Bluemountain Credit Alternatives Master Fund L.P. v. Regal Entm't Grp., Anschutz Corp.

465 P.3d 122

BLUEMOUNTAIN CREDIT ALTERNATIVES MASTER FUND L.P., BlueMountain Foinaven Master Fund L.P., BlueMountain Fursan Fund L.P., BlueMountain Guadalupe Peak Fund L.P., BlueMountain Kicking Horse Fund L.P., BlueMountain Logan Opportunities Master Fund L.P., BlueMountain Montenver Master Fund SCA SICA V-SIF, BlueMountain Summit Trading L.P., GKC Strategic Value Master Fund LP, and GKC SV SMA I, LLC: In re Appraisal of Regal Entertainment Group, Petitioners-Appellants,

v.REGAL ENTERTAINMENT GROUP, Anschutz Corporation, and Philip F. Anschutz, Respondents-Appellees.

Court of Appeals No. 19CA1671

Colorado Court of Appeals, Division A.

Announced April 9, 2020

Ireland Stapleton Pryor & Pascoe, P.C., Mark E. Lacis, Lidiana Rios, Denver, Colorado, for Petitioners-Appellants

Hogan Lovells US, LLP, Jessica Black Livingston, Denver, Colorado, for Respondents-Appellees

Opinion by CHIEF JUDGE BERNARD

¶1 The petitioners in this case are BlueMountain Credit Alternatives Master Fund L.P., BlueMountain Foinaven Master Fund L.P., BlueMountain Fursan Fund L.P., BlueMountain Guadalupe Peak Fund L.P., BlueMountain Kicking Horse Fund L.P., BlueMountain Logan Opportunities Master Fund L.P., BlueMountain Montenver Master Fund SCA SICA V-SIF, BlueMountain Summit Trading L.P., GKC Strategic Value Master Fund LP, and GKC SV SMA I, LLC. We shall call them the "minority stockholders."

¶2 The minority stockholders asked the trial court to compel Philip F. Anschutz, who is the founder and chief executive officer of the Anschutz Corporation, to comply with a deposition subpoena. (The Anschutz Corporation is also a party to this appeal.) The court denied their motion. The minority stockholders appealed. We reverse the trial court's order and remand the case to the district court for further proceedings consistent with this opinion.

I. Background

¶3 Regal Entertainment Group, which, among other things, owns and manages movie theaters throughout the United States, is a Delaware corporation. The Anschutz Corporation was Regal's controlling stockholder. The minority stockholders were noncontrolling, minority stockholders of Regal.

¶4 In February 2018, a British company called Cineworld Group plc acquired Regal in a transaction that we shall call "the merger." The minority stockholders, contending that they did not receive fair value for their shares in Regal, dissented from the merger and sought appraisal of their shares in a statutory proceeding in the Delaware Court of Chancery.

¶5 To obtain information for the appraisal proceeding, the minority stockholders served a deposition subpoena on Mr. Anschutz. In doing so, they relied on section 13-90.5-103, C.R.S. 2019, of the Uniform Interstate Depositions and Discovery Act, or the UIDDA.

¶6 Mr. Anschutz did not comply with the subpoena. So the minority stockholders filed a motion asking the trial court to order him to comply with it. They contended that, as the chief executive of the Anschutz Corporation, Mr. Anschutz was Regal's controlling stockholder and, as a result, discovering why Mr. Anschutz sold his share of Regal was critical and relevant to the appraisal proceedings. More specifically, they informed the court that they wanted to ask Mr. Anschutz about his motives and personal considerations for agreeing to the merger.

¶7 The trial court denied the motion, concluding that the questions the minority stockholders wanted to ask Mr. Anschutz in a deposition were not "relevant and necessary" to the Delaware appraisal case.

II. Enforcement of the Deposition Subpoena

A. Standard of Review

¶8 We review a court's decision to deny a motion to compel compliance with a subpoena for an abuse of discretion. Gateway Logistics, Inc. v. Smay , 2013 CO 25, ¶ 13, 302 P.3d 235. A court abuses its discretion if its decision is manifestly unreasonable, arbitrary, or unfair, or if it misapplies the law. Ferraro v. Frias Drywall, LLC , 2019 COA 123, ¶ 10, 451 P.3d 1255.

¶9 We will review de novo a trial court's (1) decisions regarding choice of law, Mountain States Adjustment v. Cooke , 2016 COA 80, ¶ 13, 412 P.3d 819 ; and (2) interpretation of pertinent statutes, In re Marriage of Ciesluk , 113 P.3d 135, 141 (Colo. 2005).

B. Choice of Law

¶10 The UIDDA allows a party to "submit a foreign subpoena to the district court for the county in which discovery is sought to be conducted in [Colorado]." § 13-90.5-103(1). An application to the district court to enforce a subpoena issued under section 13-90.5-103 must comply with the rules or statutes of Colorado. § 13-90.5-106, C.R.S. 2019. More specifically, the procedural and evidentiary laws of Colorado govern this analysis. See § 13-90.5-106 cmt. ("Evidentiary issues that may arise, such as objections based on grounds such as relevance or privilege, are best decided in the discovery state under the laws of the discovery state (including its conflict of laws principles).").

¶11 But, if Colorado law governs the process that must apply, what law governs the substantive legal issues that a court may have to decide? Colorado has adopted the general rule, as set forth in the restatement (Second) of Conflicts of Law, that the law of the state with the most "significant relationship" with the occurrence and the parties governs. AE, Inc. v. Goodyear Tire & Rubber Co. , 168 P.3d 507, 509 (Colo. 2007). Once the state having the most significant relationship is identified, the law of that state is then applied to resolve the issue. Wood Bros. Homes, Inc. v. Walker Adjustment Bureau , 198 Colo. 444, 447-48, 601 P.2d 1369, 1372 (1979). "[T]he courts of a state, in cases where the laws of another state are involved, may and should take notice of the decisions of the highest courts in the latter jurisdiction upon the law so involved." Sullivan v. German Nat'l Bank , 18 Colo. App. 99, 104, 70 P. 162, 164 (1902).

¶12 Because Regal was incorporated in Delaware, and the minority stockholders seek the enforcement of a subpoena for purposes of obtaining Mr. Anschutz's testimony in connection with the appraisal proceedings in a Delaware court, we conclude that we should apply Delaware law to resolve substantive legal matters. See Great W. Producers Co-operative v. Great W. United Corp. , 200 Colo. 180, 182 n.2, 613 P.2d 873, 875 n.2 (1980) (holding that the substantive law of Delaware applied because defendant corporation was incorporated under the laws of Delaware).

C. Relevance of Discovery

¶13 The Colorado Rules of Civil Procedure govern the scope of permissible discovery in civil cases. C.R.C.P. 26(b)(1) states that "parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party and proportional to the needs of the case .... Information within the scope of discovery need not be admissible in evidence to be discoverable."

¶14 The concept of relevance for discovery purposes is different than the concept of relevance of evidence at trial. DA Mountain Rentals, LLC v. The Lodge at Lionshead Phase III Condo. Ass'n , 2016 COA 141, ¶ 57, 409 P.3d 564. "[D]iscovery rules should be construed liberally to effectuate the full extent of their truth-seeking purpose" and "[i]n close cases, the balance must be struck in favor of allowing discovery." Antero Res. Corp. v. Strudley , 2015 CO 26, ¶ 32, 347 P.3d 149 (quoting Direct Sales Tire Co. v. Dist. Court , 686 P.2d 1316, 1321 (Colo. 1984) ).

D. Delaware Appraisal Proceedings

¶15 Under Delaware law, the statutory appraisal proceeding was created as a remedy for minority stockholders who view the sale price of a corporation as inadequate to seek "an independent judicial determination of the fair value of their shares." Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd , 177 A.3d 1, 19 (Del. 2017) (citation omitted). There is one issue in such an appraisal trial: "the value of the dissenting stockholder's stock." Id. (citation omitted).

¶16 The Delaware Court of Chancery's task is to "determine the fair value of the shares." Del. Code Ann. tit. 8, § 262(h) (West 2019). To do so, the court "shall take into account all relevant factors." Id. The examination requires consideration of "all factors and elements which reasonably might enter into the fixing of value." Tri-Cont'l Corp. v. Battye , 74 A.2d 71, 72 (Del. 1950).

1. Factors in Determining Fair Value

¶17 Factors which a Delaware court must consider in determining fair value include market value, asset value, dividends, earning prospects, the nature of the enterprise, and any other facts that were known or that could be ascertained as of the date of merger and that throw any light on the future prospects of the merged corporation. Id. (holding that these factors are not only pertinent to an inquiry as to the value of the dissenting stockholders’ interest but must be considered by the agency fixing the value). Additionally, "the deal price as a market indicator of fair value in appraisal cases conforms to [the Delaware court's] use of market-tested prices." Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. , 210 A.3d 128, 135 n.41 (Del. 2019) ; see also Dell , 177 A.3d at 19 (holding that relevant factors in determining fair value include the deal price).

¶18 The court may not adopt an "either-or" approach at the outset, thereby relying exclusively on selected factors or accepting uncritically the valuation of one party. See In re Appraisal of Metromedia Int'l Grp., Inc. , 971 A.2d 893, 899-900 (Del. Ch. 2009), reargument granted, 2009 WL 1299116 (Del. Ch. 2009). It is the court's duty to determine the core issue of fair value on the appraisal date. Id. ; see also Gonsalves v. Straight Arrow Publishers, Inc. , 701 A.2d 357, 361 (Del. 1997) (noting the court's responsibility to "independently determine the value of the shares that are the subject of the appraisal action"). After an analysis of all relevant factors, the court may then determine "that a single valuation metric is the most reliable evidence of fair value and that giving...