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COURT
STATE
CHANCERY
OF THE
OF DELAWARE
OF
f?o. BOX 581
January 11, 2001
A. Cilchrist Sparks, JIL
Alan J, Stone
David .I, Tel&s
Men-is, Nichols, Arsht & Tunnel
‘%OPGilOWN, tkAWARB lw47
TCLEPH~NE (302) 856-5424
b’S3Mllf (302) 8CG~?51
R. Bruce McNcw
Taylor & McNew LLP
371 I Kemett Pike, Suite 210
Greenville, DE 19807
r.0. Hex 1347
Wilmington,
DE 19599-134’7
AWsun v. 13n/1k E. Best, hrc., CA. No. 16329. Respondents’ motion to sever, if
granted, would sever petitioners’ claims for appraisal against F+ank 13. Best, Inc.
(“FEB”), Best Universal Lock Co. (“BUL”), and Best Lock Corporation (“BLC”)
into three scpmle actions. Since this Court has decided several matters with
regard lo this action as well as the fiduciary duty action, which sllarc the same set
of operative facts, I will not outline those facts again here, Rather, I will respond
directly to each of respondents’ three main arguments in support of their motion to
sever.
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First, respondents argue that this Court must sever the claims because
petitioners, fo’mcr shareholders of PEH, BUL, and HLC, arc engaged in litigalion
in which there are “clear, direct and serious conflicts of interest between the former
shareholders [of thcsc corporations].“’ They specifically argue that “one clear
conflict between the three SharChOlder groups arises from the fact that each of the
shareholder groups has an important linaucial interest in whether 11% C’ourt
determines that a control premium is appropriate, and if so, how that amount is
established and at which corporate level it shouId be placed.“2 They also note that
petitioners’ attorneys did not adequately inform their clients of this conflict or
secure their waiver of it and, thus, have not complied with Rule I.7 of the
Delaware Lawyer’s
Rules
of Professional Conduct, which requires attorney
disclosure and client waiver of potential conflicts of intcrcst, Respondents may
indeed bc correct that pciitioners’ attomcys have failed to disclose adequately to
their clients the
potential
conflicts of jntcrcst that may arise, for example, if the
Court employs a control premium as part of the valuation of one of the three
conlpiuks. Such a failure, while it may be the basis for disciplinary action or a
later malpractice claim against petitioners’ attorneys, does not prevent this Court
from appraising FEB, HUI,, and BLC in a single civil action.
’ Defs.’ Opening Br. in Support ofils Motion to Sever Appraisal Claims, at 3.
’ D&L’ Reply Dr. in Support of its Motion ‘to Sever Appraisal Claims, at 1.
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Second, respondents argue that neither $ 262 of the DGCL nor Court of
Chancery Rules 20(n) and 21 permit this Court to combine the appraisals of three
“sep;1ratc” Delaware corporations into a sin& civil action. I cannot agree with
this
argument, While $ 262 does not contemplate combining the appraisal of more
than one company into a single civil action, it does not, by its terms, prevent it.
Similarly, nothing in the plain language of Rules 20(a) or 21 suggests that this
Court
cannot
appraise three companies in 3 single civil action. Moreover, this
Court, In C~valiw Oil Carp, v. Hrrtnctt,3 conducted a single trial of “four statutory
appraisal actions involving two scpxate but related Delaware corporationsyY4
Thus, it is clear to mc that this Court has the authority to combine the appraisals of
I;EB, BTJL, and 131X into a single civil action,
Third, and finally, respondents argue that “the appraisal of these three
scparatc Delaware corporations in a single civil action would frustrate
I<espondcnts’ right LO scttlc the appraisal claims of single group of shareholders of
13-33, BUI,,
or BLC.“’ This is simply not true. As correctly pointed out by the
petitioners, in a statutory appraisal, each person who demands an appraisal has the
individual right to agree to accept or reject a settlement offer. Moreover, no one
3 Del. Ch., C.A. No. 7959, Jacobs, V.C. (Feb. 22, 1986), a/f’d, DeI. Supr., 564 A.2d I137 (1989).
4Scs id,, slip op. at 1.
’ I)&. Opening Er. in Support of its Motion to Sever Appraisal Claims, at 4,
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pctilioncr can require any other petitioner to also settle his or her claim. Thus, I
can not see how appraising the value of thcsc three corporations in a single civil
action would frustrate Ihc respondents’ right to settle the appraisal claims of a
single shareholder or a group of shareholders. According, I deny the respondents’
motion to sever.
In light of the above ruling, 1 deny pctitioncrs’ motion to file a sur-reply
brief in this nlatter, 1 also deny respondents’ motion for a protective order, as no
good reason exists Tar discovery not to proceed in the appraisal action at this time.
IT IS SO ORDIXED.
Very tsuly yours,
#iii!LiJU~
William B. Chandler III
WBCX1:meg
oc:
XC:
Register in Chancery
Vice Chancellors
Law I,ibraries
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