ROBERT B. FISHER, ET AL.
FROM THE CIRCUIT COURT OF HENRICO COUNTY. Catherine C. Hammond, Judge.
John A. Hutchings (L. Lee Byrd; Robert B. Delano, Jr.; Eric C. Howlett; Sands Anderson; Dill, Dill, Carr, Stonbraker & Hutchings, on briefs), for appellants.
Daryl P. Rains (John A. Trocki, III; Morrison & Foerster, on brief), for appellee.
PRESENT: Lemons, C.J., Goodwyn, Millette, Mims, McClanahan and Powell, JJ., and Lacy, S.J.
S. BERNARD GOODWYN,
[289 Va. 71] In this appeal, we consider whether a shareholder in a Virginia corporation is entitled to appraisal rights under Virginia law when a Virginia corporation changes its state of incorporation prior to a sale of its assets.
On August 29, 2013, Robert B. Fisher, Carla L. Fisher, Bradley G. Rhodes and James D. Schwartz (Minority Shareholders) filed a complaint in the Circuit Court of Henrico County to demand shareholder appraisal rights concerning the sale of Tails, Inc. (Tails). The Minority Shareholders sought a declaratory judgment regarding whether the transaction by which Tails sold all of its assets, after changing its state of incorporation from Virginia to Delaware, gave rise to appraisal rights for the Minority Shareholders. The Minority Shareholders also requested monetary damages for various violations predicated upon the existence of the alleged appraisal rights. Tails filed a demurrer to the complaint.
The circuit court entered a final order sustaining the demurrer without leave to amend. The circuit court noted that changing the Tails corporate domicile from Virginia to Delaware did not trigger appraisal rights, and that " [t]he complaint fail[ed] to state facts sufficient to support the asserted causes of action." The Minority Shareholders appeal.
[289 Va. 72] Facts
Tails was organized as a Virginia corporation to operate as a regional franchisee of RE/MAX LLC, a Delaware limited liability company (RE/MAX). Tails held franchise rights for the District of Columbia, Maryland, Virginia and West Virginia. Officers, directors or employees of RE/MAX or its affiliates owned a majority of the outstanding shares of Tails. The Minority Shareholders held approximately 21% of the outstanding shares.
On August 9, 2013, Buena Suerte Holdings, Inc. (Buena Suerte), another affiliate of RE/MAX, and Tails signed a " Plan of Reorganization and Purchase Agreement" in which Tails would be sold to Buena Suerte in four steps. First, Tails would become a Delaware corporation, changing its state of incorporation from Virginia to Delaware pursuant to Virginia Code § 13.1-722.2 and title 8, § 265 of the Delaware Code (reincorporation step). Second, Tails would merge with and into a newly-formed Delaware limited liability company, Tails, LLC (merger step). Tails, LLC would be a subsidiary of a newly-formed holding company, Tails Holdco, Inc. (Holdco), and Holdco would hold all of Tails, LLC's membership interests. Third, Holdco would cause Tails, LLC to amend and restate its LLC agreement to remove certain limited liability company provisions (amendment step). Finally, Holdco would sell Buena Suerte all of its membership interests in Tails, LLC (the sale).
On August 12, 2013, each of the Minority Shareholders received a " Notice and Proxy/Information Statement" stating that there was a ...