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New York Supreme Court Confirms That ‘Entire Interest’ in a Company Dissolution Agreement Includes Goodwill
The New York Supreme Court was asked to provide a preliminary injunction enjoining the defendants from conducting business that resulted in damage to the goodwill of a company it had sold in its entirety as part of a dissolution agreement. The court granted the “limited preliminary injunction.”
Ng v. Ng
The New York Supreme Court was asked to provide a preliminary injunction enjoining the defendants from conducting business that resulted in damage to the goodwill of a company it had sold in its entirety as part of a dissolution agreement. The court granted the “limited preliminary injunction.”
SEC v. Bluepoint Inv. Counsel
This case dealt with a suit by the SEC against the defendants for alleged violations of the Securities Act. The ruling digested here was a short ruling on motions in limine. The key motion considered here was a motion to exclude evidence of Amiran’s value not known by GTIF (a plaintiff’s entity) when valuations were prepared. The court denied the motion to exclude the SEC’s expert on the basis that she used information that was known or knowable. The court noted that her assumptions can be challenged on cross-examination.
U.S. District Court Rules on Known or Knowable Issue and Allows Testimony of SEC Valuation Expert—Can Be Challenged on Cross-Examination
This case dealt with a suit by the SEC against the defendants for alleged violations of the Securities Act. The ruling digested here was a short ruling on motions in limine. The key motion considered here was a motion to exclude evidence of Amiran’s value not known by GTIF (a plaintiff’s entity) when valuations were prepared. The court denied the motion to exclude the SEC’s expert on the basis that she used information that was known or knowable. The court noted that her assumptions can be challenged on cross-examination.
Robertson v. Hyde Park
This case was a partnership dispute where the defendant partners tried to buy out the plaintiff partners. On appeal before the New Jersey Superior Court Appellate Division, the defendants argued that the plaintiffs’ dissociation was wrongful and damages should be assessed, discounts for lack of control and marketability should be applied to the value, and the partnership value should be reduced to account for partnership outstanding debts and other amounts. The plaintiffs argued that the trial court erred by relying on the defendants’ expert’s report and not their expert’s report, refusing to increase the value by personal loans taken by the defendant partners, and failing to find that the partnership overpaid management and accounting fees. The appellate court affirmed the trial court with one exception, whether the partnership agreement disassociated properly. On that count, the appellate court determined that the disassociation was appropriate.
New Jersey Appellate Court Affirms Valuation of Shopping Mall, Disallows Any Control or Marketability Discounts, Affirms Proper Dissociation by Plaintiffs
This case was a partnership dispute where the defendant partners tried to buy out the plaintiff partners. On appeal before the New Jersey Superior Court Appellate Division, the defendants argued that the plaintiffs’ dissociation was wrongful and damages should be assessed, discounts for lack of control and marketability should be applied to the value, and the partnership value should be reduced to account for partnership outstanding debts and other amounts. The plaintiffs argued that the trial court erred by relying on the defendants’ expert’s report and not their expert’s report, refusing to increase the value by personal loans taken by the defendant partners, and failing to find that the partnership overpaid management and accounting fees. The appellate court affirmed the trial court with one exception, whether the partnership agreement disassociated properly. On that count, the appellate court determined that the disassociation was appropriate.
Pitsch v. Pitsch Holding Co.
In this shareholder deadlock litigation, the appellate court affirmed the decision of the trial court that the solution to the deadlock was to order a buyout of the plaintiffs’ stock by the defendants as opposed to a dissolution of the company. The appellate court also affirmed the use of a modified-liquidation value as providing a value that maximized the value to the individual shareholders.
Michigan Appeals Court Affirms Modified-Liquidation Value in a Shareholder Deadlock Litigation
In this shareholder deadlock litigation, the appellate court affirmed the decision of the trial court that the solution to the deadlock was to order a buyout of the plaintiffs’ stock by the defendants as opposed to a dissolution of the company. The appellate court also affirmed the use of a modified-liquidation value as providing a value that maximized the value to the individual shareholders.
Koch v. Koch
This shareholder dispute case involved two businesses three brothers in Minnesota owned. One of the brothers, Jim Koch, had a falling out with the other two, Randy and Dave Koch. A temporary agreement was made among them in 2006, but subsequently the relationship and actions of the parties deteriorated. In particular, an IRS audit of the two businesses triggered a disagreement as to whether required payments under the agreement had to be tax deductible. Certain actions by the defendants breached the 2006 agreement as determined by a jury resulting in a damages award of $12 million. The court then held a bench trial to determine the value of the two businesses for determining the buyout amount for Jim’s interest in both businesses. Experts for each side testified as to value. The opinion provided a good analysis of the various issues in the methodologies each of the experts used.
Minority Shareholder Receives Award of $12 Million for Breach of Contract, $58 Million Buyout Award for Minority Interest
This shareholder dispute case involved two businesses three brothers in Minnesota owned. One of the brothers, Jim Koch, had a falling out with the other two, Randy and Dave Koch. A temporary agreement was made among them in 2006, but subsequently the relationship and actions of the parties deteriorated. In particular, an IRS audit of the two businesses triggered a disagreement as to whether required payments under the agreement had to be tax deductible. Certain actions by the defendants breached the 2006 agreement as determined by a jury resulting in a damages award of $12 million. The court then held a bench trial to determine the value of the two businesses for determining the buyout amount for Jim’s interest in both businesses. Experts for each side testified as to value. The opinion provided a good analysis of the various issues in the methodologies each of the experts used.
Sullivan v. Loden
In this malpractice case against an estate attorney, the attorney was denied a summary judgment. The primary issue related to the attorney’s valuation of stock of a family business that was gifted to two of the four children of the decedent. While an “equalization payment” was made to each of the two remaining children, one of these two sued the attorney for both breach of fiduciary duty and for undervaluing the stock gifted, resulting in an underpaid equalization payment.
Estate Attorney Is Denied a Summary Judgment for Alleged Incorrect Valuation of Gifts of Stock—Malpractice Case Proceeds
In this malpractice case against an estate attorney, the attorney was denied a summary judgment. The primary issue related to the attorney’s valuation of stock of a family business that was gifted to two of the four children of the decedent. While an “equalization payment” was made to each of the two remaining children, one of these two sued the attorney for both breach of fiduciary duty and for undervaluing the stock gifted, resulting in an underpaid equalization payment.
Snyder v. Snyder
In this Pennsylvania divorce matter, the appellate court accepted the wife’s valuation of the marital business using the “gross sales approach,” despite the husband’s objection that she was not qualified to determine the value. The trial court master recommended the wife’s value be accepted. However, the appellate court finds that the trial court double counted four business assets and remanded for a redetermination of the marital estate.
Court Affirms Acceptance of the Wife’s Gross Sales Valuation Method for the Marital Business, Remands for Double Counting of Business Assets
In this Pennsylvania divorce matter, the appellate court accepted the wife’s valuation of the marital business using the “gross sales approach,” despite the husband’s objection that she was not qualified to determine the value. The trial court master recommended the wife’s value be accepted. However, the appellate court finds that the trial court double counted four business assets and remanded for a redetermination of the marital estate.
In Re Riddle
The appeal in this case dealt with, among other issues, the trial court’s decision to adopt the husband’s expert’s value that was based on a capitalization of earnings based on expected future income. The appellate court noted that the evidence from the trial showed that the business received no revenue after the wife sold her interest to a third party, and there was no evidence that similar earnings would occur in the future. The trial court’s determination of value was vacated and remanded.
Trial Court’s Decision of Value of Business Based on a Going Concern Is Reversed and Remanded
The appeal in this case dealt with, among other issues, the trial court’s decision to adopt the husband’s expert’s value that was based on a capitalization of earnings based on expected future income. The appellate court noted that the evidence from the trial showed that the business received no revenue after the wife sold her interest to a third party, and there was no evidence that similar earnings would occur in the future. The trial court’s determination of value was vacated and remanded.
Stone v. Citizens Equity First Credit Union (In re Int’l Supply Co.)
The trustee of International Supply Company (ISCO) asked for avoidance and recovery of prepetition fraudulent transfers made to Citizens Equity First Credit Union. ISCO was insolvent when the transfers were made, and the transfers were for the benefit of the controlling shareholder. The court disallowed two of the fraudulent transfers. Some complaint counts against certain individuals were dismissed without prejudice.
Bankruptcy Court Sides With Trustee—Disallows (Fraudulent) Transfers
The trustee of International Supply Company (ISCO) asked for avoidance and recovery of prepetition fraudulent transfers made to Citizens Equity First Credit Union. ISCO was insolvent when the transfers were made, and the transfers were for the benefit of the controlling shareholder. The court disallowed two of the fraudulent transfers. Some complaint counts against certain individuals were dismissed without prejudice.
Therapeutics MD, Inc. v. Evofem Biosciences, Inc.
In this trademark infringement case before a U.S. magistrate judge, the magistrate recommended to the District Court whether certain experts should be allowed to testify. The recommendations were for granting or denying motions of both parties to exclude testimony of the other party’s experts. The magistrate reviewed not only the qualifications of each of the experts, but also the subject of their testimony and opinions and whether they are appropriate and helpful to the court in resolving the issues. In the end, the magistrate recommended to deny the plaintiff’s motion to exclude the defendant’s experts and the defendant’s motion to exclude the plaintiff’s experts be granted in part and denied in part.
Magistrate Judge Recommends That the Plaintiff’s Motion to Exclude the Defendant’s Experts Be Denied and That the Defendant’s Motion to Exclude Plaintiff’s Experts Be Granted in Part and Denied in Part
In this trademark infringement case before a U.S. magistrate judge, the magistrate recommended to the District Court whether certain experts should be allowed to testify. The recommendations were for granting or denying motions of both parties to exclude testimony of the other party’s experts. The magistrate reviewed not only the qualifications of each of the experts, but also the subject of their testimony and opinions and whether they are appropriate and helpful to the court in resolving the issues. In the end, the magistrate recommended to deny the plaintiff’s motion to exclude the defendant’s experts and the defendant’s motion to exclude the plaintiff’s experts be granted in part and denied in part.
Harrison v. Envision Mgmt. Holding, Inc.
The U.S. District Court (Colorado) denied a motion to compel arbitration the defendants brought in a case the plaintiff participants brought (a purported class action) in an ESOP the defendant company, et al. established. “The Plaintiff argues that the Defendants’ actions related to the sale caused him and all other ESOP participants to suffer significant losses to their ESOP retirement savings.” The court denied the motion.
U.S. District Court Denies Motion of Defendants in an ESOP Case to Compel Plaintiff Into Arbitration
The U.S. District Court (Colorado) denied a motion to compel arbitration the defendants brought in a case the plaintiff participants brought (a purported class action) in an ESOP the defendant company, et al. established. “The Plaintiff argues that the Defendants’ actions related to the sale caused him and all other ESOP participants to suffer significant losses to their ESOP retirement savings.” The court denied the motion.
Stout Risius Ross, LLC v. Aspen Specialty Ins. Co.
Stout Risius Ross LLC asked for a declaratory judgment to require Aspen Specialty Insurance Co. to defend Stout Risius Ross in a lawsuit brought against it by its former client, Wilmington Trust, in an ESOP matter. Stout Risius Ross performed a valuation for an ESOP transaction that the court later criticized in that matter (Brundle). After being sued by Wilmington Trust, Stout Risius Ross filed a claim with Aspen, which was denied by Aspen, citing the “prior knowledge” clause. The court denied Stout Risius Ross’ motion for declaratory judgment and did not allow Stout Risius Ross to amend its motion.
U.S. District Court Dismisses Accounting Firm’s Plea to Require Insurance Company to Defend a Lawsuit Against It
Stout Risius Ross LLC asked for a declaratory judgment to require Aspen Specialty Insurance Co. to defend Stout Risius Ross in a lawsuit brought against it by its former client, Wilmington Trust, in an ESOP matter. Stout Risius Ross performed a valuation for an ESOP transaction that the court later criticized in that matter (Brundle). After being sued by Wilmington Trust, Stout Risius Ross filed a claim with Aspen, which was denied by Aspen, citing the “prior knowledge” clause. The court denied Stout Risius Ross’ motion for declaratory judgment and did not allow Stout Risius Ross to amend its motion.
Sproule v. Johnson
In this partnership dissolution case, the North Dakota Supreme Court affirmed the district court’s decision to use an appraisal of the Canadian entity as of 2019 instead of a value from an earlier agreement in principal. The later date was within the purview of the district court’s flexibility. Further, the Supreme Court affirmed the district court’s decision not to reduce the value of a partnership asset of stock in a Canadian corporation for taxes.