In Delaware, appraisal is a creature of statute. It is a statutory claim, born from 8 Del. Code Section 262; it is a claim in its own right, but it also carries with it statutory requirements. Appraisal requires that the right kind of demand be sent at the right time by the right entity. Quasi-appraisal is a creature of the common law and, as lawyers from Blank Rome observe in a growing concern for deal lawyers. Whereas appraisal rights claims are basically individual in nature, quasi-appraisal has been brought as a potential remedy for a class of all shareholders who have otherwise foregone their appraisal rights.
The differences between appraisal and quasi-appraisal go deeper than just their source in statute or common law. While appraisal is a well-defined “claim” in its own right, quasi-appraisal is far more akin to a remedy than to a claim. While both demand a determination of “fair value,” the vast majority of Delaware case law determines fair value within the confines of the statutory appraisal scheme, including, for example, a bar on considering synergies. Quasi-appraisal is more “amorphous”–as the authors observe–and can frustrate predictability in a merger. Whereas appraisal claims must, by statute, be known (and pressed) at a certain time, quasi-appraisal remedies/claims can pop up later, after the appraisal window has closed.
The authors of this piece also point out that unlike appraisal, the quasi-appraisal remedy is often connected to a breach of fiduciary claim (note that appraisal claims require no breach of any duty and require no proof of any wrongdoing by anyone). Breach of fiduciary duty claims, in turn, are directed at the corporate officers and directors, not the company itself, and those officers and directors, in turn, may have indemnification rights from the company or the insurance that covers claims against them. The takeaway then is that a when a party is seeking quasi-appraisal, it may well involve many more parties and may come up at a time well past the otherwise statutorily set appraisal window. As the authors observe:
[A]s quasi-appraisal claims continue to increase, the predictability that comes with the timely perfection of appraisal rights may be lost. Buyers may need to consider more than just the number of dissenting stockholders and, more specifically, also consider if a class of all (or most) of the stockholders would or could pursue a quasi-appraisal claim against the seller’s former directors for which the buyer might have indemnity responsibility. … [The] intersection of quasi-appraisal remedies and directors’ indemnification rights could put a buyer potentially at odds with a seller’s former directors, and highlight further unanticipated deal risks. Navigating these changing tides in Delaware corporate law is of critical importance, particularly for buyers, and these considerations should receive appropriate attention in the early stages of the deal negotiations.