Case Study: Shareholder Dispute

 
 

Shareholder disputes and partnership disputes often include complex financial issues combined with high emotions and complicated legal issues. For more background information and related financial issues refer to our blog post: Shareholder Disputes.

Challenges

  • High level of contentiousness

  • Near certainty of going to trial given the allegations in the case

  • No clear and consistent definition of Fair Value

Assignment

  • Corporate buy out of a family member owning an 8% interest in a closely held business

  • Oregon Statutory Fair Value determination triggered by an ORS 60.952(6) election

  • Determine and testify to Fair Value with and without discounts
    for lack of control and lack of marketability

Outcome

The Judge carefully listened to fact testimony and expert testimony from Jay Sickler and the other business valuation expert. When it came to valuation discounts the Court determined that because “none of the alleged conduct was oppressive” that discounts for lack of control and lack of marketability would apply. This ruling essentially took the value of the shares into the realm of the more commonly understood fair market value, where discounts do apply. The Court adopted our methodology, with a couple of adjustments, because:

  • We carried out a Valuation vs. a Calculation of Value

  • We interviewed senior management of the Company

  • We showed that bonuses to underpaid employee-shareholders were not disguised dividends

  • Our inputs regarding future capital expenditures and company-specific risk premium were based on interviews with the Company

What Counsel Had to Say

Simply, Jay and his team were the most valuable resource we had throughout the course of our case, including through trial. From working with the client to develop our strategy, to digesting the other expert’s report, to presenting a compelling narrative at trial, the Cogence team was with us every step of the way. Jay’s trial presentation was top notch, and it led the judge to adopt in her opinion Jay’s methodology and nearly every conclusion he reached. We were lucky to have Cogence on our side.

Nicholas Kampars, Wildwood Law Group LLC

April 2019

 
Forensics, Case StudiesCogence Group