City of North Miami Beach General Employees' Retirement Plan v. Dr Pepper Snapple Group, Inc. ( 2018 )


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  •       IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
    )
    CITY OF NORTH MIAMI BEACH                )
    GENERAL EMPLOYEES’                       )
    RETIREMENT PLAN and                      )
    MAITLAND POLICE OFFICERS                 )
    AND FIREFIGHTERS RETIREMENT )
    TRUST, on behalf of themselves and all )
    other similarly situated stockholders of )
    Dr Pepper Snapple Group, Inc.,           )
    )
    Plaintiffs,  )
    )
    v.                                )      C.A. No. 2018-0227-AGB
    )
    DR PEPPER SNAPPLE GROUP, INC., )
    MAPLE PARENT HOLDINGS CORP., )
    SALT MERGER SUB, INC., LARRY             )
    YOUNG, DAVID E. ALEXANDER,               )
    ANTONIO CARRILLO, JOSÉ M.                )
    GUTIÉRREZ, PAMELA H.                     )
    PATSLEY, RONALD G. ROGERS,               )
    WAYNE R. SANDERS, DUNIA A.               )
    SHIVE, and M. ANNE SZOSTAK,              )
    )
    Defendants.  )
    )
    OPINION
    Date Submitted: May 25, 2018
    Date Decided: June 1, 2018
    Michael J. Barry, Jeff A. Almeida, and Laina M. Herbert of GRANT &
    EISENHOFER P.A., Wilmington, Delaware; Mark Lebovitch and John Vielandi of
    BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP, New York, New York;
    Counsel for Plaintiffs.
    S. Mark Hurd, Melissa A. DiVincenzo, Eric S. Klinger-Wilensky, and Alexandra
    Cumings of MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington,
    Delaware; Brian A. Herman of MORGAN, LEWIS & BOCKIUS LLP, New York,
    New York; Jason H. Wilson of MORGAN, LEWIS & BOCKIUS LLP, Philadelphia,
    Pennsylvania; Counsel for Defendants Dr Pepper Snapple Group, Inc., Salt Merger
    Sub, Inc., Larry Young, David E. Alexander, Antonio Carrillo, José M. Gutiérrez,
    Pamela H. Patsley, Ronald G. Rogers, Wayne R. Sanders, Dunia A. Shive, and M.
    Anne Szostak.
    Paul J. Lockwood, Joseph O. Larkin, Sarah R. Martin, Alyssa S. O’Connell, and
    Michelle L. Davis of SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
    Wilmington, Delaware; Counsel for Defendant Maple Parent Holdings Corp.
    BOUCHARD, C.
    Earlier this year, Dr Pepper Snapple Group, Inc. and Keurig Green Mountain,
    Inc. announced an agreement to combine their businesses to create a more
    diversified beverage company. The transaction is structured so that Keurig will
    become an indirect wholly-owned subsidiary of Dr Pepper through a reverse
    triangular merger. Dr Pepper stockholders will receive $103.75 per share in a special
    cash dividend and will retain their shares of Dr Pepper, which will account for 13%
    of the shares of the combined company. The indirect owners of Keurig will receive
    shares of Dr Pepper and will hold the remaining 87% of the equity of the combined
    company.
    Dr Pepper stockholders are not being asked to approve the merger, which
    combines a merger subsidiary of Dr Pepper with the parent of Keurig. But they are
    being asked to approve two proposals necessary to effectuate the transaction at a
    stockholders meeting scheduled for June 29, 2018.
    On March 8, 2018, Dr Pepper issued a preliminary proxy statement for the
    stockholders meeting. It states that Dr Pepper stockholders will not have appraisal
    rights under Section 262 of the Delaware General Corporation Law in connection
    with the proposed transaction. That filing prompted two stockholder plaintiffs to
    file this action in which they assert that Dr Pepper stockholders “ought” to be
    afforded appraisal rights in connection with the proposed transaction.
    The parties agree that “this action concerns a purely legal question” 1
    concerning the availability of appraisal rights under Section 262. They have filed
    cross-motions for summary judgment, requesting a decision before the upcoming
    stockholders meeting.
    Section 262 affords stockholders of Delaware corporations a statutory remedy
    for appraisal of their shares in certain defined circumstances. Relevant here, Section
    262(b) expressly provides that appraisal rights shall be available only for the shares
    of stock of a “constituent corporation” in a merger or consolidation to be effected
    pursuant to certain provisions of the General Corporation Law. The three-step
    process for determining a stockholder’s entitlement to appraisal under Section
    262(b) also contemplates that the stockholder will relinquish its shares in the merger
    or consolidation.
    For the reasons explained below, the court holds that the term “constituent
    corporation” as used in Section 262 means an entity actually being merged or
    combined and not the parent of such an entity. Based on that construction, the court
    concludes that Dr Pepper’s stockholders do not have a statutory right to appraisal
    under Section 262(b) because Dr Pepper is not a constituent corporation. Instead,
    1
    Pls.’ Mot. to Expedite 10 (Dkt. 1); Dr Pepper Defs.’ Opening Br. 5 (Dkt. 25).
    2
    Dr Pepper is simply the parent of one of the two corporations that will be merged in
    connection with the proposed transaction.
    As a second ground for its decision, the court concludes that Dr Pepper
    stockholders are not entitled to appraisal because they are retaining their shares in
    connection with the proposed transaction. This type of transaction does not fit the
    statutory scheme of Section 262(b), which contemplates that the shares for which
    appraisal is sought will be relinquished in a merger or consolidation.
    Based on these conclusions, defendants’ motions for summary judgment will
    be granted, and plaintiffs’ motion for summary judgment will be denied.
    I.       BACKGROUND
    The facts recited herein are based on the uncontroverted allegations of the
    Verified Class Action Complaint (the “Complaint”)2 and certain documents filed
    with the Securities and Exchange Commission that were cited in the parties’
    submissions in connection with their cross-motions for summary judgment.3
    A.    The Parties and Relevant Non-Parties
    Defendant Dr Pepper Snapple Group, Inc. (“Dr Pepper”) is a publicly traded
    corporation that produces and sells more than fifty brands of flavored beverages
    2
    Dkt. 1.
    3
    Transmittal Aff. of Alexandra Cumings (“Cumings Aff.”) (Dkt. 25); Transmittal Aff. of
    Laina M. Herbert (“Herbert Aff.”) (Dkt. 27).
    3
    throughout North America and the Caribbean.4 Defendant Salt Merger Sub, Inc.
    (“Merger Sub”) is a wholly-owned subsidiary of Dr Pepper that was formed solely
    for the purpose of facilitating the transactions described herein.5 The nine individual
    defendants comprise Dr Pepper’s board of directors: Larry Young, David E.
    Alexander, Antonio Carrillo, José M. Gutiérrez, Pamela H. Patsley, Ronald G.
    Rogers, Wayne R. Sanders, Dunia A. Shive, and M. Anne Szostak.6
    Defendant Maple Parent Holdings Corp. (“Maple Parent”) is a private entity
    that indirectly owns non-party Keurig Green Mountain, Inc., a leader in specialty
    coffee and single-serve brewing systems.7 Non-party JAB Holdings Company S.à
    r.l. (“JAB”) controls Maple Parent.8
    Plaintiffs City of North Miami Beach General Employees’ Retirement Plan
    and Maitland Police Officers and Firefighters Retirement Trust purportedly hold an
    undisclosed number of shares of Dr Pepper common stock.9
    4
    Herbert Aff. Ex. A at 4.
    5
    Herbert Aff. Ex. D at 1; Compl. ¶ 16.
    6
    Compl. ¶¶ 17-25.
    7
    Herbert Aff. Exs. A at 4, B at 2; Compl. ¶ 15.
    8
    Herbert Aff. Ex. C at iii.
    9
    Compl. ¶¶ 12-13.
    4
    B.       The Proposed Transactions
    On January 29, 2018, Dr Pepper, Maple Parent, and Merger Sub entered an
    Agreement and Plan of Merger (the “Merger Agreement”).10 Under the Merger
    Agreement, Merger Sub will merge “with and into Maple Parent,” with Maple Parent
    surviving the transaction as a wholly-owned subsidiary of Dr Pepper (the
    “Merger”).11 Each share of Merger Sub common stock will be converted into one
    share of the surviving corporation (i.e., Maple Parent), and each share of Maple
    Parent common stock will be converted into the right to receive shares of newly-
    issued Dr Pepper common stock determined pursuant to an exchange ratio set forth
    in the Merger Agreement.12 Before the closing of the Merger, Maple Parent will
    declare a $9 billion cash dividend to Dr Pepper.13
    If completed, the equity holders of Maple Parent immediately before the
    effective time of the Merger (the “Effective Time”) will own approximately 87% of
    Dr Pepper’s common stock immediately after the Effective Time.14 The public
    stockholders of Dr Pepper immediately before the Effective Time will retain their
    10
    Cumings Aff. Ex. A.
    11
    
    Id. § 1.01.
    12
    
    Id. §§ 3.01(a),
    (b).
    13
    
    Id. § 7.13(b).
    14
    
    Id. at First
    Recital.
    5
    shares and own approximately 13% of Dr Pepper after the Merger. 15 After the
    Merger, JAB will be Dr Pepper’s controlling stockholder.16
    The Merger is depicted in the diagram below:17
    15
    
    Id. 16 Herbert
    Aff. Ex. C at 53-54.
    17
    For the sake of simplicity, Keurig Green Mountain, Inc. is depicted in the diagrams set
    forth below as a direct subsidiary of Maple Parent. Whether Keurig Green Mountain, Inc.
    is a direct or indirect subsidiary of Maple Parent does not affect the analysis in this opinion.
    6
    Dr Pepper plans to declare a special cash dividend to its stockholders of record
    as of the business day immediately preceding the closing of the Merger, entitling
    them to $103.75 per share, payable one business day after the Effective Time (the
    “Special Dividend”).18 Dr Pepper expects to fund the Special Dividend with funds
    secured from third-party financing sources and the $9 billion dividend it will receive
    from Maple Parent.19 The post-Merger entity and Special Dividend are depicted in
    the diagram below:
    18
    Cumings Aff. Ex. A at Fourth Recital, § 7.13(c).
    19
    Dr Pepper Defs.’ Opening Br. 7; see also Cumings Aff. Ex. A §§ 4.16(a), 7.13(b).
    7
    C.    The Charter Amendment and Share Issuance Proposals
    Dr Pepper’s stockholders are not being asked to vote to approve the Merger.
    Rather, as described in a preliminary proxy statement filed with the SEC on March
    8, 2018 (the “Preliminary Proxy”), Dr Pepper’s stockholders will vote on two
    proposals necessary to effectuate the transactions contemplated by the Merger
    Agreement at a stockholders meeting to be held on June 29, 2018.20                First, Dr
    Pepper’s stockholders will “vote on a proposal to approve the issuance of [Dr
    Pepper] common stock as merger consideration pursuant to the [Merger
    Agreement]” (the “Share Issuance Proposal”).21 Second, Dr Pepper’s stockholders
    will “vote on a proposal to approve an amendment to the certificate of incorporation
    of [Dr Pepper] to provide for [] an increase in authorized shares to permit issuance
    of a sufficient number of shares as merger consideration” (the “Charter Amendment
    Proposal”).22 The Merger only can be consummated, and stockholders only will
    receive the Special Dividend if Dr Pepper’s stockholders approve both the Share
    Issuance and Charter Amendment Proposals.23
    The Preliminary Proxy informs Dr Pepper’s stockholders that they do not have
    appraisal rights in connection with the Merger. Specifically, it states that “Section
    20
    Tr. 42 (May 25, 2018); Cumings Aff. Ex. B at Cover Letter to Stockholders.
    21
    Cumings Aff. Ex. B at Notice of Annual Meeting of Stockholders.
    22
    
    Id. 23 Id.
    at Cover Letter to Stockholders.
    8
    262 of the DGCL does not provide for appraisal rights in connection with the
    transactions contemplated by the merger agreement for holders of shares of [Dr
    Pepper] common stock.”24
    II.       PROCEDURAL HISTORY
    Plaintiffs filed the Complaint on March 28, 2018, asserting two claims. Count
    I asserts that the individual defendants breached their fiduciary duties by failing to
    inform Dr Pepper’s stockholders that they have appraisal rights in connection with
    the Merger.25 Count II asserts that 
    8 Del. C
    . § 262(d)(1) was violated because the
    Preliminary Proxy did not inform stockholders of the availability of appraisal
    rights.26 Plaintiffs ask the court to “[e]njoin the Proposed Transaction until Plaintiffs
    and the Class are provided their rights under 
    8 Del. C
    . § 262, or alternatively permit
    class members to demand and petition this Court for appraisal.”27
    On April 30, 2018, Maple Parent and Dr Pepper each filed a motion for
    summary judgment under Court of Chancery Rule 56.28 On May 1, 2018, plaintiffs
    24
    
    Id. at 18,
    185.
    25
    Compl. ¶¶ 45-54.
    26
    Compl. ¶¶ 55-56.
    27
    Compl. at 18.
    28
    Dkts. 25 & 26.
    9
    filed a cross-motion for summary judgment.29 Briefing was completed on May 18,
    2018, and the court heard argument on the motions on May 25, 2018.
    III.     ANALYSIS
    This action boils down to the purely legal question of whether Dr Pepper’s
    stockholders have appraisal rights in connection with the Merger under 
    8 Del. C
    . §
    262. For the reasons explained below, I find that they do not. Thus, the motions for
    summary judgment of Dr Pepper and Maple Parent will be granted, and plaintiffs’
    motion will be denied.
    A.     Summary Judgment Standard
    Under Court of Chancery Rule 56(c), summary judgment “shall be rendered
    forthwith if the pleadings, depositions, answers to interrogatories and admissions on
    file, together with the affidavits, if any, show that there is no genuine issue as to any
    material fact and that the moving party is entitled to a judgment as a matter of law.”30
    The parties have filed cross-motions and agree that there is no genuine issue as to
    any material fact that would preclude the court from granting summary judgment.31
    Thus, under Court of Chancery Rule 56(h), “the Court shall deem the motions to be
    29
    Dkt. 27.
    30
    Ct. Ch. R. 56(c).
    31
    Pls.’ Opening Br. 11 (Dkt. 27); Dr Pepper Defs.’ Opening Br. 5.
    10
    the equivalent of a stipulation for decision on the merits based on the record
    submitted with the motions.”32
    B.     Dr Pepper’s Stockholders are not Entitled to Appraisal Rights
    Under 
    8 Del. C
    . § 262
    “Under Delaware law, the appraisal remedy is entirely a creature of statute.”33
    “The goal of statutory construction is to determine and give effect to legislative
    intent.”34 Thus, “[t]he plain meaning of the statutory language controls if the statute
    is found to be clear and unambiguous” and, “[i]f a statutory provision is ambiguous,”
    the court should “consider the statute as a whole, rather than in parts, to produce a
    harmonious interpretation of a given provision.”35 In either event, “it is a well
    established principle of statutory interpretation that the law favors rational and
    sensible construction.”36
    As explained below, Dr Pepper’s stockholders are not entitled to appraisal of
    their shares in connection with the Merger because the statutory requirements plainly
    32
    Ct. Ch. R. 56(h).
    33
    Alabama By-Prods. Corp. v. Cede & Co. ex rel. Shearson Lehman Bros., 
    657 A.2d 254
    ,
    258 (Del. 1995) (citation and internal quotations omitted).
    34
    One-Pie Invs., LLC v. Jackson, 
    43 A.3d 911
    , 914 (Del. 2012) (citation and internal
    quotations omitted).
    35
    Pellicone v. New Castle Cty., 
    88 A.3d 670
    , 673 (Del. 2014) (citations omitted); see also
    Arbern-Wilmington, Inc. v. Director of Revenue, 
    596 A.2d 1385
    , 1390 (Del. 1991) (citation
    omitted) (“It is a well-settled principle of construction that the legislature enacts statutes as
    a whole and that each part must be read in conjunction with the other parts.”).
    36
    One-Pie 
    Invs., 43 A.3d at 914
    (citation and internal quotations omitted).
    11
    enumerated in Section 262 have not been met for two reasons that are corroborative
    of each other: (i) Dr Pepper is not a “constituent corporation” in the Merger as
    required under Section 262(b) in order to trigger a right to appraisal, and (ii)
    stockholders of Dr Pepper are retaining their shares in connection with the Merger.
    1.     Dr Pepper’s Stockholders are not Entitled to Appraisal
    Rights because Dr Pepper is not a Constituent Corporation
    in the Merger
    Section 262(b) imposes a threshold requirement for determining when
    appraisal rights are available in connection with a merger or consolidation effected
    under the Delaware General Corporation Law:
    Appraisal rights shall be available for the shares of any class or series
    of stock of a constituent corporation in a merger or consolidation to
    be effected pursuant to § 251 . . ., § 252, § 254, § 255, § 256, § 257,
    § 258, § 263 or § 264 of this title . . .37
    37
    
    8 Del. C
    . § 262(b) (emphasis added). In addition to the statutory right to appraisal
    afforded under Section 262(b), the statute provides that a corporation may provide in its
    certificate of incorporation for appraisal rights under Section 262 in certain circumstances,
    specifically “for the shares of any class or series of its stock as a result of an amendment
    to its certificate of incorporation, any merger or consolidation in which the corporation is
    a constituent corporation or the sale of all or substantially all of the assets of the
    corporation.” 
    8 Del. C
    . § 262(c) (emphasis added). No contention is made in this case
    that Dr Pepper’s certificate of incorporation provides for appraisal under Section 262(c).
    Notably, even when a certificate of incorporation expands under Section 262(c) the
    availability of appraisal rights for a merger or consolidation beyond what is available under
    Section 262(b), the statute still limits the remedy to shares of “a constituent corporation”
    to the merger or consolidation.
    12
    Thus, as a statutory matter, appraisal is available in a merger or consolidation
    governed by Section 262(b) only for the stock of a “constituent corporation.”38
    The Delaware General Corporation Law does not explicitly define the term
    “constituent corporation,” but a number of its provisions give insight into the
    meaning of the term. Together, they clearly imply that “constituent corporations”
    are entities that actually were merged or combined in the transaction and not a parent
    of such entities.
    For example, Section 251(a) provides: “Any 2 or more corporations of this
    State may merge into a single surviving corporation, which may be any 1 of the
    constituent corporations or may consolidate into a new resulting corporation formed
    by the consolidation.”39 Because this statute provides that the entity surviving a
    merger may be either (i) a “new resulting” entity of a consolidation or (ii) one of
    two or more “constituent corporations” to a merger, the term “constituent
    corporations” must mean the corporations actually being merged or consolidated.
    38
    2 DAVID A. DREXLER ET AL., DELAWARE CORPORATION LAW AND PRACTICE § 36.02, at
    36-2 (2017) (“Section 262 begins with the premise that appraisal rights exist for the shares
    of each class or series of stock of each constituent corporation.”); 1 DONALD J. WOLFE, JR.
    & MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE
    COURT OF CHANCERY § 8.10[a], at 8-207 (2014) (“Section 262 of the Delaware General
    Corporation Law provides a procedure for a judicial determination of the fair value of
    shares of stock of Delaware corporations that are constituent parties to certain types of
    mergers or consolidations.”).
    39
    
    8 Del. C
    . § 251(a).
    13
    Similarly, Section 262(b)(1)(ii) states that “no appraisal rights shall be
    available for any shares of stock of the constituent corporation surviving a merger if
    the merger did not require for its approval the vote of the stockholders of the
    surviving corporation as provided in § 251(f) in this title.”40 Logically, for a
    constituent corporation to “survive” a merger, the constituent corporation must be
    an entity preexisting the merger that was combined with another entity in the
    transaction.
    In the same vein, this court has interpreted the term “constituent corporations”
    to mean only those legal entities actually being combined in a transaction.
    Specifically, in In re Inergy L.P. Unitholder Litig.,41 the court considered whether
    the unitholders of a limited partnership (Inergy) were entitled to vote on a proposed
    merger under Inergy’s partnership agreement. The court explained that the answer
    “turns on whether Inergy is actively ‘merging’ or ‘consolidating’ with another entity
    so that it is a constituent party to such merger or consolidation.”42 Although Inergy
    was a contractual party to the merger agreement, the court concluded that it was
    “clear” that Inergy was “not a constituent of the merger between Holdings and
    40
    
    8 Del. C
    . § 262(b)(1)(ii).
    41
    
    2010 WL 4273197
    (Del. Ch. Oct. 29, 2010).
    42
    
    Id. at *10.
    14
    MergerCo.”43 Accordingly, the court found that Inergy’s unitholders were unlikely
    to succeed on their claim that they were entitled to vote on the merger.
    In analyzing the issue, the Inergy court analogized to the use of triangular
    mergers in the corporate context, i.e., where “a parent corporation can acquire a
    target corporation by setting up a subsidiary to merge with the target.” 44 The court
    explained that the “effect of this arrangement is that the parent does not become a
    constituent to the merger between the target and the subsidiary” and thus the
    stockholders of the parent “generally are not entitled to vote on the merger.”45 This
    conclusion is consistent with this court’s observation in Lewis v. Ward that the
    stockholders of a parent corporation of a merging subsidiary in a triangular merger
    “generally do not have the right to vote on the merger, nor are they entitled to
    appraisal.”46
    The authorities discussed above support interpreting the term “constituent
    corporation” in Section 262 to mean only an entity that actually is being merged or
    43
    Id.; see also 
    id. (“Thus, the
    constituent parties to the merger are Holdings and MergerCo,
    and not Inergy.”).
    44
    
    Id. at *11.
    45
    
    Id. 46 2003
    WL 22461894, at *4 n.18 (Del. Ch. Oct. 29, 2003) (Strine, V.C.). aff’d, 
    852 A.2d 896
    (Del. 2004). See also 1 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, THE
    DELAWARE LAW OF CORPORATIONS & BUSINESS ORGANIZATIONS § 9.7. (explaining that
    “[t]he stockholders of [the acquiring corporation in a triangular merger] do not have the
    right to vote on the merger, nor are they entitled to appraisal rights since [the acquiring
    corporation] is not a constituent corporation”).
    15
    combined with another entity in a merger or consolidation and thus does not include
    a parent of such entities. This interpretation is consistent with how this court and
    leading Delaware corporate law treatises have understood the term, albeit without
    specifically analyzing the issue.47
    Tellingly, plaintiffs did not advance an alternative interpretation of the term
    “constituent corporation” in their briefs.48 Instead, relying heavily on dictum in
    Hollinger Inc. v. Hollinger International, Inc.,49 plaintiffs argue that Dr Pepper
    47
    See, e.g., Cede & Co., Inc. v. MedPointe Healthcare, Inc., 
    2004 WL 2093967
    , at *8 (Del.
    Ch. Sept. 10, 2004) (noting that “in applying the appraisal statute, [the court] is constrained
    by it to value the Carter-Wallace entity that was merged” and characterizing Carter-
    Wallace as “the ‘constituent corporation’ in the Merger”); Kaye v. Pantone, Inc., 
    395 A.2d 369
    , 375 (Del. Ch. 1978) (“The right to an appraisal is limited to stockholders of the merged
    corporations.”); 1 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, THE DELAWARE LAW
    OF CORPORATIONS & BUSINESS ORGANIZATIONS § 9.43[A], at 9-128 n.635 (3d ed. Supp.
    2015) (“The ‘constituent corporations’ [referenced in provisions of the General
    Corporation Law] are those corporations that are the actual corporations merging or
    consolidating.”); 2 EDWARD P. WELCH ET AL., FOLK ON THE DELAWARE GENERAL
    CORPORATION LAW § 262.02[A], at 9-178 (6th ed. Supp. 2018) (“[I]t is plain from [Section
    262] and other sections of the General Corporation Law that all of the corporations merging
    or consolidating are constituent corporations, whether surviving or disappearing.”).
    48
    When pressed on this point at oral argument, plaintiffs proffered two definitions.
    Plaintiffs initially suggested that the term “constituent corporation” should mean “the
    company whose business is being merged” and then advocated that the term should
    “include the real party in interest to the merger.” Tr. 23, 75 (May 25, 2018). Plaintiffs
    provided no textual basis in the General Corporation Law to support either interpretation,
    both of which undoubtedly would engender litigation and inject uncertainty into the
    availability of appraisal rights under Section 262.
    49
    
    858 A.2d 342
    , 372-75 (Del. Ch. 2004) (Strine, V.C.), interlocutory appeal refused, 
    871 A.2d 1128
    (Del. 2004) (TABLE).
    16
    simply “ought” to be considered a constituent corporation even though it is not being
    merged or combined with another entity in the proposed transaction.50
    In Hollinger, Chief Justice Strine, writing as Vice Chancellor, addressed
    whether 
    8 Del. C
    . § 271, as then written,51 required a vote of a parent corporation’s
    stockholders to approve a sale of certain assets when those assets were held by an
    indirect, wholly-owned subsidiary.52 The court ultimately held that the value of the
    challenged asset sale did not meet the threshold necessary to require a stockholder
    vote under Section 271.53 In doing so, the court discussed but did not decide the
    merits of defendant’s “technical defense” that when the subsidiary actually was the
    entity that held the assets, there was no requirement for the parent’s stockholders to
    vote on the sale under Section 271.54 Plaintiffs rely in particular on the following
    passage from this discussion in which the court posited that it may be appropriate in
    certain circumstances to disregard corporate formalities for Section 271’s vote
    requirement:
    50
    Pls.’ Answering Br. 4 (Dkt. 36).
    51
    In 2005, the year after Hollinger was decided, Section 271 was amended to specifically
    provide that the property and assets of a wholly-owned and controlled, directly or
    indirectly, subsidiary will be considered the property and assets of its parent corporation
    for purposes of Section 271. See 
    8 Del. C
    . § 271(c).
    52
    
    Hollinger, 858 A.2d at 346
    .
    53
    
    Id. at 348-49.
    54
    
    Id. at 371-75.
    17
    When an asset sale by the wholly owned subsidiary is to be
    consummated by a contract in which the parent entirely guarantees the
    performance of the selling subsidiary that is disposing of all of its assets
    and in which the parent is liable for any breach of warranty by the
    subsidiary, the direct act of the parent’s board can, without any
    appreciable stretch, be viewed as selling assets of the parent itself. By
    its direct contractual action, the parent board is promising to dispose of
    all of the underlying assets of the subsidiaries by having the parent
    cause its wholly owned subsidiaries to sell, by promising to bear all the
    economic risks of the asset sale itself, and by therefore essentially
    eliminating the subsidiary’s purpose and existence and monetizing for
    itself as parent the value of the assets held by that subsidiary. To find
    that § 271’s vote requirement were implicated by such a contract if it
    involved the sale of assets that would, if owned directly by the parent,
    comprise substantially all of the parent’s assets would not, despite
    [defendant’s] well-stated arguments to the contrary, be an irrational
    implementation of the legislative intent expressed in that section of
    our corporation code.55
    Apart from the fact that the foregoing discussion is dictum, it would be
    inadvisable in my opinion to attempt to extend this reasoning to this case because
    disregarding the distinction between corporate entities would have more significant
    negative repercussions in the context of applying Section 262 than it would have had
    in applying the prior version of Section 271. In Hollinger, the court focused on a
    singular question: whether a subsidiary’s assets could constitute “all or substantially
    all” of a parent corporation’s assets to trigger a stockholder’s right to vote on an
    asset sale under Section 271. The answer to that question was the end of the court’s
    statutory analysis. Section 262, by contrast, is a more complicated statutory scheme
    55
    Pls.’ Answering Br. 7 (emphasis in original; quoting 
    Hollinger, 858 A.2d at 375
    ).
    18
    that not only determines when stockholders have appraisal rights,56 but also
    enumerates certain procedures to perfect and litigate those rights57 in order to receive
    a specified remedy.58
    As defendants point out,59 in a transaction with as many components as the
    one in this action (i.e., the Share Issuance Proposal, the Charter Amendment
    Proposal, the Merger, and the Special Dividend), disregarding the corporate form
    would lead to many open questions under the appraisal statute without readily
    apparent answers, such as:
     How can Section 262’s references to shares not “voted in favor of the
    merger” be harmonized with the fact that Dr Pepper’s stockholders are not
    being asked to vote on the Merger?
     Would references to the “corporation,” the “constituent corporation,” and the
    “surviving corporation” in Section 262 refer to Dr Pepper or Maple Parent?
     Would Dr Pepper’s stockholders seeking to perfect appraisal rights be
    permitted to retain their Dr Pepper shares?
     Would Dr Pepper’s stockholders seeking to perfect appraisal rights be
    permitted to accept the Special Dividend?
    56
    
    8 Del. C
    . § 262(b).
    57
    
    8 Del. C
    . §§ 262(d)-(g).
    58
    
    8 Del. C
    . §§ 262(h)-(j); see Golden Telecom, Inc. v. Glob. GT LP, 
    11 A.3d 214
    , 217-18
    (Del. 2010) (emphasis in original) (“Section 262(h) unambiguously calls upon the Court
    of Chancery to perform an independent evaluation of ‘fair value’ at the time of a
    transaction.”).
    59
    Dr Pepper Defs.’ Opening Br. 28-29.
    19
     If Dr Pepper’s stockholders seeking to perfect appraisal rights are permitted
    to accept the Special Dividend payment, and if fair value of Dr Pepper is
    judicially determined to be less than the Special Dividend, will Dr Pepper’s
    stockholders be required to return such payment?
    Plaintiffs purport to have answers to these open questions, and they urge the court
    to adopt their interpretation of how the statute should apply to this transaction.60 This
    invitation is problematic because it asks the court to gloss over the actual words in
    Section 262 to stitch together a new set of rules, cobbling together a bespoke statute
    for this particular fact pattern. Such an approach is undesirable as it would “create
    uncertainty in the law and invite litigation.”61
    As Chief Justice Strine recognized in Hollinger, “it remains a fundamental
    principle of Delaware law that the courts of this state should apply a statute in
    accordance with its plain meaning, as the words that our legislature has used to
    express its will are the best evidence of its intent.”62 Former Chancellor Allen
    similarly extolled the virtue of taking a literal approach to statutory construction
    when interpreting the Delaware General Corporation Law:
    As a general matter, those who must shape their conduct to conform to
    the dictates of statutory law should be able to satisfy such requirements
    by satisfying the literal demands of the law rather than being required
    to guess about the nature and extent of some broader or different
    restriction at the risk of an ex post facto determination of error. The
    utility of a literal approach to statutory construction is particularly
    60
    Pls.’ Answering Br. 18-21.
    61
    Hariton v. Arco Elecs., Inc., 
    188 A.2d 123
    , 125 (Del. 1963).
    62
    
    Hollinger, 858 A.2d at 376
    .
    20
    apparent in the interpretation of the requirements of our corporation
    law—where both the statute itself and most transactions governed by it
    are carefully planned and result from a thoughtful and highly rational
    process.63
    The authorities discussed above uniformly support, and I so hold, that the term
    “constituent corporation” in Section 262 plainly means only an entity that actually
    is being merged or combined with another entity in a merger or consolidation and
    thus does not include a parent of such entities. Applying this definition, it is clear
    that the “constituent corporations” in the Merger are Maple Parent and Merger Sub
    and that Dr Pepper is not a constituent corporation in the Merger.
    The transaction here is structured as a reverse triangular merger, where parent
    Dr Pepper causes its subsidiary Merger Sub to merge with and into Maple Parent,
    resulting in Maple Parent becoming a wholly-owned subsidiary of Dr Pepper. The
    fact that Merger Sub merely functions as an intermediary entity, solely formed to
    facilitate the Merger, does not confer Merger Sub’s status as a constituent
    corporation on its parent Dr Pepper.64 Accordingly, because Dr Pepper is not a
    63
    Speiser v. Baker, 
    525 A.2d 1001
    , 1008 (Del. Ch. 1987) (Allen, C.)
    64
    See Inergy L.P., 
    2010 WL 4273197
    , at *11 (“That MergerCo is an intermediary vessel
    in this transaction where significant consideration passes between Holdings and Inergy
    does not make Inergy a constituent to the merger between Holdings and MergerCo.”).
    21
    constituent corporation in the Merger, its stockholders are not entitled to appraisal
    rights under 
    8 Del. C
    . § 262.65
    2.     Dr Pepper’s Stockholders are not Entitled to Appraisal
    Rights Because They are Retaining Their Shares
    A second reason why Dr Pepper’s stockholders are not entitled to appraisal
    rights under Section 262(b) is because they are not being forced to give up their
    shares of Dr Pepper in connection with the proposed transaction. As discussed
    below, the three-step process for determining a stockholder’s entitlement to
    appraisal under Section 262(b) plainly contemplates that the stockholder relinquish
    its shares.
    For the sake of argument, assume that Dr Pepper qualifies as a constituent
    corporation and the initial requirements of Section 262(b) described above have been
    met. The second step in the appraisal-entitlement analysis appears in Section
    262(b)(1), which creates the “market-out” exception:
    [N]o appraisal rights under this section shall be available for the shares
    of any class or series of stock, which stock . . . at the record dated fixed
    to determine the stockholders entitled to receive notice of the meeting
    of stockholders to act upon the agreement of merger or consolidation,
    were either: (i) listed on a national securities exchange or (ii) held of
    record by more than 2,000 holders.66
    65
    Plaintiffs’ citation of Krieger v. Wesco Fin. Corp., 
    30 A.3d 54
    (Del. Ch. 2011) is
    inapposite. In that case, the court first determined that Wesco was a constituent corporation
    and then proceeded to consider whether Wesco stockholders were required to accept
    consideration other than publicly traded stock in a triangular merger. 
    Id. at 56-58.
    Here,
    Dr Pepper does not meet the threshold of qualifying as a constituent corporation.
    66
    
    8 Del. C
    . § 262(b)(1).
    22
    At this point in the analysis, Dr Pepper’s stockholders would not be entitled
    to appraisal rights because Dr Pepper’s stock is listed on a national securities
    exchange.67 The analysis does not stop there, however, but proceeds to a third step.
    “In what is known affectionately as the ‘exception to the exception,’ Section
    262(b)(2) restores appraisal rights to a class or series of stock otherwise covered by
    the market-out exception if the holders are required to accept certain types of
    consideration.”68
    [A]ppraisal rights under this section shall be available for the shares of
    any class or series of stock of a constituent corporation if the holders
    thereof are required by the terms of an agreement of merger or
    consolidation . . . to accept for such stock anything except:
    a. Shares of stock of the corporation surviving or resulting from such
    merger or consolidation . . .;
    b. Shares of stock of any other corporation . . . which shares of stock
    . . . at the effective date of the merger or consolidation will be either
    listed on a national securities exchange or held of record by more
    than 2,000 holders;
    c. Cash in lieu of fractional shares . . .; or
    d. Any combination of the shares of stock . . . and cash in lieu of
    fractional shares . . . described in the foregoing paragraphs . . . of
    this section.69
    67
    Herbert Aff. Ex. A at 4.
    68
    
    Wesco, 30 A.3d at 57
    .
    69
    
    8 Del. C
    . § 262(b)(2) (emphasis added).
    23
    The “exception to the exception” would not restore appraisal rights to Dr
    Pepper’s stockholders here, because they are not required to accept anything for their
    Dr Pepper shares.70 Indeed, post-Merger, Dr Pepper’s stockholders will continue to
    hold their shares, albeit then constituting a minority equity stake in the combined
    entity. To be sure, the Merger is a sale of control of Dr Pepper to Maple Parent,71 a
    point that defendants do not dispute.72 Section 262, however, does not bestow
    appraisal rights on stockholders simply upon a sale of control. Rather, as the three-
    step process set forth in Section 262(b) for determining a stockholder’s entitlement
    to appraisal demonstrates, stockholders are only entitled to appraisal of their shares
    when those shares are being taken from them in certain, statutorily specified types
    of transactions.
    Apart from providing a second textual basis in the statute for finding that Dr
    Pepper’s stockholders do not have appraisal rights here, the fact that Section 262(b)
    is structured to afford appraisal rights only to stockholders who relinquish their
    shares in a merger or consolidation confirms my interpretation of the term
    70
    See Dr Pepper Defs’ Answering Br. at 7 n.13 (noting that the appraisal remedy exists to
    enable stockholders “to obtain the ‘fair value’ of the shares that have been taken”) (citing
    JAY W. EISENHOFER & MICHAEL J. BARRY, SHAREHOLDER ACTIVISM HANDBOOK § 11.01,
    at 11-3 (2014)).
    71
    See Herbert Aff. Ex. E at 4 (Dr Pepper’s President and CEO Larry Young stating “[t]hey
    bought us”); Am. Compl. ¶¶ 5, 15 (alleging that Maple Parent is Keurig’s parent).
    72
    Dr Pepper Defs.’ Opening Br. 28.
    24
    “constituent corporation.” This is because, in order to relinquish one’s shares in a
    merger or consolidation, the stockholder must hold shares in an entity that actually
    is being merged or combined (i.e., in a “constituent corporation”) and not in the
    parent of such an entity.
    Notwithstanding the clear terms of Section 262, plaintiffs implore the court to
    focus on “the structure and economic reality of this deal.”73 Specifically, plaintiffs
    ask the court to cut through the form of the Merger and Special Dividend and
    consider the “give” and “get” of the transaction: Dr Pepper’s stockholders are giving
    up 100% control of Dr Pepper in exchange for $103.75 per share in cash and a 13%
    equity stub in the post-Merger entity.74
    According to plaintiffs, appraisal “should”75 be available here because it
    resembles the transaction in Louisiana Municipal Police Employees’ Retirement
    System v. Crawford.76 In Crawford, the challenged transaction involved CVS
    acquiring Caremark through a reverse triangular merger, with a CVS subsidiary
    being merged with and into Caremark.77 After the merger, the former Caremark
    stockholders would own approximately 45.5% of the combined entity via newly held
    73
    Pls.’ Answering Br. 3.
    74
    
    Id. 75 Id.
    76
    
    918 A.2d 1172
    (Del. Ch. 2007).
    77
    
    Id. at 1177-79;
    Cumings Aff. Ex. C at 1.
    25
    CVS/Caremark stock,78 and they would receive a special cash dividend of $6 per
    share payable by Caremark for the stock they previously held.79 The court found
    that this special cash dividend was “fundamentally cash consideration paid to
    Caremark shareholders on behalf of CVS” that did not have independent legal
    significance from the merger.80 The court thus held that Caremark stockholders had
    appraisal rights because they were being forced to accept cash consideration.81
    Comparing the transaction in this action to the one in Crawford, plaintiffs here
    argue “[i]f appraisal is provided in either transaction, it should be in the one that
    almost entirely cashes out the target’s stockholders and leaves them with nominal
    equity in a controlled entity. It would be ironic if the law required the opposite
    result.”82
    This argument is not persuasive. The form of the transaction in Crawford
    neatly meets Section 262’s requirements—Caremark was a constituent corporation
    in the merger with a CVS subsidiary, and Caremark’s stockholders were required to
    78
    Cumings Aff. Ex. C at 2.
    79
    
    Crawford, 918 A.2d at 1191
    .
    80
    
    Id. at 1191
    (emphasis in original) (“[The acquirer (CVS)] specifically condition[ed]
    payment of the $6 cash ‘special dividend’ on shareholder approval of the merger
    agreement. Additionally, the payment becomes due upon or even after the effective time
    of the merger. . . In this case, the label ‘special dividend’ is simply cash consideration
    dressed up in a none-too-convincing disguise.”).
    81
    
    Id. at 1191
    -92
    82
    Pls.’ Answering Br. 3.
    26
    exchange their Caremark shares for CVS/Caremark shares and cash consideration.
    Here, as described above, Dr Pepper is not a constituent corporation in the Merger,
    and Dr Pepper’s stockholders are not being required to relinquish their shares. In
    essence, plaintiffs are asking the court to disregard the express terms of the appraisal
    statute to surmise the underlying economic and practical effect of the Merger and
    the Special Dividend. It would be inappropriate for me to judicially rewrite the
    statute to achieve this result, and I decline to do so.83
    IV.    CONCLUSION
    The premise of Counts I and II of the Complaint is that Dr Pepper’s
    stockholders are entitled to appraisal rights under Section 262(b) in connection with
    the proposed transaction. Because that premise is incorrect for the reasons stated
    above, the motions for summary judgment of Dr Pepper and Maple Parent are
    GRANTED, and plaintiffs’ cross-motion for summary judgment is DENIED.
    IT IS SO ORDERED.
    83
    Plaintiffs contend that “to deny stockholders appraisal rights here would encourage other
    companies to imitate [Dr Pepper’s] contortionist moves, and minority stockholders would
    be stripped of the protections that Section 262 offers.” Pls.’ Answering Br. 17. This
    contention is overstated. The form of this transaction is no secret. It was employed nearly
    ten years ago in a merger involving Allscripts Healthcare Solutions, Inc. and Misys plc.
    See Cumings Aff. Ex. D at 1-7 (Allscripts Healthcare Solutions, Inc. proxy statement, dated
    August 21, 2008); Allscripts-Misys Healthcare Solutions, Inc., Current Report (Form 8-K)
    (Oct. 10, 2008). In any event, if the Legislature is concerned about the lack of availability
    of appraisal rights for this type of transaction, the appropriate recourse is to amend the
    statute.
    27