Andrew J. Czerkawski of the Lewis Brisbois Delaware office prepared this post.

          This litigation followed a recent plenary Revlon action in which the Delaware Court of Chancery awarded damages to a shareholder class after finding the CEO, with a private equity firm’s aiding and abetting, breached his fiduciary duties.  The lead class shareholder plaintiffs in the underlying fiduciary action, a group of hedge funds, simultaneously petitioned the Court to appraise their shares.  The Court in In re Mindbody, Inc., 2023 Del. Ch. LEXIS 575 (Del. Ch. Nov. 15, 2023), consolidated the fiduciary and appraisal proceedings for trial.


          The challenged merger closed at $36.50 per share.  And after the plenary action’s trial, the Court awarded the shareholder class damages of $1 per share.  The parties, however, disputed how the post-trial decision should play out as a final order; in pertinent part, the parties disagreed over whether the shareholder class plaintiffs could elect to receive the merger consideration and class damages.


          The Court examined Delaware’s precedential treatment of shareholders simultaneously seeking both appraisal and fiduciary damages, concluding neither procedurally forecloses the other.

          First, The Court held that it can consolidate both claims as alternatives to one another, but Delaware law does not impose an obligation on the shareholder to elect a remedy before trial—“the opposite result would impose perverse incentives on defendants while disadvantaging potential stockholders who seek to vindicate their rights.”

          Second, the Court noted it can award shareholder class plaintiffs seeking concurrent fiduciary and appraisal claims the remedy of a “‘fairer price.’

          Furthermore, diving deeper into Cede, the Court considered whether electing to receive the class remedy precludes the shareholders from continuing to pursue appraisal: it does. 


          This decision potentially opens the door (or perhaps keeps the door open) for the more risk averse shareholders, who might not otherwise pursue uncertain, lengthy Revlon fiduciary litigation to hedge some of that risk and allow them to pull the trigger on a litigation strategy that reflects the Court’s opinion.