Stauffer v. Standard Brands, Inc.

Supreme Court of Delaware · 1962 · Corporations

41 Del. Ch. 7 (1962)

Updated August 22, 2026

CorporationsMergerShort-form mergerAppraisalDelawareshort merger statute8 Del. C. § 253appraisal remedy

Facts

Standard Brands acquired more than 90% of the stock of Planters Nut and Chocolate Company, then created Planters of Delaware and merged the Pennsylvania company into it under § 252, with notice that Planters of Delaware would then be merged into Standard Brands under § 253. Standard Brands thereafter effected the short-form merger and paid the minority cash of $105 per share. The plaintiff did not learn of the merger until after the twenty-day statutory period for demanding appraisal had expired because he was out of the country. He then sued, alleging that $105 per share was grossly inadequate and amounted to constructive fraud because the stock was supposedly worth at least $150 to $160 per share.

Issue

When a minority stockholder challenges a § 253 short-form merger solely on the ground that the cash paid is grossly inadequate, may the stockholder maintain an equitable action for constructive fraud, or is appraisal the exclusive remedy? Does missing the appraisal deadline permit the stockholder to recast a valuation dispute as fraud?

Rule

Under Delaware's short merger statute, appraisal is the exclusive remedy where the stockholder's complaint amounts only to a disagreement over the value of the shares received in a short-form merger. Equity's power to address illegality or fraud remains, but mere allegations of inadequate price or constructive fraud based solely on valuation do not displace the exclusivity of appraisal.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

North Harbor Foods, Inc., a Delaware parent corporation based in Chicago, owns 93% of Prairie Leaf Confections, Inc., a Delaware subsidiary. North Harbor's board completes a short-form merger and cashes out the remaining minority at $42 per share; Dana Mercer, a minority stockholder in Ohio, sues in equity alleging the shares were really worth $68 and asks the court to rescind the merger.

What is the strongest argument for dismissing Dana's suit?

Explanation. Under the majority opinion, when the substance of the complaint is that the merger consideration was too low, the claim is a valuation dispute. In a short-form merger, appraisal is the adequate and exclusive remedy unless there is illegality or fraud beyond a mere disagreement over value. Labeling the claim as a request for rescission does not change its substance. (Derived from Stauffer v. Standard Brands, Inc. (1962).)