As we have noted repeatedly, appraisal is a shareholder-protective remedy.  While much of the academic and media commentary on appraisal focuses on Delaware and appraisal in the context of large public mergers, appraisal exists beyond Delaware, and in contexts far removed from headline making mergers. For example, in New York, appraisal rights are afforded to minority members of an LLC when they are involuntarily cashed out of their LLC – often referred to as a freezeout. The relevant statutes, New York’s Limited Liability Company Law  §1005(b) and New York’s Business Corporation Law (BCL) §623, provide that when a former LLC member “disputes the company’s calculation of the fair market value of the former member’s interest, then a special proceeding must be commenced to fix its value” – i.e., an appraisal proceeding.

As with many appraisal regimes, the rights or appraisal come with a limitation: here, barring fraud or illegality in the freeze-out, appraisal is likely to be the sole remedy available to the disaffected minority member – in particular, if the majority members have followed the relevant corporate formalities and otherwise effectuated the freezeout within the confines of New York law. But, caselaw maintains an exception to the likely appraisal-only remedy: when a freezeout is effectuated for an improper purposes, done fraudulently, or does not follow New York law – then equitable relief may be available.

For a more extensive discussion of New York LLC appraisal, when it is the sole remedy, and when fraud or illegality may allow for other remedies or claims, see this New York Law Journal article.