252 P.3d 663
Nev.2011Background
- Cordillera Fund, L.P. dissenting from American Ethanol, Inc. merger with AE Biofuels, Inc. held Series B preferred stock acquired for $3 per share.
- Merger notified dissenting stockholders; Cordillera gave timely notice and demanded payment under NRS 92A.440.
- district court determined fair value after trial, with Cordillera proposing $3 per share and appellants proposing $0.15 per share; no appraisals initially provided.
- District court valued fair value as $3 per share (offering price) and awarded judgment to Cordillera for $1.9189 million plus interest.
- Appellants appealed, arguing district court abused its discretion by not applying Steiner factors and by burden allocation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who bears the burden of proof on fair value? | Cordillera asserts burden on corporation alone. | American Ethanol contends Cordillera bears sole burden. | Both sides bear burden by preponderance; court retains independent judgment. |
| What standard governs 'fair value' determination? | Cordillera relies on flexible, all-relevant-factors approach. | Appellants prefer a fixed Steiner-factor framework. | Court adopts flexible, all-relevant-factors approach with independent determina tion. |
| Can the district court rely on non-Steiner evidence to determine fair value? | Cordillera presented evidence supporting $3 per share offering price. | Appellants contend Steiner factors are required. | Yes; district court may rely on record-supported methodologies and fashion its own value. |
| What is the proper outcome when neither party proves a value by a preponderance? | Cordillera maintains its evidence suffices. | Appellants urge acceptance of the other party's value. | Court must use its own independent judgment to determine fair value. |
Key Cases Cited
- Montgomery Cellular Holding Co. v. Dobler, 880 A.2d 206 (Del. 2005) (joint burden approach with independent court valuation)
- In re Appraisal of Metromedia Intern. Group, 971 A.2d 893 (Del.Ch.2009) (court may fashion its own valuation after considering evidence)
- Highfields Capital. Ltd. v. AXA Financial, 939 A.2d 34 (Del.Ch.2007) (Delaware preferred burden-sharing framework in appraisal)
- M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513 (Del.1999) (dual-burden, preponderance standard in appraisal actions)
- Gonsalves v. Straight Arrow Publishers, 701 A.2d 357 (Del.1997) (court independence in determining fair value)