Appraisal sits in a somewhat odd area between what is traditionally understood as ‘class’ litigation – i.e., when a person or persons seeks to represent an entire group of all ‘similarly situated’ persons. This is the model of the vast majority of securities litigation, consumer fraud litigation, mass tort, and other claims. The benefit to the representative-plaintiff is that the potential damages are aggregated, even where a single persons damages would be minuscule and not worth litigating; the downside is that the decisions made in the class, including things like settlement, can bind all persons in the class.
On the opposite pole of class claims are individual claims – the plaintiff brings their claims on behalf of themselves, and does not purport to represent others. While the individual plaintiff cannot aggregate, they also cannot bind the rest of the group.
Enter appraisal – which is not a class action, but is a collective action. We’ve covered the anatomy of an appraisal action before, but a brief recap is: anyone who may wish to seek appraisal must dissent. Not every dissenter seeks appraisal. And not every person seeking appraisal needs to file a petition. And not every petitioner becomes lead petitioner. But, the decision in the appraisal action will ultimately bind not all of those entities – from lead petitioner all the way down to dissenter. On the other hand, lead petitioner does not get to keep a share of passive appraisers’ merger uplift – at least not in a traditional sense.
This issue, along with others relevant to appraisal, will be covered in the forthcoming textbook Representative Shareholder Litigation.
We look forward to reviewing another take on this interesting issue in appraisal and will follow-up after this text is officially released.