Recently, two minority shareholders wanted to liquidate their interest in a New York corporation. The company engaged a business appraiser to value the company, and based on his recommendations, it purchased the minority shareholders’ interests for $3 million. Two years later, the company sold for more than $28 million and the minority shareholders sued, claiming that the CEO and the appraiser fraudulently misrepresented the actual value of their stock. During discovery, plaintiffs tried to compel production of communications among the CEO, the appraiser, and the company attorneys, which defendants claimed were subject to attorney-client privilege. The trial court agreed, but ordered their disclosure under a fraud exception.
Defendants appealed to the New York Supreme Court (Appellate Div.), which affirmed disclosure on alternate grounds. “Here, all of the communications that the defendants' claim are privileged were made by and between [the appraiser] and attorneys employed by [the company].” The appraiser was neither an agent of the company nor a client of defense counsel. Accordingly, none of the requested communications was subject to the attorney-client privilege, the court ruled.
A complete abstract of the case, Seiger v. Zak, 2009 WL 562988 (March 3, 2009) will appear in the upcoming May 2009 issue of Business Valuation Update™. For those in need of the full-text court opinion: BVR has recently completed programming at the BVLibrary.com website to “link” court case abstracts with their corresponding full-text court opinion. After a user retrieves an abstract using the search engine, a link will be provided at the top of the page to view the full-text court opinion—and vice versa if the user first retrieves the full-text court opinion. A subscription to both products is required for users who want to pass back and forth between the abstract and the full-text opinion.
Please let us know
if you have any comments about this article or enhancements you would like to see.