Wisniewski v. Walsh, 2015 N.J. Super. Unpub. LEXIS 3001 (Dec. 24, 2015)
Just when attorneys and valuators working on dissenting shareholder suits in New York courts have become increasingly vocal about their objection to the imposition of a marketability discount in that jurisdiction, in comes a piquant New Jersey ruling in which the appeals court upheld a 25% DLOM.
The New Jersey case, Wisniewski v. Walsh, in many ways is sui generis. It is decades old and involves feuding family members (which may explain its length and intensity). The litigation has resulted in three appeals, and it has featured valuators of the highest caliber. Along the way, the trial court found, and the appeals court agreed, that the plaintiff, who positioned himself as the oppressed shareholder, actually was the oppressor and should be bought out by the two remaining shareholders. Even though a marketability discount was usually only applicable in "extraordinary circumstances" in forced buyout suits, the trial and appeals courts found the circumstances of the case justified the application of a DLOM.
The DLOM was not the only discount in play, however.
The parties' most recent fight focused on whether the prevailing expert's DCF analysis embedded a marketability discount to account for illiquidity. If not, the trial court had to decide what the appropriate DLOM rate was. The plaintiff-selling shareholder argued in favor of a zero marketability discount, and the defendants-buying shareholders presented an expert valuation that specified a 35% DLOM, based on the expert's use of a market approach.