3.3.3.2.3 Discovery and monitoring function

Kanda and Levmore conclude that the appraisal remedy serves a discovery purpose as well.1 Controlling shareholders and the board of directors are tempted to engage in self-interested transactions to the detriment of the minority, and the appraisal remedy enables dissenting shareholders to discover possible misconduct in connection with the appraisal triggers. The Delaware court has allowed dissenting shareholders to engage in discovery in appraisal proceedings with an aim to assen claims of unfair dealing or breach of fiduciary duty in a separate lawsuit after the appraisal claim has been brought.2 The court has asserted that "shareholders pursuing discovery during an appraisal proceeding are likely to acquire the relevant information needed to pursue a fraud action if such information exists".3 The merit of the appraisal is thus to provide information which is useful for a potential subsequent case based on breach of fiduciary duties while at the same time sparing the potential plaintiffs' the effort to prove any wrong-doing at an initial stage. And the permissive position of the court on discovery can also deter insiders from wrongful transactions.4 Again, I do not think this is the main role of the appraisal remedy. It is an ancillary function of the appraisal proceeding.