Today’s business news may seem technical but it is very important from a corporate standpoint: the Delaware Chancery Court stuck its nose into Michael Dell’s management buyout of Dell stock and   stuck buyers with millions of extra liability above and beyond the apparently market-set tender price.

AND– the court explicitly and purposely wholly ignored the market price in reaching its determination.

Shareholders claimed that the management buy-out was not at “fair value” and sued for more money under the Delaware appraisal statute: as in (I believe) all States, the corporate law permits disgruntled shareholders to seek court determination as to whether the price paid in a shareholder buy-out is fair to the selling shareholders, who as a practical matter will not have an option to stay in the company under most structures.  Until now, the trend for courts as been to say “well, shareholders in the market took the deal and the deal was thus priced fairly by market forces.”

Two take-aways: at least in management buy-outs where management by definition will always have better information than the shareholders no matter how robust the written disclosures may be, shareholders now have renewed hope which will lead to more litigation; and, in private buy-outs with small numbers of shareholders (to which the statutes apply and as to which a claim that the “market” fixed the price fairly doesn’t really ring true) it is a time for buyers to beware of litigation, as litigants have little to lose and lawyers often will take such cases on favorable economic terms in hopes of a big score.