Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. ( 2018 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
VERITION PARTNERS MASTER FUND )
LTD. and VERITION MULTI-STRATEGY )
MASTER FUND LTD., )
)
Petitioners, )
v. ) C.A. No. 11448-VCL
)
ARUBA NETWORKS, INC., )
)
Respondent. )
MEMORANDUM OPINION
Date Submitted: February 27, 2018
Date Decided: May 21, 2018
Stuart M. Grant, Michael J. Barry, Christine M. Mackintosh, Michael T. Manuel, Rebecca
A. Musarra, GRANT & EISENHOFFER P.A., Wilmington, Delaware; Attorneys for
Petitioners.
Michael P. Kelly, Steven P. Wood, McCARTER & ENGLISH, LLP, Wilmington,
Delaware; Marc J. Sonnenfeld, Karen Pieslak Pohlmann, Laura Hughes McNally,
MORGAN, LEWIS & BOCKIUS LLP, Philadelphia, Pennsylvania; Attorneys for
Respondent.
LASTER, V.C.
In May 2015, Hewlett-Packard Company (“HP”) acquired Aruba Networks, Inc.
(“Aruba” or the “Company”). Under the merger agreement, each share of Aruba common
stock was converted into the right to receive consideration of $24.67 per share, subject to
the holder’s statutory right to eschew the merger consideration and seek appraisal.1 The
petitioners perfected their appraisal rights and litigated this statutory appraisal proceeding.
In a post-trial memorandum opinion dated February 15, 2018, I determined that the
fair value of Aruba for purposes of appraisal was $17.13 per share.2 In reaching this
conclusion, I relied heavily on the Delaware Supreme Court’s recent decisions in Dell3 and
DFC.4 As I read them, those decisions endorsed using the market price of a widely traded
firm as an indicator of fair value if the market for the shares of the firm exhibited attributes
associated with the premises underlying the efficient capital markets hypothesis.5 As I read
them, those decisions also endorsed using the deal price in a third-party, arm’s-length
transaction as an indicator of fair value, after deducting synergies from the deal price.6 As
1
See 8 Del. C. § 262.
See Verition P’rs Master Fund Ltd. v. Aruba Networks, Inc. (Post-Trial Ruling),
2
2018 WL 922139, at *4 (Del. Ch. Feb. 15, 2018).
3
Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd, 177 A.3d 1 (Del.
2017).
4
DFC Glob. Corp. v. Muirfield Value P’rs, L.P., 172 A.3d 346 (Del. 2017).
5
See Dell, 177 A.3d at 5, 24-27; DFC, 172 A.3d at 369-70, 373.
6
See Dell, 177 A.3d at 21-22, 34-35; DFC, 172 A.3d at 367, 371.
1
I read them, those decisions also cautioned against relying on discounted cash flow
analyses prepared by adversarial experts when reliable market indicators are available.7
Informed by my readings of Dell and DFC, the Post-Trial Ruling declined to give
any weight to the expert valuations, which relied on discounted cash flow analyses to reach
divergent results.8 The market for Aruba’s common stock exhibited attributes consistent
with the premises of the efficient capital markets hypothesis, 9 so I considered Aruba’s
thirty-day average unaffected market price of $17.13 per share to be a reliable indicator of
value.10 I also considered the deal price to be a reliable indicator of value, but concluded
that Dell, DFC, and the appraisal statute required adjustments to exclude “any element of
value arising from the accomplishment or expectation of the merger.”11 Based on a study
cited by the respondent’s expert and synergy estimates in the record from Aruba and HP, I
7
See Dell, 177 A.3d at 25 (describing the management buy-out in that proceeding
and stating that “this appraisal case does not present the classic scenario in which there is
reason to suspect that market forces cannot be relied upon to ensure fair treatment of the
minority”); DFC, 172 A.3d at 369 n.118 (explaining that discounted cash flow models are
“often used in appraisal proceedings when the respondent company was not public or was
not sold in an open market check”).
8
Post-Trial Ruling, 2018 WL 922139, at *2, *52-53.
9
Id. at *1, *25-28, *51.
10
Id. at *1, *34.
11
8 Del. C. § 262(h); see also Dell, 177 A.3d at 20; DFC, 172 A.2d at 364, 368.
2
derived a midpoint valuation indication based on the deal-price-minus-synergies of $18.20
per share.12
I then confronted the challenge of how to harmonize, weigh, or otherwise decide
between two probative yet divergent indications of fair value. Although my deal-price-
minus-synergies indicator represented my best effort under the circumstances, it potentially
suffered from a variety of measurement errors, raising concerns about its reliability.13 I also
concluded, based on the work of leading scholars, that my deal-price-less-synergies figure
continued to incorporate an element of value derived from the merger itself: the value that
the acquirer creates by reducing agency costs through the aggregation of a control position
(here 100% ownership).14 Under the appraisal statute, the petitioners should not be entitled
to share in that element of value, because it “aris[es] from the accomplishment or
expectation of the merger.”15 My synergy deduction compensated for the one element of
12
Post-Trial Ruling, 2018 WL 922139, at *2, *45.
13
See id. at *2, *44-45, *53-54.
14
See William J. Carney & Mark Heimendinger, Appraising the Nonexistent: The
Delaware Court’s Struggle with Control Premiums, 152 U. Pa. L. Rev. 845, 847-48, 857-
58, 861-66 (2003) [hereinafter Control Premiums]; Lawrence A. Hamermesh & Michael
L. Wachter, Rationalizing Appraisal Standards in Compulsory Buyouts, 50 B.C. L. Rev.
1021, 1023-24, 1034-35, 1044, 1046-54, 1067 (2009) [hereinafter Rationalizing
Appraisal]; Lawrence A. Hamermesh & Michael L. Wachter, The Short and Puzzling Life
of the “Implicit Minority Discount” in Delaware Appraisal Law, 156 U. Penn. L. Rev. 1,
30-36, 49, 52, 60 (2007) [hereinafter Implicit Minority Discount]; Lawrence A.
Hamermesh & Michael L. Wachter, The Fair Value of Cornfields in Delaware Appraisal
Law, 31 J. Corp. L. 119, 128, 132-33, 139-42 (2005) [hereinafter Fair Value of Cornfields].
15
8 Del. C. § 262(h); see M.P.M. Enters., Inc. v. Gilbert 731 A.2d 790 (Del. 1999)
(“Fair value, as used in § 262(h), Is more properly described as the value of the company
3
value arising from the merger, but addressing this other aspect would require a further
downward adjustment.16 By contrast, the market value indicator did not require
adjustments. Under a traditional formulation of the efficient capital markets hypothesis, the
unaffected market price provides a direct indication of the value of the subject company
based on its operative reality independent of the merger, at least for a company that is
widely traded and lacks a controlling stockholder.17 I therefore concluded on the facts
to the stockholder as a going concern, rather than its value to a third party as an
acquisition.”); see also Rationalizing Appraisal, supra, at 1038 (“[T]hird-party sale value
is an inappropriate standard for determining the fair value of dissenting shares because it
incorporates elements of value—associated with acquisitions of control by third parties—
that do not belong to the acquired enterprise or to shares of stock in that enterprise.”);
Implicit Minority Discount, supra, at 30 (“The value of the firm is not its third-party sale
value (V3PS). In an arm’s-length transaction, an acquirer will pay a premium to VE in
purchasing the firm. The premium largely reflects synergies arising from the merger, but
it can also reflect benefits of control.”); Fair Value of Cornfields, supra, at 148
(“[E]xcluded gains [for purposes of appraisal] include, for example, those resulting from
economies of scale or increased market share, or those that result from the acquirer’s plans
to operate the post-merger enterprise more efficiently.”); id. at 151 (concluding that Section
262(h) excludes value arising from both “synergies dependent on the consummation of an
arm’s-length acquisition” and “operating efficiencies that arise from the acquirer’s new
business plans”).
16
See Rationalizing Appraisal, supra, at 1055 (discussing an acquisition of a widely
held firm and explaining that “the firm’s going concern value can be estimated in this case
as the actual purchase price minus synergies minus control value”).
17
See Richard A. Booth, Minority Discounts and Control Premiums in Appraisal
Proceedings, 57 Bus. Law. 127, 151 n.130 (2001) (“[M]arket price should ordinarily equal
going concern value if the market is efficient.”); Control Premiums, supra, at 857-58 (“The
basic conclusion of the Efficient Capital Markets Hypothesis (ECMH) is that market values
of companies’ shares traded in competitive and open markets are unbiased estimates of the
value of the equity of such firms.”); id. at 879 (noting that the appraisal statute requires
consideration of all relevant factors and stating that “in an efficient market, absent
information about some market failure, market price is the only relevant factor”); Implicit
Minority Discount, supra, at 52 (“Take the case of a publicly traded company that has no
4
presented that the most persuasive evidence of Aruba’s fair value was its unaffected trading
price of $17.13 per share.18
Under Court of Chancery Rule 59(f), “[a] motion for reargument setting forth briefly
and distinctly the grounds therefor may be served and filed within 5 days after the filing of
the Court’s opinion or the receipt of the Court’s decision.”19 The petitioners have moved
for reargument.20
As movants, the petitioners bear the burden of demonstrating that I “overlooked a
decision or principle of law that would have controlling effect” or “misapprehended the
law or the facts so that the outcome of the decision would be affected.”21 A party moving
for reargument is not permitted “to raise new arguments that they failed to present in a
timely way.”22 An argument that was not previously raised “is therefore waived, and the
controller. Efficient market theory states that the shares of this company trade at the pro
rata value of the corporation as a going concern.”); id. at 60 (“As a matter of generally
accepted financial theory . . . , share prices in liquid and informed markets do generally
represent th[e] going concern value . . . .”).
18
See Post-Trial Ruling, 2018 WL 922139, at *4, *55.
19
See Ct. Ch. R. 59(f).
20
Dkt. 190 (the “Reargument Motion”).
21
Miles, Inc. v. Cookson Am., Inc., 677 A.2d 505, 506 (Del. Ch. 1995) (quoting
Stein v. Orloff, 1985 WL 21136, at *2 (Del. Ch. 1985)).
22
Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, 2010 WL 975581, at
*1 (Del. Ch.) (Strine, V.C.), aff’d, 7 A.3d 485 (Del. 2010) (TABLE).
5
motion must be denied for that reason alone.”23 Rule 59 is also “not a vehicle to rehash or
more forcefully present arguments already made.”24 “[T]he Court will deny a motion for
reargument that does no more than restate a party’s prior arguments.”25
The Reargument Motion advances what appear to be eight grounds for reargument.
In the order presented, they are:
 I misapprehended the law due to my “frustration with many of the Supreme Court’s
pronouncements.”26
 I misapprehended both the law and the facts by reaching “an absurd result that no
litigant would even ask for.”27
 I misapprehended the import of the discussion of the efficient capital markets
hypothesis in Dell and DFC, because “the superior tribunal simply referred to the
ECMH to criticize the Court of Chancery’s reliance on information that the Supreme
Court deemed was known to the market as a reason for not giving substantial weight
to the deal price.”28
23
Id. See generally Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and
Commercial Practice in the Delaware Court of Chancery § 4.09 (2015) (explaining that a
“motion for reargument may not introduce any new legal theories or issues that could have
been raised” but were not).
24
Lechiter v. Del. Dep’t of Nat. Res., 2016 WL 878121, at *2 (Del. Ch. Mar. 8,
2016); accord McElroy v. Shell Petroleum, Inc., 1992 WL 397468, at *1 (Del. Nov. 24,
1992) (TABLE) (“A motion for reargument is not intended to rehash the arguments already
decided by the court.”).
Zutrau v. Jansing, 2014 WL 6901461, at *2 (Del. Ch. Dec. 8, 2014), aff’d, 123
25
A.3d 938 (Del. 2015).
26
Reargument Mot. ¶ 1.
27
Id.28
Id. ¶ 4.
6
 I misapprehended the facts when applying the efficient capital markets hypothesis
because the trial record established that there was information about the value of
Aruba that had not been incorporated into the unaffected market price.29
 I misapprehended the law because relying on the unaffected trading price as an
indicator of value is “ridiculous.”30
 I acted “arbitrarily and capriciously” by using a 30-day average to measure the
unaffected market price rather than some other period.31
 I misapprehended the law and the facts because “the measuring point for the
valuation is supposed to be the closing date (May 18, 2015), but the Court
effectively used the 30 day period between January 26, 2015 and February 24, 2015
as the ‘valuation date.’”32
 I violated my “oath to Delaware to uphold the Delaware Constitution”33 by using
the unaffected market price as an indicator of fair value because this means, as a
practical matter, “that there can never be an appraisal for a public company receiving
a premium offer, regardless of the size of that premium.”34 This approach
“eliminated the statutory right to appraisal provided by the General Assembly in the
context of a publicly traded company.”35
In this decision, I take the liberty of grouping conceptually similar objections together,
rather than following the order in which the petitioners presented them.
29
Id. ¶ 5.
30
Id. ¶ 7.
31
Id.
32
Id. ¶ 8.
33
Id. ¶ 9
34
Id.
35
Id.
7
This decision denies the Reargument Motion. The petitioners have not shown that I
misapprehended the facts or the applicable law. When preparing the Post-Trial Ruling, I
reasoned through the issues as best I could and reached what I believe is the correct
determination of fair value for purposes of this case. At this point, the proper institutional
remedy for correcting any errors lies with the senior tribunal on appeal.
A. Objections To The Application Of The Legal Framework
Three of the petitioners’ objections accept for the sake of argument that the Post-
Trial Ruling could rely on the unaffected market price as a valuation indicator, but they
assert that I misapprehended the law and the facts when doing so. These are the petitioners’
most straightforward contentions, so this decision starts with them.
1. The Use Of A Thirty-Day Average
The petitioners contend that I acted “arbitrarily and capriciously” by using a 30-day
average to determine the unaffected market price rather than some other measurement
period.36 The petitioners claim that “[t]here is no record evidence or citation to support that
choice.”37 They ask rhetorically, “Does an efficient market really take 30 days to adjust to
provide evidence of fair value . . . ? Why isn’t it 90 days? Why isn’t it 1 day?”38 They note
that the period chosen makes a substantial difference in the outcome:
[H]ad the Court selected 1 day, the fair value would have been $18.38; had
it selected 90 days, it would have been $18.81; had it selected 120 days, it
36
Id. ¶ 7.
37
Id.
38
Id.
8
would have been $19.51; had it selected the opening price the day HP first
approached Aruba about a deal, it would have been $22.01.39
The petitioners’ objection to the 30-day measurement period represents a new argument
that is not cognizable under Rule 59(f).
During post-trial briefing and at post-trial argument, the respondent consistently
argued for using Aruba’s 30-day average trading price, measured before the news of a
potential deal leaked, as the relevant metric for the unaffected market price.40 The
39
Id. ¶ 7 n.8.
40
See, e.g., Dkt. 163 at 1 (“[HP] paid $24.67 per share for [Aruba]—a significant
premium over the unaffected market value of $17.13 per share.”); id. at 3 (“Aruba’s 30 day
average unaffected market price was $17.13 . . . .”); id. at 37 (“The market for Aruba stock
was a ‘thick and efficient’ one, such that Aruba’s stock price reflected its going concern
value.”); Dkt. 167 at 1 (“Marcus’ valuation far exceeds . . . Aruba’s unaffected market
value of $17.13.”); id. at 2 (“Dages’ analysis is also consistent with how the market . . .
valued Aruba.”); id. (“Aruba’s share price was not, as Verition contends, trading in an [sic]
‘trough,’ but reflected an efficient market’s concerns about Aruba’s future.” (internal
citations omitted)); id. at 6 (“Verition . . . does not contend that the market for Aruba’s
stock was not efficient.”); id. (arguing that Aruba had positive and negative aspects, “all of
which the market knew and incorporated into Aruba’s stock price”); Dkt. 174 at 1 (“[DFC]
confirms Aruba’s position that the Court should reject Verition’s proposed DCF fair value
of $32.57 and adopt Aruba’s proposed DCF fair value of $19.75 because the latter is
consistent with . . . Aruba’s pre-transaction trading price of $17.13 . . . .”); id. (“DFC makes
clear that Aruba’s pre-transaction trading price is relevant to fair value and negates certain
of Verition’s challenges to the deal process.”); id. (“[T]he fact that the market for Aruba
stock is informationally efficient refutes Verition’s argument that the deal price was
negotiated while Aruba traded in an artificial ‘trough.’”); id. at 3 (“DFC Shows That
Aruba’s Market Price Of $17.13 Is Informative Of Fair Value.”); id. at 15 (arguing that the
court should consider “the market price”); Dkt. 178 at 97-98 (“I would submit that these
four numbers, Aruba’s unaffected contemporaneous market price of [$]17.13 a share, the
merger price of [$]24.67 a share as a ceiling, and HP’s valuation . . . of Aruba at [$]19.10
a share, and the DCF valuation of Mr. Dages of no greater than [$]19.75 a share, all cluster
around the same valuation range.”); id. at 98-104 (discussing relevance of unaffected
market price of $17.13 per share as indicator of fair value); Dkt. 188 at 1 (“[Dell] confirms
Aruba’s position that the Court must consider Aruba’s pre-transaction market price of
9
respondent did not bury the lede: Aruba identified this metric in the opening lines of every
one of its post-trial briefs, and its counsel mentioned it at the outset of his argument during
the post-trial hearing.41
The petitioners never contested the 30-day metric, nor did they offer a different one.
They took the broader position that Aruba’s market price was depressed and unreliable.
The petitioners could have engaged on the proper measurement period for market value by
$17.13 as both an independent indicator of Aruba’s fair value and as a reliable anchor for
the $24.67 merger price less shared synergies.”); id. at 2 (“[T]he Court should consider
Dages’ imminently reasonable $19.75 DCF as yet another check that confirms the
reliability of the $17.13 market price, and reject Marcus’ $32.57 DCF as there is no
rational, factual basis for the 90% valuation gap between this and the market price.”); id.
at 14 (arguing for reliance on “Aruba’s 30-day unaffected market price of $17.13”).
41
See, e.g., Dkt. 163 at 1 (respondent’s answering post-trial brief: “[HP] paid $24.67
per share for [Aruba]—a significant premium over the unaffected market price of $17.13
per share.”); Dkt. 167 at 1 (respondent’s post-trial sur-reply brief: “Marcus’ valuation far
exceeds . . . Aruba’s unaffected market value of $17.13.”); Dkt. 174 at 1 (respondent’s
supplemental post-trial brief on DFC: “[DFC] confirms Aruba’s position that the Court
should reject Verition’s proposed DCF fair value of $32.57 and adopt Aruba’s proposed
DCF fair value of $19.75 because the latter is consistent with . . . Aruba’s pre-transaction
trading price of $17.13 . . . .”); Dkt. 178 at 97-98 (respondent’s counsel beginning his
argument during the post-trial hearing: “I would submit that these four numbers, Aruba’s
unaffected contemporaneous market price of [$]17.13 a share, the merger price of [$]24.67
a share as a ceiling, and HP’s valuation . . . of Aruba at [$]19.10 a share, and the DCF
valuation of Mr. Dages of no greater than [$]19.75 a share, all cluster around the same
valuation range.”); id. at 98-104 (discussing relevance of unaffected market price of $17.13
per share as indicator of fair value); Dkt. 188 at 1 (respondent’s supplemental post-trial
brief on Dell: “[Dell] confirms Aruba’s position that the Court must consider Aruba’s pre-
transaction market price of $17.13 as both an independent indicator of Aruba’s fair value
and as a reliable anchor for the $24.67 merger price less shared synergies.”); id. (“[I]n
response to the Supreme Court’s recent guidance in Dell and [DFC], Aruba now
understands that its pre-transaction market price is indeed the single most important mark
of its fair value.” (footnote omitted)).
10
noting that they believed that the market price was unreliable, but that if the court disagreed
and chose to consider that metric, then the court should use a different measurement period.
Parties often make alternative arguments of this type. Rather than engaging in this manner,
the petitioners did not advocate in favor of any metric for market value. Even now, the
Reargument Motion does not argue that the court should have used a particular
measurement period. The Reargument Motion simply observes that different measurement
periods could produce different valuation indications.
Had the petitioners engaged on the measurement period, then the respondent
doubtless would have provided support for the 30-day metric. In response to the
Reargument Motion, the respondent has cited authorities indicating that using a 30-day
period is both “generally considered acceptable in the financial community” 42 and within
a court’s discretionary judgment.43 I would have considered the parties’ competing
42
Weinberger v. UOP, Inc., 457 A.2d 701, 712 (Del. 1983); see Dkt. 192 ¶ 9 n.8
(citing Arthur J. Keown & John M. Pinkerton, Merger Announcements and Insider Trading
Activity: An Empirical Investigation, 36 J. Fin. 855, 866 (1981) for the proposition that “a
30-day average has the benefit of correcting for ‘what appears to be common knowledge
on the street: impending merger announcements are poorly held secrets’”). Given the
strictures of Rule 59(f) and the fact that the petitioners had not previously raised the issue,
I have not delved into the valuation and academic literature on this point, but I suspect
many treatises and other articles could be cited to support the general acceptance of a 30-
day average as a common metric for calculating the unaffected trading price.
43
See, e.g., In re Appraisal of Shell Oil Co., 1990 WL 201390, at *29 (Del. Ch. Dec.
11, 1990) (explaining that it “was not improper, as a matter of law,” to base the unaffected
market price on either “the day prior to the offer announcement” or a day “30 days prior to
the merger announcement”), aff’d, 607 A.2d 1213 (Del. 1992); In re Olivetti Underwood
Corp., 246 A.2d 800, 805 (Del. Ch. 1968) (declining to recognize any rule of law
mandating a particular measurement period and finding that an average was reasonable).
11
arguments, and perhaps there would have been good reason to choose a different period.
But the petitioners did not engage on how long the measurement period should be. They
chose to reject market value entirely. For the petitioners to dispute the proper measurement
period now constitutes a new argument that is beyond the scope of Rule 59(f).
The petitioners also point out that I did not provide a footnoted record citation for
the source of the 30-day average. This argument presents a somewhat different point than
their objection to the 30-day average because the petitioners could not have raised this
omission before seeing the Post-Trial Ruling.
Because the 30-day measurement period permeated the briefing, it did not occur to
me to provide a footnoted record citation to support it. It appeared uncontested that if I
adopted market value as a metric, then the 30-day average was an appropriate measurement
period and $17.13 per share was the relevant figure. The Post-Trial Ruling spanned 129
pages and was encumbered by 498 footnotes. In my view, the omission of a 499th footnote
does not rise to a misapprehension of fact sufficient to warrant reargument.
2. The Gap Between The Market Indication And The Valuation Date
The petitioners next contend that I misapprehended the law because “the measuring
point for the valuation is supposed to be the closing date (May 18, 2015), but the Court
effectively used the 30 day period between January 26, 2015 and February 24, 2015 as the
‘valuation date.’”44 I did not misapprehend the law regarding the valuation date or miss the
44
Reargument Mot. ¶ 8.
12
fact that using earlier market measures resulted in a temporal gap between the evidence of
value and the valuation date. The Post-Trial Ruling considered the issue explicitly,45 just
as I have done in other appraisal decisions.46
The Post-Trial Ruling found that “neither side proved that Aruba’s value had
changed materially by closing, so this decision sticks with the unaffected market price and
the deal price less synergies.”47 As support for the legitimacy of this determination, the
Post-Trial Ruling cited Chief Justice Strine’s decision in the Union Illinois case, issued
while he served on this court, in which he reached a similar conclusion regarding the
insignificance of the temporal gap based on the record presented in that matter. 48
The petitioners have not shown that I misapprehended the law or facts as to the
temporal gap. They simply disagree with the finding made in the Post-Trial Ruling. That
disagreement gives rise to an issue for appeal, not grounds for reargument.49
45
Post-Trial Ruling, 2018 WL 922139, at *53.
46
See Merion Capital L.P. v. Lender Processing Servs., Inc., 2016 WL 7324170, at
*23-26 (Del. Ch. Dec. 16, 2016); In re Appraisal of Dell Inc. (Dell Trial Fair Value), 2016
WL 3186538, at *21 (Del. Ch. May 31, 2016), aff’d in part, rev’d in part sub nom. Dell,
177 A.3d 1.
47
Post-Trial Ruling, 2018 WL 922139, at *53.
48
See Union Ill. 1995 Inv. Ltd. P’ship v. Union Fin. Gp. Ltd., 847 A.2d 340, 358
(Del. Ch. 2004) (describing the temporal gap as a “quibble” and “not a forceful objection”).
49
See Zutrau, 2014 WL 6901461, at *2 (finding “[m]ere disagreement with the
Court’s resolution of a matter” to be insufficient grounds for reargument.).
13
3. The Existence Of Information That Was Not Known To The Market
The petitioners also contend that I misapprehended the facts when applying the
efficient capital markets hypothesis as framed in Dell and DFC because the trial record
established that there was information about the value of Aruba that was undisclosed and
could not have been incorporated into the unaffected market price.50 The petitioners
contend that by using the 30-day unaffected market price, the Post-Trial Ruling effectively
adopted the strong form of market efficiency rather than the semi-strong form that the Dell
and DFC decisions endorsed.51
I agree that the Delaware Supreme Court’s decisions in Dell and DFC endorsed a
traditional version of the semi-strong form of the efficient capital markets hypothesis, not
the strong form.52 Under the semi-strong version, information concerning a company is
quickly impounded into the company’s stock price such that the price reflects the
information. The semi-strong form of the hypothesis differs from the strong form, in which
stock prices reflect all information relevant to value, both public and nonpublic.53
50
Reargument Mot. ¶ 5.
51
Id. ¶ 4.
52
See, e.g., Post-Trial Ruling, 2018 WL 92139, at *24 (“The Delaware Supreme
Court’s recent decisions in DFC and Dell teach that if a company’s shares trade in a market
having attributes consistent with the assumptions underlying a traditional version of the
semi-strong form of the efficient capital markets hypothesis, then the unaffected trading
price provides evidence of the fair value of a proportionate interest in the company as a
going concern.” (footnote omitted)); see also id. at *25, *30, *31 n.207, *34.
53
See generally Eugene F. Fama, Efficient Capital Markets: A Review of Theory
and Empirical Work, 25 J. Fin. 383 (1970).
14
The petitioners now argue that I found that there was information that was not
impounded into the trading price. In the Post-Trial Ruling, I made the following findings
about Aruba’s release of information to the market:
At the end of January 2015, HP offered to acquire Aruba for $23.25 per share.
During the first week of February, while Aruba was considering its response,
another analyst report criticized the Company, and the stock price fell again,
closing around $16.07 the day after the report. Contrary to the market’s
perception, Aruba management knew internally that Aruba was having an
excellent quarter and would beat its guidance. But, rather than correcting the
market’s perception, Aruba management proposed to time the announcement
of the merger to coincide with the announcement of Aruba’s February 2015
earnings. Companies often announce significant items as part of an earnings
release, particularly if the earnings are bad and the news is good (or vice
versa). In this case, Aruba management believed that an increase in the stock
price would hurt their chances of getting the deal approved. Providing both
pieces of information simultaneously would blur the market’s reaction to
Aruba’s strong quarterly results and help get the deal approved.54
I noted that after Aruba announced its strong quarterly results in conjunction with the
merger, “Aruba’s stock traded briefly above the deal price, indicating the market took into
account both the announcement of the deal and Aruba’s strong results.”55
As with the measurement period, the petitioners could have used the conjunctive
announcement as an opportunity to engage with the respondent’s proffered measure of the
unaffected market price and argue for a higher figure. Had they done so, then in my view
the respondent would have had a strong argument that to the extent the market price reacted
to news of the deal, the resulting valuation impact represented an “element of value arising
54
Post-Trial Ruling, 2018 WL 922139, at *33 (footnotes omitted).
55
Id. at *34.
15
from the . . . expectation of the merger.”56 That argument would have forced the petitioners
to try to disentangle the effect of the earnings information from the effect of the merger
announcement.57
The petitioners did not make the attempt. Instead, they argued broadly that the
market price was unreliable and should be disregarded because investors were
undervaluing Aruba. The Post-Trial Ruling considered that argument and rejected it.58
For the petitioners now to argue that I should have constructed and considered a
different market price constitutes a new argument. It does not provide a basis for relief
under Rule 59(f).
B. Objections To The Interpretation Of Dell And DFC That Created The Legal
Framework
The petitioners’ next three objections disagree with the Post-Trial Ruling’s reliance
on Aruba’s unaffected market price as a valuation indicator. They contend that the Post-
Trial Ruling misapprehended the import of the Delaware Supreme Court’s rulings in Dell
and DFC and should not have considered the unaffected market price. This is logically the
next set of arguments to tackle.
56
8 Del. C. § 262(h).
57
See Post-Trial Ruling, 2018 WL 922139, at *35 (noting that “[r]eleasing
information simultaneously or in close proximity might make it difficult for an expert to
disentangle the price reaction”).
58
See id. at *28-34.
16
1. Whether Dell And DFC Meant To Endorse The Efficient Capital
Markets Hypothesis As A Valuation Tool
The petitioners argue that the Post-Trial Ruling misapprehended the import of the
discussion of the efficient capital markets hypothesis in Dell and DFC, because neither
decision “required the Court of Chancery to weight the supposedly ‘unaffected’ market
trading price at all.”59 Rather, the petitioners say that “the superior tribunal simply referred
to the ECMH to criticize the Court of Chancery’s reliance on information that the Supreme
Court deemed was known to the market as a reason for not giving substantial weight to the
deal price.”60
I agree that Dell and DFC did not require the Court of Chancery to give weight to
the unaffected market price. The Post-Trial Ruling did not proceed on the premise that I
was required to give weight to the unaffected market price, nor did I ultimately give
exclusive weight to the unaffected market price because I thought I was required to do so.
Instead, I perceived that Dell and DFC endorsed the reliability of the unaffected
market price as an indicator of value, at least for a widely traded company, without a
controlling stockholder, where the market for its shares has attributes consistent with the
assumptions underlying the efficient capital markets hypothesis. As a result, I believe that
trial courts now can (and often should) place heavier reliance on the unaffected market
price.
59
Reargument Mot. ¶ 6.
60
Id. ¶ 4.
17
From my standpoint, this aspect of the Dell and DFC decisions represented a change
in direction for Delaware appraisal law. Before Dell and DFC, my conceptual framework
for approaching the determination of fair value called for regarding the trading price with
skepticism, while having relatively greater confidence in the contemporaneous views of
management and other sophisticated parties and placing relatively greater reliance on
management projections prepared in the ordinary course of business. This skeptical
approach to market prices did not flow from any personal value judgment on my part, but
rather from how Delaware Supreme Court decisions had treated the unaffected trading
price as a valuation indicator.61
The relatively diminished role of the market price in this conceptual framework also
influenced the circumstances under which I perceived that the deal price would provide
reliable evidence of fair value. While recognizing the potential relevance of that indicator,
I believed that if contemporaneous evidence from knowledgeable insiders indicated that
61
See, e.g., Cede & Co. v. Technicolor, Inc. (Technicolor II), 684 A.2d 289, 301
(Del. 1996) (observing, in context of appraisal of publicly traded company following
arm’s-length deal, that the “market price of shares may not be representative of fair value”
(internal quotation marks omitted) (quoting Paramount Commc’ns, Inc. v. Time Inc., 571
A.2d 1140, 1150 n.12 (Del. 1989))); Rapid-American Corp. v. Harris, 603 A.2d 796, 806
(Del. 1992) (describing the Court of Chancery’s rejection of market value in Chicago Corp.
v. Munds, 172 A. 452 (Del. Ch. 1934), and observing that “Munds’ succinct evaluation of
the market has lost none of its lustre”); see also Glassman v. Unocal Expl. Corp., 777 A.2d
242, 248 (Del. 2001) (stating that if a transaction “was timed to take advantage of a
depressed market, or a low point in the company’s cyclical earnings, or to precede an
anticipated positive development, the appraised value may be adjusted to account for those
factors”). See generally Implicit Minority Discount, supra, at 8 (“Delaware appraisal law
has never been particularly friendly to the idea that stock market prices always accurately
represent a proportional share of the value of the enterprise as a going concern.”).
18
the company’s market price was depressed, then the party arguing for reliance on the deal
price (typically the respondent) would bear the burden of showing that the process had
provided a sufficient opportunity for price discovery to warrant regarding the deal price as
a reliable indicator of fair value.62 I have previously described my then-operative
understandings of what this inquiry contemplated, so I will not repeat them here.63
As discussed in greater detail below, the Delaware Supreme Court’s decisions in
Dell and DFC contained an unprecedented level of discussion of the efficient capital
markets hypothesis.64 To my mind, the Delaware Supreme Court’s endorsement of the
62
See M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 520 (Del. 1999) (“In a
statutory appraisal proceeding, both sides have the burden of proving their respective
valuation positions by a preponderance of evidence.”).
63
See Dell Trial Fair Value, 2016 WL 3186538, at *22-28; Lender Processing,
2016 WL 7324170, at *14-26.
64
I use “unprecedented” descriptively—and without intending any pejorative
connotation—to mean literally without prior Delaware Supreme Court precedent. I
personally have been unable to locate a single Delaware Supreme Court decision before
Dell and DFC that mentioned the efficient capital markets hypothesis by name, much less
cited it with approval. Among various research efforts, I queried the Delaware cases
database on Westlaw (DE-CS) with a broad search (efficient +5 market), then limited the
results to Delaware Supreme Court decisions. The results consisted of nine opinions,
including Dell and DFC. Of the remaining seven, three explained that uniform
interpretations of standard provisions in indentures and other commercial documents
promote the “efficient working of capital markets.” See Caspian Alpha Long Credit Fund,
L.P. v. GS Mezzanine P’rs 2006 L.P., 93 A.3d 1203, 1206 n.9 (Del. 2014) (quoting Sharon
Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039, 1048 (2d Cir. 1982)); RAA
Mgmt., LLC v. Savage Sports Hldgs., Inc., 45 A.3d 107, 119 (Del. 2012); Kaiser Aluminum
Corp. v. Matheson, 681 A.2d 392, 398 (Del. 1996) (quoting Sharon Steel, 691 F.2d 1039).
A fourth used the phrase when describing the defendants’ rationale for proceeding with a
controlling-stockholder acquisition that the plaintiffs had challenged. See Ams. Mining
Corp. v. Theriault, 51 A.3d 1213, 1229 (Del. 2012) (noting that the defendants contended
that a stock-for-stock merger would increase the number of outstanding shares, which
19
would “improve stockholder liquidity, generate more analyst exposure, and create a more
efficient market for Southern Peru shares”). A fifth quoted my observation in a post-trial
decision that “the reliability of an observed beta depends on an efficient trading market.”
RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 867 (Del. 2015) (quoting In re Rural
Metro Corp. S’holders Litig., 88 A.3d 54, 108-09 (Del. Ch. 2014)).
The last two of the pre-Dell and DFC decisions involved appraisal cases. In one, the
Delaware Supreme Court referred to the “efficient market” when describing the
respondent’s request on appeal for the creation of a presumption that the deal price equated
to fair value, which the high court declined to adopt. See Golden Telecom, Inc. v. Glob. GT
LP, 11 A.3d 214, 216 (Del. 2010) (“Supported by the arms-length nature of the merger and
the efficient market price, Golden contends that the merger price indicated Golden’s fair
value for purposes of appraisal.”). The final decision cited Eugene Fama’s seminal Efficient
Capital Markets in support of the observation that “[i]nformation and insight not
communicated to the market may not be reflected in stock prices; thus, minority
stockholders being cashed out may be deprived of part of the true investment value of their
shares.” Cede & Co. v. Technicolor, Inc. (Technicolor I), 542 A.2d 1182, 1187 n.8 (Del.
1988). The only substantive reference—Technicolor I—thus cut against relying on the
efficient capital markets hypothesis, not in favor of it, as did the eventual outcome in that
case.
In the interest of completeness, there is one pre-DFC decision from the Delaware
Supreme Court that referred favorably to market price as a method of determining value.
See Applebaum v. Avaya, Inc., 812 A.2d 880 (Del. 2002). The Applebaum decision
interpreted Section 155(2) of the Delaware General Corporation Law, which states that
when a reverse stock split or other transaction generates fractional shares, a corporation
may “pay in cash the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined.” 8 Del. C. § 155(2). A corporation used the market
price to determine the amount due for factional shares following a reverse stock split. The
Court of Chancery upheld this determination, and the Delaware Supreme Court affirmed,
stating that “the Vice Chancellor properly held that the trading price of actively-traded
stock of a corporation, the stock of which is widely held, will provide an adequate measure
of fair value for the stockholders’ fractional interests for purposes of a reverse stock split
under Section 155.” Applebaum, 812 A.2d at 883. The high court later reiterated that “[t]he
Vice Chancellor correctly concluded that a well-informed, liquid trading market will
provide a measure of fair value superior to any estimate the court could impose.” Id. at 890.
The court cautioned, however, that “market price is not employed in all valuation
contexts,” citing both the appraisal statute and Smith v. Van Gorkom, 488 A.2d 858, 876
(Del. 1985). See Applebaum, 812 A.2d at 889 & n.28.
20
efficient capital markets hypothesis suggested a greater (yet still non-mandatory) role for
the use of market price when determining fair value.
The petitioners are correct that the structure of the Delaware Supreme Court’s
opinions in Dell and DFC permits the interpretation that the Delaware Supreme Court only
discussed the efficient capital markets hypothesis en route to endorsing a deal-price-less-
synergies metric and that the discussion might carry no weight for purposes of assessing
market price as a separate valuation indicator. Both Dell and DFC follow the same broad
structure. First, the opinions discussed the efficient capital markets hypothesis. Second,
they discussed the sale processes and held that the processes provided sufficiently reliable
evidence of fair value that it constituted an abuse of discretion for the trial judge not to
have given that indicator greater weight. Third, for completeness, they worked through
challenges to the discounted cash flow analyses. Finally, they remanded the cases so that
the trial court could consider giving greater weight to the deal price.
Because of this high-level structure, it is possible to read the decisions as discussing
the efficient capital markets hypothesis only instrumentally in support of a deal-price-less-
synergies metric. I personally considered that possibility, but after multiple readings of
Dell and DFC, several factors convinced me that something more was at work.
First, discussing the efficient capital markets hypothesis did not appear to be
logically necessary at the appellate level in either Dell or DFC. To endorse the deal price
as a valuation indicator, the Delaware Supreme Court could have started and finished by
discussing the deal process itself and explaining why market forces generated a reliable
price. The DFC court cited a series of Court of Chancery decisions that had given exclusive
21
weight to the deal price.65 These decisions focused on whether the deal price resulted from
a “proper transactional process.”66 None of the cited decisions discussed the efficient
capital markets hypothesis. Only one—Autoinfo—considered an argument that the market
price was unreliable because the company “was thinly traded and lacked financial analyst
coverage.”67 In addressing this argument, the court discussed the sale process and noted
that the resulting deal generated a premium of 22% over the closing price on the last trading
day before the announcement of the merger. The court concluded that “[w]hile the market
may have been uninformed about AutoInfo before the sale process, it subsequently gained
ample information.”68
The Delaware Supreme Court could have followed a similar course in Dell and DFC
by focusing on the reliability of the sale process without discussing the efficient capital
65
See DFC, 172 A.3d at 364 n.84 (citing In re PetSmart, Inc., 2017 WL 2303599(Del. Ch. May 26, 2017); Merion Capital LP v. BMC Software, Inc., 2015 WL 6164771(Del. Ch. Oct. 21, 2015); LongPath Capital, LLC v. Ramtron Int’l Corp., 2015 WL
4540443 (Del. Ch. June 30, 2015); Merlin P’rs LP v. AutoInfo, Inc., 2015 WL 2069417(Del. Ch. Apr. 30, 2015); In re Appraisal of Ancestry.com, Inc., 2015 WL 399726 (Del.
Ch. Jan. 30, 2015); Huff Fund Inv. P’ship v. CKx, Inc., 2013 WL 5878807 (Del. Ch. Nov.
1, 2013); Union Ill., 847 A.2d 340).
66
Ramtron, 2015 WL 4540443, at *20; accord PetSmart, 2017 WL 2303599, at
*31; see also BMC, 2015 WL 6164771, at *17 (“robust, arm’s-length sales process”);
Ancestry.com, 2015 WL 399726, at *16 (“[T]he process here . . . appears to me to represent
an auction of the Company that is unlikely to have left significant stockholder value
unaccounted for.”).
67
2015 WL 2069417, at *12.
68
Id.22
markets hypothesis or the general reliability of market prices.69 Instead, the high court
chose to endorse those propositions. To my mind, these aspects of the high court’s decision
carried independent doctrinal significance. Moreover, the analytical move seemed
particularly meaningful because it represented a departure from prior Delaware Supreme
Court precedent, which had not previously endorsed the efficient capital markets
hypothesis and had expressed skepticism about the reliability of market prices.70
Second, the opinions in Dell and DFC did not just mention the efficient capital
markets hypothesis in passing. Both devoted considerable space to the subject, and both
seemed quite forceful in their endorsement of market prices as an indicator of value. Here
are a selection of quotations from Dell and DFC that contributed to my impressions on
these points:
 “[T]he Court of Chancery’s analysis ignored the efficient capital market hypothesis
long endorsed by this Court.”71
 “[The efficient capital markets hypothesis] teaches that the price produced by an
efficient market is generally a more reliable assessment of fair value than the view
69
See, e.g., DFC, 172 A.3d at 366 (“[W]e have little quibble with the economic
argument that the price of a merger that results from a robust market check, against the
back drop of a rich information base and a welcoming environment for potential buyers, is
probative of the company’s fair value.”); id. (“[O]ur refusal to craft a statutory presumption
in favor of the deal price . . . does not in any way signal our ignorance to the economic
reality that the sale value resulting from a robust market check will often be the most
reliable evidence of fair value . . . .”).
70
See supra notes 61-64 and accompanying text.
71
Dell, 177 A.3d at 24.
23
of a single analyst, especially an expert witness who caters her valuation to the
litigation imperatives of a well-heeled client.”72
 “[T]he [efficient market hypothesis] states that the market assessment of value is
more accurate, on average, than that of any individual, including an appraiser.”73
 “Market prices are typically viewed superior to other valuation techniques because,
unlike, e.g., a single person’s discounted cash flow model, the market price should
distill the collective judgment of the many based on all the publicly available
information about a given company and the value of its shares.”74
 When the market for a company’s shares is efficient, “a company’s stock price
‘reflects the judgments of many stockholders about the company’s future prospects,
based on public filings, industry information, and research conducted by equity
analysts.’”75
 When the market for a company’s shares is efficient, “a mass of investors quickly
digests all publicly available information about a company, and in trading the
company’s stock, recalibrates its price to reflect the market’s adjusted, consensus
valuation of the company.”76
 “As one textbook puts it, ‘[i]n an efficient market you can trust prices, for they
impound all available information about the value of each security.’”77
 “‘For many purposes no formal theory of value is needed. We can take the market’s
word for it.’”78
72
Id.
73
DFC, 172 A.3d at 367 n.104 (alterations in original) (internal quotation marks
omitted) (quoting Bradford Cornell, Corporate Valuation 47 (1999)).
74
Id. at 369-70.
75
Dell, 177 A.3d at 25 (quoting DFC, 172 A.3d at 373-74).
76
Id. (citing DFC, 172 A.3d at 370).
77
DFC, 172 A.3d at 370 (alteration in original) (quoting Richard A. Brealey et al.,
Principles of Corporate Finance 373 (2008)).
78
Id. (quoting Brealey et al., supra, at 13).
24
 “[T]he relationship between market valuation and fundamental valuation has been
strong historically.”79
 “[C]orporate finance theory reflects a belief that if an asset—such as the value of a
company as reflected in the trading value of its stock—can be subject to close
examination and bidding by many humans with an incentive to estimate its future
cash flows value, the resulting collective judgment as to value is likely to be highly
informative and that, all estimators having equal access to information, the
likelihood of outguessing the market over time and building a portfolio of stocks
beating it is slight.”80
 “[I]t is unlikely that a particular party having the same information as other market
participants will have a judgment about an asset’s value that is likely to be more
reliable than the collective judgment of value embodied in a market price.”81
 Although the market price may not always be right, “one should have little
confidence she can be the special one able to outwit the larger universe of equally
avid capitalists with an incentive to reap rewards by buying the asset if it is too
cheaply priced.”82
 “[O]n average, market forecasts and market valuations will be at least as accurate
as those produced by individual investors and appraisers, no matter how expert.”83
 “Like any factor relevant to a company’s future performance, the market’s
collective judgment of the effect of regulatory risk may turn out to be wrong, but
established corporate finance theories suggest that the collective judgment of the
many is more likely to be accurate than any individual’s guess.”84
79
Id.
80
Id.
81
Id. at 367.
82
Id.
83
Id. at 373 n.144 (alteration in original) (internal quotation marks omitted) (quoting
Cornell, supra, at 47).
84
Id. at 349.
25
In Dell, after describing Dell’s market capitalization, public float, weekly trading volume,
bid-ask spread, and analyst coverage and the response to the news of the buyout offer, the
high court observed that “[b]ased on these metrics, the record suggests the market for Dell
stock was semi-strong efficient, meaning that the market’s digestion and assessment of all
publicly available information concerning Dell was quickly impounded into the
Company’s stock price.”85 In its legal analysis, the Delaware Supreme Court returned to
and reiterated these points, stressing that the market for Dell’s shares was efficient and that
it was error to discount the trading price.86 To my mind, this degree of emphasis did not
seem solely instrumental, but rather independently important.
Third and more generally, the Delaware Supreme Court stressed in both Dell and
DFC that the trial courts must take into account accepted financial and economic
principles. This mandate applies to the trial court’s factual findings.87 It extends to the trial
85
Dell, 177 A.3d at 7.
86
Id. at 25-27.
87
See DFC, 172 A.3d at 372 (“Although the Court of Chancery has broad discretion
to make findings of fact, those findings of fact have to be grounded in the record and
reliable principles of corporate finance and economics.”); id. (“[T]he Chancellor found that
the deal price was unreliable because DFC was in a trough with future performance
dependent upon the outcome of regulatory actions, but he cited no economic literature to
suggest that markets themselves cannot price this sort of regulatory risk.” (emphasis
added)); see also Dell, 177 A.3d at 24 (“We consider each of these premises in turn and
find them untenable in view of the Court of Chancery’s own findings of fact as considered
in light of established principles of corporate finance.”); id. at 30-31 (describing trial
court’s finding that the Dell sale process only involved private equity bidders and therefore
had attributes of a common value auction, which in turn affected price, as “not grounded
in accepted financial principles”).
26
court’s choice of valuation methodologies.88 And it encompasses the final determination
of fair value.89 As the Delaware Supreme Court repeatedly emphasized in Dell and DFC,
the efficient capital markets hypothesis is a widely accepted principle in corporate
finance.90 It follows that a trial court would be obligated to consider the valuation
88
See Dell, 177 A.3d at 22 (“[W]hatever route it chooses, the trial court must justify
its methodology (or methodologies) according to the facts of the case and relevant,
accepted financial principles.”); see also id. at 5 (explaining that the trial court “erred
because its reasons for giving [the stock price and the deal price] no weight—and for
relying instead exclusively on its own discounted cash flow (‘DCF’) analysis to reach a
fair value conclusion of $17.62—do not follow from the court’s key factual finding and
from relevant, accepted financial principles”); id. at 6 (“[T]he trial court’s decision to rely
‘exclusively’ on its own DCF analysis is based on several assumptions that are not
grounded in relevant, accepted financial principles.”).
89
See DFC, 172 A.3d at 388 (“[T]he Court of Chancery must exercise its
considerable discretion while also explaining, with reference to the economic facts before
it and corporate finance principles, why it is according a certain weight to a certain indicator
of value.”); see also Dell, 177 A.3d at 5-6 (“We defer to the trial court’s fair value
determination if it has a ‘reasonable basis in the record and in accepted financial principles
relevant to determining the value of corporations and their stock.’” (quoting DFC, 172
A.3d at 348-49)); DFC, 172 A.3d at 349 (explaining that trial court erred when giving one-
third weight to the deal price where “economic principles suggest that the best evidence of
fair value was the deal price”).
90
See, e.g., DFC, 172 A.3d at 349 (“[E]stablished corporate finance theories suggest
that the collective judgment of the many [in a market] is more likely to be accurate than
any individual’s guess.”); id. at 366 & n.104 (collecting valuation treatises to support
proposition that “in any assessment of the economic value of something—be it a company,
a product, or a service—economics teaches that the most reliable evidence of value is that
produced by a competitive market”); id. at 366 n.104 (“Most of us economists who believe
in this efficient market theory do so because we view markets as amazingly successful
devices for reflecting new information rapidly and, for the most part, accurately.” (quoting
Burton G. Malkiel, Are Markets Efficient?, Wall St. J., Dec. 28, 2000); id. at 367 (noting
that the fair value of the petitioners’ shares “would, to an economist, likely be best reflected
by the prices at which their shares were trading as of the merger”); id. at 370 (“[C]orporate
finance theory reflects a belief that if an asset—such as the value of a company as reflected
in the trading value of its stock—can be subject to close examination and bidding by many
27
implications of a stock price generated by a market having attributes consistent with the
efficient capital markets hypothesis.
Fourth, particularly in Dell, the Delaware Supreme Court appeared to regard my
failure to give weight to the stock price as a separate and distinct source of error. If the
petitioners’ instrumentalist view were correct, one would expect the Delaware Supreme
Court to have stressed my giving inadequate weight to the deal price (the root cause of the
error) and to have placed less emphasis on the market price (the instrumental error).
Instead, the Delaware Supreme Court prominently discussed both as sources of error.91
humans with an incentive to estimate its future cash flows value, the resulting collective
judgment as to value is likely to be highly informative . . . .”).
91
See Dell, 177 A.3d at 5 (“The problem with the trial court’s opinion is not, as the
Company argues, that it failed to take into account the stock price and deal price. The trial
court did consider this market data. It simply decided to give it no weight. But the court
nonetheless erred because its reasons for giving that data no weight . . . do not follow from
the court’s key factual findings and from relevant, accepted financial principles.”); id. at
34 (“The actual facts concerning Dell’s market values—the particularities of its stock
market and the sale process—demonstrate that the court of Chancery’s reasons for
assigning no weight to the market values are flawed.”); id. at 35 (citing list of factors,
including “the evidence of market efficiency,” that results in the trial-level outcome in Dell
“abus[ing] even the wide discretion afforded the Court of Chancery in these difficult
cases”); id. (citing as error the decision “to give no weight to the prices resulting from the
actions of Dell’s stockholders and potential buyers”).
That said, it bears noting that at one point the Dell opinion did describe the stock
market error instrumentally, stating: “In short, the record does not adequately support the
Court of Chancery’s conclusion that the market for Dell’s stock was inefficient and that a
valuation gap in the Company’s market trading price existed in advance of the lengthy
market check, an error that contributed to the trial court’s decision to disregard the deal
price.” Id. at 27 (emphasis added). To reiterate, I agree that one possible reading of Dell
and DFC would treat the discussion of the efficient capital markets hypothesis as merely
an instrumental step along the road to reliance on the deal price. For the reasons I have
28
Most significantly, the Delaware Supreme Court specifically identified the failure to give
weight to the market price as a standalone source of error because the market price itself
provided evidence of fair value: “Here, the trial court gave no weight to Dell’s stock price
because it found its market to be inefficient. But the evidence suggests that the market for
Dell’s shares was actually efficient and, therefore, likely a possible proxy for fair value.”92
This language appeared to me to recognize explicitly that when the market for a company’s
shares has attributes associated with the premises underlying a traditional view of the
efficient capital markets hypothesis, and the company lacks a controlling stockholder, then
the stock market price is “likely a possible proxy for fair value.”93
Finally, as a matter of policy, I was aware that some commentators have expressed
concern about a regime that incentivizes appraisal arbitrage and have contended that the
statutory interest rate permits appraisal arbitrageurs to generate outsized profits with
minimal risk, because the fair value determination often comes in at the deal price or
slightly below it.94 The Dell and DFC decisions appeared to me to be taking steps to
outlined, I concluded that the discussion of the efficient capital markets hypothesis carried
independent doctrinal weight.
92
Id. at 6.
93
Id.
94
See generally Charles K. Korsmo & Minor Myers, Interest in Appraisal, 42 J.
Corp. L. 109, 111, 126-31 (2016) (discussing and critiquing the work of journalists,
transactional lawyers, law students, and other commentators who have made this
assertion). I personally find persuasive Korsmo and Myers’ conclusion that the interest rate
has played a minimal if nonexistent role in spurring appraisal arbitrage. Nevertheless, I
acknowledge that others appear genuinely concerned about its effects.
29
moderate the attractiveness of appraisal arbitrage. From that standpoint, a rule that
channeled outcomes towards the deal price could have the effect of bolstering the ability
of arbitrageurs to benefit from the interest rate.95 That risk would particularly afflict
acquisitions by financial sponsors, where the opportunity for operational synergies is
generally reduced. For the Delaware Supreme Court to open up the fair value analysis by
permitting greater consideration of the unaffected market price seemed to me to be
directionally consistent with and perhaps the next logical step in the path laid out by Dell
and DFC.
Having considered these factors, I concluded that the discussion of the efficient
capital markets hypothesis in Dell and DFC was not merely deployed instrumentally in
support of a deal-price-less-synergies metric, but rather was intended to have independent
doctrinal heft as a means of altering the traditional skepticism with which Delaware
decisions have approached the stock market price when determining fair value. That
conclusion represents one individual’s reading of the operative decisions. For present
purposes, however, the possibility that Dell and DFC had discussed the efficient capital
markets hypothesis only for instrumental purposes was not something that I
95
Cf. Cooper v. Pabst Brewing Co., 1992 WL 208763, at *9 (Del. Ch. June 8, 1993)
(observing that Delaware courts had been hesitant to rely heavily on deal price as evidence
of fair value because it would “in effect make the deal price a ‘floor,’” presenting
stockholders “with a ‘no-lose’ situation if they seek an appraisal” and creating a regime in
which “dissents from mergers would therefore be encouraged”).
30
misapprehended. I was aware of that possibility and considered it when issuing the Post-
Trial Ruling.
2. Whether Relying On The Unaffected Market Price Is Ridiculous
In a stronger variant of their argument that the Post-Trial Ruling misapprehended
the import of Dell and DFC, the petitioners contend that the those decisions could not have
meant what I interpreted them to mean because using the unaffected market price as
evidence of fair value is “ridiculous”96 and “absurd.”97 I do not share that view.
The main reason why the petitioners appear to denigrate my reliance on the
unaffected market price is that it departs from this court’s traditional approach to
determining fair value, which typically relied on multiple metrics, even when appraising a
publicly traded company. Indeed, it appears that the Post-Trial Ruling may be the first
decision to hold that the unaffected market price was the best evidence of fair value and
award that figure.
I do not dispute that the Post-Trial Ruling takes an approach that differs from prior
Court of Chancery precedent. As this decision already has noted, Delaware Supreme Court
decisions on appraisal that pre-dated Dell and DFC expressed skepticism about the
reliability of the market price as an indicator of fair value. In my view, Dell and DFC
changed things. I regarded the Delaware Supreme Court’s endorsement of the efficient
96
Reargument Mot. ¶ 7.
97
Id. ¶ 1.
31
capital markets hypothesis and its emphasis on market indicators over the subjective views
of knowledgeable insiders as altering the decisional landscape and authorizing greater
reliance on market value.
If one jettisons the notion that relying on the market price just isn’t done, then it is
hard to regard using the unaffected market price as ridiculous or absurd, at least for a
publicly traded firm that lacks a controlling stockholder and whose shares otherwise trade
in a market having attributes associated with the assumptions underlying the efficient
capital markets hypothesis. Reliance on market value is a technique that is “generally
considered acceptable in the financial community and otherwise admissible in court.”98
Prominent legal scholars have recommended this approach.99 As suggested by the sources
that the Delaware Supreme Court cited, finance scholars also endorse it.100
98
Weinberger, 457 A.2d at 712.
99
See Booth, supra, at 151 n.130 (“[M]arket price should ordinarily equal going
concern value if the market is efficient.”); Control Premiums, supra, at 857-58 (“The basic
conclusion of the Efficient Capital Markets Hypothesis (ECMH) is that market values of
companies’ shares traded in competitive and open markets are unbiased estimates of the
value of the equity of such firms.”); Implicit Minority Discount, supra, at 52 (“Take the
case of a publicly traded company that has no controller. Efficient market theory states that
the shares of this company trade at the pro rata value of the corporation as a going
concern.”); id. at 60 (“As a matter of generally accepted financial theory . . . , share prices
in liquid and informed markets do generally represent th[e] going concern value . . . .”);
see also Rationalizing Appraisal, supra, at 1033-34 (questioning the use of market price
for determining fair value where there is no public market price at all, the shares are illiquid
or thinly traded, or there is a controlling stockholder, but observing that outside of these
scenarios, “because financial markets are efficient, one can simply use the market price”).
100
See DFC, 172 A.3d at 367 n.104 (“[T]he [efficient market hypothesis] states that
the market assessment of value is more accurate, on average, then that of any individual or
appraiser.” (alterations in original) (internal quotation marks omitted) (quoting Cornell,
32
Once the unaffected market price is no longer regarded as a disfavored metric, then
it should not be problematic to rely on it exclusively. The Delaware Supreme Court has
made clear that a trial court can rely on a single valuation methodology. 101 While serving
on this court, Chief Justice Strine invoked a culinary metaphor to argue in favor of using
one valuation technique rather than several:
As a law-trained judge who has to come up with a valuation deploying the
learning of the field of corporate finance, I choose to deploy one accepted
method as well as I am able, given the record before me and my own abilities.
Even if one were to conclude that there are multiple ways to come up with a
discount rate, that does not mean that one should use them all at one time and
then blend them together. Marc Vetri, Mario Batali, and Lidia Bastianich all
make a mean marinara sauce. Is the best way to serve a good meal to your
guest to cook up each chef’s recipe and then pour them into a single huge
pot? Or is it to make the hard choice among the recipes and follow the chosen
one as faithfully as a home cook can? This home cook will follow the one
recipe approach and use the recipe endorsed by Brealey, Myers and Allen
and the mainstream of corporate finance theory taught in our leading
academic institutions . . . .102
supra, at 47)); id. at 370 (“For many purposes no formal theory of value is needed. We can
take the market’s word for it.” (quoting Brealey et al., supra, at 13)); id. at 373 n.144 (“In
an efficient market you can trust prices, for they impound all available information about
the value of each security.” (internal quotation marks omitted) (quoting Brealey et al.,
supra, at 373)).
101
See M.G. Bancorporation, 737 A.2d at 525-26 (explaining that “in discharging
its statutory mandate” to determine fair value, “the Court of Chancery has the discretion to
select one of the parties’ valuation models as its general framework or to fashion its own”
and that it is “entirely proper for the Court of Chancery to adopt any one expert’s model,
methodology, and mathematical calculations, in toto, if that valuation is supported by
credible evidence and withstands a critical judicial analysis on the record”).
102
In re Orchard Enters., Inc., 2012 WL 2923305, at *18 (Del. Ch. July 18, 2012),
aff’d sub nom. Orchard Enters., Inc. v. Merlin P’rs LP, 2013 WL 1282001 (Del. Mar. 28,
2013) (TABLE).
33
In DFC, the Delaware Supreme Court similarly cautioned against using multiple valuation
techniques, admonishing that the Court of Chancery “may well feel tempted to turn its
valuation decisions into a more improvisational variation of the old Delaware Block
Method, but one in which the court takes every valuation method put in the record, gives
each equal weight, and then divides by the number of them.” 103 The high court mandated
that if the Court of Chancery relies on multiple valuation methods, it “must exercise its
considerable discretion while also explaining, with reference to the economic facts before
it and corporate finance principles, why it is according a certain weight to a certain indicator
of value.”104 The high court admonished that “[i]n some cases, it may be that a single
valuation metric is the most reliable evidence of fair value and that giving weight to another
factor will do nothing but distort that best estimate.”105
The Dell and DFC decisions observe that while the unaffected market price need
not equate to fundamental value, it nevertheless generates a measure of value that is more
likely to be accurate than other methodologies. “[T]he efficient market hypothesis long
endorsed by this Court . . . teaches that the price produced by an efficient market is
generally a more reliable assessment of fair value than the view of a single analyst . . . .”106
[C]orporate finance theory reflects a belief that if an asset—such as the value
of a company as reflected in the trading value of its stock—can be subject to
103
DFC, 172 A.3d at 388.
104
Id.
105
Id.
106
Dell, 177 A.3d at 24.
34
close examination and bidding by many humans with an incentive to estimate
its future cash flows value, the resulting collective judgment as to value is
likely to be highly informative and that, all estimators having equal access to
information, the likelihood of outguessing the market over time and building
a portfolio of stocks beating it is slight.107
A single valuator, such as a trial judge conducting an appraisal, “should have little
confidence she can be the special one able to outwit the larger universe of equally avid
capitalists with an incentive to reap rewards by buying the asset if it is too cheaply
priced.”108 And even a “market that is not perfectly efficient may still value securities more
accurately than appraisers who are forced to work with limited information and whose
judgments by nature reflect their own views and biases.”109 Like democracy, the unaffected
market price may be imperfect, but absent proof undermining its premises, it often will be
better than the other metrics that have been tried.110
I therefore cannot agree that using the unaffected market price as the most reliable
indicator of fair value is so ridiculous or absurd as to mean that I misapprehended the law.
I do not claim to have privileged insight into the high court’s intent, and I may well have
misunderstood the import of Dell and DFC, but that is a matter for appeal, not for a motion
for reargument.
107
DFC, 172 A.3d at 370.
108
Id. at 367.
109
Dell, 177 A.3d at 24 n.113 (quoting Cornell, supra, at 46).
110
Cf. Winston Churchill, Churchill By Himself 574 (Richard Langworth ed., 2008)
35
3. An Outcome That No Litigant Proposed
A third reason that the petitioners regard the Post-Trial Ruling as necessarily
misapprehending Dell and DFC is because it resulted in a fair value conclusion “that no
litigant would even ask for.”111 The assertion that no litigant would ask for an award equal
to the unaffected trading price seems limited to the facts of this case. If respondents in
appraisal proceedings believe that the facts and the law can support an appraisal award
equal to the unaffected trading price, they doubtless will ask for that outcome.
Limiting the assertion to the facts of this case, the respondent actually did propose
that I rely on the unaffected market price.112 In every one of its briefs, the respondent argued
that Aruba’s unaffected trading price of $17.13 per share was informative of fair value.113
Moreover, in its post-trial brief on the implications of Dell, the respondent advanced the
following proposition: “[I]n response to the Supreme Court’s recent guidance in Dell and
[DFC], Aruba now understands that its pre-transaction market price is indeed the single
most important mark of its fair value.”114 Consequently, the respondent asserted that “the
Court should find fair value to be Aruba’s 30-day unaffected market price of $17.13.”115
111
Reargument Mot. ¶ 1.
112
Dkt. 192 ¶ 3.
113
See supra notes 40-43.
114
Dkt. 188 at 1.
115
Id. at 14.
36
But the picture is more complicated, because what really happened is that the
respondent’s valuation position evolved over the course of the case. As the Post-Trial
Ruling explained,
During discovery and at trial, both sides focused on their experts’ discounted
cash flow valuations. As the number of opinions that focused on the deal
price mounted, the respondent placed greater emphasis on that metric, and
the petitioners responded by attacking the process that led to the deal. After
DFC, the respondent stressed a combination of the unaffected market price
and the deal price. After Dell, the respondent redoubled its emphasis on the
combination of the unaffected market price and the deal price.116
During post-trial argument, before the parties provided their supplemental submissions on
Dell, the petitioners chastised the respondent for presenting a moving target in its valuation
assertions.117 In response, the respondent cited various valuation indications, including the
unaffected market price, but counsel ultimately asserted that they were relying on their
expert’s updated valuation opinion of $19.75 per share as their valuation contention.118
Taking this history into account, I thought it reasonable when making my fair value
determination to regard the respondent as bound by their contention that the minimum fair
value for Aruba was $19.75 per share. Given this fact, I debated whether I should award
116
Post-Trial Ruling, 2018 WL 922139, at *24.
117
Dkt. 178 at 4 (petitioners’ counsel: “Respondent didn’t prove anything other than
its ability to constantly change its valuation model to accommodate adverse litigation
developments.”); id. at 36 (describing expert’s change in his valuation opinion as “a
litigation-driven decision” and “advocacy”); id. at 64-67 (tracing changes in respondent’s
valuation contentions).
118
Id. at 118 (“[W]e’re standing behind our expert. And he says Aruba is worth
[$]19.75 . . . .”).
37
what I believed represented the most reliable estimate of fair value, or whether,
notwithstanding my belief, I should award $19.75 on the theory that the respondent should
be estopped from benefitting from a valuation lower than what it had endorsed.
I ultimately found persuasive the authorities which require this court to make its
own, independent valuation determination.119 I also was concerned, as a matter of policy,
that to hold that a court would not go outside the range of fair value established by the
parties might further incentivize parties to adopt extreme valuation positions as a means of
demarcating the widest possible field in which the court could exercise its discretion.
On different facts, holding a party to its valuation contention might be warranted.
For present purposes, however, because I considered the issue when issuing the Post-Trial
Ruling, it does not result in a misapprehension of fact or law that would support a motion
for reargument.
119
See 8 Del. C. § 262(h) (“[T]he Court shall determine the fair value of the shares
. . . .”); Del. Open MRI Radiology Assocs., P.A. v. Kessler, 898 A.2d 290, 310-11 (Del. Ch.
2006) (Strine, V.C.) (“I cannot shirk my duty to arrive at my own independent
determination of value . . . .”); Cooper v. Pabst Brewing Co., 1993 WL 208763, at *8 (Del.
Ch. June 8, 1993) (“When . . . none of the parties establishes a value that is persuasive, the
Court must make a determination based upon its own analysis.”). See generally Jesse A.
Finkelstein & John D. Hendershot, Appraisal Rights in Mergers and Consolidations, 38-
5th C.P.S. § VI(K), at A-90 (BNA) (“If both parties fail to meet the preponderance standard
on the ultimate question of fair value, the Court is required under the statute to make its
own determination.”).
38
C. Objections To My Good Faith In Rendering The Post-Trial Ruling
The petitioners’ final two arguments question my good faith in issuing the Post-
Trial Ruling. The short answer is that notwithstanding the petitioners’ suspicions, I
honestly did the best I could.
1. An Act Of Political Theater
The petitioners initially argue that I issued the Post-Trial Ruling as an act of political
theater designed to show the Delaware Supreme Court the error of its ways. They
sympathize that the Post-Trial Ruling must reflect my “frustration with many of the
Supreme Court’s pronouncements,”120 only to posit that this frustration led me to pen a
decision designed to show “the absurdity of the literal application of certain
pronouncements made by the Supreme Court in Dell and DFC to appraisal actions.”121
They conclude that I must be engaging in a “battle of legal titans” with the Delaware
Supreme Court and that the emotional fervor of intellectual combat led me to impose an
unjust ruling.122 The motion strives to remind me that the petitioners are not characters in
an academic hypothetical but “real” litigants with “real dollars at stake” who should not be
turned into “collateral damage.”123
120
Reargument Mot. ¶ 1.
121
Id.
122
Id. ¶ 9.
123
Id.
39
Technically, this argument neither contends that I “overlooked a decision or
principle of law that would have controlling effect,” nor that I “misapprehended the law or
the facts so that the outcome of the decision would be affected.”124 At one level, it contends
that I apprehended the language of Dell and DFC too well and took it too seriously. Read
fairly, however, it contends that I did not carry out the judicial task of rendering a decision
based on the applicable law and the facts of the case, but rather sacrificed the petitioners’
interests because of intellectual vanity. If this were true, it would seem to me to provide a
legitimate basis for reargument. Indeed, in my view it would provide grounds for vacating
the decision and asking the Chancellor to reassign the case to a colleague who could carry
out the responsibilities of a judicial officer. Those responsibilities include that a judge
“perform the duties of the office impartially and diligently”125 and be “unswayed by
partisan interests, public clamor, or fear of criticism.”126 If the petitioners were correct,
then I permitted partisan intellectual interests to affect my impartiality and sway the
outcome.
Recognizing that the human mind does not offer an Archimedean perch for self-
assessment, I nevertheless have sought to take seriously the petitioners’ assertion that I did
not try in good faith to follow Dell and DFC. Rather than rejecting the petitioners’ rather
124
Miles, Inc., 677 A.2d at 506 (quoting Stein, 1985 WL 21136, at *2).
125
Del. Judges’ Code Judicial Conduct Canon 2, Rule 2.5(A).
126
Id., Rule 2.4(A).
40
extraordinary position at face value, I have carefully re-read DFC, Dell, and other appraisal
authorities, and I have re-read the Post Trial Ruling with the petitioner’s concern squarely
in mind.
After undertaking this process, I do not believe that that petitioner’s contention is
accurate. I personally do not believe that I issued the Post-Trial Ruling out of frustration.
To the contrary, I personally believe that I engaged in a lengthy, laborious (in both senses),
and reasoned effort to implement Delaware Supreme Court precedent.
For starters, I am not a legal titan. I am a state court trial judge. I personally do not
think that the role of a trial judge accommodates active resistance to Delaware Supreme
Court pronouncements. I rather view the job as calling for adherence to Delaware Supreme
Court precedent. While I think it is fair game for a trial judge to suggest potential changes
in the law,127 I do not believe that a trial judge has the flexibility to disregard the Delaware
Supreme Court’s holdings, nor do I think that a trial judge should look for clever ways to
evade their implications. When a new precedent arrives, I view my job as requiring that I
update my understanding of Delaware law to incorporate the new precedent.
127
I took this approach when ruling on whether certain petitioners in the Dell matter,
were entitled to seek appraisal. Although I argued for a different rule, I applied the
governing Delaware Supreme Court precedent. Compare In re Appraisal of Dell Inc., 2015
WL 4313206, at *9-10 (Del. Ch. July 13, 2015) (applying existing Delaware law), with id.
at *11 (arguing for “another possible interpretation of the Record Holder Requirement”).
41
That is what I tried to do in this case. As this decision already has discussed at
length, I made this effort when evaluating the persuasiveness of the unaffected market
price.
I made a similar effort when evaluating the persuasiveness of the deal price. As
discussed in the Post-Trial Ruling, the petitioners in this case proved that the sale process
had flaws,128 so it was critical for me to attempt to understand whether the deal price could
be regarded as a reliable valuation indicator under the framework envisioned by Dell and
DFC. From a conceptual standpoint, I imagined four hypothetical bands of deal-price
reliability, ranging from the most reliable to least reliable:
 Band 1: A sale process is so well-constructed and well-executed that a trial court
would err by not giving the deal price heavy, if not dispositive, weight.
 Band 2: A sale process is sufficiently good that the trial court would err by not
treating the deal price as a reliable valuation indicator, but the trial court would not
commit error by failing to give the deal price heavy, if not dispositive, weight.
 Band 3: The sale process is sufficiently flawed that the trial court could determine
without erring that the deal price was not a reliable valuation indicator.
 Band 4: The sale process is so flawed that the trial court would err by treating the
deal price as a reliable valuation indicator.
Although I have described these bands as separate domains, the lines between them
necessarily will be fact-specific and fuzzy.
In this case, the petitioners argued that the sale process fell squarely into Band 4 or,
at worst, in the lower range of Band 3. The respondent argued that the sale process fell
128
See Post-Trial Ruling, 2018 WL 922139, at *36-44.
42
within Band 1 or, at worst, within Band 2. As I read Dell and DFC, those decisions placed
the deal prices in those cases in Band 1. At the trial level in DFC, Chancellor Bouchard
found that the sale process was sufficiently reliable to warrant consideration as a valuation
indicator, and he gave it one-third weight. The Delaware Supreme Court reversed, holding
that “under the conditions found by the Court of Chancery, economic principles suggest
that the best evidence of fair value was the deal price.”129 Likewise in Dell, I found that the
sale process was sufficiently reliable to exclude outlier valuations like the twice-the-deal-
price figure that the petitioners advanced, and I relied on it to that extent. But I found that
the sale process was not sufficiently reliable to rule out a smaller valuation discrepancy.
The Delaware Supreme Court reversed, concluding that “the deal price deserved heavy, if
not dispositive, weight.”130
Because the holdings in Dell and DFC addressed when a deal price fell within Band
1, they logically did not have implications for when a sale process would be so flawed as
to require placing the deal price in Band 4, nor for demarcating the boundary between
Bands 4 and 3, or between Bands 3 and 2. Technically, the holdings did not even clearly
delineate the border between Bands 2 and 1. The Delaware Supreme Court placed both
deal prices into Band 1, but the high court might have believed the sale processes were so
129
DFC, 172 A.3d at 349.
130
Dell, 177 A.3d at 23.
43
good that they fell into an upper register of Band 1, without excluding the possibility that
a not-as-good sale process still could generate a deal price warranting Band 1 treatment.
After I issued the Post-Trial Ruling, Vice Chancellor Glasscock issued his decision
in AOL.131 He derived sale process characteristics from Dell and declined to give any
weight to a sale process that he found was not “Dell Compliant.”132 This outcome suggests
to me that he viewed whether a transaction is “Dell Compliant” as demarcating the point
within Band 2 at which a trial judge could opt to disregard the deal price.
I obviously did not have the benefit of AOL when reasoning through these issues,
but I considered similar questions. After pondering Dell and DFC, those decisions seemed
to me to imply that a deal price fell above the point of disregard and should be considered
as a valuation indicator if the transaction did not involve a controlling stockholder and was
otherwise at arm’s length. This is a lower standard than the “Dell Compliant” concept.
I derived my lower test from a confluence of factors, including the following:
 In both Dell and DFC, the Delaware Supreme Court linked the purpose of an
appraisal to whether the transaction involved a third-party buyer.
o “[T]he purpose of an appraisal . . . is to make sure that [the petitioners] receive
fair compensation for their shares in the sense that it reflects what they deserve
to receive based on what would fairly be given to them in an arm’s-length
transaction.”133
131
See In re Appraisal of AOL, Inc., 2018 WL 1037450 (Del. Ch. Feb. 23, 2018).
132
Id. *1-2. Technically, he did give the deal price some weight in that he used it as
a cross-check, see id. at *21, but he did not use it as an input when deriving fair value.
133
DFC, 172 A.3d at 370–71.
44
o Fair value for purposes of appraisal “means a price that is one that a reasonable
seller, under all of the circumstances, would regard as within a range of fair
value; one that such a seller could reasonably accept.”134
o “[T]he key inquiry [in an appraisal] is whether the dissenters got fair value and
were not exploited.”135
 In both cases, the Delaware Supreme Court seemed to discount the importance of
considering whether a different or more open sale process might have generated a
higher value.
o “[T]he purpose of an appraisal is not to make sure that the petitioners get the
highest conceivable value that might have been procured had every domino
fallen out of the company’s way . . . .”136
o “[F]air value is just that, ‘fair.’ It does not mean the highest possible price that a
company might have sold for had Warren Buffett negotiated for it on his best
day and the Lenape who sold Manhattan on their worst.”137
o “To be sure, ‘fair value’ does not equal ‘best value.’”138
o “The issue in an appraisal is not whether a negotiator has extracted the highest
possible bid.”139
 The Delaware Supreme Court placed the Dell transaction in Band 1 even though the
transaction was a management buy-out in which Michael Dell, the eponymous
founder, CEO, and largest blockholder, was a net buyer of shares.
 In Dell, the Delaware Supreme Court rejected as a matter of law the possibility that
a sale process involving homogenous bidders operating within the confines of a
134
Id. at 370 (quoting Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134, 1143
(Del. Ch. 1994), aff’d, 663 A.2d 1156 (Del. 1995)).
135
Dell, 177 A.3d at 33.
136
DFC, 172 A.3d at 370-71.
137
Id. at 370.
138
Dell, 177 A.3d at 23.
139
Id. at 33.
45
leveraged buy-out model could fall short of the valuation that would be placed on
the entity by a diversified group of public owners.
Based on these factors, I concluded that although the sale process in Aruba had flaws, the
deal price warranted consideration as a reliable valuation indicator.
My assessment of the Aruba sale process in light of Dell and DFC meant that I had
two reliable indications of value: the unaffected market price and the deal price. At that
point, I had to determine how to weigh, choose between, or otherwise evaluate the two
indications. I have already described the thought process that led me to select the unaffected
market price as the most reliable indicator of fair value.
I thus submit that the Post-Trial Ruling resulted from my efforts to reason through
the Dell and DFC decisions and apply them to the facts presented. That said, I cannot fault
the petitioners for inferring some frustration on my part. Most notably, at one point in the
Post-Trial Ruling, I included a footnote detailing the record evidence that I relied on when
rendering my factual finding in Dell about the existence of a valuation gap.140 Having re-
read this language in light of the Reargument Motion, I understand how it could sound
petulant.
I did not include that footnote gratuitously. Rather, I included it to emphasize why
what I regarded as the far less extensive and persuasive evidence presented in this case
would not be sufficient to support a factual finding in the petitioners’ favor. In the face of
more extensive evidence in Dell, the Delaware Supreme Court had concluded that “[t]he
140
Post-Trial Ruling, 2018 WL 822139, at *31 n.307.
46
record before us provides no rational, factual basis for such a ‘valuation gap’”141 and that
“[t]here is also no evidence in the record that investors were ‘myopic’ or shortsighted.”142
As I noted in the Post-Trial Ruling, these holdings by the high court demonstrated that the
justices regarded the comparatively more extensive showing in Dell as “the equivalent of
no evidence at all.”143
The Delaware Supreme Court reversed or criticized many other aspects of my trial
level rulings in Dell. I did not use the Post-Trial Ruling as a platform for engaging in debate
on any of those points. The footnote regarding the evidentiary basis for my finding in Dell
was relevant to and supported my decision not to rely on weaker evidence in the Post-Trial
Ruling. Nevertheless, given how it evidently came across, I should have phrased that
footnote differently. If the Reargument Motion is a guide, the footnote missed its intended
mark and detracted from the reasoning in the Post-Trial Ruling. That is a helpful lesson,
but I do not believe that the misimpression I inadvertently created warrants granting
reargument.
2. Judicial Oath Breaking
The petitioners also argue that I could not have issued the Post-Trial Ruling in good
faith without violating my oath as a judge. They assert that even if I believed in good faith
that I was properly applying the teachings of Dell and DFC and that those decisions
141
Dell, 177 A.3d at 25.
142
Id. at 26.
143
Post-Trial Ruling, 2018 WL 822139, at *31.
47
authorized a trial court to rely exclusively on the unaffected market price, I still should not
have accepted that outcome because of my “oath to Delaware to uphold the Delaware
Constitution, which creates three branches of government, including the legislature.”144
The petitioners claim that the Post-Trial Ruling somehow violated that oath because using
the unaffected market price as an indicator of fair value would mean, as a practical matter,
“that there can never be an appraisal for a public company receiving a premium offer,
regardless of the size of that premium”145 and would “eliminate[] the statutory right to
appraisal provided by the General Assembly in the context of a publicly traded
company.”146
I do not agree that my reading of Dell and DFC means “that there can never be an
appraisal for a public company receiving a premium offer, regardless of the size of that
premium.”147 The common law develops incrementally, case by case. As the Post-Trial
Ruling noted, “[p]erhaps future appraisal litigants will retain experts on market efficiency,
as is common in federal securities actions, and maybe future appraisal decisions will
consider subtler aspects of the efficient capital markets hypothesis.”148 Depending on the
facts and the persuasiveness of the experts, future petitioners might demonstrate that the
144
Reargument Mot. ¶ 9.
145
Id.146
Id.147
Id.148
Post-Trial Ruling, 2018 WL 922139, at *24 n.257.
48
trading price is not a reliable indicator of value. Or perhaps future petitioners will
demonstrate the existence of information that was unknown to the market and argue for a
specific valuation impact. Doubtless other possibilities are possible.
Equally important, it does not violate the Delaware Constitution for the Delaware
Supreme Court to interpret the appraisal statute, even if it refines the litigation target zone
for petitioners in appraisal proceedings. “In our constitutional system, this Court’s role is
to interpret the statutory language that the General Assembly actually adopts, even if
unclear and explain what we ascertain to be the legislative intent without rewriting the
statute to fit a particular policy position.”149 “[T]he Constitution invests the Judiciary, not
the Legislature, with the final power to construe the law.”150 The interpretation of statutory
text is “one of the Judiciary’s characteristic roles.”151 The Delaware courts play a
particularly significant role in the corporate arena,152 where historically the judiciary, rather
149
Taylor v. Diamond State Port Corp., 14 A.3d 536, 542 (Del. 2011).
150
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 325 (1992).
151
Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 230 (1986).
152
See Jill E. Fisch, The Peculiar Role of the Delaware Courts in the Competition
for Corporate Charters, 68 U. Cin. L. Rev. 1061, 1074 (2000) (“Delaware corporate law
relies on judicial lawmaking to a greater extent than other states.”); Lawrence Hamermesh,
How We Make Law in Delaware, and What to Expect from Us in the Future, 2 J. Bus. &
Tech. L. 409, 409 (2007) [hereinafter How We Make Law] (“The best-known of the
principal policymakers in Delaware are the members of the judiciary.”); Marcel Kahan &
Edward Rock, Symbiotic Federalism and the Structure of Corporate Law, 58 Vand. L. Rev.
1573, 1591 (2005) (“The most noteworthy trait of Delaware’s corporate law is the extent
to which important and controversial legal rules are promulgated by the judiciary, rather
than enacted by the legislature.”).
49
than the General Assembly, has taken the lead.153
For nearly seventy years, the Delaware Supreme Court has spoken authoritatively
on the standard for value under the appraisal statute and the weight to be given various
types of evidence within that valuation framework. The Delaware Supreme Court first
addressed the governing standard of value in Battye,154 then again in Weinberger,155 and
subsequently in decisions like Cavalier Oil,156 Rapid-American,157 and Technicolor II.158
The high court has now continued its interpretive role in Dell and DFC.
A trial judge’s oath is not a license to disregard the Delaware Supreme Court’s
rulings. DFC and Dell reflect authoritative statements of appraisal law. For purposes of the
153
See, e.g., How We Make Law, supra, at 414 (“[W]e view the courts as the first
line of defense, the first responders in dealing with complex situations. When drafting
legislation, we abstain from addressing complicated matters that are hard to figure out,
allowing them to develop through the common law.”); Omari Scott Simmons, Branding
the Small Wonder: Delaware’s Dominance and the Market for Corporate Law, 42 U. Rich.
L. Rev. 1129, 1159 (2008) (“As a result of the legislature’s preference against regulatory
prescription and its deference to the judicial branch, Delaware courts are often the first
responders to corporate law controversies.”); see also Lawrence A. Hamermesh & Norman
M. Monhait, A Delaware Response to Delaware’s Choice, 39 Del. J. Corp. L. 71, 75 (2014)
(agreeing that the Corporation Law Council and the General Assembly “have often
subscribed to . . . ‘a wait-and-see approach,’ proposing and enacting, respectively,
amendments to the DGCL only when there are persuasive reasons to do so” and endorsing
a continuing policy of “reticence to initiate legislative action” (footnote omitted)).
154
Tri-Continental Corp. v. Battye, 74 A.2d 71, 72 (Del. 1950).
155
Weinberger, 457 A.2d at 711-13.
156
Cavalier Oil Corp. v. Hartnett, 564 A.2d 1137, 1144-45 (Del. 1989).
157
603 A.2d at 805.
158
684 A.2d at 296-97.
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separation of powers, if the high court has moved in a direction contrary to the General
Assembly’s liking, the General Assembly can amend the appraisal statute. The dynamic
interplay among the constitutional branches of government fulfills, rather than contravenes,
the constitutional scheme.
II. CONCLUSION
The Reargument Motion is denied. The parties shall cooperate in preparing a final
order that will bring this case to conclusion at the trial court level.
51