EMC Ins. Group, Inc. v. Gregory M. Shepard, 20-0698

Background

EMCI merged with majority owner EMCC; Gregory Shepard was beneficial owner of ~1.1 million EMCI shares held in Morgan Stanley brokerage accounts that participate in DTC’s book‑entry system.
EMCI’s transfer agent record as of the record date listed DTC’s nominee Cede & Co. as the registered (record) shareholder for those shares; Morgan Stanley and Shepard did not appear on the corporate stock ledger.
The proxy disclosed that beneficial owners must submit the record holder’s written consent to assert appraisal (dissenters’) rights; the proxy and merger agreement warned shares would be cancelled and converted into merger consideration unless appraisal rights were perfected.
Shepard (through counsel and Morgan Stanley) objected to the merger, delivered a broker letter and returned an appraisal form by Nov. 4, but did not obtain or submit Cede’s written consent; EMCI paid $36/share at closing and cancelled the shares.
EMCI sued for declaratory relief; the district court granted summary judgment holding Shepard failed to perfect appraisal rights because he lacked written consent from the record shareholder (Cede); Shepard’s waiver and equitable‑estoppel claims were rejected.
The Iowa Supreme Court affirmed: Cede was the sole record shareholder as a matter of law, Shepard’s appraisal rights were not perfected, and waiver/estoppel arguments failed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the "record shareholder" whose written consent is required under Iowa Code §490.1303(2)(a) was Cede or Morgan Stanley/Shepard	Shepard: Morgan Stanley (as DTC participant shown on Cede breakdown) was effectively the relevant record holder and Shepard satisfied requirements through broker communications	EMCI: The corporation’s stock ledger and transfer‑agent list showed Cede as the registered owner; only the record shareholder on the corporation’s records can provide the required written consent	Held: Cede was the sole record shareholder on corporate records; consent of Cede was required and absent, appraisal rights were not perfected
Whether EMCI waived enforcement of the record‑holder consent requirement by paying and cancelling shares before the appraisal deadline	Shepard: EMCI’s payment/cancellation and its September 26 appraisal notice implicitly allowed Shepard to perfect rights by returning the form (which he did)	EMCI: Payment and cancellation followed the merger agreement and proxy; the statutory consent requirement remained; EMCI did not voluntarily relinquish the right to enforce statutory perfection requirements	Held: No waiver. EMCI did not expressly or impliedly relinquish the statutory consent requirement; Shepard remained on notice of the consent rule
Whether EMCI is equitably estopped from asserting lack of Cede consent because of its communications (or silence) to Shepard	Shepard: EMCI’s letters and failure to tell him his submissions were insufficient induced reliance and prejudice	EMCI: No false representations or concealment; proxy and attachments disclosed consent rule; no fiduciary relationship; silence is insufficient to estop in arm’s‑length context	Held: No estoppel. Shepard failed to show affirmative misrepresentation or a fiduciary relationship; reliance element not met

Key Cases Cited

Enstar Corp. v. Senouf, 535 A.2d 1351 (Del. 1987) (beneficial owners’ appraisal demands invalid absent record holder’s demand)
In re Appraisal of Dell Inc., 143 A.3d 20 (Del. Ch. 2016) (Cede remains record owner; omnibus proxy transfers voting rights but not record ownership)
Graeser v. Phoenix Fin. Co. of Des Moines, 254 N.W. 859 (Iowa 1934) (title not perfected vis‑à‑vis corporation until transfer on corporate books)
Crown EMAK Partners, LLC v. Kurz, 992 A.2d 377 (Del. 2010) (statutory schemes should be altered by legislature, not courts)
In re Kaiser Steel Corp., 110 B.R. 514 (D. Colo. 1990) (recognizing DTC/Cede nominee as the registered owner for issuer payment and notice purposes)