This appeal in a California court involved a dispute over an appraisal of the plaintiffs’ 15% interest in a grocery store the defendant operated. The plaintiffs alleged that the award of the superior court was obtained by fraud and that the arbitrator prejudiced their rights.
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The Delaware Chancery Court Erred in Dismissing Claims Regarding Appraisal Rights Disclosures in a Merger—Supreme Court Remands
Brookfield Property Partners Inc. acquired GGP Inc. in a merger transaction. During negotiations, Brookfield Property Partners LP expressed concern over the number of GGP stockholders who might see appraisal under Delaware law. Brookfield Property Partners suggested inserting an appraisal rights closing condition that allowed it to terminate the agreement if a specified number of GGP shares demanded appraisal. Brookfield Property Partners objected, and the condition was nixed. At the urging of Brookfield Property Partners, the merger was structured so that Brookfield funded a sizable preclosing dividend which was paid by GGP to eligible shareholders, followed by a small residual payment called a “per share merger consideration.” GGP stockholders were told they could exercise their appraisal rights solely in connection with the merger, set at $23.50 per share, in relation to the per-share merger consideration valued at $0.312 per share. Plaintiff stockholders claimed they were led to believe that a fair value determination would be limited to the value of the post-dividend of GGP. The Supreme Court agreed with the Chancery Court that the defendants did not unlawfully eliminate appraisal rights but disagreed that the proxy disclosures were sufficient.
Fair v. Fair
The primary issue in this appeal was the value of Surgical Imaging Specialists Inc. (SIS), a subchapter S corporation that the parties formed in 2002. Stephan Fair, the husband, was the sole registered shareholder of SIS. Darlene Fair, the wife, was listed on all tax returns as an equal owner. The trial court awarded all community property interest to the husband and eliminated 25% of SIS’ goodwill as personal goodwill. On appeal, the husband contended that the trial court undervalued the personal goodwill discount and failed to apply a discount for lack of marketability. The husband also appealed the separate property award of an IRA account and a reimbursement to the wife for additional salary payments made by SIS to the husband. The court of appeal affirmed the trial court value of SIS, remanded the issue of IRA gains, and affirmed the reimbursement for additional salary payments.
Appellate Court Rules on the Value of the Marital Business as to Personal Goodwill, Minority, Liquidity, and Marketability Discounts
The primary issue in this appeal was the value of Surgical Imaging Specialists Inc. (SIS), a subchapter S corporation that the parties formed in 2002. Stephan Fair, the husband, was the sole registered shareholder of SIS. Darlene Fair, the wife, was listed on all tax returns as an equal owner. The trial court awarded all community property interest to the husband and eliminated 25% of SIS’ goodwill as personal goodwill. On appeal, the husband contended that the trial court undervalued the personal goodwill discount and failed to apply a discount for lack of marketability. The husband also appealed the separate property award of an IRA account and a reimbursement to the wife for additional salary payments made by SIS to the husband. The court of appeal affirmed the trial court value of SIS, remanded the issue of IRA gains, and affirmed the reimbursement for additional salary payments.
Weinstein v. Weinstein
In this Vermont divorce case, the Supreme Court affirmed the value of the husband’s law practice even though there was evidence of some potential personal goodwill left in the value determined by the lower court. The Supreme Court also affirmed the wife’s expert’s determination of the husband’s income for maintenance purposes. Note that, per the court, “decisions of a three-justice panel are not to be considered as precedent before any tribunal.”
Vermont Supreme Court Affirms Value of Husband’s Law Practice, Declines to Eliminate Personal Goodwill, Affirms Determination of Husband’s Income
In this Vermont divorce case, the Supreme Court affirmed the value of the husband’s law practice even though there was evidence of some potential personal goodwill left in the value determined by the lower court. The Supreme Court also affirmed the wife’s expert’s determination of the husband’s income for maintenance purposes. Note that, per the court, “decisions of a three-justice panel are not to be considered as precedent before any tribunal.”
Agnelli v. Lennox Miami Corp.
In this lengthy opinion dealing with the fair value of a 12.5% interest the plaintiff held in a Florida hotel holding corporation, the U.S. District Court determined that discounts for minority interest and for marketability are not allowed. The court also determined damages for the breach of contract, or, in the alternative, breach of fiduciary duty, on the part of the plaintiff.
U.S. District Court Denies Use of Discounts in Determining the Fair Value of a Hotel Holding Corporation in a Dissolution Case
In this lengthy opinion dealing with the fair value of a 12.5% interest the plaintiff held in a Florida hotel holding corporation, the U.S. District Court determined that discounts for minority interest and for marketability are not allowed. The court also determined damages for the breach of contract, or, in the alternative, breach of fiduciary duty, on the part of the plaintiff.
In re Columbia Pipeline Group
“In plaintiffs' action against an energy company for aiding and abetting alleged breaches of fiduciary duty by the officers of a pipeline company, the court granted a motion in limine to exclude an expert's report under Del. R. Evid. 702(a) because it expressed a legal opinion on whether the fiduciaries' conduct was reasonable. [Also], [t]he expert report impermissibly expressed opinions about state of mind, which were factual determinations for the court to make. [Finally] [t]he expert offered impermissible opinions about whether the parties believed their agreement was breached, because he interpreted the agreement using extrinsic evidence.”
Expert Excluded for Offering Legal and State of Mind Opinions in Delaware
“In plaintiffs' action against an energy company for aiding and abetting alleged breaches of fiduciary duty by the officers of a pipeline company, the court granted a motion in limine to exclude an expert's report under Del. R. Evid. 702(a) because it expressed a legal opinion on whether the fiduciaries' conduct was reasonable. [Also], [t]he expert report impermissibly expressed opinions about state of mind, which were factual determinations for the court to make. [Finally] [t]he expert offered impermissible opinions about whether the parties believed their agreement was breached, because he interpreted the agreement using extrinsic evidence.”
Couturier v. Comm'r
The Tax Court was asked in this ESOP-related case to approve the taxpayer’s motion for summary judgment. The petitioner contended that the IRS “is precluded as a matter of law from asserting excise tax liability under section 4973” because it did not issue him a notice of deficiency challenging his income tax treatment of the transactions that generated the excess contributions. The motion was denied. The alleged excess contributions were more than $26 million with alleged excise tax of more than $8 million.
Tax Court Denies Taxpayer’s Motion for Summary Judgment Relative to an Excess IRA Contribution Relating to an ESOP Purchase/Sale
The Tax Court was asked in this ESOP-related case to approve the taxpayer’s motion for summary judgment. The petitioner contended that the IRS “is precluded as a matter of law from asserting excise tax liability under section 4973” because it did not issue him a notice of deficiency challenging his income tax treatment of the transactions that generated the excess contributions. The motion was denied. The alleged excess contributions were more than $26 million with alleged excise tax of more than $8 million.
Hollis v. Hollis
One of the main issues in this appeal was how to classify the husband’s “book of business,” i.e., his client relationships, assets under management, and related income. The husband was a financial advisor for UBS. The wife contended the book of business had value that constituted a marital asset. The husband pointed out that UBS now took the position that a financial advisor who left the company cannot take any information with him or her. The court also noted that “deferred cash agreements” were actually bonuses that were marital assets. The appellate court affirmed the trial court’s decision to exclude the book of business from marital assets. The court also affirmed the trial court decision on payment of alimony to the wife “in futuro.”
The Tennessee Appeals Court Affirms the Trial Court’s Decision to Exclude From the Marital Estate Financial Advisor the Husband’s ‘Book of Business’
One of the main issues in this appeal was how to classify the husband’s “book of business,” i.e., his client relationships, assets under management, and related income. The husband was a financial advisor for UBS. The wife contended the book of business had value that constituted a marital asset. The husband pointed out that UBS now took the position that a financial advisor who left the company cannot take any information with him or her. The court also noted that “deferred cash agreements” were actually bonuses that were marital assets. The appellate court affirmed the trial court’s decision to exclude the book of business from marital assets. The court also affirmed the trial court decision on payment of alimony to the wife “in futuro.”
In re Ascena Retail Grp., Inc. Sec. Litig.
In this securities putative class action litigation, plaintiff shareholders alleged that the defendants (Ascena) misrepresented the value of Ascena’s goodwill and trade names in order to inflate Ascena’s stock price artificially. In June 2017, Ascena announced an impairment charge to those assets of $1.3 billion “causing Ascena's already-declining share price to fall precipitously. Ascena ultimately declared Chapter 11 bankruptcy in July 2020.” The defendants moved to dismiss for failure to plead material misrepresentation or scienter or both. The court granted the motion to dismiss but allowed the plaintiffs to amend their complaint.
New Jersey U.S. District Court Dismisses Plaintiffs’ Complaint That Public Company Defendant Overvalued Its Goodwill
In this securities putative class action litigation, plaintiff shareholders alleged that the defendants (Ascena) misrepresented the value of Ascena’s goodwill and trade names in order to inflate Ascena’s stock price artificially. In June 2017, Ascena announced an impairment charge to those assets of $1.3 billion “causing Ascena's already-declining share price to fall precipitously. Ascena ultimately declared Chapter 11 bankruptcy in July 2020.” The defendants moved to dismiss for failure to plead material misrepresentation or scienter or both. The court granted the motion to dismiss but allowed the plaintiffs to amend their complaint.
Sipko v. Koger, Inc.
The Supreme Court of New Jersey, in its second attempt to resolve this long-running shareholder dispute, a “thoroughly chewed apple”, and buyout, reversed the appellate court and remanded the case to the trial court for reinstatement of its valuation of the shareholder’s interest in two businesses and also agreed with the trial court that no marketability discount should be allowed to reduce the amount to be awarded to the plaintiff. The defendants chose not to call their own expert to provide an opinion of the fair value of the shareholder’s interests.
The Supreme Court of New Jersey Accepts Trial Court’s Value of Companies and Denies a Marketability Discount in a Contentious Buyout Dispute
The Supreme Court of New Jersey, in its second attempt to resolve this long-running shareholder dispute, a “thoroughly chewed apple”, and buyout, reversed the appellate court and remanded the case to the trial court for reinstatement of its valuation of the shareholder’s interest in two businesses and also agreed with the trial court that no marketability discount should be allowed to reduce the amount to be awarded to the plaintiff. The defendants chose not to call their own expert to provide an opinion of the fair value of the shareholder’s interests.
Kuzma v. N. Ariz. Healthcare Corp.
The defendants in this qui tam case asked for summary judgment against the plaintiff Relator, who had alleged violations of the False Claims Act as it related to the sale of Surgery and Rehabilitation Centers by the defendants. Relator brought suit against the defendants, alleging they violated the FCA by overpaying the physician-owners of the Summit Center to reward them for past business and to induce future business in violation of the federal Anti-Kickback Statute. The defendants advanced three arguments in favor of summary judgment: (1) the acquisition price paid for the Summit Center was fair market value; (2) Relator had no evidence that the defendants acted with the requisite scienter; and (3) Relator cannot show a causal link between the alleged kickback and the submission of false claims.
U.S. District Court Partially Denies Motion for Summary Judgment Regarding Qui Tam Case on Excess Purchase Price Under the False Claims Act
The defendants in this qui tam case asked for summary judgment against the plaintiff Relator, who had alleged violations of the False Claims Act as it related to the sale of Surgery and Rehabilitation Centers by the defendants. Relator brought suit against the defendants, alleging they violated the FCA by overpaying the physician-owners of the Summit Center to reward them for past business and to induce future business in violation of the federal Anti-Kickback Statute. The defendants advanced three arguments in favor of summary judgment: (1) the acquisition price paid for the Summit Center was fair market value; (2) Relator had no evidence that the defendants acted with the requisite scienter; and (3) Relator cannot show a causal link between the alleged kickback and the submission of false claims.
In Re S-Tek 1, LLC
The debtor, S-Tek 1 LLC, submitted a motion to value to the Bankruptcy Court to determine the value of the collateral of Surv-Tek Inc. as to debt owed it by the debtor pledged as collateral for debt owed by S-Tek to Surv-Tek. The valuation was to be used in the confirmation of a Chapter 11 reorganization of S-Tek. The court used the replacement value standard of value instead of the “ongoing concern” value since the replacement value provided a value greater than the “enterprise value” (i.e., ongoing concern value).
Bankruptcy Court Uses the ‘Replacement Value Standard’ as It Determines That Debtor ‘Enterprise Value’ Is Lower and Inappropriate
The debtor, S-Tek 1 LLC, submitted a motion to value to the Bankruptcy Court to determine the value of the collateral of Surv-Tek Inc. as to debt owed it by the debtor pledged as collateral for debt owed by S-Tek to Surv-Tek. The valuation was to be used in the confirmation of a Chapter 11 reorganization of S-Tek. The court used the replacement value standard of value instead of the “ongoing concern” value since the replacement value provided a value greater than the “enterprise value” (i.e., ongoing concern value).
King v. King
In this Maryland divorce case, the Court of Special Appeals affirmed the trial court on all appealed issues including marital property determinations; monetary award to the wife; determination of incomes of the husband and wife; and determinations of alimony, child support, and related expenses. The Court of Special Appeals also affirmed that the husband’s business was not a gift and was marital property, and it determined the value of the business as the wife’s expert presented. Both parties were forensic accountants.
Maryland Appellate Court Affirms Trial Court on Value of Husband’s Business as Well as Several Other Divorce-Related Issues
In this Maryland divorce case, the Court of Special Appeals affirmed the trial court on all appealed issues including marital property determinations; monetary award to the wife; determination of incomes of the husband and wife; and determinations of alimony, child support, and related expenses. The Court of Special Appeals also affirmed that the husband’s business was not a gift and was marital property, and it determined the value of the business as the wife’s expert presented. Both parties were forensic accountants.
Ohio Appellate Court Affirms Trial Court’s Denial of Permanent Injunction and Dismisses a Claim of Tortious Interference
An Ohio appellate court affirmed the trial court’s denial of a permanent injunction to the plaintiff because the evidence did not show that it faced immediate and irreparable injury or harm. It was also held that the trial court properly dismissed the plaintiff’s claim for tortious interference because the plaintiff did not allege that the defendant induced a third party not to continue to do business with the plaintiff.
Total Quality Logistics, LLC v. Tucker, Albin and Assocs.
An Ohio appellate court affirmed the trial court’s denial of a permanent injunction to the plaintiff because the evidence did not show that it faced immediate and irreparable injury or harm. It was also held that the trial court properly dismissed the plaintiff’s claim for tortious interference because the plaintiff did not allege that the defendant induced a third party not to continue to do business with the plaintiff.