Ambiguous expert report prompts order to revalue minority interest

Swiderski Equip. v. Swiderski, 2017 Wisc. App. LEXIS 91 (Feb. 14, 2017)

A recent Wisconsin case illustrates that a shareholder agreement in place is no guarantee for the smooth buyout of the minority shareholder. The case also includes a caution to experts to strive for clarity in their expert reports. Here, the parties’ animosity and ambiguity in the shareholder agreement as well as the trial court’s rulings and the expert report have made a resolution of the dispute thus far unattainable.

The father owned a majority interest in a company that dealt in farm equipment and technology. The son initially worked for the company and later became the only minority shareholder. The parties entered into a corporate redemption agreement (CRA) that gave the company the option to buy the son’s shares. The CRA specified a price but allowed the price was subject to reappraisal under certain conditions. After the son’s departure from the company, disagreements erupted and several lawsuits ensued.

The parties first fought over whether the company had an obligation to buy out the son. Once the company decided to do so, the flashpoint was whether the price in the shareholder agreement was controlling. The trial court said yes, but the appeals court ruled in favor of the son and required a revaluation of his shares in accordance with the CRA.

On remand, the parties argued over the scope of the valuation and whether discounts for lack of control and lack of marketability were appropriate.

In terms of how to value the son’s shares, the trial court’s order to the designated appraiser was not a model of clarity. But neither was it clear from the expert report how the appraiser approached the valuation. Did he, or did he not, apply a minority discount and, if so, was the use of a minority discount in keeping with the shareholder agreement?

The valuation prompted another appeal from the son.

Find out more about the most recent decision from the Court of Appeals here.