DiRienzo v. Steel Partners Holdings L.P., f/k/a WebFinancial L.P., C.A. No. 4506-CC (Del. Ch. Dec. 8, 2009) (C. Chandler)

Chancellor Chandler dismissed an appraisal petition on summary judgment because the petitioners
failed to comply with the record holder requirement of Section 262(a). Petitioners were beneficial
holders of the common stock of WebFinancial Corporation (the “Company”) who held their shares
in street name. The record owner of the petitioners’ shares was Cede & Company (“Cede”); thus,
because the appraisal demand was not made by Cede, it was deficient under Section 262(a). Although a corporation may waive its right to object to a defective appraisal demand, the Chancellor found that the Company’s letters in response to petitioners’ demand did not constitute a waiver, which requires “a clear, unequivocal, and decisive act of the party demonstrating relinquishment of the right.” The Chancellor further found that the Company’s letters did not constitute acquiescence to or acceptance of the defective demand. Finally, the Chancellor found that any alleged disclosure violations in the Company’s proxy did not estop the Company from challenging the validity of petitioners’ appraisal demand, and noted that the petitioners were free to commence a separate fiduciary duty action.

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