Without enough evidence, a court can only decide on a valuation with what it has to work with. In a Michigan case, two 50% owners of a Ponderosa steakhouse were locked in a battle over the Old West-themed eatery, with both owners engaging in oppressive conduct against the other. They left it up to the court to decide their fate, and it ordered one owner to buy out the other at fair value.

Dying breed: In Michigan, “fair value” can mean anything the court deems appropriate “under the totality of the circumstances.” Naturally, both parties were miles apart in their personal opinions of value. A business valuation was done, but the expert’s report was not entered into evidence nor did the expert testify. The owner being bought out said Ponderosa was a “dying breed” and the real value was in the real estate. An appraisal of the real estate was presented, and the expert testified that she did not include the value of the going concern nor the furniture, fixtures, or equipment. No competing evidence to her appraisal was offered.

With this scant evidence, the court concluded that the restaurant had a “fading popularity” and believed an asset approach was the most appropriate valuation method. It accepted the real estate valuation and made some adjustments, such as for equipment and both parties’ oppressive behavior.

More details can be found in the case, which is Herremans v. Fedo (In re Herremans), 2023 Bankr. LEXIS 1800; 2023 WL 4611429, and a case analysis and full court opinion are on the BVLaw platform.