Cite as 2017 Ark. 193
SUPREME COURT OF ARKANSAS
N". cv-15-898
opinion Delivered: May 25,2017
CLYDE N. BOOTH AND FRANK W.
BOOTH APPEAL FROM THE SEBASTIAN
APPELLANTS COUNTY CIRCUIT COURT
INO. CV-14-0130-VI]
V.
HONORABLE JAMES O. COX,
CANDICE A. FRANKS, BANK JUDGE
COMMISSIONER OF THE STATE OF
ARKANSAS AFFIRMED.
APPELLEE
SHAWN A. 'WOMACK, Associate Justice
Appellants Clyde and Frank Booth appeal from the decision of the Sebastian Counry
Circuit Court dismissing their challenge to a bank merger and the constitutionality of the
procedures followed in that merger by the Appellee, the commissioner of the Arkansas State
Banking Board ("the Board"). For the reasons stated below, we atlirm.
The Booths were minoriry stockholders in First Communiry Bank of Crawford
Counry ("FCB"), each owning 50 shares of stock that they had purchased at a per-share
price of$100. FirstBank reached an agreement on October 22,2013, to merge with FCB;
First Bank would be the surviving entiry. As part of the required merger process, First Bank
filed an application with the Board on November 15, 2A13. In compliance with Bank
Department Regulation 46.403.1, First Bank published notice of the application in the
Arkansas Democrat-Gazette on three equally spaced days during a window ten days before
Cite as 2017 Ark. 193
and after the actual filing of the application.r The November 1,5,2013 application triggered
the fifteen-day window under Arkansas Code Annotated section 23-46-406(a)(1) (Repl.
201,5) during which any person wishing to appear in opposition to the application before
the Board must file a written protest. It is uncontested that the Booths did not file a written
protest during this period.
On December 6, 2013, FCB notified its stockholders, including the Booths, of the
upcoming meeting to vote on the plan of merger. This notice contained the proposed $.01
per-share valuation of their stock holdings and information about their rights as dissenting
stockholders should rhey choose to oppose the merger. The shareholder meeting occurred
on December 19,201,3; the merger plan was adopted despite the Booths'votes against it,
and the Booths gave notice to FCB that they intended to exercise their dissenters' rights
under Arkansas Code Annotated section 23-48-506. The Booths reafhrmed their intention
to dissent several days later. OnJanuary 7 , 201,4, they notified First Bank that they intended
to challenge the constitutionaliry of the merger procedure.
The Board conducted its formal hearing-the proceeding that had been announced
via newspaper in November-on January 1,6, 201,4. The Board approved the merger. The
Booths were not present. On February 1,0, 201.4, the Booths filed a complaint in the
Sebastian Counry Circuit Court seeking review of the Board's decision under a variefy of
theories, but the claims can be simplified for our discussion here into two broad categories:
(1) The Board did not adequately fulfill its duties under administrative law in reaching its
decision and (2) the statutes and regulations followed by the Board unconslitutionally
I The notice dates were November 6, L3, and 20,201,3.
2
Cite as 2017 Ark. 193
infringe on the due process and properry rights of minoriry stockholders. The circuit court
dismissed the constitutional and statutory claims as not preserved because the Boorhs did
not raise them at the administrative hearing. It did, however, hold that even nonparties
affected by administrative decisions are entitled to an appeal under the Arkansas
Administrative Procedure Act. Upon conducting a review of the administrative record, the
court concluded that the Board's original order contained inadequate findings of fact and
conclusions of law. The court remanded to the Board to expand upon the order.
The Booths then wrote to the Board, requesting an opportuniry to present their
arguments in advance of the additional administrative action required by the circuit court.
The Board rejected the Booths' attempts, citing their failure to object within the 15-day
postapplication window of Arkansas Code Annotated section 23-46-406(r)(1). The Board
issued its expanded findings in January 201.5, and the Booths renewed their objections to
the whole process with an amended complaint in the circuit court. In an August 14,2015
order, the circuit court determined that the updated findings were sufficient and reaffirmed
that the Boorhs had failed to preserve their substantive objections due to their failure to
present these objections before the Board.
As their brief makes clear, the Booths' primary concern is the low value placed on
their shares in the merger of First Bank and FCB. They regard the $.01 per-share payout as
a violation of fundamental properry rights and due process because, they assert, the assets are
worth closer to $100 per share. To the extent that the Booths have a special right as
minoriry, dissenting shareholders to vindicate their claim of undervaluing, ir is first and
foremost through the bank's shareholder meeting. Having failed to stop or alter the merger
-)
Cite as 2017 Ark. 193
terms at that juncture, the Booths could have utilized the process under Arkansas Code
Annotated section 23-48-506 by which dissenters can receive additional appraisals of their
shares' value. Notice of dissent must be given at or prior to the meeting approving the
action, and the stockholder must follow with a written demand of payment within ten days
after the meeting. Ark. Code Ann. S 23-48-506(b)(1). The bank fixes an initial value on
the shares within twenfy days of the meeting, and if the stockholders wish to accept the
offbr, they must do so within thirry days of the meeting. Ark. Code Ann. S 23-48-506(b)(3)-
(4). If the stockholders do not accept this initial assessment, the statute provides that the
stockholders are entitled to a second opinion from a panel of three appraisers-one chosen
by the stockholders, one by the bank, and one by the first two appraisers. Ark. Code Ann.
S 23-48-506(c). If the value chosen by the majoriry of this panel is still unsatisfactory to the
dissenting stockholders, they may still appeal within five days to the bank commissioner,
who is empowered to fix the final value of the shares. Id.
The record indicates that the Booths began an attempt under this statute to address
their claims of undervaluation; at the shareholder meeting, they gave notice of dissent under
section 23-48-506. After the Board first approved the merger, the Booths' pursuit of the
appraisal remedy was more equivocal. They attempted to give "conditional notice" of their
inlent to seek a section 23-48-506 appraisal but asserted that any action under the statute
should be halted pending the circuit court's action on their litigation over broader
constitutional clairns. As the Board noted in response, there is no statutory provision for
conditional notice. The timeline for additional appraisal to vindicate dissenting shareholders'
claims is mechanical and nondiscretionary. The Board instead treated the conditional notice
Cite as 2017 Ark. 193
as effective notice. These communications demonstrate that the Booths were aware of the
specific avenue provided by Arkansas law for dissenting shareholders to challenge an
allegedly deficient valuation in a merger agreement.
The Booths instead argue on appeal that the Board's notice of its general hearing on
the merger was constitutionally deficient as applied to shareholders. They base this argument
on precedent from both the United States Supreme Court and this court that "newspaper
notice" alone is insufficient when reasonable diligence could uncover the names and
residences of the parties involved in a proceeding for which notice is required. In those
circumstances, the state must require targeted notice through mail or other means to satisfii
due process. See Mullane v. Central Hanouer Bank & Trust C0.,339 U.S. 306, 319 (1950).
The Booths' reliance on these cases, however, is misplaced. As discussed above, the Booths
were timely informed of all private and public avenues in which their status as shareholders
entitled them to challenge the bank's valuation of their shares. The Board's hearings on
proposed mergers address broader considerations, most notably whether the merging banks
complied with statucory requiremen[s and whether the merger will create a financially sound
resulting bank. The hearing did not implicate the Booths in any special way that would
require more than the newspaper announcements afforded to any other citizen who may
wish to cornment on a merger's economic impact on the state.
Because we hold that the Board's notice of the merger hearing was not deficient, rzu'e
agree with the circuit court's determination thar the Booths' failure to file a written protest
within che statutory window prevented them from making arguments before the Board.
The arguments were therefore not preserved for judicial review.
Cite as 2017 Ark. 193
Affirmecl"
Frank W. Booth, for appellants.
Leslie Rutledge, Att'y Gen., by: Juliane Chavis, Deputy Att'y Gen., for appellee.