BVLaw case update: buyout disputes

BVWireIssue #189-4
June 27, 2018

judicial dissolution, shareholder dissent/oppression
fair value, discount for lack of marketability (DLOM), minority discount, standard of value, redemption, book value, professional corporation, stock buyback

Even when the members of a business entity plan ahead for a potential buyout, a lot can still go wrong, often because the language in a controlling shareholder agreement leaves too much room for interpretation or a necessary corporate document is missing. The following cases illustrate some of the pitfalls:

  • Hornberger v. Dave Gutelius Excavating, Inc., 2017 Pa. Super. LEXIS 1044 (Dec. 15, 2017) 

    The issue was discounts. The parties disagreed over whether the controlling shareholder agreement, which included provisions on how to value the shares of a terminated shareholder, allowed for the use of discounts. The agreement required the calculation of adjusted net book value by the company’s independent CPA and mandated three specific adjustments. The trial and appellate court found the appraiser was justified in applying discounts in addition to making the required adjustments, where such discounts are consistent with industry practice.


  • Lynd v. Marshall County Pediatrics, P.C., 2018 Ala. LEXIS 40 (April 27, 2018) 

    The issue was the standard of value. A medical practice’s bylaws provided that the valuation should be in accordance with the method stated in the separate shareholder agreement. This method would be “in lieu of” the method provided for in the statute applicable at the time. But no shareholder agreement was ever made. Ultimately, the state high court found that, based on the bylaws, the trial court’s use of book value to value the separating member’s stock was error. However, the plaintiff failed to show she was entitled to a fair value determination as a matter of law.
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