COMMENTARY AND
ANALYSIS 332 (1972).
50 Armstrong v. Marathon Oil Co., 513 N.E.2d 776, 782 (Ohio 1987) (describing appraisal remedy for dissenting shareholders
as nearly universal).
51 Another handful of states had specific statutes providing for appraisal in railroad consolidations only. See WALTER
C. NOYES, A TREATISE ON THE LAW OF INTERCORPORATE RELATIONS 57 n.4 (1902) (listing Alabama,
Nebraska, Ohio, South Carolina, and Wyoming).
52 See infra Figure 1. Among the first 12 states, a gap between consolidation and appraisal occurred in Illinois, Missouri,
Louisiana, Maryland, Ohio, Colorado, and Utah. See infra Appendix Table 3.
53 Again, statutes authorizing consolidation for railroad companies were much more common. Noyes's 1902 treatise notes that
nearly all the states had general consolidation statutes applicable to railroads. NOYES, supra note 51, 23, at 36. Noyes
reported 17 states with consolidation statutes for other companies, some limited to mining or other specific enterprises. Id.
at 36.
54 A handful of states resisted this trend until the 1950s. See infra Appendix Table 2. The trend toward requiring appraisal for
sale of assets developed somewhat more slowly with about 26 states providing appraisal by 1938. WILLIAM O. DOUGLAS,
SECURITIES AND EXCHANGE COMM'N REPORT ON THE STUDY AND INVESTIGATION OF THE WORK,
ACTIVITIES, PERSONNEL AND FUNCTIONS OF PROTECTIVE AND REORGANIZATION COMMITTEES at
Pt. VII (1938). There was little change through the 1950s. See 2 MODEL BUSINESS CORP. ACT ANN. 13.02 (3d ed.
1984). Lattin reported 30 in 1959. NORMAN D. LATTIN, THE LAW OF CORPORATIONS 517 (1959); see also Daniel
L. Skoler, Some Observations on the Scope of Appraisal Statutes, 13 BUS. LAW. 240, 243 (1958) (reporting 30 in 1958). The
number of states requiring appraisal for a sale of assets is now 45. See 2 MODEL BUSINESS CORP. ACT ANN. 13.02 (3d
ed. 1984). Appraisal for a minority shareholder triggered by a change in the corporation's articles of incorporation was even
slower to develop. Only 11 states provided appraisal for any kind of charter amendment by 1952 and such a trigger did not
gain widespread use until similar language was included in the Model Business Corporation Act in 1978. Compare 2 MODEL
BUSINESS CORP. ACT ANN. 81 (2d ed. 1971) with 2 MODEL BUSINESS CORP. ACT ANN. 13.02 (3d ed. 1984).
55 See HANDBOOK OF THE NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS
AND PROCEEDINGS OF THE THIRTY-EIGHTH ANNUAL MEETING 334 (1928) [hereinafter THIRTY-EIGHTH
ANNUAL MEETING] (noting that Uniform Business Corporation Act was recommended for adoption by state legislatures
at the 1928 meeting).
56 A committee on Uniform Incorporation Laws reported to the Conference in 1904 on the need for uniformity and
recommended that Congress pass a national incorporation act. See PROCEEDINGS OF THE FOURTEENTH ANNUAL
CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 95-100 (1904) [hereinafter FOURTEENTH
ANNUAL CONFERENCE]. A subsequent committee presented a series of drafts beginning in 1910. See generally
PROCEEDINGS OF THE TWENTY-FOURTH ANNUAL CONFERENCE OF COMMISSIONERS ON UNIFORM
STATE LAWS (1914). The committee's 1924 report, with its ninth draft, reported that it was omitting mergers,
consolidations, and dissolutions from the project. NATIONAL CONFERENCE OF COMMISSIONERS, REPORT OF
THE COMMITTEE ON A UNIFORM INCORPORATION ACT, 1924 PROCEEDINGS 543 (1924). By 1927, the
committee was able to report that the divergence of views previously reported was now less apparent so that mergers
and consolidations were covered. HANDBOOK OF THE NATIONAL CONFERENCE OF COMMISSIONERS ON

UNIFORM STATE LAWS AND PROCEEDINGS OF THE THIRTY-SEVENTH ANNUAL MEETING 779, 781 (1927).
This draft was the first to contain an appraisal remedy. Id. at 48.
57 See Manning, supra note 2, at 230; see also Carney, supra note 20, at 94 (explaining that because right of minority became
enforceable only at discretion of court of equity, it constituted little more than claim for breach of contract); Vorenberg, supra
note 28, at 1200 (describing reasons to maintain status of minority shareholders against trend toward treating stake as simply
fungible dollar claim).
This can also be described as substituting a liability rule for a property rule. See, e.g., Angie Woo, Note, Appraisal Rights
in Mergers of Publicly-Held Delaware Corporations: Something Old, Something New, Something Borrowed and Something
B.L.U.E., 68 S. CAL. L. REV. 719, 728 (1995) (describing appraisal rights as liability rule); Michael R. Schwenk, Note,
Valuation Problems in the Appraisal Remedy, 16 CARDOZO L. REV. 649, 657 (1994) (same). See generally Guido Calabresi
& A. Douglas Melamed, Property Rules, Liability Rules and Inalienability: One View of the Cathedral, 85 HARV. L. REV.
1689 (1972).
58 Henry W. Ballantine, Questions of Policy in Drafting a Modern Corporation Law, 19 CAL. L. REV. 465, 482 (1931) (The
statutes which have been so far drafted upon this subject are for the most part purely experimental ....).
59 Wiley B. Rutledge, Jr., Significant Trends in Modern Incorporation Statutes, 22 WASH. U. L.Q. 305, 341 (1937).
60 ROBERT S. STEVENS, HANDBOOK ON THE LAW OF PRIVATE CORPORATIONS 589 (2d ed. 1949).
61 Manning, supra note 2, at 245 n.37. Manning placed appraisal statutes within a formal view of the corporate entity, which he
saw as overshadowing the entity's reality in commerce. He concluded that this view of corporations as a field of intellectual
effort, is dead in the United States.... Those of us in academic life who have specialized in corporation law face technological
unemployment, or at least substantial retooling. Id.
62 Id. at 241 (Every extension of the appraisal remedy increases the burdens on the going enterprise.).
63 Eisenberg, supra note 2, at 85.
64 Victor Brudney & Marvin A. Chirelstein, Fair Shares in Corporate Mergers and Takeovers, 88 HARV. L. REV. 297, 304 (1974).
65 FOLK, supra note 49, at 373 (noting that it would not be surprising to see it eliminated altogether). This is a statement
he would recant in subsequent editions. See 2 ERNEST L. FOLK ET AL., FOLK ON THE DELAWARE GENERAL
CORPORATION LAW: A COMMENTARY AND ANALYSIS 262.1, at 125 (2d ed. 1988) (Subsequent developments
in the law have altered that perception.).
66 See HENRY W. BALLANTINE, BALLANTINE ON CORPORATIONS 702 (rev. ed. 1946); see also ADOLF A. BERLE,
JR. & GARDNER C. MEANS, THE MODERN CORPORATION AND PRIVATE PROPERTY 247-87 (1932) (discussing
equitable limits on apparently absolute corporate powers in several contexts including mergers, but not mentioning appraisal
as a check on majority power).
67 See FOLK, supra note 49, at 318 (stating that [p]rior to 1967, the merger technique was a second choice for Delaware
corporate counsel); George S. Hills, Consolidation of Corporations by Sale of Assets and Distribution of Shares, 19 CAL. L.
REV. 349, 350 (1931) (stating that it was fashionable to use statutory sale of assets rather than consolidation or merger);
Weiss, supra note 30, at 637 ([T]he corporate practitioner, concerned then, as now, with predictability and certainty when
structuring a major transaction, was inclined to avoid the perils of noncompliance with these merger laws by using the asset
sale route instead.) (footnote omitted).
68 See Schulman & Schenk, supra note 33, at 1532-33 (suggesting that Model Act allows for avoidance of rights granted to
shareholders of merger survivors by selecting any form of acquisition other than two-party merger).
69 Hariton v. Arco Elecs., Inc., 188 A.2d 123, 125 (Del. 1963) (finding reorganization resulting in de facto merger legal because
sale of assets statute and merger statute independent; thus, minority shareholder not entitled to remedy).

70 Manning, supra note 2, at 261-62; see also id. (concluding that [w]here the courts have a chance, they should restrict the
remedy; their instinct is right in holding the shareholders' nose to the procedural grindstone and holding his recovery to the
market value).
71 THIRTY-EIGHTH ANNUAL MEETING, supra note 55, at 405; see also In re Timmis, 93 N.E. 522, 523-24 (N.Y. 1910)
(holding that two-thirds majority can sell if they deem it best policy, but minority protected if opposed to sale); THIRTY-
EIGHTH ANNUAL MEETING, supra note 55, at 334-418 (presenting text of entire Uniform Business Corporation Act);
Changes in the Model Business Corporation Act Affecting Dissenters' Rights, 32 BUS. LAW. 1855, 1855 (1977) (introducing
modernization of appraisal provisions of Model Business Corporation Act, describing its focus in liquidity terms as response
to the tension between the desire of the company leadership to enter new fields, acquire new enterprises, and rearrange
investor rights, and the desire of investors to adhere to the rights and the risks on the basis of which they invested).
72 See Moreley Bros. v. Clark, 361 N.W.2d 763, 764 (Mich. Ct. App. 1984) (holding that minority shareholders entitled to dissent
and appraisal protection when closely held corporation issued 400% more stock to accomplish upside down acquisition);
Dynamics Corp. of Am. v. Abraham & Co., 152 N.Y.S.2d 807, 810 (App. Div.) (holding that minority shareholders entitled to
dissent and appraisal protection provided they serve notice of objection to merger prior to meeting called to act on proposal),
modified, 153 N.Y.S.2d 533 (1956).
73 See Cole v. National Cash Credit Ass'n, 156 A. 183, 187 (Del. Ch. 1931) (holding that dissenting shareholders have option to
take allotment of stock or dissociate themselves from consolidation, secure valuation of their stocks, and collect the money
as debt due).
74 See Johnson v. Baldwin, 69 S.E.2d 585, 591 (S.C. 1952) (holding that minority shareholders entitled to value of stock at
date of consolidation if minority objects thereto; stock transformed to consolidated corporation and shareholder ceases to be
shareholder in constituent corporation); see also Irving J. Levy, Rights of Dissenting Shareholders to Appraisal and Payment,
15 CORNELL L. REV. 420, 428 (1930) (arguing that dissenting shareholders' right to retire and be compensated should exist
whether or not they are able to vote against the change).
75 See MELVIN A. EISENBERG, THE STRUCTURE OF THE CORPORATION 224-51 (1976) (discussing corporate
combinations and mergers and statutory option of dissenting shareholders).
76 Yanow v. Teal Indus., Inc., 422 A.2d 311, 318 (Conn. 1979) (stating that twentieth-century implied contract idea of
corporate management has led to recognition that minority shareholders entitled to say I want out, have stock appraised,
and be paid in cash).
77 See, e.g., Troupiansky v. Henry Disston & Sons, Inc., 151 F. Supp. 609, 612 (E.D. Pa. 1957); see also In re Northeastern Water
Co., 38 A.2d 918, 922 (Del. Ch. 1944) (stating that liberal construction of appraisal statute provides registered holders remedy
when they dissent from proposed merger). This idea dates from the earliest consolidation cases. See Kean v. Johnson, 9 N.J.
Eq. 401, 414-15, 423 (N.J. Ch. 1853) (holding that majority cannot force shareholder to put funds in new venture; expansion
requires amending articles via unanimous shareholder approval); NOYES, supra note 51, 51, at 84 (to give [the minority
shareholder] the privilege of selling out instead of embarking in the new enterprise).
78 See In re San Joaquin Light & Power Corp., 127 P.2d 29, 35 (Cal. Ct. App. 1942) (finding that appraisal option for shareholder
to elect; it is established principle that dissolution cannot be used to eliminate a minority); Cole v. Nat'l Cash Credit Ass'n,
156 A. 183, 187 (Del. Ch. 1931) (finding that option is given to each dissenting shareholder); Colgate v. United States Leather
Co., 67 A. 657, 668 (N.J. Ch. 1907) (finding that minority shareholder is not put to choice until majority has put forward
merger that is legal and fair), aff'd, 72 A. 126 (N.J. 1909); Adams v. United States Distrib. Corp., 34 S.E.2d 244, 249 (Va.
1945) (finding that shareholder who does not timely dissent elects to participate in merger), cert. denied, 327 U.S. 788 (1946);
see also Levy, supra note 74, at 427 (The right to payment is regarded as an alternative one with the right of going along in
the new venture or preventing it if improper.).
79 There were fewer [s]ituations where certain groups [were] more likely to attempt to appropriate wealth because of conflict
of interest and coordination problems of minority shareholders. Daniel R. Fischel, The Appraisal Remedy in Corporate Law,
1983 AM. B. FOUND. RES. J. 875, 876.

80 Carney, supra note 20, at 97 (citing Theis v. Spokane Falls Gaslight Co., 74 P. 1004, 1006 (Wash. 1904)).
81 See In re Paine, 166 N.W. 1036, 1038-39 (Mich. 1918) (stating that it is not conceivable that legislature intended statute to be
used to drive out minority for no better reason than majority wanted to acquire minority's interest); Outwater v. Public Serv.
Corp. of N.J., 143 A. 729, 732 (N.J. Ch. 1928) (stating that fairness requires correspondingly permanent investment value),
aff'd, 146 A. 916 (N.J. 1929).
82 NOYES, supra note 51, 51, at 83.
83 Weiss, supra note 30, at 631 (arguing that courts closely regulated manner in which majority shareholders used consolidation
power); see also Ervin v. Oregon Ry. & Nav., 27 F. 625, 631 (C.C.S.D.N.Y. 1886) (arguing that majority cannot consolidate
corporation with another and impose on minority responsibilities and hazards not originally contemplated absent express
statutory authority); Colgate v. United States Leather Co., 67 A. 657, 668 (N.J. Ch. 1907) (finding that majority shareholders
cannot compel sale of minority shareholders' stock by imposing terms so illegal or unfair that consent would be neither
contemplated nor given), aff'd, 72 A. 126 (N.J. 1909); Theis, 74 P. at 1006 (finding that dissolution not proper if only purpose
is to get rid of disagreeable minority shareholders).
84 Norman D. Lattin, Equitable Limitations on Statutory or Charter Powers Given to Majority Shareholders, 30 MICH. L. REV.
645, 665 (1932); see Adolf A. Berle, Jr., Corporate Powers as Powers in Trust, 44 HARV. L. REV. 1049, 1069-72 (1931)
(arguing that respective interests of shareholders of all classes must be recognized and substantially protected). In the words
of Brudney and Chirelstein, two sagacious commentators of conflict of interest transactions: Appraisal is predicated more
on the conception of managerial incompetence in valuing the old enterprise and negotiating a price for it than on the notion
of a conflict of interest which results in a diversion of a portion of the merger proceeds to a controlling parent. Brudney &
Chirelstein, supra note 64, at 306.
85 Rutledge, supra note 59, at 341. Ballantine and Sterling argue:
[C]ompensation aims to give the dissenters a more simple and direct remedy, extending not only to cases of fraudulent changes
but to those which are regarded by the dissenter as merely unfair or disadvantageous, in order that the minority may not be
at the mercy of the majority. It offers the dissatisfied investor an assured market.
Ballantine & Sterling, supra note 39, at 657 (footnote omitted).
86 Specific exclusions of changes attributable to the transactions appeared as early as 1901 and were included in half of the
appraisal statutes by 1930. In 1931, Lattin referred to the exclusion provision as usual. Norman D. Lattin, Remedies of
Dissenting Stockholders Under Appraisal Statutes, 45 HARV. L. REV. 233, 243 (1931). In 1960, 11 states had such language.
2 MODEL BUSINESS CORP. ACT ANN. 74, at 399 (1960).
There is nothing to suggest that the remaining statutes were inconsistent, because the usual phrasing of value-as of the day
before the merger-would on its own exclude any change for the merger. The two phrasings could produce a different result
if announcement of the merger affected the price prior to the merger, a possibility that today's theories of efficient markets
clearly would embrace, but one not likely on the horizon of statute writers early in the twentieth century. See 2 JAMES C.
BONBRIGHT, THE VALUATION OF PROPERTY 830 (1937) (stating that Ohio and several other states expressly provide
for exclusion, and that even in absence of statutes, this position has been taken by New York Court of Appeals in In re Fulton,
178 N.E. 766, 768 (N.Y. 1931), and asserting that as general principle this rule is correct).
87 See STEVENS, supra note 60, at 590 (stating that appraisal can so drain corporation as to make it either practically impossible
to continue in business or make contemplated merger undesirable to other corporation); Manning, supra note 2, at 234 (stating
that demand for a cash pay-out to shareholders often comes at a time when the enterprise is in need of every liquid dollar it can
put its hands on); see also Bache & Co. v. General Instrument Corp., 198 A.2d 759, 763 (N.J. 1964) (stating that corporation
is entitled to know number of dissenting shareholders in advance so that it may guide its actions accordingly).
88 See, e.g., Act of Aug. 14, 1931, ch. 862, 369, 1931 Cal. Stat. 1762, 1817-18; Act of June 16, 1931, Pub. L. No. 327, 44,
54, 1931 Mich. Pub. Acts 568, 583-84, 588-89.
89 New York passed such legislation in 1961, N.Y. BUS. CORP. LAW 902(a)(3) (McKinney 1986); Delaware in 1967, Act
of July 3, 1967, ch. 50, 262, 56 Del. Laws 151, 219-21 (1967); New Jersey in 1968, N.J. STAT. ANN. 14A:10-1(2)(c),

10-5(1) (West 1969); and the Model Business Corporation Act in 1969, 2 MODEL BUSINESS CORP. ACT ANN. 71-72,
at 352 (2d ed. 1971).
Cash had been included in some statutes as early as the 1920s but not for the purpose of permitting cash-outs. See Weiss, supra
note 30, at 632-33 (suggesting that contemporary judicial and legal opinion were hostile to take-outs and did not consider
legislatures to have approved take-outs by these statutes). New York permitted cash-outs for utilities in 1936 and they were
extended to short form mergers (in which the controlling group owned 95%) for any corporation in 1949, but there were only
a handful of cash-outs that survived judicial scrutiny during this time. See id. at 641, 646 (stating that during the 1940's and
early 1950's, state courts approved only one take out merger).
90 See Stauffer v. Standard Brands, Inc., 187 A.2d 78, 79 (Del. 1962) (holding that minority shareholders failed in challenge
of short form merger statute when court found, in absence of fraud, exclusive remedy to be appraisal and cash payment);
Coyne v. Park & Tilford Distillers Corp., 154 A.2d 893, 896 (Del. 1959) (holding that minority shareholders failed in challenge
of cash merger statute when court found statute more than just procedural and construction of cash obvious); David J.
Greene & Co. v. Schenley Indus., Inc., 281 A.2d 30, 35 (Del. Ch. 1971) (holding that minority shareholders failed in attempt
to enjoin parent-subsidiary merger when court found value of cash and debentures approximated by price shares traded on
stock exchange and not grossly unfair). Even these decisions seemed to reflect a liquidity concern. See R. Franklin Balotti,
The Elimination of the Minority Interests By Mergers Pursuant to Section 251 of the General Corporation Law of Delaware, 1
DEL. J. CORP. L. 63, 75 (1976) (suggesting cash-out result of Stauffer and Coyne would not be as easy if consideration were
debentures and not cash: Until a court has spoken definitively on the use of debentures, such a merger should be viewed
with suspicion.).
91 Weiss, supra note 30, at 653 (stating that minority shareholders were adequately protected as long as they had appraisal rights).
92 FOLK, supra note 49, at 391 n.152 (This theory is stated in the Reporter's comments on section 262(k), written immediately
after enactment of the 1967 revision.). Professor Folk was the reporter for the 1967 revision.
93 See 2 MODEL BUSINESS CORP. ACT ANN. 11.02, 11.03 (3d ed. 1985) (section 11.02 provides for share exchange and
11.03(g)(3) imposes the 20% limit).
94 FOLK, supra note 49, at 318. The committee that deleted the market exception from the Model Business Corporation Act
in 1977 noted that the 20% exception already removed appraisal for shareholders of a larger company absorbing a much
smaller company, where the committee viewed the need for the stock market exception as strongest. See Alfred F. Conard,
Amendments of Model Business Corporation Act Affecting Dissenters' Rights (Sections 73, 74, 80 and 81), 33 BUS. LAW.
2587, 2595-96 (1978).
95 Weiss, supra note 30, at 653. This was emphatically illustrated in a federal case, in which Judge Mansfield pointed out the
deficiencies of the remedy. Green v. Santa Fe Indus., Inc., 533 F.2d 1283, 1298 n.4 (2d Cir. 1976) (In short, the controlling
shareholders have every incentive to freeze out the outsiders since, even if the appraisal system functions perfectly, by the terms
of the statute the insiders alone capture all of the prospective gains associated with the merger.), rev'd, 430 U.S. 462 (1977).
96 457 A.2d 701 (Del. 1983).
97 See id. at 704, 715. In Singer v. Magnavox Co., 380 A.2d 969 (Del. 1977), overruled by Weinberger v. UOP, Inc., 457 A.2d 701
(Del. 1983), the Delaware Supreme Court reversed a decision that had interpreted previous Delaware cases to stand for the
proposition that a merger designed primarily to eliminate minority shareholders was not an improper use of merger statutes.
Instead, the Delaware Supreme Court provided minority shareholders with an additional remedy-they could challenge a merger
if it lacked a business purpose. Id. at 979-80. That decision came shortly after a U.S. Supreme Court decision raising the
specter of federalizing the law on mergers. See Santa Fe Indus., Inc. v. Green, 430 U.S. 462 (1977). Although the Supreme
Court reversed the Second Circuit, and gave a narrow construction to fraud under Rule 10b-5, the Court did note that [t]here
may well be a need for uniform federal fiduciary standards to govern mergers such as that challenged in this complaint, and
in a footnote it cited Professor William Cary's famous article arguing for comprehensive federal fiduciary standards. Id. at
479-80 & n.17 (quoting William L. Cary, Federalism and Corporate Law: Reflections Upon Delaware, 83 YALE L.J. 663, 700
(1974), in which Cary argues for frontal attack by using or implementing new federal statute rather than manipulating every
kind of corporate dispute into federal court under Rule 10b-5 and other provisions of federal securities laws).

98 457 A.2d at 712-13. At separate points in the opinion the Court refers to appraisal as plaintiff's monetary remedy, the
financial remedy available to minority shareholders in a cash-out merger, and mandating a stockholder's recourse to the
basic remedy of an appraisal. Id. at 714-15.
99 See Coggins v. New England Patriots Football Club, Inc., 492 N.E.2d 1112, 1117 (Mass. 1986) (applying business purpose
test because [t]he dangers of self-dealing and abuse of fiduciary duty are greatest in freeze-out situations like the Patriots
merger, where a controlling stockholder and corporate director chooses to eliminate public ownership); Alpert v. 28 Williams
St. Corp., 473 N.E.2d 19, 24 (N.Y. 1984) (holding that two-step merger valid as long as justified by independent corporate
business purpose and transaction as whole is fair to minority shareholders).
100 See Lewis v. Clark, 911 F.2d 1558, 1560-61 (11th Cir. 1990) (citing Delaware and Florida corporations statutes in concluding
that [n]othing in these statutes expressly permits stockholders of the same class of stock to be differently treated in requiring
minority shareholders to take cash). But see NoDak Bancorporation v. Clarke, 998 F.2d 1416, 1423-24 (8th Cir. 1993)
(disagreeing with Lewis and asserting that law has moved away from longstanding equity tradition referred to in Lewis and
modern view is to allow freeze-out mergers).
101 See infra note 201 and accompanying text.
102 See Kahn v. Lynch Communications Sys., Inc., 638 A.2d 1110, 1117 (Del. 1994); Shell Petroleum, Inc. v. Smith, 606 A.2d 112,
114 (Del. 1992); Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1186 (Del. 1988); Rosenblatt v. Getty Oil Co., 493 A.2d 929,
931 (Del. 1985); In re Radiology Assocs., Inc. Litig., 611 A.2d 485, 487 (Del. Ch. 1991); Citron v. E.I. Du Pont de Nemours &
Co., 584 A.2d 490, 500 (Del. Ch. 1990); Sealy Mattress Co. of N.J. v. Sealy, Inc., 532 A.2d 1324, 1333 (Del. Ch. 1987); Rabkin
v. Philip A. Hunt Chem. Corp., 547 A.2d 963, 969 (Del. Ch. 1986); Merritt v. Colonial Foods, Inc., 505 A.2d 757, 762-63
(Del. Ch. 1986); Edick v. Contran Corp., No. 7662 (Del. Ch. Mar. 18, 1986), reprinted in 12 DEL. J. CORP. L. 244 (1986);
Glassman v. Wometco Cable TV, Inc., No. 7307 (Del. Ch. June 19, 1985), reprinted in 11 DEL. J. CORP. L. 649 (1985).
Four of the above opinions (Cede, Citron, Rosenblatt, and Merritt) related to transactions occurring prior to the Weinberger
decision in which the Delaware Supreme Court purported to make appraisal plaintiff's sole financial remedy, but there is no
indication that appraisal would be the exclusive remedy if the transactions were post-Weinberger. Compare those decisions
with the decisions that come after Weinberger and involve transactions occurring before the announcement of the Weinberger
decision, in which the courts specify they are applying the quasi-approval remedy provided in Weinberger for those situations
in which Weinberger would make appraisal exclusive. See Kahn v. Household Acquisition Corp., 591 A.2d 166 (Del. 1991)
(transaction arose in 1979-80); Patents Management Corp. v. O'Connor, No. 7110 (Del. Ch. June 10, 1985), reprinted in 11
DEL. J. CORP. L. 693 (1985) (transaction arose in 1982).
103 The Principles of Corporate Governance states:
Although these improvements have significantly reduced the costs of exercising the remedy, problems still remain with the
efficacy of appraisal procedures .... [E]xclusivity is justified only if (i) the procedures applicable to the appraisal remedy
minimize those barriers that now inhibit its exercise by eligible shareholders, and (ii) some limited exceptions to exclusivity are
recognized in those circumstances where conflicts of interest are most apparent.
2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, Pt. VII, at 294-95.
104 Joel Seligman, Reappraising the Appraisal Remedy, 52 GEO. WASH. L. REV. 829, 829 n.3 (1984); see also Elmer J. Schaefer,
The Fallacy of Weighting Asset Value and Earnings Value in the Appraisal of Corporate Stock, 55 S. CAL. L. REV. 1031, 1032
& n.6 (1982) (stating that appraisal statutes apply to all mergers, but, in practice, most [appellate] cases ... involve conflicts
of interest, and noting that 11 of 13 cases in recent compendium of cases involved self-dealing) (citing Note, The Dissenting
Shareholder's Appraisal Remedy, 30 OKLA. L. REV. 629, 641-42 (1972)).
105 Many of the transactions generated multiple decisions either of the same case or related cases arising from the same transaction.
The cases were taken from the Westlaw key number for appraisal (Corporations 584) from 1984 through the first part of 1994.
The results are presented in Table 1. The 80 transactions referred to in the text does not include the four miscellaneous cases
that lacked sufficient facts to catalogue the transactions.
106 See infra Table 1.

107 To compare the modern cases in Table 1 to the early appraisal period, I reviewed appraisal cases from the Decennial Digests
between 1896 and 1936 under the same key number (Corporations 584) used to collect the cases analyzed in Table 1. Of the 56
transactions represented in those cases (as with the modern sample there were transactions generating multiple opinions), 19
showed a majority shareholder with an interlocking directorate or some other possible conflict. Note that because cash-outs
were not permitted at this time, the minority shareholders usually could continue in the new enterprise if they wished. Self-
dealing did occur in this period. See Carney, supra note 20, at 71-72 & n.11 (discussing rule of absolute voidability of self-
dealing transactions and its subsequent erosion). It was not, however, the focus of the appraisal remedy. For a discussion of
the early history of appraisal, see supra Part IIA.
108 See Armstrong v. Marathon Oil Co., 513 N.E.2d 776, 782 (Ohio 1987) (discussing development of appraisal as remedy for
minority shareholders).
109 Fischel, supra note 79, at 876.
110 See BNE Mass. Corp. v. Sims, 588 N.E.2d 14, 19 (Mass. App. Ct. 1992) (finding that purpose of appraisal is to assure minority
shareholders that those in control of enterprise will not obtain unfair advantage); Endicott Johnson Corp. v. Bode, 338 N.E.2d
614, 617 (N.Y. 1975) (finding that fair value rather than market value of stock protects dissenting shareholders from being
forced to sell at values arbitrarily and unilaterally fixed by those who dominate corporation).
111 See Kanda & Levmore, supra note 8, at 463 (observing that appraisal statutes are difficult, if not impossible, to explain
perfectly).
112 See supra Table 1.
113 Manning, supra note 2, at 261 (North Carolina and Connecticut); see Yanow v. Teal Indus., Inc., 422 A.2d 311, 318 (Conn.
1979) (describing Professor Manning as principal author).
114 See 2 MODEL BUSINESS CORP. ACT ANN. 11.01 (3d ed. 1985) (listing merger statutes for all 50 states). Because
Delaware and other states with a large share of incorporated businesses have a market exception, the number of corporations
governed by the rule exceeds the percentage of states that have adopted it. See Seligman, supra note 104, at 835 n.21 (stating
that 73% of U.S. corporations were incorporated in one of 25 states showing stock market exception to appraisal process).
115 See infra note 125 and accompanying text.
116 See FOLK, supra note 49, at 391.
117 See Changes in the Model Business Corporation Act Affecting Dissenters' Rights, supra note 71, at 1862; Conard, supra note
94, at 2595-96.
118 See Chicago Corp. v. Munds, 172 A. 452 (Del. Ch. 1934). Compare Eisenberg, supra note 2, at 81 (arguing that little has
changed since then) with Fischel, supra note 79, at 884 (arguing that notion of capital markets as inefficient is contradicted
by large and growing body of evidence).
119 See Fischel, supra note 79, at 885.
120 DEL. CODE ANN. tit. 8, 262(b)(2) (1991 & Supp. 1994).
121 FOLK, supra note 49, at 395 (explaining that unavailability of certain permissible varieties of consideration will trigger
appraisal rights).
122 See Fischel, supra note 79, at 885 (The availability of appraisal rights where the consideration received is cash represents a
recognition ... that appraisal should be available when the danger of appropriation is the greatest.).
123 In a reverse stock split, an amendment to the corporation's articles of incorporation (usually passed by a majority vote of
the shareholders) reduces the number of outstanding shares, so that, for example, every 10 existing shares are converted into
one new share. The amendment specifies that any fractional shares are converted into cash. If the ratio is large enough (e.g.,
every 700 shares converted into one share), the effect is to leave with fractional shares all but the majority shareholder, thereby

cashing out minority shareholders. See 1 F. HODGE O'NEAL & ROBERT THOMPSON, O'NEAL'S OPPRESSION OF
MINORITY SHAREHOLDERS 5.10 (2d ed. 1985).
124 See, e.g., IND. CODE 23-1-22-8 (1994); OR. REV. STAT. 50.554 (1993).
125 See NATIONAL ASSOCIATION OF SECURITIES DEALERS, SECURITIES DEALERS MANUAL 1808 (1994); John
C. Groth & David Dubofsky, The Liquidity Factor, in THE NASDAQ HANDBOOK 361 (1987). As Groth and Dubofsky
illustrate:
Each specialist's bid/ask quote holds for at least 100 shares. Similarly, each market maker must be willing to trade a minimum
of 100 shares. Thus, if several dealers all quote the same or nearly the same bid/ask prices, then jointly they are effectively
good for several hundred shares at the posted prices.
Id. at 368. The bid/ask spread does not reflect the price change that is necessary for a large block of shares to trade, so that
if there are only two market makers obligated for only 100 shares each, a large shareholder may have no liquidity at all or
only at substantially below the traded price. Id. at 370.
126 See IND. CODE 23-1-22-8 (1994); OR. REV. STAT. 50.554 (1993).
127 FOLK, supra note 49, at 318.
128 See 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, 7.21(a).
129 The Official Comment to the Model Business Corporation Act section that made a similar allocation as to voting rights
makes the direct admission: This anomaly reflects a compromise among basically conflicting points of view. 2 MODEL
BUSINESS CORP. ACT ANN. 11.03 cmt. 2 (3d ed. 1985). Because appraisal rights turn on voting rights, the anomaly
extends to appraisal.
130 See GILSON, supra note 16, at 579 (arguing that under structural approach there is role for legal constraints when market
constraints on managerial behavior fail).
131 See supra text accompanying notes 15-26.
132 See GILSON, supra note 16, at 579.
133 See DEL. CODE ANN. tit. 8, 261 (1991).
134 See Hariton v. Arco Elecs., Inc., 188 A.2d 123 (Del. 1963).
135 See Schulman & Schenk, supra note 33, at 1529.
136 See Terry v. Penn Central Corp., 668 F.2d 188, 194 n.7 (3d Cir. 1981) (refusing to apply de facto merger doctrine but noting
[a] different result might be reached if here, as in Farris, the acquiring corporation were significantly smaller than the acquired
corporation such that the acquisition greatly transformed the nature of the successor corporation); Applestein v. United Bd.
& Carton Corp., 159 A.2d 146 (N.J. Ch.) (applying de facto merger doctrine to situation in which shareholder of disappearing
corporation would acquire effective control of surviving corporation), aff'd, 101 A.2d 474 (N.J. 1960).
137 See CAL. CORP. CODE 181, 1001, 1201, 1300 (West 1990 & Supp. 1995).
138 Id. 181 (codifying de facto merger doctrine so right of shareholders in corporate combination does not depend upon form
in which transaction is cast).
139 See 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, 7.21.
140 Melvin Eisenberg, Chief Reporter for the ALI corporate governance project, earlier provided the framework for the California
statute. The coreporters for part seven were Marshall Small, a San Francisco practitioner, and Ronald Gilson, a Stanford
law professor.
141 See supra note 43 and accompanying text.

142 See Robert B. Thompson, Squeeze-Out Mergers and the New Appraisal Remedy, 62 WASH. U. L.Q. 415, 432-34 (1984)
(arguing that greater difficulty in valuation of close corporation and different expectations of shareholders requires tighter
regulation of squeeze-out mergers in closely held corporations).
143 See 1 O'NEAL & THOMPSON, supra note 123, 5.10.
144 See Whetstone v. Hossfeld Mfg. Co., 457 N.W.2d 380 (Minn. 1990) (upholding appraisal for amendment to articles of
incorporation removing veto right stating that enhanced availability of appraisal will deter oppression).
145 See, e.g., Lerner v. Lerner, 511 A.2d 501, 501 (Md. 1986) (affirming preliminary injunction against reverse stock split); cf.
Sullivan v. First Mass. Fin. Corp., 569 N.E.2d 814, 817 (Mass. 1991) (permitting common-law appraisal right: Certainly
objecting minority shareholders must have a means of challenging the fairness of a price dictated to them by the majority.).
146 850 P.2d 565 (Wash. Ct. App. 1993).
147 Id. at 568 (stating that [t]he purpose of [appraisal] is to protect the property rights of dissenting shareholders from actions by
majority shareholders which alter the character of [the dissenters'] investment) (quoting FLETCHER CYC. CORP. 5906.1
(perm. ed.)).
148 See 1 O'NEAL & THOMPSON, supra note 123, 5.24 (describing move of part of corporation to different jurisdiction as
early step in squeeze play).
149 See REVISED MODEL BUSINESS CORP. ACT 13.01 cmt. (1985) (indicating that majority of states adhere to goal of
preserving minority shareholders prior right as shareholder).
150 See American Gen. Corp. v. Camp, 190 A. 225, 228 (Md. 1937) (stating that [s]ince the dissentient will not unite with the
majority [in effecting the merger], the value of his stock should not be affected by a corporate change in which he refused to
participate); In re Fulton, 178 N.E. 766, 768 (N.Y. 1931) (holding that dissenting stockholder is not entitled to share in an
enhanced value of stock due to the sale which he has opposed and from which he dissents).
151 See Jones v. Missouri-Edison Elec. Co., 144 F. 765, 779 (8th Cir. 1906) (holding that because of self-dealing, minority gets
any increase of value from the transaction).
152 1982 N.Y. Laws 202 9; see Cawley v. SCM Corp., 530 N.E.2d 1264, 1267 (N.Y. 1988) (finding that by adding all
relevant factors and deleting change from merger, legislature evinced intent that postmerger factors should enter valuation
computation).
153 Weinberger v. UOP, Inc., 457 A.2d 701, 713 (Del. 1983). Prior to Weinberger, Brudney and Chirelstein concluded that such
an element [a portion of the gain anticipated from the merger] has never been included in valuation in appraisal proceedings,
and indeed would be altogether contrary to their purpose. Brudney & Chirelstein, supra note 64, at 307 n.28.
154 542 A.2d 1182 (Del. 1988).
155 Id. at 1187 n.8.
156 Id.
157 Id. The court concluded with a quotation from Harvard Law School Dean Robert Clark, suggesting a detailed investigation
into the facts that is warranted by the acute conflict of interest and the potential for investor harm that is inherent in the
freezeout transactions. Id. (quoting ROBERT C. CLARK, CORPORATE LAW 12.2, at 508 (1986)).
158 Richard M. Buxbaum, The Internal Division of Powers in Corporate Governance, 73 CAL. L. REV. 1671, 1721 (1985).
159 REVISED MODEL BUSINESS CORP. ACT 13.01 (1985). A similar exclusion had been included in the predecessor to
chapter 13, 81(a)(3) of the prior Model Act after its revision in 1977. The comment noted that the exception is for squeeze-
outs when a dissenter is excluded against his will from continued participation in the altered enterprise by some method such
as a cash merger. See Changes in the Model Business Corporation Act Affecting Dissenters' Rights, supra note 71, at 1874.

The comment then went on to address the more usual situation, where the dissenter refuses to maintain a continuing interest
in the altered enterprise, where the general rule should prevail. Id. (emphasis added).
160 R.S.B.C. ch.59, 231(5) (1979) (Can.) (The price to be paid to a dissenting member for his shares shall be their fair value as
of the day before the date on which the resolution ... was passed, including any appreciation or depreciation in anticipation
of the vote on the resolution ....).
161 Anders Braun & Michael Lansky, The Appraisal Remedy for Dissenting Shareholders in Canada: Is It Effective?, 8
MANITOBA L.J. 683, 704 (1978).
162 See Stringer v. Car Data Sys., Inc., 841 P.2d 1183 (Or. 1992).
163 Mendel v. Carroll, 651 A.2d 297, 305 (Del. Ch. 1994) (The law has acknowledged, albeit in a guarded and complex way, the
legitimacy of the acceptance by controlling shareholders of a control premium.).
164 See Cavalier Oil Corp. v. Harnett, 564 A.2d 1137, 1145 (Del. 1989) (holding minority discount inappropriate); In re Valuation
of Common Stock of McLoon Oil Co., 565 A.2d 997, 1008 (Me. 1989) (same); Rigel Corp. v. Cutcahll, 511 N.W.2d 519, 526
(Neb. 1994) (same); see also Hunter v. Mitek Indus., Inc., 721 F. Supp. 1102, 1107 (E.D. Mo. 1989) (stating that purpose is to
give minority shareholder value of what he owned, i.e., proportionate interest in going concern); Brown v. Allied Corrugated
Box Co., 154 Cal. Rptr. 170, 176 (Ct. App. 1979) (holding devaluation incorrect when purchaser is already in control of
corporation); Walter S. Cheesman Realty Co. v. Moore, 770 P.2d 1308, 1312-13 (Colo. Ct. App. 1988) (holding devaluation
inappropriate when corporation faces imminent dissolution); Richardson v. Palmer Broadcasting Co., 353 N.W.2d 374, 379
(Iowa 1984) (noting that devaluation contrary to spirit of fair value determinations for minority); Woodward v. Quigley, 133
N.W.2d 38, 42-43 (Iowa) (holding fair value to be fraction of worth of corporation, not value of number of shares in hands
of particular shareholder), modified on other grounds, 136 N.W.2d 280 (Iowa 1965); MT Properties, Inc. v. CMC Real Estate
Corp., 481 N.W.2d 383, 388 & n.5 (Minn. Ct. App. 1992) (adhering to purpose of appraisal statute, protecting fair value of
stock to minority holders, even in nonsqueeze-out context); Columbia Mgt. Co. v. Wyss, 765 P.2d 207, 213-14 & n.8 (Or. Ct.
App. 1988) (holding devaluation incorrect when corporation faces imminent dissolution); Charland v. Country View Gold
Club, Inc., 588 A.2d 609, 611-12 (R.I. 1991) (arguing that if discount allowed, majority could freeze out minority at low price,
then dissolve corporation and get full value for shares); Robblee v. Robblee, 841 P.2d 1289, 1295 (Wash. Ct. App. 1992)
(finding that there is no justification for minority discount when there is no market for shares and majority has strong incentive
to buy them). But see Hernando Bank v. Huff, 609 F. Supp. 1124, 1126 (N.D. Miss. 1985) (asserting that minority shares
may not be valued as controlling share), aff'd, 796 F.2d 803 (5th Cir. 1986); Perlman v. Permonite Mfg. Co., 568 F. Supp.
222, 222-23 (N.D. Ind. 1983) (same), aff'd, 734 F.2d 1283 (7th Cir. 1984); Atlantic States Constr., Inc. v. Beavers, 314 S.E.2d
245, 251 (Ga. Ct. App. 1984) (focusing on value of stock as held by dissenters); Stanton v. Republic Bank of Chicago, 581
N.E.2d 678, 682 (Ill. 1991) (allowing trial court discretion to discount or not); Moore v. New Ammest, Inc., 630 P.2d 167, 177
(Kan. Ct. App. 1981) (citing control of corporate decisions as element of value of stock unless corporation about to be sold);
Armstrong v. Marathon Oil Co., 513 N.E.2d 776, 789 (Ohio 1987) (directing trial court to look at active market for stock to
determine fair value and assess what market would discount); Blasingame v. American Materials, Inc., 654 S.W.2d 659, 666-67
(Tenn. 1983) (adopting Delaware rule requiring three methods of valuation: asset value; market value; and investment or
earning value, which takes into consideration minority status).
165 See Chicago Corp. v. Munds, 172 A. 452, 455 (Del. Ch. 1934) (noting difference between New Jersey and Delaware statutes;
absence of word market in Delaware statute allowed flexibility in method of appraisal); In re Fulton, 178 N.E. 766, 768
(N.Y. 1931) (stating that when corporation not dissolving, market quotation should be considered, but not decisive).
166 See BNE Mass. Corp. v. Sims, 588 N.E.2d 14, 19 (Mass. App. Ct. 1992) (interpreting statute to require determination of
what willing buyer would pay for enterprise as a whole); see also Rapid-American Corp. v. Harris, 603 A.2d 796 (Del. 1992)
(holding that corporation's valuation should include any control premium that results from owning 100% of subsidiaries). But
cf. King v. F.T.J., Inc., 765 S.W.2d 301 (Mo. Ct. App. 1989) (upholding trial court's use of 7% minority discount).
167 Sims, 588 N.E.2d at 19 (holding that in legal, nonfraudulent, arms-length transaction, dissenters should receive amount
received by all other stockholders).

168 In re Valuation of Common Stock of McLoon Oil Co., 565 A.2d at 1005 (arguing that minority discounting transfers wealth
from minority to majority, encouraging freeze-outs).
169 See REVISED MODEL BUSINESS CORP. ACT 13.21(a)(1) (1985).
170 See id. 13.21(a)(2).
171 See id. 13.23.
172 See, e.g., PA. STAT. ANN. tit. 15, 1578 (Supp. 1995). The more common provision is that the shareholder may include an
estimate of fair value.
173 See, e.g., DEL. CODE ANN. tit. 8, 262(e) (1991); LA. REV. STAT. ANN. 12:131(E) (1994); N.C. GEN. STAT. 55-13-30
(1990); OKLA. STAT. ANN. tit. 18, 1091(E) (West 1986 & Supp. 1994-95).
174 See Manning, supra note 2, at 234-35 (citing primary danger as inability of corporations to find out number of dissenters until
appraisal deadline, after transaction is finalized).
175 See Gibson v. Strong Co., 708 S.W.2d 603, 604-05 (Ark. 1986) (disallowing objection made one and one-half hours after vote);
Tabbi v. Pollution Control Indus., Inc., 508 A.2d 867, 870-71 (Del. Ch. 1986) (shareholder whose demand letter was delivered
on morning of shareholders' meeting but after meeting occurred was not entitled to relief even though delay could have been
attributed to letter carrier; plaintiff did not do any follow-up to assure demand had been perfected); Sarrouf v. New England
Patriots Football Club, Inc., 492 N.E.2d 1122, 1130 (Mass. 1986) (finding that three shareholders whose notice of objection
did not arrive before taking of merger vote were not entitled to relief). But see In re Olson v. Tufford, 392 N.W.2d 281, 284-85
(Minn. Ct. App. 1986) (excusing written demand for supplemental payment 16 days after statutory period had expired and
shareholder had orally advised company of intention to make claim); In re Fair Value of Shares of Bank of Ripley, 399 S.E.2d
678, 684 (W. Va. 1990) (holding that shareholder who failed to tender shares timely for notation did not lose dissenters' rights
if delay was insubstantial and corporation not prejudiced; court noted that statute was not model of clarity).
176 See McCall v. McCall Enter., Inc., 578 So. 2d 260 (La. Ct. App. 1991) (finding that bank acknowledgement required by statute
filed two days after demand); Solomon v. Atlantis Dev., Inc., 516 A.2d 132 (Vt. 1986) (noting that plaintiff objected but did
not file written objection). But see Tabbi, 508 A.2d at 871 (finding that letter saying we feel that a detailed analysis [should]
be made sufficiently expressed shareholder's dissatisfaction and implied request for appraisal remedy).
177 See Sornberger v. Chesapeake & O. Ry., 566 A.2d 503, 509-10 (Md. Ct. App. 1989) (holding that complaint filed within time
period specified for demand cannot suffice as functional equivalent of demand).
178 Pritchard v. Mead, 455 N.W.2d 263, 267 (Wis. Ct. App. 1990) (refusing dissenters' rights to minority shareholder who does
not meet precisely all four requirements of appraisal statutes).
179 See 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, 7.04 (proposing attorney-sharing system for
appraisal).
180 See CAL. CORP. CODE 1308 (West 1990); DEL. CODE ANN. tit. 8, 262(k) (1991).
181 DEL. CODE ANN. tit. 8, 262(h) (1991). In contrast, the Model Business Corporation Act requires payment of the
corporation's estimate of fair value immediately upon receipt of a minority shareholder's demand. REVISED MODEL
BUSINESS CORP. ACT 13.25 (1985).
182 See Rapid-American Corp. v. Harris, 603 A.2d 796, 808 (Del. 1992) (holding that 262(i) gives trial court discretion to
determine whether simple or compound interest should be awarded; no abuse of discretion to award simple interest).
183 See, e.g., LEWIS D. SOLOMON ET AL., CORPORATIONS LAW AND POLICY: MATERIALS AND PROBLEMS (3d
ed. 1994) (illustrating that with compound interest, shareholder in Harris case would have received 55% more); David S. Reid,
Note, Dissenters' Rights: An Analysis Exposing the Judicial Myth of Awarding Only Simple Interest, 36 ARIZ. L. REV. 515,
515 (1994) (describing Delaware courts as having perpetuated the judicial myth that awarding simple interest in an appraisal
remedy is sufficient).

184 See 2 PRINCIPLES OF CORPORATE GOVERNANCE, supra note 5, Pt. VII, at 296 (stating that exclusivity justified only
if procedure minimizes barriers).
185 See 2 id. at 293-94 (stating that the procedures surrounding the exercise of the appraisal remedy have long been viewed as
so cumbersome and time-consuming as to deter all but the largest and most determined shareholders); Seligman, supra note
104, at 829 (asserting that [v]iewed empirically, the costs, risks and time delays of an appraisal usually dissuade all but the
wealthiest of plaintiffs from demanding a valuation, and that in the few decisions in which plaintiff's holdings were disclosed,
the amount was rarely below $100,000).
186 Tabbi v. Pollution Controls Indus., Inc., 508 A.2d 867, 869 (Del. Ch. 1986) (stating that the statutory requirements are
to be liberally construed for the protection of dissenting stockholders within the limits of orderly corporate procedures and
consistent with the purpose of the requirements); In re Valuation of Common Stock of McLoon Oil Co., 565 A.2d 997,
1001-02 (Me. 1989) (finding sufficient procedural compliance).
187 See Egret Energy Corp. v. Peierls, 796 P.2d 25, 27 (Colo. Ct. App. 1990) (finding that corporation failed to file suit within
60 days of first demand and therefore must pay shareholder's statement of value pursuant to statutory procedure); In re
Rosenblum, 560 N.Y.S.2d 884, 884-85 (App. Div. 1990) (holding that company's failure to exercise its option to terminate
dissenters' rights within 45 days from notice of objection precludes it from refusing dissenters' rights even though plaintiff
subsequently failed timely to submit certificates).
188 See, e.g., Anderson v. International Minerals & Chem. Corp., 67 N.E.2d 573 (N.Y. 1946).
189 Act of Aug. 14, 1931, ch. 862, 369, 1931 Cal. Stat. 1762, 1817-1818; Act of June 16, 1931, Pub. L. No. 327, 44, 54, 1931
Mich. Pub. Acts 568, 583, 588-89.
190 DOUGLAS, supra note 54, at 609-10 (The effect of such provisions is to enable the management group, with the support of
majority shareholders to ride roughshod over the dissenting minority upon payment of the appraisal value of the dissenting
stock.).
191 BALLANTINE, supra note 66, at 703-04.
192 See REVISED MODEL BUSINESS CORP. ACT 13.01 (1985).
193 See 1 O'NEAL & THOMPSON, supra note 123, 5.32.
194 ILL. ANN. STAT. ch. 32, para. 11.65(a) (Smith-Hurd 1995).
195 REVISED MODEL BUSINESS CORP. ACT 13.02(b) (1985).
196 See supra Part IIB.
197 Weinberger v. UOP, Inc., 457 A.2d 701, 703-04 (Del. 1983).
198 Id. at 714.
199 93 A.2d 107 (Del. 1952).
200 Id.; see also Vorenberg, supra note 28, at 1211 (observing that although appraisal remedy was clearly available to minority,
neither Chancellor nor Delaware Supreme Court mentioned it in course of long opinions).
201 See Steinberg v. Amplica, Inc., 729 P.2d 683, 690 (Cal. 1989); Grace Bros., Ltd. v. Farley Indus., Inc., 450 S.E.2d 814, 817-18
(Ga. 1994); Rosenstein v. CMC Real Estate Corp., 522 N.E.2d 221, 227 (Ill. App. Ct. 1988); Yeager v. Paul Semonin Co., 691
S.W.2d 227, 228-29 (Ky. Ct. App. 1985); Walter J. Schloss Assoc. v. Chesapeake & O. Ry., 536 A.2d 147, 158 (Md. Ct. Spec.
App. 1988); Sifferle v. Micom Corp., 384 N.W.2d 503, 510 (Minn. Ct. App. 1986); Green v. Santa Fe Indus., Inc., 514 N.E.2d
105, 111 (N.Y. 1987); Walter J. Schloss Assoc. v. Arkwin Indus., Inc., 460 N.E.2d 1090, 1091 (N.Y. 1984); IRA v. Brenner
Co., 419 S.E.2d 354, 358 (N.C. Ct. App. 1992); Stepak v. Schey, 553 N.E.2d 1072, 1075 (Ohio 1990); Stringer v. Car Data

Sys., Inc., 841 P.2d 1183, 1190 (Or. 1992); American Network Group, Inc. v. Kostyk, 834 S.W.2d 296, 299 (Tenn. Ct. App.
1991); Pritchard v. Mead, 455 N.W.2d 263, 265-66 (Wis. Ct. App. 1990).
202 See, e.g., Stringer, 841 P.2d 1183; Pritchard, 455 N.W.2d 263; see also Stauffer v. Standard Brands, Inc., 187 A.2d 78 (Del.
1962). Stauffer relied on this distinction when the plaintiff had been out of the country during the merger, apparently having
missed the opportunity to challenge the price. This is not an overpowering case for use of fiduciary duty in any era and provides
little support to modern cases. The court noted that the complaint contained conclusory allegations of oppressive treatment
of the minority, but found it plain that the real relief sought was monetary value. In Singer v. Magnavox Co., 380 A.2d
969 (Del. 1977), overruled by Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983), the court's somewhat half-hearted effort to
distinguish Stauffer as turning on a dispute over valuation says more about the conclusory power of this line of reasoning and
how it necessarily turns on a prior assumption about fiduciary duty:
We do not read [Stauffer] as approving a merger accomplished solely to freeze-out the minority without a valid business
purpose.... Likewise neither [David J. Greene & Co. v. Schenley Indus., Inc., 281 A.2d 30 (Del. Ch. 1971)] nor Bruce [v. E.L.
Bruce Co., 174 A.2d 29 (Del. Ch. 1961)] involved a cash-out merger, the sole purpose of which was to eliminate minority
stockholders. Accordingly, those cases are inapposite. Any statement therein which seems to be in conflict with what is said
herein must be deemed overruled.
Singer, 372 A.2d at 978-79.
203 See supra text accompanying notes 89-98.
204 See Arkwin Indus., Inc., 460 N.E.2d at 1108; Kostyk, 834 S.W.2d at 298.
205 See Stringer, 841 P.2d at 1189 (finding that in merger implemented just after majority rejected third-party offer that was
substantially greater than price in merger, one can infer only that the amount paid was unfair and unreasonably low, not that
fraud or misleading representations were involved: Cases such as this are the very kind addressed by the statutory scheme.).
206 See Harold Marsh, Jr., Are Directors Trustees?-Conflicts of Interest and Corporate Morality, 22 BUS. LAW. 35, 36-44 (1966)
(describing movement from considering director conflict transaction as void or voidable to upholding them subject to judicial
review for fairness).
207 Subchapter F added to the Model Business Corporation Act in 1991 (although not yet adopted in a large number of states)
blocks judicial review of a director's conflicting interest transaction if the transaction receives the approval of disinterested
directors or shareholders. See REVISED MODEL BUSINESS CORP. ACT 8.60-8.63 (1991). Note, however, for purposes
of this discussion that the comment to 8.60 views conflicts of a parent corporation and a partially owned subsidiary (which
describes many cash-out mergers) as raising the possibility of abuse of power by the majority shareholder to the disadvantage
of the minority shareholder that is better addressed outside of the basic rules for conflicting interest transactions. In such cases,
Subchapter F has no relevance as to how a court should deal with that claim. Id. 8.60 cmt. 2, at 292.
Other examples in which courts have turned to internal corporate decision-making to resolve conflict transactions are
derivative suits in which a plaintiff must make demand on directors unless (in Delaware) at least a majority of the directors
have a conflict of interest, see Aronson v. Lewis, 473 A.2d 805, 814-15 (Del. 1984), and termination of a derivative suit by a
committee of disinterested directors, see Zapata Corp. v. Maldonado, 430 A.2d 779, 785-86 (Del. 1981); REVISED MODEL
BUSINESS CORP. ACT 7.44(b) (1991).
208 These cases are cited supra note 102.
209 In Rabkin v. Philip A. Hunt Chem. Corp., 498 A.2d 1099, 1100 (Del. 1985), the court stated:
[T]he holding in Weinberger is broader than the scope accorded it by the trial court.... [T]he trial court's narrow interpretation
of Weinberger would render meaningless our extensive discussion of fair dealing found in that opinion. Weinberger's mandate
of fair dealing does not turn solely on issues of deception. We particularly noted broader concerns respecting the matter of
procedural fairness.
Id. at 1104-05.
210 See Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988); see also Bershad v. Curtiss-Wright Corp., 535 A.2d 840 (Del.
1987); Rosenblatt v. Getty Oil Co., 493 A.2d 929 (Del. 1985); Citron v. E.I. Du Pont de Nemours & Co., 584 A.2d 490 (Del. Ch.

1990); Sealy Mattress Co. of N.J. v. Sealy Inc., 532 A.2d 1324 (Del. Ch. 1987); Glassman v. Wometco Cable TV, Inc., No. 7307
(Del. Ch. June 19, 1985), reprinted in 11 DEL. J. CORP. L. 649 (1985); Joseph v. Shell Oil Co., 498 A.2d 1117 (Del. Ch. 1985).
211 Cede & Co. 542 A.2d at 1186.
212 See Alabama By-Products Corp. v. Neal, 588 A.2d 255, 258 n.1 (Del. 1991) (finding no basis for extending statutorily limited
appraisal remedy by invocation of equitable principles; in statutory appraisal proceeding, an act of unfair dealing is only
relevant to assess credibility of those supplying information in support of valuation contention); Cede & Co., 542 A.2d at
1189 (declining enlargement of appraisal action to include claims based on fraud by corporate directors because of limited
legislative purpose and concerns of unforseeable administrative and procedural problems).
213 In Citron, the Delaware Chancery Court stated explicitly: Shareholder ratification and disinterested director intervention have
a different procedural effect where the transaction is a parent-subsidiary merger, than in cases where the transaction is with a
fiduciary that does not control the corporation. 584 A.2d at 502. The Delaware Supreme Court cited with approval Citron's
policy rationale in holding that entire fairness is the exclusive standard for judicial review for interested merger transactions:
[I]n a merger between the corporation and its controlling shareholder-even one negotiated by disinterested, independent
directors-no court could be certain whether the transaction terms fully approximate what truly independent parties would
have achieved in arm's length negotiation. Given that uncertainty, a court might well conclude that even minority shareholders
who have ratified a ... merger need procedural protections beyond those afforded by full disclosure of all material facts. One
way to provide such protections would be to adhere to the more stringent entire fairness standard of judicial review.
Kahn v. Lynch Communications Sys., Inc., 638 A.2d 1110, 1116-17 (Del. 1994) (emphasis added) (quoting Citron, 584 A.2d
at 502). The court held in Kahn that approval by a disinterested committee or approval by majority shareholders could shift
the burden of proof to the plaintiffs, but that neither process was sufficient to eliminate judicial review of the entire fairness
of the transaction. Id. at 1117; see also Rosenblatt, 493 A.2d at 937-38 (rejecting argument to apply business judgment rule
review in context of interested merger transaction said to be cleansed by shareholder approval).
214 See, e.g., Weinberger v. UOP, Inc., 457 A.2d 701, 714 (Del. 1983) (holding that rescissory damages may be awarded if found
by court to be susceptible of proof and a remedy appropriate to all the issues of fairness before him); see also Cede &
Co., 542 A.2d 1182 (permitting breach of fiduciary duty claim in addition to appraisal claim concurrently so long as there
was not double recovery). This opinion instructed the Chancellor to resolve the fiduciary duty claim first and assumed that
rescissory recovery would be the remedy if a violation were found, and that the appraisal claim would be moot. On remand,
the Chancellor determined the appraisal claim first, with a valuation lower than that offered in the merger transaction. This
then became the basis for dismissing the fiduciary duty claim for lack of any damage caused by the breach. The Supreme Court
reversed the Chancery Court on this issue since this result would deprive plaintiff of the right to have the court review the
entire fairness of the transaction. Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 370 (Del. 1993). This reasoning parallels the
Kahn and Citron decisions, both of which found that breach of fiduciary duty leads to an entire fairness review. When the case
returned to the Chancellor, he found that the transaction met the entire fairness standard and, in addition, ruled that rescissory
recovery would not be appropriate in a third-party merger setting. Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134 (Del.
Ch. 1994). (The Cede transaction, unlike other cases discussed in this section, arose in a context of a merger between unrelated
parties). The Delaware Supreme Court affirmed the Chancellor's decision on entire fairness without discussing rescissory
damages. Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995).
215 Rapid-American Corp. v. Harris, 603 A.2d 796 808 (Del. 1992).
216 See Cede & Co., 542 A.2d at 1182.
217 Cavalier Oil Corp. v. Harnett, 564 A.2d 1137, 1143 (Del. 1989) (finding that parties had previously agreed to consider these
claims in determining appraisal value: While ordinarily a section 262 appraisal proceeding does not lend itself to any claims
other than those incident to the appraisal proceeding itself ... the consent of the parties [in a prior settlement agreement]
that ... derivative-like claims are viable for appraisal purposes require that [the] corporate opportunity claim[s] be considered
in valu[ation].).
218 See Alabama By-Products Corp. v. Neal, 588 A.2d 255, 257-58 (Del. 1991) (Since claims of unfair dealing cannot be litigated
in a statutory appraisal proceeding, an act of unfair dealing cannot be the equitable basis for independently attributing value

to stock in such an action. In a statutory appraisal proceeding, an act of unfair dealing is only relevant to assess the credibility
of those supplying information in support of a valuation contention.).
219 See Kademian v. Ladish Co., 792 F.2d 614, 630 (7th Cir. 1986) (applying Wisconsin law and noting that appraisal remedy
cannot substitute for a suit for breach of fiduciary duty or other torts when plaintiff alleged fraudulent premerger conduct,
self-dealing, and personal gain); Bayberry Assocs. v. Jones, 783 S.W.2d 553, 561-62 (Tenn. 1990) (stating that [a]ppraisal
remedies are limited to valuation and do not address wrongdoing and concluding that claim that directors rejected higher
offer to preserve their position and for financial benefit could be brought outside of appraisal).
220 Steinberg v. Amplica, Inc., 729 P.2d 683, 688 (Cal. 1987). The court's holding that appraisal was exclusive was limited to cases
arising under CAL. CORP. CODE 1312(b), in which one merging corporation does not control the other and they are not
under common control. Id. at 685 n.3.
221 See, e.g., Friedman v. Mohasco, 929 F.2d 77 (2d Cir. 1991); Overberger v. BT Fin. Corp., 106 F.R.D. 438 (W.D. Pa.
1985); Bronzaft v. Caporali, 616 N.Y.S.2d 863, 866-67 (1994); Rubinstein v. Catacosinos, 458 N.E.2d 1247 (N.Y. 1983). But
see Blasband v. Rales, 971 F.2d 1034, 1042 (3d Cir. 1992) (permitting shareholder suit even though merger has resulted in
shareholder owning shares in new parent corporation); Gaillard v. Natomas Co., 219 Cal. Rptr. 74 (Ct. App. 1985) (holding
that shareholder who meets contemporaneous ownership requirement does not lose that status by subsequent merger that
causes her to involuntarily lose that status).
222 See Kramer v. Western Pac. Indus., Inc., 546 A.2d 348, 354 (Del. 1988) (holding that if merger itself is subject of fraud being
perpetrated merely to deprive shareholders of standing to bring derivative action, the former shareholder may prosecute such
action); Merritt v. Colonial Foods, Inc., 505 A.2d 757, 765-66 (Del. Ch. 1986) (holding that cash-out violated directors's
fiduciary duty when instigated to terminate shareholder's derivative suit and directors had no basis for their contention that
merger was in corporation's best interest or that price offered was fair).
223 See Scattergood v. Perelman, 945 F.2d 618, 626 (3d Cir. 1991) (finding that cash-out deprives shareholder of standing absent
dominant motive to deprive of standing); Kramer, 546 A.2d at 354 (stating that if merger was merely to deprive shareholder
of standing, suit can continue; claim that management wasted assets in connection with cash-out was essentially derivative
and could not continue after merger).
224 See FOURTEENTH ANNUAL CONFERENCE, supra note 56, at 898-900 (The first thing to be done, it seems to us, is
to secure the passage by Congress of a National Incorporation Law.).
225 See CORPORATION LAW COMM., PRELIMINARY DRAFT OF A FEDERAL CORPORATION ACT (1943). This
draft was presented to the ABA Section on Corporation Banking and Business Law and was a predecessor to a suggested
state Business Corporation Act presented by the Corporation Law Committee in 1946.
226 See supra note 96 and accompanying text.
227 430 U.S. 462 (1977).
228 Id. at 473-74.
229 Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1106-08 (1991).
230 Id. at 1107.
231 See, e.g., Howing Co. v. Nationwide Corp., 972 F.2d 700 (6th Cir. 1992) (holding that lost appraisal is sufficient causation
for an action under section 13(e) of Securities Exchange Act of 1934), cert. denied, 113 S. Ct. 1645 (1993); Wilson v. Great
Am. Indus., Inc., 979 F.2d 924 (2d Cir. 1992) (holding that lost appraisal is sufficient causation for an action under section
14(a) of Securities Exchange Act of 1934).
232 See, e.g., Green v. Santa Fe Indus., Inc., 514 N.E.2d 105, 106 (N.Y. 1987) (dismissing nonappraisal state law claim arising
out of same transaction that generated United States Supreme Court decision discussed in text).
233 Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988).

234 The existence of a federal remedy would require resolution of so-called sue facts as a basis for relief under Rule 10-b. A sue
fact is a fact that is material to a decision to bring litigation. The majority opinion in Virginia Bankshares expressed doubt
about this being the basis for a federal claim. See Virginia Bankshares, Inc., 501 U.S. at 1100 n.9.
235 See REVISED MODEL BUSINESS CORP. ACT 14.30, 14.34 (1985).
236 See generally Robert B. Thompson, The Shareholder's Cause of Action for Oppression, 48 BUS. LAW. 699, 708 (1993).
237 See id. at 718 (describing this most dramatic change in legislative and judicial thinking on solutions to minority shareholder
problem and noting that legislative or judicial support exists in half of states).
238 See Hite v. Thomas & Howard Co. of Florence, Inc., 409 S.E.2d 340 (S.C. 1991) (denying appraisal rights to minority
shareholder whose interests had been diluted by compulsory share exchange with corporation that was majority shareholder
because minority shareholder's corporation was surviving corporation, but permitting cash value to be awarded under
oppression statute), overruled on other grounds by Huntley v. Young, No. 24319, 1995 WL 566645 (S.C. Sept. 18, 1995) (per
curiam).
239 See, e.g., Hendley v. Lee, 676 F. Supp. 1317 (D.S.C. 1987) (applying South Carolina law); Brown v. Allied Corrugated Box
Co., 154 Cal. Rptr. 170 (Ct. App. 1979); Charland v. Country View Golf Club, Inc., 588 A.2d 609 (R.I. 1991).
240 See Government Securities Act Amendments of 1993, Pub. L. No. 103-202, tit. III, sec. 422, 107 Stat. 2344 (Limited
Partnership Rollup Reform Act). A roll-up transaction generally refers to the combination of several limited partnership
investments into one larger or master partnership. A general partner or roll-up sponsor must offer dissenting investors at least
one of the following: appraisal, retention of their original security, approval of the rollup by a 75% supermajority, the use of
an independent committee, or other comparable right to protect the dissenting shareholder. If one of these protections is not
offered, the new rollup entity cannot be listed on a national exchange.
*55 APPENDIX
TABLE 2
FIRST APPRAISAL PROVISION IN A GENERAL INCORPORATION STATUTE
A. Before 1900 (5 states)
(1890) New York: The Business Corporation Law, ch. 567, 14, 1890 N.Y. Laws 1167, 1172.
(1891) Maine: Act of Mar. 21, 1891, ch. 84, 2, 1891 Me. Laws 68, 68 (sale of assets). For
merger, see Act of Apr. 6, 1929, ch. 242, 1, 1929 Me. Laws 200, 200-02.
(1893) Kentucky: Act of Apr. 5, 1893, ch. 171, art. I, 21, 1893 Ky. Acts 612, 624.
(1896) New Jersey: Act of Apr. 21, 1896, ch. 185, 108, 1896 N.J. Laws 277, 312.
(1899) Delaware: The General Corporation Law, ch. 273, 56, 21 Del. Laws 445, 462-63
(1899).
B. 1900-1914 (11 states)
(1901) Connecticut: Act of June 17, 1901, ch. 157, 41, 1901 Conn. Pub. Acts 1334, 1344-45.
(1901) Pennsylvania: Act of May 29, 1901, No. 216, 5, 1901 Pa. Laws 349, 352.
(1903) Alabama: Act of Oct. 2, 1903, No. 395, 41, 1903 Ala. Acts 310, 332-33.
(1903) Massachusetts: Business Corporation Law, ch. 437, 44, 1903 Mass. Acts 418, 438
(sale of assets). For merger, see Act of July 24, 1941, ch. 514, 2, 1941 Mass. Acts
604, 605-06.
(1903) Nevada: General Corporation Law, ch. 88, 45, 1903 Nev. Stat. 121, 139-40.
(1903) Virginia: Act of May 21, 1903, No. 270, ch. 5, 41, 1903 Va. Acts 437, 476-79.
(1905) Montana: Act of Mar. 7, 1905, ch. 103, 3, 1905 Mont. Laws 226, 229-30 (sale of
assets). For merger, see Act of Feb. 28, 1951, ch. 175, 5, 1951 Mont. Laws 352,
357-58.
(1905) New Mexico: Act of Mar. 15, 1905, ch. 79, 114, 1905 N.M. Laws 142, 188.
(1906) Ohio: Act of Apr. 2, 1906, sec. I, 325 bd, 1906 Ohio Laws 229, 230 (sale of assets).
For consolidation, see General Corporation Act, 72, 1927 Ohio Laws 9, 37.
(1907) Tennessee: Act of Apr. 10, 1907, ch. 437, 4, 1907 Tenn. Pub. Acts 1488, 1489-90
(sale of assets). For merger, see Act of Apr. 10, 1929, ch. 90, 41, 1929 Tenn. Pub.
Acts 235, 266.

(1908) Maryland: Act of Mar. 31, 1908, ch. 240, 31, 1908 Md. Laws 23, 35-36.
C. 1915-1936 (17 states)
(1915) Vermont: Act of Apr. 1, 1915, ch. 141, 23, 1915 Vt. Laws 222, 229-30 (sale of assets).
For merger, see Act of Apr. 8, 1919, No. 125, 1, 1919 Vt. Laws 131, 131-32.
(1919) Illinois: Act of June 28, 1919, 73, 1919 Ill. Laws 294, 331-32.
(1919) New Hampshire: Act of Mar. 28, 1919, ch. 92, 31, 1919 N.H. Laws 113, 124 (sale
of assets). For merger, see Act of June 17, 1939, ch. 219, 1, 1939 N.H. Laws 306,
307-10.
(1920) Rhode Island: Act of July 1, 1920, ch. 1925, 56, 1920 R.I. Pub. Laws 189, 215-17
(sale of assets). For merger, see Act of Feb. 4, 1948, ch. 1989, sec. 3, 56, 1948 R.I.
Pub. Laws 27, 32-34.
(1925) Arkansas: Act of Mar. 11, 1925, No. 155, 4, 1925 Ark. Acts 472, 476-77.
(1925) Florida: Act of June 1, 1925, 38, 1925 Fla. Laws. ch. 10,096.
(1925) North Carolina: Act of Feb. 27, 1925, ch. 77, 1224-c, 1925 N.C. Sess. Laws 81,
84-85.
(1925) South Carolina: Act of Apr. 14, 1925, No. 169, 3, 1925 S.C. Acts 246, 249-50.
(1927) Minnesota: Act of Apr. 12, 1927, ch. 385, 3, 1927 Minn. Laws 510, 512-14.
(1927) Oregon: Act of Mar. 3, 1927, ch. 324, 1927 Or. Laws 417, 417-18.
(1928) Louisiana: Act of July 18, 1928, No. 250, 46-52, 1928 La. Acts 409, 445-46, 449-51.
(1929) Idaho: Act of Mar. 18, 1929, ch. 262, 37, 1929 Idaho Sess. Laws 545, 574-75.
(1929) Indiana: Indiana General Corporation Act, ch. 215, 37, 1929 Ind. Acts 725, 756-57.
(1931) California: Act of Aug. 14, 1931, ch. 862, 369, 1931 Cal. Stat. 1762, 1817-19.
(1931) District of Columbia: Act of Feb. 12, 1931, ch. 120, 639d, 46 Stat. 1088, 1090.
(1931) Michigan: Act of June 16, 1931, No. 327, 44, 54, 1931 Mich. Pub. Acts 568, 583-84,
588-89.
(1933) Washington: The Domestic and Foreign Corporations Act, ch. 185, 47, 1933 Wash.
Laws 770, 807.
D. 1937-1953 (11 states)
(1937) Hawaii: Act of Apr. 26, 1937, ch. 221A, 6764D, 1937 Haw. Sess. Laws 187, 195-99.
(1938) Georgia: Act of June 28, 1938, No. 259, 20, 1937-38 Ga. Laws 214, 233-35.
(1939) Arizona: Act of Mar. 20, 1939, ch. 81, 7, 1939 Ariz. Sess. Laws 236, 239.
(1939) Kansas: The General Corporation Code, ch. 152, 103, 1939 Kan. Sess. Laws 219,
252.
(1941) Colorado: Act of Feb. 4, 1941, ch. 109, 5, 1941 Colo. Sess. Laws 344, 347-48.
(1941) Nebraska: Act of May 21, 1941, ch. 41, 61, 1941 Neb. Laws 158, 198.
(1943) Missouri: The General and Business Corporation Act, ch. 410, 71, 1943 Mo. Laws
410, 450-51.
(1947) Iowa: Act of Mar. 18, 1947, ch. 249, 12, 1947 Iowa Acts 305, 309-10.
(1947) Oklahoma: The Business Corporation Act, tit. 18, 157, 1947 Okla. Sess. Laws 84,
138.
(1947) Wisconsin: Act of Mar. 24, 1947, ch. 15, 10, 1947 Wis. Laws 34, 39-41.
(1947) Wyoming: Act of Feb. 11, 1947, ch. 31, 5, 1947 Wyo. Sess. Laws 27, 30.
E. After 1953 (7 states)
(1954) Mississippi: Act of Mar. 25, 1954, ch. 201, 3, 1954 Miss. Laws 210, 212-14.
(1955) South Dakota: Act of Mar. 10, 1955, ch. 17, 7, 1955 S.D. Laws 39, 41.
(1955) Texas: The Texas Business Corporations Act, art. 5.11, 1955 Tex. Gen. Laws 239,
279.
(1957) Alaska: Act of Mar. 29, 1957, ch. 126, 71, 74, 1957 Alaska Sess. Laws 164, 201-02,
203-04.
(1957) North Dakota: Act of Mar. 21, 1957, ch. 102, 75, 78, 1957 N.D. Laws 109, 160-61,
162-64.
(1961) Utah: Act of Mar. 1, 1961, ch. 28, 75, 1961 Utah Laws 93, 130-33.
(1974) West Virginia: Act of Mar. 1, 1974, ch. 13, 31-1-122, 1974 W. Va. Acts, 167, 279.

TABLE 3
FIRST AUTHORIZATION FOR CONSOLIDATION OR MERGER IN A GENERAL INCORPORATION
STATUTE (THE YEAR OF THE FIRST APPRAISAL STATUTE FOLLOWS IN PARENTHESES)
A. Before 1900 (12 states)
(1867) Illinois: Act of Feb. 21, 1867, 1867 Ill. Laws 80, 80 (1919).
(1868) Maryland: Act of Mar. 30, 1868, ch. 471, 36, 1868 Md. Laws 911, 917-18 (1908).
(1870) Missouri: Act of Mar. 25, 1870, sec. 1, 1870 Mo. Laws 24, 24-25 (1943).
(1874) Louisiana: Act of Dec. 12, 1874, No. 158, 1, 1874 La. Acts 18, 18 (1928).
(1877) Colorado: Act to Provide for the Formation of Corporations, ch. 19, para. 191, sec.
122, 1877 Colo. Sess. Laws 143, 184-85 (1941).
(1890) New York: The Business Corporation Law, ch. 567, 13, 1890 N.Y. Laws 1167, 1171
(1890).
(1891) Maine: Act of Mar. 21, 1891, ch. 84, 1891 Me. Laws 68 (sale of assets) (1891).
(1893) Kentucky: Act of Apr. 5, 1893, ch. 171, art. I, 18, 1893 Ky. Acts 612, 619-20 (1893).
(1896) New Jersey: Act of Apr. 21, 1896, ch. 185, 104, 1896 N.J. Laws 277, 301-10 (1896).
(1896) Utah: Act of Apr. 4, 1896, ch. 86, 2273, 1896 Utah Laws 298, 302-03 (1961).
(1897) Wisconsin: Act of Apr. 24, 1897, ch. 341, 1, 1897 Wis. Laws 768 (1947).
(1899) Delaware: The General Corporation Law, ch. 273, 52, 21 Del. Laws 445, 461 (1899)
(1899).
B. 1900-1914 (13 states)
(1901) Connecticut: Act of June 17, 1901, ch. 157, 37, 1901 Conn. Pub. Acts 1334, 1343
(1901).
(1901) Pennsylvania: Act of May 29, 1901, No. 216, 1, 1901 Pa. Laws 349, 350 (1901).
(1901) West Virginia: Act of Feb. 18, 1901, ch. 35, sec. 33, 83, 1901 W. Va. Acts 98, 110
(sale of assets) (1974).
(1903) Alabama: Act of Oct. 2, 1903, No. 395, 39, 1903 Ala. Acts 310, 330 (1903).
(1903) Massachusetts: Business Corporation Law, ch. 437, 40, 1903 Mass. Acts 418, 437
(sale of assets) (1903).
(1903) Nevada: General Corporation Law, ch. 88, 43, 1903 Nev. Stat. 121, 137-39 (1903).
(1903) Virginia: Act of May 21, 1903, No. 270, ch. 5, 41, 1903 Va. Acts 437, 476 (1903).
(1905) Montana: Act of Mar. 7, 1905, ch. 103, 3, 1905 Mont. Laws 226, 226-29 (sale of
assets) (1905).
(1905) New Mexico: Act of Mar. 15, 1905, ch. 79, art. 11, 109, 1905 N.M. Laws 142, 180
(1905).
(1905) Oregon: Act of Feb. 21, 1905, ch. 194, 1, 1905 Or. Laws 325, 325 (1927).
(1906) Ohio: Act of Apr. 2, 1906, sec. I, 3256b, 1906 Ohio Laws 229, 229-30 (1906).
(1907) Tennessee: Act of Apr. 10, 1907, ch. 437, 4, 1907 Tenn. Pub. Acts 1488, 1488 (sale of
assets) (1907).
(1909) South Dakota: Act of Mar. 2, 1909, ch. 118, 1, 1909 S.D. Laws 196, 196-97 (sale of
assets) (1955).
C. 1915-1936 (14 states)
(1915) Vermont: Act of Apr. 1, 1915, ch. 141, 22, 1915 Vt. Laws 222, 229 (sale of assets)
(1915).
(1919) New Hampshire: Act of Mar. 28, 1919, ch. 92, 4, 1919 N.H. Laws 113, 115 (sale of
assets) (1919).
(1920) Rhode Island: Act of July 1, 1920, ch. 1925, 55, 1920 R.I. Pub. Laws 189, 215 (sale
of assets) (1920).
(1921) Michigan: Act of Apr. 26, 1921, No. 84, ch. 3, 2, 1921 Mich. Pub. Acts 125, 131
(1931).
(1925) Arkansas: Act of Mar. 11, 1925, No. 155, 1, 1925 Ark. Acts 472, 473 (1925).
(1925) Florida: Act of June 1, 1925, 36, 1925 Fla. Laws ch. 10,096 (1925).
(1925) North Carolina: Act of Feb. 27, 1925, ch. 77, 1224-a, 1925 N.C. Sess. Laws 81, 81-82
(1925).
(1925) South Carolina: Act of Apr. 14, 1925, No. 169, 1, 1925 S.C. Acts 246, 246-47 (1925).
(1927) Minnesota: Act of Apr. 12, 1927, ch. 385, 1, 1927 Minn. Laws 510, 510-11 (1927).
(1929) California: Act of June 6, 1929, ch. 711, 27, 1929 Cal. Stat. 1261, 1273 (1931).
(1929) Idaho: Act of Mar. 18, 1929, ch. 262, 38, 1929 Idaho Sess. Laws 545, 575 (1929).

(1929) Indiana: Indiana General Corporation Act, ch. 215, 31, 1919 Ind. Acts 725, 749
(1929).
(1931) District of Columbia: Act of Feb. 12, 1931, 639d, 46 Stat. 1088, 1089 (sale of assets)
(1931).
(1933) Washington: The Domestic and Foreign Corporations Act, ch. 185, 43, 1933 Wash.
Laws 770, 803 (1933).
D. 1937-1953 (8 states)
(1937) Hawaii: Act of Apr. 26, 1937, ch. 221A, 6764-A, 1937 Haw. Sess. Laws 187, 188
(1937).
(1938) Georgia: Act of June 28, 1938, No. 259, 18, 1937-38 Ga. Laws 214, 230 (1938).
(1939) Arizona: Act of Mar. 20, 1939, ch. 81, 1, 1939 Ariz. Sess. Laws 236, 236 (1939).
(1939) Kansas: The General Corporation Code, ch. 152, 97, 1939 Kan. Sess. Laws 219, 250
(1939).
(1941) Nebraska: Act of May 21, 1941, ch. 41, 59, 1941 Neb. Laws 158, 193-97 (1941).
(1947) Iowa: Act of Mar. 18, 1947, ch. 249, 2, 1947 Iowa Acts 305, 305 (1947).
(1947) Oklahoma: The Business Corporation Act, tit. 18, 166, 1947 Okla. Sess. Laws 84,
138, 144-45 (1947).
(1947) Wyoming: Act of Feb. 11, 1947, ch. 31, 1, 1947 Wyo. Sess. Laws 27, 27-28 (1947).
E. After 1952 (4 states)
(1954) Mississippi: Act of Mar. 25, 1954, ch. 201, 1, 1954 Miss. Laws 210, 210-11 (1954).
(1955) Texas: The Texas Business Corporations Act, art. 5.07, 1955 Tex. Gen. Laws 239,
277-78 (1954).
(1957) Alaska: Act of Mar. 29, 1957, ch. 126, 65, 1957 Alaska Sess. Laws 164, 197-98
(1957).
(1957) North Dakota: Act of Mar. 21, 1957, ch. 102, 68, 1957 N.D. Laws 109, 154 (1957).
End of Document 2017 Thomson Reuters. No claim to original U.S. Government Works.

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Georgetown Law Journal

EXIT, LIQUIDITY, AND MAJORITY RULE: APPRAISAL'S ROLE IN CORPORATE LAW

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A. A LARGELY UNQUALIFIED SYSTEM OF MAJORITARIAN CONTROL

B. MARKETS, CONTRACTS, AND LAWS THAT COUNTER POTENTIAL MAJORITY ABUSE

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C. APPRAISAL'S ROLE AGAINST THE BACKDROP OF MARKETS, CONTRACTS, AND LAW

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II. THE RISE AND FALL AND REINCARNATION OF APPRAISAL

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A. APPRAISAL'S FIRST LIFE

1. Facilitating Business Combinations

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*15 FIGURE 1: FIRST PROVISIONS AUTHORIZING MERGER

TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE

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3. Providing Liquidity, Not a Check on Conflict of Interest

4. Procedures Reflecting the Liquidity Purpose

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B. THE RENAISSANCE OF APPRAISAL RIGHTS

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C. THE CONTEXT IN WHICH MODERN APPRAISAL APPEARS

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A. LEGAL RULES DEFINING THE REACH OF APPRAISAL

*29 1. Denying Appraisal When Shares Are Widely Traded

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3. De Facto Mergers and the Reach of Appraisal

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B. VALUATION AND PROCEDURES

1. Excluding Appreciation or Depreciation Attributable to the Merger Transaction

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C. RELATION TO OTHER REMEDIES

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3. Relation to Federal Remedies

*52 4. Relation to Other State Remedies

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45 Manning, supra note 2, at 229.

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