Low buyback value stings departing owners
Shareholder-employees should take a lesson from a recent case and take a fresh look at their buyout agreements—especially the part about the redemption value.
Laurilliard v. McNamee Lochner, P.C.
The plaintiffs, minority shareholder employees in a law firm, brought suit against their firm for breaching their employment contracts. The court determined that the plaintiffs were at-will employees and that there was no breach of their agreements when they were terminated. The court also determined that the under-market-value payment under their repurchase agreements was allowable since they were at-will employees.
New York Court Allows Enforcement of Under-Market-Value Buy-Sell and Approves At-Will Termination of Shareholder-Employees
The plaintiffs, minority shareholder employees in a law firm, brought suit against their firm for breaching their employment contracts. The court determined that the plaintiffs were at-will employees and that there was no breach of their agreements when they were terminated. The court also determined that the under-market-value payment under their repurchase agreements was allowable since they were at-will employees.
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 unusual business tort case, court exhibits flexibility in terms of calculating damages
The 8th Circuit recently upheld a sizable damages award in an unusual business tort case litigated under Nebraska law. One noteworthy aspect in terms of determining economic damages was that the court allowed expert testimony regarding the loss of value to the plaintiff even though the plaintiff did not fail completely upon the wrongdoing.
8th Circuit Validates Employment Contract and Damages Related to Breach
Appeals court affirms plaintiff’s employment contract with employee is enforceable, and competitor interfering with it is liable for profits plaintiff employer lost; court notes plaintiff established causation and proved loss with reasonable certainty.
St. Jude Med. S.C., Inc. v. Biosense Webster, Inc.
Appeals court affirms plaintiff’s employment contract with employee is enforceable, and competitor interfering with it is liable for profits plaintiff employer lost; court notes plaintiff established causation and proved loss with reasonable certainty.
Multimillion-Dollar Personal Goodwill Allocation Leaves Court Stunned
Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.
Potok v. Rebh
Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.
Bross Trucking, Inc. v. Commissioner
Tax Court says taxpayer’s company owned no corporate goodwill and had no right to taxpayer’s personal goodwill and, therefore, was not liable under IRC Sect. 311(b)(1); the taxpayer, in turn, was not liable for gifting corporate goodwill to his sons.
In re Marriage of Gelman
A medical partnership’s exclusive contract to provide anesthesiology services to a hospital is an intangible asset, but since buy-sell agreement limits wife’s interest to $1.00, the court finds she has no ownership interest in the business and the contrac ...
Damages Based on Inconsistent Testimony
Kraatz sued Heritage Imports for wrongful termination.
Entire Settlement Payment Is Purchase Price
One of the issues for the Tax Court was whether $4,856,922 of a $19,886,922 settlement made by Indeck Energy Services, Inc. to Michael P. Polsky was interest deductible by Indeck and recognizable as ordinary income to Polsky or whether it was part of the purchase price for shares of Indeck stock held by Polsky.
Kraatz v. Heritage Imports
Issue was damages where employment agreement entitled plaintiff to 15% of the value of Heritage's stock in excess of $2.5 million, in the event of wrongful termination.
Indeck Energy Services, Inc. v. Commissioner
Issues are whether part of settlement payment constitutes interest deductible by Indeck and recognizable as ordinary income by petitioners, and whether penalties apply.
FMV Formula in Agreements Requires Inclusion of All Assets
One of the issues in this case was whether the trial court erred in using a book valuation method in determining share price.
Shriner v. Sheehan
One of the issues in this case was whether the trial court erred in using a book valuation method in determining share price.
Distinguishing and measuring personal goodwill in a litigation setting Part 2 of 2 parts
We have published this article on personal goodwill in two parts. The first part of the article, printed in the July 2001 BVU, gave a background on recent court cases that involved and distinguished b ...
Ignoring non-compete and/or employment agreements often causes overvaluations
An important adjustment that many business appraisers, attorneys, and courts often overlook is the deduction of the value of a non-compete agreement and/or employment agreement in reaching a conclusio ...
Arbitration Agreement Case
Appellate court affirmed trial court's denial of motion to compel arbitration.
Ikon Office Solutions v. Eifert
At issue are the terms of an employment agreement and acquisition agreement.