Court refuses to take stand on minority discount in buyback of shares

Curran v. Curran, 2016 Conn. Super. LEXIS 77 (Jan. 12, 2016)

A contract is a contract. That’s the conclusion a court recently reached in the context of a share buyback, after one party to a valuation agreement belatedly attacked the appraiser’s use of a minority discount and the resulting drop in share price.

The plaintiff owned a 30% interest in a VW dealership. Initially, he asked for a dissolution of the company, but the company obtained permission from the court to buy back his shares. The court urged the parties to take charge of the valuation process in order to avoid “the needless expense of a ‘battle of appraisers'" or a judicial proceeding.

The parties eventually retained a sole appraiser, whom both sides knew from past appraisals he had done of the company. Prior to formally engaging the appraiser, in a court hearing, the parties broached the issue of whether it was appropriate to apply a minority discount in valuing the plaintiff's shares. The court declined to weigh in on the subject,  but it told the parties the minority discount issue should form “part of the discussion” they needed to have over the valuation methodology.

Ultimately, the parties stipulated that the appraiser's value determination "shall be final and binding, with no right of appeal for any party."

Regardless of the parties' commitment to the agreement, the plaintiff subsequently challenged the appraiser's decision to apply a 25% minority discount—which lowered the value of his interest by about $100,000—in court.

The court was not obliging. To find out more about the court's reaction, click here.