ILNews

All elements of 'fair value' must be considered

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Diocese of Fort Wayne-South Bend in December, but U.S. District Judge Robert Miller later reduced that to about $540,000 to put the damages for suffering under the statutory cap of $300,000.

  2. I was trying to remember, how did marriage get gay in Kentucky, did the people vote for it? Ah no, of course not. It was imposed by judicial fiat. The voted-for official actually represents the will of the majority in the face of an unelected federal judiciary. But democracy only is just a slogan for the powerful, they trot it out when they want and call it bigotry etc when they don't.

  3. Ah yes... Echoes of 1963 as a ghostly George Wallace makes his stand at the Schoolhouse door. We now know about the stand of personal belief over service to all constituents at the Carter County Clerk door. The results are the same, bigotry unable to follow the directions of the courts and the courts win. Interesting to watch the personal belief take a back seat rather than resign from a perception of local power to make the statement.

  4. An oath of office, does it override the conscience? That is the defense of overall soldier who violates higher laws, isnt it? "I was just following orders" and "I swore an oath of loyalty to der Fuhrer" etc. So this is an interesting case of swearing a false oath and then knowing that it was wrong and doing the right thing. Maybe they should chop her head off too like the "king's good servant-- but God's first" like St Thomas More. ...... We wont hold our breath waiting for the aclu or other "civil liberterians" to come to her defense since they are all arrayed on the gay side, to a man or should I say to a man and womyn?

  5. Perhaps we should also convene a panel of independent anthropological experts to study the issues surrounding this little-known branch of human sacrifice?

ADVERTISEMENT