Borghetti v. System & Computer Techonology, Inc.

2008 UT 77
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
William Borghetti; Michelle Borghetti; 	No. 20070513
La Famiglia Borghetti, LLC; La Dozzina
Sporca, LLC; and Campus Pipeline, Inc.,
Plaintiffs, Appellants,
and Cross-Appellees,
v.
System & Computer Tech, Inc., a
corporation; Thomas Lewis, Jr.;
Darin Gilson; Chad Muir; Fred
Harmon; David Gardner; Eric Haskell;
Michael Chamberlain; David Murray;
Andy Cooley; Scott Doughman;
John Dunn; Tyler Thatcher; Thomas
Weisel & Partners; SunGard/Sct,
Inc.; Oak Investment Partners;
Bendinger, Crockett, Peterson, & Casey,
a professional corporation;
Jeffery S. Williams; Does 1 to 100,
Inclusive; David Peterschmidt;
Allen Friedman; and Fred Harman, 	F I L E D
Defendants, Appellees,
and Cross-Appellants. 	November 7, 2008
---
Third District, Salt Lake
The Honorable John Paul Kennedy
No. 040921012
Attorneys: 	Curtis L. Wenger, Salt Lake City, Martin Stanley,
Santa Monica, CA, for plaintiffs
John A. Pearce, Andrew H. Stone, Mark D. Tolman, Salt
Lake City, for defendants System & Computer
Technology, Inc.; Thomas K. Lewis, Jr.; Darin Gilson;
Chad Muir; Fred Harmon; David Gardner; Eric Haskell;
Michael Chamberlain; David Murray; Andy Cooley; Scott
Doughman; John Dunn; Tyler Thatcher; Thomas Weisel &
Partners; Sunguard/SCT, Inc.; Oak Investment
Partners

No. 20070513 	2
Stuart H. Schultz, Philip R. Fishler, Byron G.
Martin, Salt Lake City, for defendants Jeffery S.
Williams; Bendinger, Crockett, Peterson & Casey
---
DURRANT, Associate Chief Justice:
INTRODUCTION
¶1 	System & Computer Technology, Inc. (“S & C Tech.”)
merged with Campus Pipeline, Inc. (“Campus Pipeline”) when S & C
Tech. purchased Campus Pipeline for an amount less than Campus
Pipeline’s preferred shareholders’ liquidation preference.
Campus Pipeline’s common shareholders received nothing in the
merger, and their shares were cancelled. 	William Borghetti, one
of Campus Pipeline’s common shareholders, and other common
shareholders (collectively, “Borghetti”) sued S & C Tech. and
others, alleging fraud, breach of fiduciary duty, and unjust
enrichment. 	Borghetti also sued a law firm, Bendinger Crockett
Peterson & Casey, P.C., as well as one of its individual
attorneys, Jeffery Williams (“Bendinger Crockett”), in
malpractice for failing to inform him of the 120-day deadline for
filing a Delaware appraisal action. 	The district court granted
summary judgment to all defendants, holding that Borghetti failed
to raise a genuine issue of material fact as to whether he
suffered damages. 	The court reasoned that because Borghetti
could not show that Campus Pipeline was worth more than the
liquidation preference, his shares had no value in a merger and
therefore he suffered no damages. 	While we affirm as to the
malpractice claim, we reverse as to the claims against S & C
Tech. because the district court failed to consider rescissory
damages, which in this case are the value of Borghetti’s shares
had the merger not taken place.
BACKGROUND
¶2 	William Borghetti was a founder and shareholder of
common shares in Campus Pipeline, a software company that
provided services to college campuses. 	In 1998, Campus Pipeline
sold sixty percent of its common shares to S & C Tech. 	As a
result of the sale, S & C Tech. obtained a controlling interest
in Campus Pipeline. 	In 1999, and again in 2000, Campus Pipeline
sold preferred shares to S & C Tech. and other outside investors
in exchange for capital contributions of over $80 million. 	Under
the terms of the preferred shares sale, preferred shareholders
received a “liquidation preference,” which entitled them to

3 	No. 20070513
receive the first $80.8 million if Campus Pipeline were purchased
or liquidated.
¶3 	Following the bursting of the “internet bubble” in 1999
and 2000, Campus Pipeline struggled financially. 	While Campus
Pipeline had working capital and was not bankrupt, it was losing
money every quarter, and company officers believed that Campus
Pipeline needed to merge with or purchase another company to
strengthen its position in the market. 	Thus, Campus Pipeline
began exploring merger and acquisition options with at least
twenty-five companies, including S & C Tech.
¶4 	In 2002, Campus Pipeline accepted a purchase offer from
S & C Tech. in the amount of $42 million, which was the highest
of several offers it had received. 	The purchase of Campus
Pipeline by S & C Tech. resulted in the merger of the two
companies and triggered the preferred shareholders’ $80.8 million
liquidation preference. 	Borghetti and other common shareholders
opposed the merger, but, because they were in the minority, they
could not prevent the transaction. 	Because Campus Pipeline was
sold for less than the liquidation preference, the common
shareholders, including Borghetti, received nothing in the
resulting merger, and their shares were cancelled.
¶5 	After receiving notice of the merger, Borghetti
consulted with Jeffery Williams, an attorney with the law firm
Bendinger Crockett, about the possibility of pursuing a Delaware
appraisal action. 	Although Williams and Borghetti had numerous
communications and meetings, they dispute whether Borghetti ever
retained Bendinger Crockett as counsel for the purpose of
pursuing an appraisal action to determine the fair value of his
shares. 	Borghetti alleges that Bendinger Crockett failed to
inform him of the 120-day deadline for filing an appraisal
action. 	Neither Borghetti nor Bendinger Crockett commenced an
appraisal action before the expiration of the 120-day deadline.
¶6 	Borghetti sued Bendinger Crockett for legal
malpractice. 	Additionally, he sued S & C Tech., members of
Campus Pipeline’s board of directors, and others for fraud,
breach of fiduciary duty, and unjust enrichment.
¶7 	The value of Borghetti’s common shares that were
cancelled in the merger is important to the measure of damages
for each of Borghetti’s claims. 	And, critical to determining the
value of Borghetti’s common shares, is an assessment of the value
of Campus Pipeline as a whole. 	Thus, the value of Campus
Pipeline was a crucial issue in the proceedings. 	All parties
submitted expert testimony of Campus Pipeline’s worth. 	Thomas

No. 20070513 	4
Wiesel, an appraiser hired by Campus Pipeline prior to the
merger, testified that, based on 2003 revenue, the value of
Campus Pipeline was within the rather expansive range of $200,000
and $58.9 million. 	Bendinger Crockett’s appraisal expert
assessed the fair value of Campus Pipeline to be $35 million, and
S & C Tech.’s appraiser valued it at just over $36 million.
Borghetti’s expert, Avner Kalay, determined that the value of
Campus Pipeline was between $63.6 million and $72.9 million.
Despite the differences in values, all experts placed Campus
Pipeline’s value at significantly less than the preferred
shareholders’ $80.8 million liquidation preference.
¶8 	After the close of discovery, all defendants filed
motions for summary judgment, asserting that, because Campus
Pipeline was sold for less than the liquidation preference,
Borghetti’s shares were valueless, and he could not succeed on
any of his causes of action.
¶9 	In March 2006, after the parties’ motions for summary
judgment were filed, Borghetti submitted an affidavit of the
value of his shares from his valuation expert, Avner Kalay (the
“Kalay affidavit”). 	Using the “Black-Scholes” method of
valuation, Kalay opined that, at the time of the merger,
Borghetti’s shares were worth between $4.2 million and $6.7
million. 	The “Black-Scholes” valuation method is a Nobel Prize-
winning, option-pricing theory. 	While it is accepted as a method
to value options to purchase shares in a leveraged company, the
parties dispute whether the Black-Scholes method is appropriate
for valuing common shares. 	All defendants moved to strike the
Kalay affidavit.
¶10 	The district court granted summary judgment in favor of
all defendants, ruling that there was no issue of material fact
as to damages. 	It held that because none of the experts valued
Campus Pipeline at more than the $80.8 million liquidation
preference, Borghetti could not prove that his shares had value
and, therefore, he could not prove damages. 	Consequently, his
claims for malpractice, fraud, breach of fiduciary duty, and
unjust enrichment all failed. 	The district court denied the
defendants’ motion to strike the Kalay affidavit, holding that
because Borghetti suffered no damages and his claims were
therefore dismissed, the issue was moot.
¶11 	Borghetti appeals, alleging that the valuation methods
employed by the district court were incorrect and that the Kalay
affidavit raised an issue of a material fact as to damages.
S & C Tech. cross-appeals, arguing that the Kalay affidavit

1 Blue Cross & Blue Shield v. State, 779 P.2d 634, 636 (Utah
1989).
2 Utah R. Civ. P. 56(c).
3 Orvis v. Johnson, 2008 UT 2, ¶ 10, 177 P.3d 600.
4 Eagar v. Burrows, 2008 UT 42, ¶ 15, 191 P.3d 9 (quoting
Waddoups v. Amalgamated Sugar Co., 2002 UT 69, ¶ 31, 54 P.3d
1054).
5 	No. 20070513
should not have been admitted as evidence. 	We have jurisdiction
pursuant to Utah Code section 78A-3-102(3)(j) (Supp. 2008).
STANDARD OF REVIEW
¶12 	The district court granted summary judgment in favor of
Bendinger Crockett on the legal malpractice claim, as well as in
favor of the S & C Tech. defendants on the claims of fraud,
breach of fiduciary duty, and unjust enrichment. 	We review a
grant of summary judgment for correctness, viewing all inferences
and disputed facts in the light most favorable to the nonmoving
party. 1 	Summary judgment is appropriate 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 judgment as a matter of law. 2
ANALYSIS
¶13 	We will begin by addressing the burdens of each party
on summary judgment. 	Then, we will review Borghetti’s
malpractice claim against Bendinger Crockett. 	Finally, we will
discuss his claims of fraud, breach of fiduciary duty, and unjust
enrichment against S & C Tech.
I. 	BORGHETTI HAD THE BURDEN OF RAISING A GENUINE ISSUE OF
MATERIAL FACT SUFFICIENT TO AVOID SUMMARY JUDGMENT
¶14 	In this case, the defendants, who moved for summary
judgment, had the initial burden of demonstrating that there was
no issue of material fact and that they were entitled to judgment
as a matter of law. 3 	But “‘once the moving party challenges an
element of the nonmoving party’s case on the basis that no
genuine issue of material fact exists, the burden then shifts to
the nonmoving party to present evidence that is sufficient to
establish a genuine issue of material fact.’” 4 	In this case, the
defendants presented expert testimony that Borghetti’s shares had

5 Bennett v. Jones, Waldo, Holbrook & McDonough, 2003 UT 9,
¶ 44, 70 P.3d 17.
6 Harline v. Barker, 912 P.2d 433, 439 (Utah 1996).
7 See id. at 439-40.
No. 20070513 	6
no value, and that Borghetti, therefore, suffered no damages.
The burden then shifted to Borghetti to present evidence raising
a genuine issue of material fact as to the value of his shares.
II. 	THE DISTRICT COURT CORRECTLY GRANTED SUMMARY JUDGMENT IN
FAVOR OF BENDINGER CROCKETT BECAUSE BORGHETTI SUFFERED NO DAMAGES
AS A RESULT OF FAILING TO INSTITUTE AN APPRAISAL ACTION WITHIN
THE 120-DAY FILING DEADLINE
¶15 	Borghetti sued Bendinger Crockett for malpractice,
alleging that he was injured by its failure to inform him of the
120-day filing deadline for an appraisal action under Delaware
Code title 8 section 262. 	In view of the fact that the preferred
shareholders were entitled to the $80.8 million liquidation
preference that was triggered by the merger, Borghetti did not
raise a genuine issue of material fact as to whether he suffered
damages by not initiating an appraisal action, and he could not
avoid summary judgment on his legal malpractice claim.
A. 	To Avoid Summary Judgment on His Malpractice Claim, Borghetti
Was Required to Raise a Genuine Issue of Material Fact as to
Whether He Would Have Been Awarded Damages in an Appraisal Action
¶16 	The lack of damages or absence of direct causation of
damages by the alleged malpractice is fatal to any legal
malpractice claim. 5 	Plaintiffs suing for malpractice must show
that there was a causal connection between the breach of duty and
the resulting injury. 6 	They must first prove the “case within
the case.” 7 	The “case within the case” in this instance is the
underlying appraisal action. 	After Bendinger Crockett submitted
evidence showing that Borghetti suffered no damages as a result
of failing to file an appraisal action, the burden shifted to
Borghetti to show that he was damaged by Bendinger Crockett’s
failure to inform him of the 120-day deadline to commence an
appraisal action. 	Therefore, to avoid summary judgment on his
legal malpractice claim, Borghetti was required to show that he
could have prevailed and collected damages in an appraisal
action.
B. 	In an Appraisal Action, the Court Assumes the Validity of the
Merger

8 Del. Code Ann. tit. 8, § 262(a) (2007).
9 542 A.2d 1182, 1186 (Del. 1988) (citations omitted), aff’d
in part, rev’d in part, 884 A.2d 26 (Del. 2005).
10 Del. Code Ann. tit. 8, § 262(h).
11 In re Shell Oil Co., 607 A.2d 1213, 1218 (Del. 1992)
(citations and internal quotation marks omitted).
12 Del. Code Ann. tit. 8, § 262(i).
13 See id. tit. 8, § 262.
14 Id.
7 	No. 20070513
¶17 	By statute, shareholders in Delaware corporations are
entitled to a judicial determination or appraisal of the fair
value of their shares in the event of a merger. 8 	In Cede & Co.
v. Technicolor, the Supreme Court of Delaware defined an
appraisal action as “a limited legislative remedy intended to
provide shareholders dissenting from a merger on grounds of
inadequacy of the offering price with a judicial determination of
the intrinsic worth (fair value) of their shareholdings.” 9 	The
statute provides that “the Court shall determine the fair value
of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation” and
the court shall consider “all relevant factors.” 10 	The court
values the corporation “as an entity, not merely as a collection
of assets, or by the sum of the market price of each share of its
stock. 	Moreover, the corporation must be viewed as an on-going
enterprise, occupying a particular market position in the light
of future prospects.” 11 	Although an appraisal action challenges
the adequacy of the price paid for the plaintiff’s shares, it
does not challenge the validity of the merger transaction itself,
and rescission is not an available remedy. 	The only remedy
available is an award for damages for the difference between the
court-determined fair value and the price that was actually paid
for the plaintiff’s shares. 12 	The court derives the fair value
of the plaintiff’s shares by assessing the value of the entire
company and then dividing that value by the plaintiff’s
proportionate share. 13 	Therefore, the court in an appraisal
action assumes the validity of the merger and focuses exclusively
on the fair value of the shareholder’s shares. 14

No. 20070513 	8
C. 	Borghetti Has Not Raised a Genuine Issue of Material Fact as
to Damages Because He Has Not Submitted Any Evidence That Campus
Pipeline Was Worth More Than the Preferred Shareholders’
Liquidation Preference
¶18 	In this case, the liquidation preference entitled the
preferred shareholders of Campus Pipeline to receive the first
$80.8 million in the event of a merger. 	Holders of Campus
Pipeline common shares were not entitled to participate in the
proceeds from a merger unless the sale price paid for Campus
Pipeline exceeded the liquidation preference. 	Therefore, to
raise an issue of material fact as to the fair value of his
shares in the merger, Borghetti was required to offer some
evidence that Campus Pipeline was worth more than $80.8 million.
Numerous experts, including Borghetti’s own expert, provided
valuations as to the fair price of Campus Pipeline. 	Thomas
Wiesel, an appraiser hired by Campus Pipeline to give fairness
opinions related to the merger, testified that the value of
Campus Pipeline was as much as $58.9 million. 	Bendinger
Crockett’s appraisal expert put the fair value of Campus Pipeline
at $35 million, while the appraiser for S & C Tech. testified
that the value was just over $36 million. 	Even Borghetti’s
expert, Avner Kalay, assessed the value of Campus Pipeline to be
between $63.6 million and $72.9 million--still well below the
$80.8 million liquidation preference. 	Because Borghetti offered
no evidence to show that the value of Campus Pipeline was greater
than the $80.8 million liquidation preference, he failed to raise
a genuine issue of material fact as to whether he should have
received consideration for his shares in a merger.
¶19 	Although Borghetti submitted the Kalay affidavit,
asserting that the value of his shares was between $4.2 and $6.7
million, this value is not purported to represent the fair price
of his shares in the merger, which is assumed to be valid in a
Delaware appraisal action. 	The merger eliminated any opportunity
for eventual value in the common shares in an appraisal action.
Because an appraisal action assumes the validity of the merger
and the proceeds from any merger must satisfy the liquidation
preference first, Borghetti cannot rely on any valuation of his
shares that does not take into account the liquidation
preference. 	Kalay’s maximum value for Campus Pipeline of $72.9
million is wholly incompatible with any value for his shares in
this context. 	While Kalay’s estimate of the shares’ value may
represent the value of the shares in a different context--that
is, if Campus Pipeline had not merged--it does not raise an issue
of material fact as to the fair value that Borghetti should have
received in the merger. 	The fair value for Borghetti’s shares in
the merger was clearly zero, and, therefore, he would not have
been entitled to damages in an appraisal action. 	Because he

15 See Cede & Co. v. Technicolor, 542 A.2d 1182, 1187 (Del.
1988), aff’d in part, rev’d in part, 884 A.2d 26 (Del. 2005).
16 Id. at 1186.
9 	No. 20070513
suffered no damages as a result of failing to pursue an appraisal
action, he cannot succeed in his malpractice claim, and the
district court appropriately granted summary judgment in favor of
Bendinger Crockett.
¶20 	As an alternative ground on which to affirm summary
judgment, Bendinger Crockett also argued that Borghetti never
retained its services, and therefore, Bendinger Crockett owed no
duty to inform Borghetti of the 120-day filing deadline. 	Because
we determine that Borghetti failed to raise a genuine issue of
material fact as to his damages resulting from malpractice, it is
unnecessary to reach this alternative ground. 	The district court
correctly granted summary judgment in favor of Bendinger Crockett
on the malpractice claim, and we affirm.
III. 	THE DISTRICT COURT ERRED IN GRANTING SUMMARY JUDGMENT ON
BORGHETTI’S CLAIMS AGAINST S & C TECH.
¶21 	Having determined that Borghetti failed to raise a
genuine issue of material fact as to damages sufficient to avoid
summary judgment in the appraisal action underlying his
malpractice claim, we now discuss the difference between the
damages in an appraisal action and those associated with claims
of fraud, breach of fiduciary duty, and unjust enrichment. 	We
will then determine whether Borghetti raised a genuine issue of
material fact sufficient to avoid summary judgment as to damages
on these latter claims against S & C Tech.
A. 	Because Borghetti’s Claims of Fraud, Breach of Fiduciary
Duty, and Unjust Enrichment Challenge the Validity of the Merger,
Damages for These Claims May Include Rescissory Damages, Which in
This Case Are the Value of His Shares Had CPI Not Merged
¶22 	Unlike an appraisal action, which assumes the validity
of the merger, claims for fraud, breach of fiduciary duty, and
unjust enrichment challenge the validity of the merger itself. 15
As the Delaware Supreme Court in Cede & Co. v. Technicolor noted,
“a statutory appraisal proceeding under section 262 and a
rescissory suit for fraud, misrepresentation, self-dealing and
other actionable wrongs violative of ‘entire fairness’ to
minority shareholders serve different purposes and are designed
to provide different, and not interchangeable, remedies.” 16 	In
contrast to an appraisal action, which limits plaintiffs to

17 Id. at 1187-88 (“[A]n appraisal action may not provide a
complete remedy for unfair dealing or fraud because a damage
award in a fraud action may include ‘rescissory damages if the
[trier of fact] considers them susceptible of proof and a remedy
appropriate to all issues of fairness before him.’” (quoting
Weinberger v. UOP, Inc., 457 A.2d 701, 714 (Del. 1983)
(alterations in original))).
18 Breuer-Harrison, Inc. v. Combe, 799 P.2d 716, 731 (Utah
Ct. App. 1990).
19 Gillespie v. Blood, 17 P.2d 822, 825 (Utah 1932); see
also Lynch v. Vickers Energy Corp., 429 A.2d 497, 501 (Del. 1981)
(stating that “recission would restore the parties to the status
quo before sales of the shares were made”) (emphasis in
original), overruled on other grounds by Weinberger v. UOP, Inc.,
457 A.2d 701 (Del. 1983).
20 Arthur Young Co. v. Reves, 937 F.2d 1310, 1335 n.34 (8th
Cir. 1991) (quoting Black’s Law Dictionary 354 (5th ed. 1979)).
No. 20070513 	10
recovering the fair value of their shares in the context of a
merger that is assumed to be valid, plaintiffs asserting claims
for fraud, breach of fiduciary duty, or unjust enrichment can
seek rescission. 17
¶23 	Rescission is a restitutionary remedy designed, to the
extent possible, to restore the parties to the position they
occupied before the fraud or transaction. 18 	While rescission is
an equitable remedy, it is not always possible to restore the
parties to the position they occupied before the transaction
occurred. 	In this case, Borghetti is not asking that the merger,
which occurred more than six years ago, be undone, but for
rescissory damages.
¶24 	We have characterized rescissory damages as “the value
of the property . . . taken as of the time when it was
transferred, or conveyed to the defendant.” 19 	And in the context
of a claim for fraudulent inducement to buy securities, the
Eighth Circuit has held that “[r]escissory damages ‘contemplate a
return of the injured party to the position he occupied before he
was induced by wrongful conduct to enter into the transaction’
and are the monetary equivalent of the property at issue.” 20 	In
this context, the measure of damages is the value of Borghetti’s
common shares in Campus Pipeline had the merger not taken place.

11 	No. 20070513
B. 	Had the Merger Never Occurred, the Preferred Shareholders’
Liquidation Preference Would Not Necessarily Have Rendered
Borghetti’s Shares Valueless
¶25 	Based on its ruling that Borghetti’s own expert, Avner
Kalay, had assigned a value to Campus Pipeline that was less than
the $80.8 million liquidation preference, the district court
concluded that Borghetti had failed to come forward with evidence
creating a genuine issue of material fact on the question of
whether he suffered damages. 	Accordingly, the court granted
summary judgment against Borghetti on all his claims. 	While
Borghetti is precluded from establishing damages with respect to
his appraisal action because the value of Campus Pipeline as a
whole was less than the liquidation preference, Borghetti is not
precluded from establishing rescissory damages with respect to
his fraud, breach of fiduciary duty, and unjust enrichment
claims. 	Had the merger never occurred, the preferred
shareholders’ liquidation preference would not necessarily have
rendered Borghetti’s shares valueless.
¶26 	A preferred shareholders’ liquidation preference may
reduce the value of common shares in roughly the same way that a
debt load will reduce the value of shares in a leveraged company.
In either case, the preference or debt may require satisfaction
before the common shareholders receive any value. 	But, where it
is possible for a company to continue without liquidating, a
liquidation preference does not necessarily render the common
shares valueless simply because at a specific moment in time the
value of the company as a whole falls below that preference. 	If
such a company continues for some period of time without
liquidating and becomes worth more than the liquidation
preference, the common shares may develop value.
¶27 	Obviously, the ability of the company to continue
operations without liquidating is important to the determination
of the common shares’ value. 	If the company is in severe
financial distress and cannot continue, those circumstances
reduce the possibility that the company may continue operations
long enough to turn its fortunes around. 	But in order for the
common shares to have some value, the company need only have the
potential to someday be worth more than the liquidation
preference. 	Generally, unless the company is in severe financial
distress, there is some possibility that the company will rebound
and value will accrue to the common shares. 	Therefore, as long
as there was a potential that Campus Pipeline could someday be
worth more than the liquidation preference, Borghetti’s shares
had some value.

21 In support of its argument, S & C Tech. cites Orban v.
Field in which Staples purchased Office Mart for less than Office
Mart’s preferred shareholders’ liquidation preference, resulting
in cancellation of Orban’s common shares without compensation.
No. 12820, 1997 Del. Ch. LEXIS 48, at *26 (Del. Ch. April, 1997).
But the court in Orban did not hold that Orban did not suffer
damages; it held that, as a matter of law, the Board of Directors
did not breach its fiduciary duty. 	Id. at *32-33. 	And, unlike
Borghetti, who challenges the validity of the merger itself,
Orban made “no claim that the Board engaged in fraud or that the
merger itself was not in the best interests of the corporation.”
Id. at *26 n.23.
No. 20070513 	12
¶28 	In this case, there is evidence indicating that Campus
Pipeline could have continued without merging and that eventually
the common shares could have developed value. 	At the time of the
merger, Campus Pipeline had approximately $15 million in cash and
cash equivalents, and the company was not compelled to merge to
continue doing business or to complete its business model. 	Using
this capital, the company could have continued for some time even
if it had continued to lose money. 	If Campus Pipeline survived
the economic downturn and became profitable, it had the potential
to be worth more than the liquidation preference.
¶29 	Because there is some potential that Campus Pipeline,
if it had continued without merging, could have become worth more
than the liquidation preference, the common shares had some
value. Simply put, the only way for the common shares to have a
value of zero is if there were no potential that Campus Pipeline
would ever become more valuable than the $80.8 million
liquidation preference. 	In light of the fact that Campus
Pipeline was not bankrupt and did have the means to continue as
an independent entity for some period of time, the possibility of
eventual success, while perhaps slim, was almost certainly not
zero. 	The value of Borghetti’s shares, therefore, also was not
zero. 	Accordingly, the fact that the value of Campus Pipeline as
a whole was less than the liquidation preference does not
necessarily preclude Borghetti from establishing recissory
damages as to his fraud, breach of fiduciary duty, and unjust
enrichment claims.
¶30 	S & C Tech. argues that Borghetti’s claim is, in
essence, that a company’s board of directors must refuse a merger
unless the common shareholders receive value. 21 	Were this the
case, common shareholders would have a right to force a company
to keep operating without merging until its value exceeds the
liquidation preference or the company becomes bankrupt. 	We do
not so hold. 	Specifically, we do not hold that a company may

22 Atkin Wright & Miles v. Mountain States Tel. & Tel. Co.,
709 P.2d 330, 336 (Utah 1985).
13 	No. 20070513
never merge or sell itself for less than a liquidation
preference. 	Nor do we hold that such a company must continue as
a separate entity for the purpose of waiting to see if its
fortunes will turn around for the sole benefit of the common
shareholders. 	And we do not hold that a merger for less than a
preferred shareholders’ liquidation preference is necessarily a
breach of fiduciary duty to or fraud on the common shareholders.
We merely hold that if a common shareholder in such a situation
can prove that the merger was a result of fraud or breach of
fiduciary duty, or resulted in unjust enrichment, the appropriate
measure of damages is the value of the plaintiff’s shares had the
company not merged.
C. 	The Kalay Affidavit, if Admissible, Raises a Genuine Issue of
Material Fact as to the Issue of Borghetti’s Damages on His
Claims Against S & C Tech.
¶31 	While Borghetti is not precluded from establishing
damages as to his claims against S & C Tech. by the fact that the
value of Campus Pipeline was less than the liquidation
preference, in order to overcome summary judgment Borghetti must
come forward with admissible “evidence that rises above
speculation and provides a reasonable, even though not
necessarily precise, estimate of damages.” 22 	Borghetti has
sought to meet this obligation through the Kalay Affidavit. 	In
this affidavit, Kalay testifies that Borghetti’s shares had a
fair value at the time of the merger between $4.2 million and
$6.76 million. 	In arriving at these values, Kalay employs a
method used to value options known as the Black-Scholes method.
While this affidavit does not raise a genuine issue of material
fact as to damages on Borghetti’s Delaware appraisal action,
where the validity of the merger is assumed, the affidavit may
raise an issue of material fact as to damages in Borghetti’s
fraud, breach of fiduciary duty, and unjust enrichment claims,
where the validity of the merger is challenged. 	Accordingly, the
district court erred in concluding that because the value of
Campus Pipeline was less than the liquidation preference,
Borghetti could not show damages on his claims against S & C
Tech.
¶32 	Because the district court granted summary judgment
based on the fact that Kalay had assessed the value of Campus
Pipeline at less than the liquidation preference, the court
deemed the affidavit moot and did not consider the merits of
defendants’ motions to strike the affidavit. 	We conclude that,

No. 20070513 	14
if admissible, the Kalay affidavit is sufficient to create a
genuine issue of material fact as to damages on Borghetti’s
claims against S & C Tech. 	Accordingly, the district court erred
in ruling that the motions to strike the affidavit were moot. 	We
reverse the district court’s grant of summary judgment on
Borghetti’s claims against S & C Tech. and remand so that the
district court may, in the first instance, assess the
admissibility of the Kalay affidavit.
CONCLUSION
¶33 	We conclude that the district court was correct in
granting summary judgment in favor of Bendinger Crockett on the
legal malpractice claim because Borghetti failed to show that he
was damaged by the firm’s failure to inform him of the 120-day
deadline to commence an appraisal action. 	In an appraisal
action, damages are the fair value of the plaintiff’s shares in a
merger, and Borghetti’s shares had no value in the merger at
issue here because of the liquidation preference. 	But we reverse
the district court’s grant of summary judgment in favor of S & C
Tech. 	Rescissory damages associated with the claims against S &
C Tech. are the value of Borghetti’s common shares if the merger
had not taken place. 	The Kalay affidavit, if admissible, raises
a genuine issue of material fact sufficient to avoid summary
judgment as to those claims because Borghetti’s shares may have
had value if the merger had not taken place. 	Lastly, we decline
to rule on the admissibility of the Kalay affidavit because the
district court should rule on the admissibility of the affidavit
in the first instance.
¶34 	We affirm with regard to the malpractice claim against
Bendinger Crockett. 	But we reverse and remand for proceedings
consistent with this opinion on the claims against S & C Tech.
---
¶35 	Justice Wilkins, Justice Parrish, Judge Davis, and
Judge Backlund concur in Associate Chief Justice Durrant’s
opinion.
¶36 	Having disqualified herself, Chief Justice Durham does
not participate herein; District Judge John C. Backlund sat.
¶37 	Justice Nehring does not participate herein; Court of
Appeals Judge James Z. Davis sat.