Mitchell Partners, L.P. v. Irex Corp.

Justice BAER,

concurring.

I join the Majority Opinion in its entirety, and write only to expand on the Majority’s observation that mere inadequacy in price is not sufficient to implicate the fraud or fundamental unfairness exception contained in Section 1105, 15 Pa.C.S. § 1105. Maj. Op. at 47-48. Although this section contemplates remedies outside of the appraisal action pursuant to this exception, as the Majority observes, it is not to be invoked lightly. Id.

The appraisal remedy provided in Sections 1571-1580, 15 Pa.C.S. § 1571, is designed to protect dissenting shareholders by valuing their shares, see O’Connor Appeal, 452 Pa. 287, 304 A.2d 694 (1973), and is generally the exclusive remedy available to such shareholders. 15 Pa.C.S. § 1105. Section 1105 provides, however, by negative implication, that where there is fraud or fundamental unfairness, the appraisal remedy is not exclusive. 15 Pa.C.S. § 1105 (“Absent fraud or fundamental unfairness, the rights and remedies so provided shall be exclusive.”).

This exception is not to be. invoked to compensate financial unfairness. See Barter v. Diodoardo, 771 A.2d 835, 841 (Pa.Super.2001) (“[F]inancial unfairness is not the equivalent of fraud or fundamental unfairness, as the Pennsylvania Business Corporation Law, by granting dissenting shareholders the ability to demand an appraisal, see generally 15 Pa.C.S.A. §§ 1571-1580, contemplates that a shareholder may be inadequately compensated by the terms of a merger.”) (citing 15 Fletcher Cyc. Corp. § 7160.50 (“inadequacy of price, in and of itself, does not constitute fraud or illegality”)). In this regard, financial unfairness will be addressed and remedied in the appraisal proceeding. See Barter, 771 A.2d at 841 (providing that financial unfairness is an issue for the appraisal court).

Cognizant of the potential that litigants may attempt to invoke the fraud or fundamental unfairness exception on a regular basis as an alternative avenue to seek redress for pedestrian claims, which do not involve fraud or fundamental unfairness, I, like the Majority, view the exception as a narrow one, and would add that it requires the litigants to demonstrate to the trial court, as gatekeeper, that their alleged harm results from fraud or fundamental unfairness and that it cannot be compensated through the appraisal proceeding provided in Sections 1571-1580. It is only when they can make such a showing that the exception is available to remedy fraud or fundamental unfairness.