542 A.2d 1182 (Del. 1988)
In 1983 MAF acquired Technicolor through its wholly owned subsidiary Macanfor in a cash-out merger that became effective on January 24, 1983.1 MAF first purchased 3,534,181 shares at $23 per share in a tender offer that, together with 220,000 shares previously acquired, gave it control of approximately 82 percent of Technicolor’s outstanding stock; the Technicolor board then waived the charter’s 95 percent supermajority vote requirement and the shareholders approved the merger by the required two-thirds vote.2 Cinerama, Incorporated, beneficial owner of 201,200 shares representing roughly 4.5 percent of Technicolor’s common stock, and Cede & Company, the record owner, rejected the tender offer and voted against the merger.3
Cinerama demanded appraisal under 8 Del. C. § 262 and filed its appraisal action against Technicolor in the Court of Chancery in March 1983.4 In June 1983 the court entered an order declaring that Cinerama had perfected its appraisal rights.5 Document discovery was completed by mid-1985, after which Cinerama began deposing Technicolor officers and directors.6
During a December 1985 deposition, former director Charles S. Simone testified that he had neither voted to waive the supermajority requirement nor supported the merger.7 On the basis of this and other information obtained in appraisal discovery, Cinerama filed a separate fraud action in January 1986 against Technicolor, all but two of its directors, MAF, Macanfor, and Ronald O. Perelman.8 The complaint alleged fraud, conspiracy, self-dealing, waste, and breach of fiduciary duty and sought rescission of the merger or, alternatively, rescissory damages.9
In March 1986 the defendants moved to dismiss the fraud action, asserting that Cinerama lacked standing after electing appraisal.10 In April 1986 Cinerama moved to amend its appraisal complaint to add the fraud claims or, alternatively, to consolidate the two actions for discovery and trial.11 By unreported opinion and interlocutory order dated January 13, 1987, the Court of Chancery denied the motion to dismiss, the motion to amend, and the motion to consolidate, but directed Cinerama to elect which action to pursue to trial after completing discovery.12
Both sides appealed. Cinerama appealed the denial of amendment, the requirement of a pre-trial election, and the denial of consolidation. The defendants cross-appealed the denial of dismissal and the timing of any election.13
Whether a minority shareholder who has elected and pursued an appraisal remedy under 8 Del. C. § 262 after a cash-out merger is foreclosed from later filing an individual action asserting subsequently discovered claims of fraud, conspiracy, and breach of fiduciary duty seeking rescissory damages?14
A shareholder electing appraisal under 8 Del. C. § 262 retains standing to pursue a later-discovered individual claim of fraud or breach of fiduciary duty in a separate action for rescissory damages, because the statutory appraisal remedy and the equitable fraud action serve distinct purposes, rest on different factual predicates, and are not inconsistent or repugnant under the election-of-remedies doctrine.15
No. Cinerama filed its appraisal action in March 1983 after rejecting the $23 tender offer and voting against the merger that became effective January 24, 1983.16 Document discovery in the appraisal action concluded by mid-1985, and depositions began thereafter.17 In December 1985, during the deposition of former director Charles S. Simone, Cinerama first learned that Simone had neither voted to waive the 95 percent supermajority requirement nor supported the merger.18
On the basis of that and other appraisal discovery, Cinerama filed its separate fraud action in January 1986 against Technicolor, the directors, MAF, Macanfor, and Perelman, alleging fraud, conspiracy, self-dealing, waste, and breach of fiduciary duty and seeking rescission or rescissory damages.19 The two remedies are not inconsistent because appraisal assumes a valid merger and seeks fair value while the fraud action challenges the merger's validity; therefore the election doctrine does not bar the later action.
Cinerama is not foreclosed from pursuing the fraud action for rescissory damages despite having elected and pursued the appraisal remedy.20
Whether a shareholder may amend its statutory appraisal petition to add claims of fraud, unfair dealing, and breach of fiduciary duty arising from the merger?21
A statutory appraisal proceeding under 8 Del. C. § 262 is strictly limited to determining the fair value of the dissenting shares on the merger date by the surviving corporation; it does not encompass or permit adjudication of claims of fraud, unfair dealing, or breach of fiduciary duty, which must instead be asserted in a separate action against the alleged wrongdoers.22
No. Cinerama moved in April 1986 to amend its appraisal complaint to add the fraud, conspiracy, and breach-of-fiduciary-duty claims asserted in the separate fraud action.2324 The Court of Chancery denied the motion, and this Court affirmed.25 Amendment would impermissibly expand the legislative appraisal remedy beyond its statutory scope of fair-value determination, would fail to join the necessary party defendants such as MAF, Macanfor, and Perelman who are not parties to the appraisal action, and would create risks of inconsistent judgments and collateral-estoppel problems for non-appraisal shareholders litigating entire-fairness claims separately.
A shareholder may not amend the statutory appraisal petition to add claims of fraud, unfair dealing, and breach of fiduciary duty arising from the merger.26
Whether a shareholder who has filed both an appraisal action and a fraud action must make a binding election of remedies before trial or whether the two actions should instead be consolidated for discovery and trial?27
An appraisal action seeking fair value and a fraud action seeking rescissory damages are not inconsistent or repugnant remedies arising from the same known facts.28 The doctrine of election of remedies does not apply.29 The two actions should be consolidated for discovery and trial so that the court may determine the appropriate remedy after finding the facts.30
No. The Court of Chancery denied consolidation and directed Cinerama to elect after completing discovery which action to bring to trial.3132 This Court reversed that ruling. The remedies are alternative rather than repugnant: if the trial court finds fraud or breach of fiduciary duty, the appraisal action becomes moot and rescissory damages are awarded; if no wrongdoing is found and the merger was valid, fair value is awarded under the appraisal statute and the fraud action is dismissed.33 Consolidation avoids placing Cinerama in a worse position than it would have occupied had the defendants made full disclosure before the merger, permits efficient use of overlapping evidence, and ensures a single recovery.34
The appraisal and fraud actions should be consolidated for discovery and trial rather than requiring Cinerama to make a binding election of remedies before trial.35