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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In re Tesla Motors Stockholder Litig.
At issue was a 2016 acquisition of Solar City Corp. by Tesla. Some Tesla shareholders claimed that Musk caused Tesla to overpay for Solar through his alleged domination and control of Tesla’s board. The primary focus of the shareholders was that Solar was insolvent at the time of the acquisition. The court applied the “entire fairness” standard. The Court of Chancery found the acquisition to be “entirely fair.” The Delaware Supreme Court affirmed the Court of Chancery decision.
Delaware Supreme Court Upholds ‘Entire Fairness’ of a Tesla Acquisition
At issue was a 2016 acquisition of Solar City Corp. by Tesla. Some Tesla shareholders claimed that Musk caused Tesla to overpay for Solar through his alleged domination and control of Tesla’s board. The primary focus of the shareholders was that Solar was insolvent at the time of the acquisition. The court applied the “entire fairness” standard. The Court of Chancery found the acquisition to be “entirely fair.” The Delaware Supreme Court affirmed the Court of Chancery decision.
Bennetti v. Oxford Restructuring Advisors LLC (In re Community Providers of Enrichment Services AZ Liquidating, Inc.)
Employee members of an ESOP had their claims against the debtors, based on cash option rights in an ESOP, denied. The debtors were not obligated to employees under the ESOP. The ESOP needed only to provide distributions in cash. There was no right of payment from the debtors. The U.S. Bankruptcy Appellate Panel for the 9th Circuit affirmed.
Bankruptcy Appellate Panel Denies Employee Members of ESOP Claims Against Debtors
Employee members of an ESOP had their claims against the debtors, based on cash option rights in an ESOP, denied. The debtors were not obligated to employees under the ESOP. The ESOP needed only to provide distributions in cash. There was no right of payment from the debtors. The U.S. Bankruptcy Appellate Panel for the 9th Circuit affirmed.
In re Hillman
The Bankruptcy Court decided and ordered on the issue of whether the debtor qualified as a “small business debtor” under subchapter V of Chapter 11. The court decided that, as of the petition date, the debtor was engaged in commercial or business activity in both of its business activities. The debtor met her burden of proof as qualifying under Subchapter V of Chapter 11.
Bankruptcy Court Decides on Debtor Qualification as a ‘Small Business’ Under Chapter 11
The Bankruptcy Court decided and ordered on the issue of whether the debtor qualified as a “small business debtor” under subchapter V of Chapter 11. The court decided that, as of the petition date, the debtor was engaged in commercial or business activity in both of its business activities. The debtor met her burden of proof as qualifying under Subchapter V of Chapter 11.
Connelly v. United States
The importance of this case was that the 8th Circuit’s decision to affirm the lower court and IRS’ inclusion of life insurance proceeds in the value of the corporation for which decedent’s stock was redeemed. This contradicted the decision of the 11th Circuit in Estate of Blount that 26 C.F.R. § 20.2031-2(f)(2) precluded the inclusion of life-insurance proceeds in the corporate value when the proceeds were used for a redemption obligation.
8th Circuit Affirms District Court—Includes Life Insurance Proceeds in Value of Redeemed Shares
The importance of this case was that the 8th Circuit’s decision to affirm the lower court and IRS’ inclusion of life insurance proceeds in the value of the corporation for which decedent’s stock was redeemed. This contradicted the decision of the 11th Circuit in Estate of Blount that 26 C.F.R. § 20.2031-2(f)(2) precluded the inclusion of life-insurance proceeds in the corporate value when the proceeds were used for a redemption obligation.
Golock Capital, LLC v. VNUE, Inc.
The plaintiffs sued for breach of obligations on convertible promissory notes issued to the defendant. The defendant admitted it had not repaid the loans but contended that the rates of interest on the loans were “criminally usurious” and were, therefore, void. Following a bench trial, the U.S. District Court (New York) found that the interest rates were not usurious and ruled in favor of the plaintiffs, including an award for attorneys’ fees.
U.S. District Court (New York) Rules Interest Rates on Loans Are Not Usurious
The plaintiffs sued for breach of obligations on convertible promissory notes issued to the defendant. The defendant admitted it had not repaid the loans but contended that the rates of interest on the loans were “criminally usurious” and were, therefore, void. Following a bench trial, the U.S. District Court (New York) found that the interest rates were not usurious and ruled in favor of the plaintiffs, including an award for attorneys’ fees.
Mamone v. Mamone
The Nevada appellate court affirmed the trial court’s use of the Pereira method of determining the value of separate property included in the total value of the husband’s business. It was clear that the value increase in the business during the marriage was due in large part to the efforts of the husband. The “excess value” of the business over the separate property value was included in the community property. The appellate court also affirmed the ruling of the trial court that no community expenses incurred during the marriage were paid from the separate property of the husband and the husband was, therefore, not entitled to any reimbursement of those community expenses.
Nevada Appellate Court Affirms Value of Husband’s Business and His Separate Property Value in the Business
The Nevada appellate court affirmed the trial court’s use of the Pereira method of determining the value of separate property included in the total value of the husband’s business. It was clear that the value increase in the business during the marriage was due in large part to the efforts of the husband. The “excess value” of the business over the separate property value was included in the community property. The appellate court also affirmed the ruling of the trial court that no community expenses incurred during the marriage were paid from the separate property of the husband and the husband was, therefore, not entitled to any reimbursement of those community expenses.
EllDan Corp. v. Steele (In re EllDan Corp.)
The remaining matter in this bankruptcy adversary proceeding was whether the covenants not to compete in the prepetition franchise agreements were enforceable. The debtor rejected the franchise agreements after the petition date of the bankruptcy proceedings. The court ruled that the covenants were reasonable in duration and geographic scope under Minnesota law and public interest was not harmed. The court also found that the debtor breached the covenants the franchisor was contractually entitled to injunctive relief.
Despite Rejection of Franchise Agreements in Bankruptcy, Debtor Remained Obligated Not to Compete
The remaining matter in this bankruptcy adversary proceeding was whether the covenants not to compete in the prepetition franchise agreements were enforceable. The debtor rejected the franchise agreements after the petition date of the bankruptcy proceedings. The court ruled that the covenants were reasonable in duration and geographic scope under Minnesota law and public interest was not harmed. The court also found that the debtor breached the covenants the franchisor was contractually entitled to injunctive relief.
Rothwell v. Rothwell
In an appeal of a Utah divorce case, the court affirmed the district court’s determination of value of the husband’s businesses. The district court allowed the exclusion of personal goodwill (in accordance with Utah case law Sorensen v. Sorensen) but did not allow the deduction of estimated tax to be paid on a hypothetical sale of the business at some future date.
Utah Appellate Court Excludes Personal Goodwill, Disallows Reduction for Taxes on Hypothetical Sale
In an appeal of a Utah divorce case, the court affirmed the district court’s determination of value of the husband’s businesses. The district court allowed the exclusion of personal goodwill (in accordance with Utah case law Sorensen v. Sorensen) but did not allow the deduction of estimated tax to be paid on a hypothetical sale of the business at some future date.
City of Fort Collins v. Open Int’l, LLC
In a breach of contract suit concerning failure of vendor to deliver software, the court considered and ruled on motions to exclude certain expert witnesses. The court denied most motions while granting some motions in part.
ES NPA Holding, LLC v. Comm’r
The Tax Court ruled that the class C units were a profits interest because, when applying the fair market value of the LLC at the time of receipt, the partner would not receive any proceeds from a liquidation at that time. Any proceeds in excess of fair market value would be speculative. No accuracy penalty was appropriate either.
On Liquidation Tax Matters, Partner Would Not Receive Any Proceeds, Interest Received Would Be Nontaxable Profits Interest
The Tax Court ruled that the class C units were a profits interest because, when applying the fair market value of the LLC at the time of receipt, the partner would not receive any proceeds from a liquidation at that time. Any proceeds in excess of fair market value would be speculative. No accuracy penalty was appropriate either.
U.S. District Court (Colorado) Rules on Motions to Exclude Testimony of Expert Witnesses
In a breach of contract suit concerning failure of vendor to deliver software, the court considered and ruled on motions to exclude certain expert witnesses. The court denied most motions while granting some motions in part.
In re Marriage of Bainbridge
In this Iowa appellate case regarding a marital dissolution, the appellate court affirmed the decision of the trial court judge as to the value of the husband’s construction company. The wife’s expert used a valuation date of Dec. 31, 2020, versus trial date of December 2021 because of availability of information on the business.
Value of Husband’s Business Affirmed Based on Trial Judge’s Reasonable Discretion
In this Iowa appellate case regarding a marital dissolution, the appellate court affirmed the decision of the trial court judge as to the value of the husband’s construction company. The wife’s expert used a valuation date of Dec. 31, 2020, versus trial date of December 2021 because of availability of information on the business.
Kwak v. Bozarth
The Appeals Court of Massachusetts affirmed the trial court determination of the value of the wife’s dental practice. A large amount and growth of the revenues was from prosthodontics. The wife provided her own value without expert testimony, and the trial court found the methodology not appropriate. The husband’s expert determined the value based on a capitalization of earnings method, with adjustments for compensation to the owner and a 21% discount for goodwill. The appeals court affirmed the decision of the trial court, primarily accepting the valuation of the husband’s expert.
Massachusetts Trial Court Rejects Wife’s Nonexpert Value of Her Dental Practice—Appeals Court Affirms
The Appeals Court of Massachusetts affirmed the trial court determination of the value of the wife’s dental practice. A large amount and growth of the revenues was from prosthodontics. The wife provided her own value without expert testimony, and the trial court found the methodology not appropriate. The husband’s expert determined the value based on a capitalization of earnings method, with adjustments for compensation to the owner and a 21% discount for goodwill. The appeals court affirmed the decision of the trial court, primarily accepting the valuation of the husband’s expert.
Lieberman-Massoni v. Massoni
The trial court in this New York divorce awarded the value of the husband’s class B units in lieu of awarding a portion of the actual units to the wife and also barred the wife from any distributions on those units occurring after the valuation date.