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All elements of 'fair value' must be considered

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Although there isn't any Indiana caselaw detailing how the shares held by dissenting shareholders are to be appraised, the Indiana Court of Appeals adopted the view that trial courts should consider all possible elements of the present value of the corporation on the valuation date, including the company's possible future plans.

The appellate court concluded that it was appropriate for the experts valuing a hotel chain to consider the company's future plans and prospects, including the plans to build future hotels, and to consider the impact of those potential plans when valuing the hotel as of the valuation date.

In Lees Inns of America Inc. v. William R. Lee Irrevocable Trust, et al., No. 40A01-0901-CV-47, Lees Inns appealed the judgment in favor of the William R. Lee Irrevocable Trust granting the trust, as a minority shareholder, nearly $5 million for the value of its shares plus interest and other costs. The trust cross-appealed its award of prejudgment interest for only half of the relevant period under the Dissenters' Rights Statute.

Brothers William and Lester Lee owned Lees Inns. Lester transferred some stock to William, who placed it in the trust, which became the minority shareholder. Lester eventually bought out shares owned by William and the trust over their objections for a merger and paid the minority shareholders just under $1 million. The trust sued for breach of fiduciary duty and fraud because it valued the stock at $15 million.

Lees Inns requested the appointment of a special master or expert under the Dissenters' Rights Statute to help the court value the shares. The trial court denied the request and adopted one of the three valuation options offered by the parties at trial: the Deloitte Valuation that valued the minority shares at $5.9 million. The trial court also found Lester breached his fiduciary duties to the minority shareholders based on the benefits he received through corporate deals, including hefty raises and benefits on real estate deals.

The trial court didn't award interest on the eight years it took for the case to go to trial because the trust caused some of the delays.

The appellate court had to decide whether the determination of the fair value of the trust's shares of stock was supported by the evidence. Under the Dissenters' Rights Statute, "fair value" is defined as the value of the shares immediately before the sale. Because Indiana courts haven't outlined how to appraise these shares, the Court of Appeals followed the provisions of the Dissenters' Rights Statute and adopted the reasoning in Cede & Co. v. Technicolor, Inc., 684 A.2d 289, 298 (Del. 1996), to conclude it was appropriate for the parties' experts valuing Lees Inns to consider the company's future plans and prospects, including building or selling hotels, and to consider the potential impact that had on the value of Lees Inns as of the valuation date.

The Court of Appeals also affirmed Lester violated his fiduciary duty to Lees Inns, the trial court didn't abuse its discretion in denying the appointment of an expert, and the amount of interest awarded to the trust.

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  1. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

  2. "Brain Damage" alright.... The lunatic is on the grass/ The lunatic is on the grass/ Remembering games and daisy chains and laughs/ Got to keep the loonies on the path.... The lunatic is in the hall/ The lunatics are in my hall/ The paper holds their folded faces to the floor/ And every day the paper boy brings more/ And if the dam breaks open many years too soon/ And if there is no room upon the hill/ And if your head explodes with dark forbodings too/ I'll see you on the dark side of the moon!!!

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  5. My mother got temporary guardianship of my children in 2012. my husband and I got divorced 2015 the judge ordered me to have full custody of all my children. Does this mean the temporary guardianship is over? I'm confused because my divorce papers say I have custody and he gets visits and i get to claim the kids every year on my taxes. So just wondered since I have in black and white that I have custody if I can go get my kids from my moms and not go to jail?

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