Summary
holding that the rule in Bershad precluded recovery in a minority squeeze out transaction
Summary of this case from Gesoff v. IIC Indus., Inc.Opinion
C.A. No. 12885.
Submitted: May 31, 2000.
Decided: September 19, 2000.
R. Bruce McNew of Taylor McNew, LLP, Greenville, Delaware; Robert J. Kriner, Jr. of Chimicles Tikellis LLP, Wilmington, Delaware. Attorneys for Plaintiff.
Thomas A. Beck of Richards, Layton Finger, Wilmington, Delaware. OF COUNSEL: Alfred W. Putnam, Jr. and Mary Catherine Roper of Drinker Biddle Reath LLP, Philadelphia, Pennsylvania. Attorney for Defendants.
MEMORANDUM OPINION
I. INTRODUCTION
This is the Court's response to the parties' cross motions for summary judgment arising out of a cash-out merger in which the defendant majority shareholder allegedly squeezed-out the minority. One of the minority shareholders, plaintiff John Norberg, challenged the merger individually and on behalf of a purportedly similarly injured class of minority shareholders. Specifically, he alleges that the defendants, in breach of their fiduciary duties, squeezed-out the minority at a grossly inadequate price, in an unfairly timed transaction using an unfair process and without providing them information material to a decision to tender their shares or seek appraisal.
The defendants seek summary judgment arguing that Norberg acquiesced in the merger transaction when he tendered his shares of common stock for the merger consideration. Norberg moves for summary judgment arguing that there can be no factual dispute that the majority acted to freeze out the minority at an unfair price and with an unfair process. Norberg also seeks class certification under Court of Chancery Rules 23(a), 23(b)(1) and 23(b)(3).
The issues presented on these cross motions are narrowly drawn.
First, are Norberg's claims barred by acquiescence as a result of accepting the merger consideration 17 months after filing suit detailing a laundry list of reasons why the majority breached their fiduciary duties of disclosure and loyalty to the minority?
Second, should Norberg's acquiescence bar his individual claims, can he serve as an adequate class representative under Court of Chancery Rule 23?
Third, are there genuine issues of material fact in dispute about the merger process and the fairness of the merger consideration?
After reviewing the parties' briefs and hearing oral argument, I conclude defendants' motion for summary judgment should be granted and Norberg's cross motion should be denied because, as a matter of law, Norberg acquiesced in the merger transaction by accepting the $120 cash-out consideration. Although not argued by the parties in their briefs or at oral argument, I note that Norberg's conduct also fits squarely within the doctrinal parameters of waiver. Therefore, he is precluded from pursuing any litigation individually and can not adequately represent the interests of the purported class of minority shareholders which he now seeks to represent. In light of the above conclusions, consideration of the fairness of the merger process and price, the adequacy of the disclosures and class certification would be premature.
II. BACKGROUND A. The Parties
Norberg is a minority shareholder who holds 43 shares of common stock of defendant Security Storage Co. of Washington in an Individual Retirement Account ("IRA"). Security Storage, a Delaware corporation with its principal place of business in Washington, D.C., is principally engaged in the shipping and storage industry. Security Storage has acquired significant real estate holdings and investment properties in Washington D.C. and surrounding areas. In addition, the company operates a United Van Lines franchise.
Defendants Childs F. Burden, I. Townsend Burden, III, John D. Firestone, Peter P. van Roijen and Robert D. van Roijen (collectively the "Acquiring Directors") are members of Security Storage's board of directors and majority shareholders who collectively hold 82 percent of Security Storage's outstanding stock. The remaining members of the Security Storage board of directors are defendants Robert E. Windham, Philip L. Gore, Robert L. Tull, George M. Elsey, Conrad S. Posey and Conrad S. Reid (collectively the "Independent Directors").
Childs F. Burden is also the owner of Security Acquisition, director of Control Laser and partner of the Secor Group. I. Townsend Burden, III is also Director of Control Laser and partner of Secor. John D. Firestone and Peter P. van Roijen are also partners of Secor; and, Robert D. van Roijen, R., is also Chairman of Control Laser and a partner of Secor.
Defendants Gore, Tull, Elsey, Posey, Reid, and Windham, while purportedly not owners of Security Acquisition, are alleged to be interested in the transaction and/or dominated by the Acquiring Directors.
Defendant Security Acquisition Corporation is a corporate entity formed by the majority shareholders as a vehicle to acquire the remaining shares of Security Storage.
B. Nature of the Proceedings
On March 4, 1993, Norberg filed a purported class action challenging a cash-out merger transaction in which the 82 percent majority shareholder, Security Acquisition, allegedly squeezed-out the remaining 18 percent minority shareholders. On June 24, 1998, Norberg filed a motion for class certification under Court of Chancery Rules 23(a), 23(b)(1) and (3). On February 2, 1999, the defendants filed a motion for summary judgment contemporaneously with a brief in opposition to the class certification. On September 8, 1999, Norberg filed briefs in support of class certification and a cross motion for summary judgment. This is the Court's response to (1) the defendants' motion for summary judgment; (2) Norberg's cross motion for summary judgment; and (3) Norberg's request for class certification.
C. Relevant Facts
While the parties dispute several of the underlying facts, I need only address those facts that are undisputed in order to resolve the issues immediately pertinent.
In the early part of December 1992, the board of directors met to discuss the current financial condition and the future economic potential of Security Storage as an operating enterprise. At that meeting, the directors considered the possibility of a cash-out merger which the Acquiring Directors would orchestrate. In order to determine the viability of this transaction, the directors retained the Berwind Financial Group, Inc., a private investment banking and merchant banking firm, to prepare an appraisal of the company as a going concern. After evaluating and reviewing the appraisal, the Acquiring Directors proposed a cash-out merger in which they, as 82 percent majority shareholders, would form Security Acquisition as an acquisition vehicle to buy out the remaining minority interests and acquire all of Security Storage's outstanding common stock.
On December 21, 1992, the board of directors voted unanimously to approve an Agreement and Plan of Merger through which Security Acquisition would buy the remaining 18 percent of Security Storage shares at $120.00 per share without interest. They unanimously agreed that the $120 cash-out price was fair to Security Storage's shareholders. In reaching their decision, the directors examined a variety of factors including the Berwind appraisal, the financial condition of the company, the historical and projected operating results, the absence of a trading market for the shares, and the results of a "Dutch Auction" which Security Storage completed in 1991. The auction resulted in the repurchase of 1,600 shares at $120 per share.
There is an irrelevant dispute over whether the Acquiring Directors or the board of directors retained Berwind.
A self-tender offer at $120 per share that enabled certain shareholders to sell their shares of the company's stock and to simplify the administration of the company by reducing the number of shareholders. Because the "Dutch Auction" did not result in the purchase of a substantial amount of the minority shareholders shares, the board of directors initiated the freeze-out merger described in the February 3, 1993 Notice of Merger sent to shareholders.
Using a discounted cash flow analysis, the Berwind appraisal valued Security Storage as a going concern at $7,800,000 and concluded that $120 merger per share constituted (1) a 25 percent premium over the appraised per share value of $95.89 as of November 1, 1992 and (2) a 45 percent premium over the net book value of $82.76 per share as of December 31, 1991. On this basis, Berwind concluded that the $120 wold be fair to the minority shareholders.
On January 28, 1993, Security Acquisition, now the majority shareholder, unanimously agreed to approve the merger transaction. The Independent Directors, who were not financially interested in the transaction, and the Acquiring Directors approved the merger transaction. On February 3, 1993, notice of the merger was sent to the minority shareholders informing them that the merger was to become effective February 4, 1993, one day after the notice was mailed, and that each minority share would be converted into $120, the cash-out price. Along with the Notice of Merger, minority shareholders received a Letter of Transmittal, a copy of the Agreement and Plan of Merger and the Berwind appraisal. The directors also informed the shareholders of their appraisal rights under 8 Del. C. Section 262 in the event they sought to challenge the fairness of the consideration.
While many of the minority shareholders tendered their shares of stock for the merger consideration, some dissented from the merger and filed an appraisal action in the early part of 1993. One of the dissenting shareholders later agreed to settle his appraisal claim for $120 per share. This Court approved the settlement and the parties mailed a notice of the settlement to the remaining dissenters on August 24, 1993, giving them 20 days to join in the settlement. Neither Norberg, nor any of the remaining dissenters took any further steps to join the settlement during the 20-day window. In light of this, Security Storage agreed to leave the $120 settlement offer open beyond the 20-day deadline.
Affidavit of Raymond E. O'Meara at ¶ 6. O'Meara is the Secretary of Security Storage. The appraisal action was dismissed for lack of prosecution on March 16, 1996.
On March 4, 1993, Norberg filed his Complaint, styled as a class action, challenging the fairness of the transaction and seeking rescission of the merger or in the alternative, rescissory damages resulting from the merger's consummation. Norberg alleges that the defendants squeezed-out the purported class members at an unfair price, in an unfairly timed transaction using an unfair process and without providing the purported class with material information in breach of the defendants' fiduciary duties. Specifically, he alleges the $120 consideration to be unfair because it fails to account for Security Storage's real estate holdings and the United Van Lines franchise. Norberg also alleges that the merger was unfairly timed to deprive minority shareholders of the benefits from the development of the "Braddock Road" property. This investment property sits on two acres zoned industrial within the Braddock Road Metro Station in Alexandria, Virginia. Although the Braddock Road property is currently leased to the federal government, Norberg alleges that it is "underutilized" and "ripe for re-development." Norberg argues that the Berwind fairness opinion can not be relied upon because Berwind failed to consider the development potential of Security Storage's real estate, failed to account for any residual value and employed a flawed methodology in assessing the fairness of the consideration. Finally, Norberg alleges that the Notice of Merger contained misdisclosures in breach of the defendants' fiduciary duty of disclosure.
On August 24, 1994, approximately 17 months after filing his Complaint alleging unfairness of process and price and the defendants' failure to comply with their duty of disclosure in numerous ways designed to frustrate a rational determination of the value of his shares, Norberg voluntarily instructed his IRA custodian to tender his shares for the $120 merger price. Norberg now seeks rescission of the merger, recissory damages and an opportunity to serve as lead plaintiff for a class of minority shareholders who did not tender their shares.
IV. ANALYSIS
A. Summary Judgment
Under Court of Chancery Rule 56, summary judgment will be granted when no genuine issue as to any material fact exists and the moving party is entitled to judgment as a matter of law. The moving party must demonstrate clearly the absence of any genuine issue of material fact and any doubt concerning the existence of such an issue will be resolved against the moving party. The function of the trial judge is to determine whether or not there is any evidence supporting a favorable conclusion to the nonmoving party. The fact that the parties have filed cross-motions for summary judgment does not alter this standard.
Ch. Ct. R. 56.
Scureman v. Judge , Del. Ch., 626 A.2d 5 (1992).
Continental Oil Co. v. Pauley Petro., Inc. , Del. Supr., 251 A.2d 824 (1969).
United Vanguard Fund, Inc. v. TakeCare, Inc. , Del. Supr., 693 A.2d 1076, 1079 (1997).
B. Acquiescence
The availability of acquiescence as a defense is as narrowly drawn at this stage of the litigation as it would be at a trial on the merits. Therefore, this issue is appropriate for disposition on summary judgment without additional testimony or discovery.
The availability of this defense is pivotal. If available, as a matter of law, Norberg may be estopped from seeking a Weinberger claim and therefore, can not adequately represent the interests of the purported class. If the defense is not available, Norberg may continue to pursue the litigation individually and on behalf of the class of minority shareholders he now seeks to represent. I conclude that Norberg's acceptance of the merger consideration 17 months after filing his Complaint detailing the defendants' alleged inequitable conduct constitutes acquiescence.
Weinberger v. UOP, Inc. , Del. Supr., 457 A.2d 701 (1983).
Defendants allege that Norberg acquiesced in the merger by tendering his shares after the merger had been consummated. They argue that because Norberg dissented from the cash-out merger, filed suit claiming unfairness in the transaction but later tendered his shares and accepted the benefits of the transaction, he can no longer maintain his unfairness claim. Defendants argue that Norberg's only remedy is an appraisal action under 8 Del. C. Section 262, a claim that he has, however, abandoned.
At oral argument, Norberg argued that the defense of acquiescence is unavailable under Court of Chancery Rule 8(c) and the defendants' failure to plead it as a defense in their Answer operates as a waiver. Norberg's tender and acceptance of the $120 per share merger consideration occurred on August 24, 1994, approximately 17 months after the Complaint challenging the fairness of the consideration paid in the merger. It could hardly have been raised in the original answer, although no request to amend that answer has ever been filed. It is only now, in the briefs and at oral argument, that the defendants assert acquiescence as a defense.
Generally, a party arguing acquiescence as an affirmative defense must state their claim in their answer. However, if evidence were offered at trial to support the defense and objected to on the ground that it was not within the issues asserted in the pleadings, Court of Chancery Rule 15(b) would nevertheless permit me to allow the pleadings to be amended when the However, if evidence were offered at trial to support the defense and objected to on the ground that it was not within the issues asserted in the pleadings, Court of Chancery Rule 15(b) would nevertheless permit me to allow the pleadings to be amended when the "presentation of the merits of the action" will be facilitated. It is within my discretion to allow the pleadings to be amended to reflect any new issues not asserted in the pleadings so long as the responding party is not prejudiced by its admission.
Ch. Ct. R. 8(c).
Ch. Ct. R. 15(b) provides in relevant part:
If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the Court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the Court that the admission of such evidence would prejudice the party in maintaining an action or defense upon the merits. The Court may grant a continuance to enable the objecting party to meet such evidence.
Id .
Here, the defendants' conceded at oral argument that they did not plead acquiescence in their Answer because the plaintiff had not yet tendered his shares and made the defense available. I note that the defendants did not amend their answer to include acquiescence as a defense soon after they learned of Norberg's share tender. Nonetheless, Norberg's own actions 17 months after filing the action triggered the applicability of the defense and he can hardly claim prejudice from simply being held accountable for his own actions. Generally, Rule 15(b) permits me discretion to grant a continuance to the objecting party to respond to the newly admitted evidence. But, in the absence of a genuine issue of disputed fact regarding Norberg's acceptance of the merger consideration I do not need to exercise even this discretion. I consider the pleadings amended to conform to the undisputed evidence.
See supra note 12.
Generally under the doctrine of acquiescence, a shareholder who tenders his shares and accepts the benefits of a transaction may be barred from seeking equitable relief. In order for the defense to operate as a bar, the shareholder must have been adequately informed of all material facts relevant transaction. In other words, acquiescence may result in an estoppel precluding the acquiescing shareholder, who accepted the pecuniary benefits of a transaction with knowledge of the alleged inequitable conduct, from challenging transaction's validity.
Bershad v. Curtiss-Wright Corp. , Del. Supr., 535 A.2d 840, 848 (1987).
Id . at 842; Papaionanu v. Commissioners of Rehoboth , Del. Ch., 186 A.2d 745, 749-50 (1962) (quoting Herman, Commentaries on the Law of Estoppel, at 1194).
DONALD J. WOLFE, JR. MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 11-3 (1998 Supp. 2000).
For Norberg, the decisive issue becomes whether he was fully informed of the merger process and price defects when he accepted the benefits of the merger transaction. Norberg argues that the Notice failed to inform any of the minority shareholders that acceptance of the merger consideration constituted a waiver of any right other than appraisal. He also argues that he was not fully informed of all material facts because of the alleged "misdisclosures" contained in the Notice. Thus, Norberg contends that the acquiescence defense, even if timely raised, can not bar his action attacking the fairness of the transaction.
Bershad , at 842, 846-847; Siegman v. Columbia Pictures Entertainment, Inc. , Del. Ch., C.A. No. 11152, mem. op. at 19, Hartnett, V.C. (Jan. 12, 1993).
Norberg relies in part on Turner v. Bernstein , Del. Ch., C.A. No. 16190, mem. op. at 21-24 (Feb. 9, 1999) in an attempt to draw a factual analogy. In that case, Vice Chancellor Jacobs held that granting summary judgment in favor of the plaintiff shareholders, who argued that they were not fully informed, would be imprudent given the fact that the Letter of Transmittal and Notice of Merger pointedly told the shareholders that acceptance of the merger consideration would operate as a waiver of their appraisal rights. I find this argument admittedly compelling when there is clear and explicit notice to shareholders advising that acceptance of the merger consideration bars a demand for appraisal. In this case, neither the Letter of Transmittal nor the Notice gave any notice of waiver that Norberg claims should have been given. It did inform shareholders of their appraisal rights. However, Turner offers Norberg little help. He suggests that the Letter of Transmittal and Notices should have informed him that acceptance of the merger consideration operates as a waiver of all rights in order to operate as a bar to his claims, not merely appraisal rights as discussed in Turner. He ignores the fact that he had an action pending for months which asserted all his rights and argues that the very consideration he accepted 17 months later was unfair and the product of an unfair process.
I note that on September 14, 2000, plaintiff's counsel provided the Court a copy of INCE Co. v. Silgan Corp. , Del. Ch., C.A. No. 10941, 1991 WL 17171, Chandler, V.C. (Feb. 7, 1991). In an attached letter, plaintiffs counsel indicated that INCE Co . was submitted for the proposition that a disclosure violation claim should not be dismissed where shareholders are not advised that the defense of acquiescence would be asserted against them in the event they tendered their shares for the merger consideration. Generally, a party can not submit case law decided after the briefing has been closed as support for its claims, particularly where the case law submitted by plaintiffs counsel predates the events that led to this litigation. After reviewing INCE Co. , I do not agree with plaintiff's counsel's interpretation. In that case, Chancellor Chandler merely refused to dismiss a disclosure claim that the disclosure documents were misleading because they failed to disclose that shareholders who tendered their shares would be barred from pursuing an unfairness claim. Chancellor Chandler's opinion fails to address, as plaintiffs counsel suggests it does, the doctrine of acquiescence as it is applied to a shareholder who tenders his shares for merger consideration after filing a lawsuit detailing with specificity all the reasons why he could not fairly conclude that he had been offered a fair price for his shares.
The record is clear from Norberg's Complaint that he knew all of the arguments suggesting that he had been misled about the value of his shares at the time that he tendered them. It is an undisputed fact that Norberg accepted the benefits of the transaction after declaring in a court pleading that the defendants orchestrated an unfair price through an inequitable process. First, he abandoned his appraisal claim by failing to tender his shares during the extended 20-day window offered by Security Storage. Next, he filed his Complaint, styled as a class action, detailing the nature of the alleged inequitable conduct of the defendants which made it impossible for him to value his shares, more than 17 months before voluntarily instructing his IRA custodian to tender his shares for the $120 actually offered.
Norberg's Complaint is replete with allegations of false and misleading disclosures concerning the value of Security Storage and the fairness of the consideration. For instance, Norberg alleges that the board of directors failed to disclose to the minority shareholders the most recent values in the real estate appraisals. He alleges that these values were disclosed to Berwind, yet not related to the shareholders. In addition, Norberg alleges that the Notice improperly describes Berwind's conclusions concerning the merger transaction. For example, the Notice fails to note that Berwind did not perform a fair value analysis of Security Storage or that the appraisal makes no assessment of the value of the company other than on a discounted cash flow basis. The Notice also stated that Berwind considered the "replacement value of fixed assets" when, in fact, the appraisal ignored this value. It also implied that Berwind relied on the most recent appraisals when, as Norberg alleges, Berwind and the board of directors ignored those values as well. Norberg's tender, in the face of his declared knowledge of the inadequacy of the price constitutes acquiescence.
I agree with the defendants' assertion that our Supreme Court's ruling in Bershad is controlling with regard to shareholder acquiescence on its own and similar facts. Bershad , like this case, involved a minority shareholder challenging a cash-out merger in a pleading styled as a class action. Bershad alleged, inter alia, that the shareholder vote approving the merger was invalid since the proxy statement omitted material facts. On summary judgment, the Court of Chancery dismissed the claims of Bershad and "all stockholders who either voted in favor of the merger or accepted its benefits by tendering their shares for payment under the merger agreement." In other words, Bershad forfeited any rights he had to seek rescission of the merger by accepting the merger consideration. This Court found that the proxy statement fully informed the minority shareholders of all material facts regarding the merger. On appeal, the Supreme Court affirmed the Court of Chancery's finding that the minority shareholders were adequately informed of all material information. After determining the shareholder vote was an informed one, the Supreme Court held that when informed shareholder's either vote in favor of the merger or accept the benefits thereof they are precluded from attacking the fairness of the transaction. Thus, Bershad logically could not challenge the fairness of the transaction because after being made aware of all facts material to the merger he tendered his shares and accepted the merger consideration.
Bershad , at 840. Defendants also cite Trounstine v. Remington Rand, Inc. , Del. Ch., 194 A. 95, 99 (1937); Frank v. Wilson Co., Inc. , Del. Supr., 32 A.2d 277 (1943) for the proposition that when an informed minority shareholder either votes in favor of a merger or accepts the benefits of the transaction, he cannot thereafter attack the fairness of the transaction. In other words, acquiescence operates as a bar to any later action.
I invite the reader to review Vice Chancellor Hartnett's opinion in Siegman v. Columbia Pictures Entertainment, Inc. , Del. Ch., C.A. No. 11152, Hartnett, V.C. (Jan. 15, 1993) to understand the development of the defense of acquiescence under Delaware law. His opinion demonstrates the progression of the defense from Trounstine through Bershad and succinctly exposes the progressive nature of the defense and the nuances that trigger its use.
Bershad , at 841.
Id .
Id .
Id .
Id . at 842, 847.
Id . at 842, 848. See also Trounstine at 99 (stockholder claims barred by acquiescence when shared in the benefits which he later challenged as wrongful).
Norberg was fully informed of all material facts or had, at least according to his Complaint, recognized all of the deficiencies in the information he had been given when he voluntarily instructed his IRA custodian to tender his shares for $120. Having accepted the amount of consideration offered, he can not challenge the fairness of the transaction by continuing to assert that the very consideration he has accepted does not reflect the shares' real value because of defects in the process that led to the offer he accepted. I recognize that the Bershad courts made or affirmed actual findings that no breach of the duty of disclosure occurred and that the shareholders were informed of all facts material to their decision to tender. No such conclusion need be reached here because Norberg tendered after admitting in his Complaint 17 months earlier that he knew the deficiencies in the disclosures, process and price but chose to tender nonetheless.
In the alternative, Norberg argues that the doctrine of acquiescence can not be applicable to an involuntary cash-out merger transaction where the minority interests are squeezed out by the majority shareholder. In this circumstance, Norberg contends, even an informed shareholder surrendering his shares has no other alternative but to accept the merger consideration. However, even if he could not vote against the merger, rather than tendering his shares and accepting the consideration, he could have maintained his appraisal action and/or continued to litigate his fairness claim. Instead, he abandoned his appraisal claim, challenged the fairness of the price and the process and later, despite his declared assessment of the unfairness of the transaction, freely and voluntarily accepted the merger consideration. I conclude that under these circumstances, Norberg's tender constitutes acquiescence.
C. Waiver
The parties chose to focus their contentions on the equitable defense of acquiescence. For those preoccupied with doctrinal pigeonholes, I am persuaded that some discussion of waiver is helpful.
For the doctrine of waiver to apply, the Court must be persuaded that the party intended to voluntarily relinquish a known right. The intent to relinquish is a prerequisite to applying waiver as an equitable defense. Thus, the issue becomes whether the facts unequivocally establish Norberg's intention to relinquish his right to challenge the fairness of the merger. I conclude that they do and so hold for the following reasons.
Realty Growth Inv. v. Council of Unit Owners , Del. Supr., 453 A.2d 450, 456 (1982); Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico., Inc. , Del. Supr., 297 A.2d 28, 32-33 (1972); 28 Am.Jur.2d, Estoppel and Waiver, § 158 (1966).
28 Am.Jur.2d, Estoppel and Waiver, § 158 (1966); see also Realty Growth Inv. , 453 A.2d at 456 (waiver implies knowledge of all material facts, and intent to waive).
28 Am.Jur.2d, Estoppel and Waiver, § 206 (1966); see also Realty Growth Inv. , 453 A.2d at 456 (in the context of waiver "[t]he facts relied upon for proof must be unequivocal in character").
The record is clear that Norberg relinquished his right to challenge the fairness of the merger transaction when he voluntarily instructed his IRA custodian to tender his shares for the $120 cash-out value. It is an undisputed fact that Norberg accepted the benefits of the transaction after declaring in a court pleading that the defendants orchestrated an unfair price through an inequitable process. First, he abandoned his appraisal claim by failing to tender his shares during the extended 20-day window offered by Security Storage. Next, he filed his Complaint, styled as a class action, detailing the nature of the alleged inequitable conduct of the defendants more than 17 months before voluntarily instructing his IRA custodian to tender his shares for the $120 consideration. Rather than offering some caveat to his tender that he intended to pursue his litigation further, Norberg freely and voluntarily accepted the merger consideration he so fiercely attacked in his Complaint.
It is difficult to see how Norberg's conduct under these circumstances does not imply an intent to relinquish his right to challenge the fairness of the merger transaction. Generally, "an implied waiver can be established by acts and conduct from which an intention to waive may reasonably be inferred." In other words, conduct that impliedly expresses an intent to relinquish a known right can be designated as waiver. In my view, Norberg, by his conduct, intended to relinquish any rights he had as a minority shareholder when he voluntarily instructed his IRA custodian to tender his shares. Norberg's act fits squarely within the parameters of the equitable defense of waiver and establishes his intent to relinquish any right he had to continue to challenge the litigation he started nearly 17 months earlier.
28 Am.Jur.2d, Estoppel and Waiver, § 209 (1966)
D. The Remaining Claims
While Norberg's Complaint is replete with allegations of false and misleading disclosures concerning the value of Security Storage and the fairness of the consideration, this opinion need not address nor rule on the adequacy of these disclosures in light of the fact that both waiver and acquiescence bar Norberg's individual claim and make him an inadequate class representative.
For the reasons articulated above, defendants' motion for summary judgment is granted.
Having decided that defendants are entitled to summary judgment because Norberg's claims are barred by his acquiescence and/or waiver there, is no need to address Norberg's cross motion for summary judgment asking me to assess the defendants' conduct in the merger transaction under the entire fairness standard articulated in Weinberger . Since Norberg's acceptance of the merger consideration bars his claims, and that, in turn makes him atypical of the class he seeks to certify and represent, there is no need to determine class certification in the absence of an adequate class representative. An appropriate Order is attached.
ORDER
For the reasons set forth in this Court's opinion entered in this case on September 19, 2000, it is ORDERED that:
1. Defendants' motion for summary judgment is granted;
2. Norberg's cross motion for summary judgment is denied; and,
3. A decision on class certification is reserved pending an application by an adequate class representative.
4. The action will remain active for thirty days in order to allow substitution of a suitable plaintiff for the remaining claims.
SO ORDERED this 19th day of September, 2000.
________________________________ Vice Chancellor (by designation)