Tails, Inc. (Tails), was a Virginia corporation of which the majority of its shares were owned by the officers, directors, and employees of RE/MAX LLC, a Delaware limited liability company. The minority shareholders owned approximately 21 percent of the outstanding shares. On August 9, 2013, Buena Suerte Holdings, Inc. (Buena Suertes), another affiliate of RE/MAX, and Tails signed an agreement in which Tails would be sold to Buena Suerte in four steps. One of relevant steps was to change Tails’ state of incorporation to Delaware. 

On August 12, 2013, each of the minority shareholders were notified of the proposal between Buena Suertes and Tails, and a shareholder meeting was scheduled to take place on September 4, 2013. Before the shareholder meeting, each of the minority shareholders served Tails with a “Notice of Intention to Demand Payment for Shares.” On September 4, 2013, the shareholders convened, and, although each of the minority shareholders voted against the proposals, they were passed by a majority vote.

On August 29, 2013, prior to the shareholder meeting, Robert B. Fisher, Carla L. Fisher, Bradley G. Rhodes, and James D. Schwartz, the minority shareholders, filed a complaint in the Circuit Court of Henrico County to demand shareholder appraisal rights concerning the sale of Tails. The minority shareholders argued that they were entitled to appraisal rights because a series of transactions, which begins with a change in where the company is incorporated, led to an asset sale and that asset sales triggered shareholder appraisal rights under Virginia law. The circuit court sustained Tails’ demurrer to the complaint and the minority shareholders appealed.

Virginia and Delaware have different shareholder appraisal rights statutes. Which state’s statutes did the appeals court apply to the case and why? Do you agree with the the court’s reasoning? According to the court, did it matter whether Delaware or Virginia laws were used?