2020 COA 67
Colo. Ct. App.2020Background
- Regal Entertainment (Delaware corp.) was acquired by Cineworld in 2018; Anschutz Corporation was Regal’s controlling stockholder and Philip F. Anschutz was its CEO.
- Minority Regal stockholders sought appraisal in the Delaware Court of Chancery, claiming they did not receive fair value for their shares.
- The minority stockholders issued a deposition subpoena (via Colorado’s UIDDA) seeking testimony from Philip Anschutz about his motives and personal considerations in agreeing to the merger.
- The Denver district court denied the motion to compel Anschutz’s deposition; the minority stockholders appealed to the Colorado Court of Appeals.
- The Court of Appeals held Delaware law governs substantive appraisal questions, concluded Anschutz’s intent and motives were relevant to assessing the reliability/weight of the deal price, and reversed the denial of the subpoena.
- The court declined to adopt the federal “apex doctrine” under Colorado law, remanding with directions to compel the deposition unless Anschutz can establish good cause for a protective order after an evidentiary hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Delaware law governs substantive issues relevant to a subpoena issued in Colorado for use in a Delaware appraisal | Minority: Substantive appraisal issues (fair value, deal-price reliability) arise in Delaware; Delaware law should control. | Anschutz: Colorado procedural protections should limit discovery; substantive law choice not dispositive. | Held: Procedural/evidentiary process governed by Colorado, but substantive appraisal issues governed by Delaware law. |
| Whether testimony from the controlling stockholder about motive/intent is relevant to Delaware appraisal (deal-price reliability) | Minority: Anschutz’s motives (liquidity, tax, estate planning, etc.) could show the deal price is unreliable and should be given less weight. | Anschutz: Motive irrelevant; deal price should stand absent proof of manipulation. | Held: Relevant and discoverable; motive may affect weight/reliability of deal price in appraisal. |
| Whether Colorado courts should apply the apex doctrine to shield high-level executives from deposition | Minority: Apex doctrine should not bar discovery here; testimony is directly relevant. | Anschutz: Apex doctrine should shield him; party seeking deposition should bear burden to show necessity. | Held: Colorado will not adopt apex doctrine shifting burden; protections available under C.R.C.P. 26(c) (protective orders) with burden on party seeking protection. |
| Whether the UIDDA application in Colorado should be enforced to compel an out-of-state deposition | Minority: UIDDA permits submitting foreign subpoena for enforcement in Colorado; enforcement proper for Delaware appraisal purposes. | Anschutz: Enforcement should be denied under Colorado discovery limits/protections. | Held: UIDDA enforcement is proper; Colorado court must enforce unless good cause for protective order is shown after hearing. |
Key Cases Cited
- Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd, 177 A.3d 1 (Del. 2017) (Delaware appraisal standard and role of deal-price indicia)
- DFC Global Corp. v. Muirfield Value Partners, L.P., 172 A.3d 346 (Del. 2017) (weighing and assigning weight to deal price and other valuation evidence)
- Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d 128 (Del. 2019) (deal price as market indicator when competitive process exists)
- Tri-Cont'l Corp. v. Battye, 74 A.2d 71 (Del. 1950) (factors to consider in fixing fair value)
- M.P.M. Enters., Inc. v. Gilbert, 731 A.2d 790 (Del. 1999) (arm’s-length transaction and absence of collusion support deal-price fairness)
- Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995) (improper motives may undercut transaction fairness)
- Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995) (presumption that investors act to maximize their investment value)
- Branzburg v. Hayes, 408 U.S. 665 (U.S. 1972) (general principle that citizens are obligated to testify and derogations are disfavored)