OHIO'S UNFAVORABLE STANDARD OF VALUE IN APPRAISALS

The Ohio statute's definition of “fair cash value” is unfavorable to dissenting shareholders in public and private companies:

The fair cash value of a share for the purposes of this section is the amount that a willing seller, under no compulsion to sell, would be willing to accept, and which a willing buyer, under no compulsion to purchase, would be willing to pay, but in no event shall the amount thereof exceed the amount specified in the demand of the particular shareholder.216

In computing . . . fair cash value, any appreciation or depreciation in market value resulting from the proposal submitted to the directors or to the shareholders shall be excluded.217

Importantly, fair cash value is to be determined as of the day prior the shareholders' vote.218 Under the Ohio statute, if there is an active market for a company's shares, the value for an appraisal will be no more than the market price.219 In addition, the market price must be adjusted to reflect any impact on the market in reaction to the merger proposal.220 In the landmark Armstrong case, the Ohio Court of Appeals conceded that shareholders seeking appraisal would likely receive less than shareholders who accepted the merger terms:

[I]t is apparent that [appraisal] is likely to produce a fair cash value to be paid dissenting shareholders different from that received by assenting shareholders unless the fundamental corporate change is found to have had absolutely no effect on the market price of the stock, an unlikely possibility.221

The appraisal remedy in Ohio is unlike any other state. One commentator described the hapless position of an Ohio dissenting public company shareholder as follows:

The [Armstrong] court thereby rendered the appraisal remedy useless to minority shareholders of publicly traded corporations, and guaranteed that it will not be invoked in this context in the future. No matter how low the merger price, it will invariably exceed the prevailing market price prior to the announcement of the merger; thus no sensible shareholder would elect to dissent, and the appraisal remedy in Ohio has been rendered largely impotent by judicial construction.

To make matters worse, the Ohio Supreme Court has held that the appraisal remedy is the exclusive remedy available to minority shareholders complaining about the fairness of a merger price. See Stepak v. Schey, 553 N.E.2d 1072, 1075 (Ohio 1990); Armstrong, 513 N.E.2d at 798. The appraisal remedy in Ohio is thus both useless and exclusive. [emphasis added] In effect, as long as the controlling shareholder pays any amount over the prevailing market price, it is free to cash out the minority shareholders and appropriate to itself any value not accurately reflected in the market price.222

Moreover, Ohio's fair cash value standard negatively impacts shareholders of private companies because it allows discounts that would not be permitted in calculating fair value. Using the willing buyer–willing seller approach, Ohio has concluded that minority and marketability discounts are appropriate. In an oppression case, the Ohio Court of Appeals concluded:

The cases that appellant cites in support of his public policy argument [opposing discounts] are distinguishable because they all are from foreign jurisdictions where statutory law provides that a dissenting shareholder is entitled to the “fair value” of his or her shares. The concept of “fair value” is far different from the “fair cash value” concept.223

FAIR VALUE NORMALLY EXCLUDES DISCOUNTS AND PREMIUMS

Most States Now Reject Minority and Marketability Discounts

An issue in many fair value cases is whether discounts and/or premiums are applicable. If applicable, the issue becomes the magnitude of such discounts and/or premiums. The primary issue is shareholder-level discounts. The debate for the courts is whether minority shares should be valued at a pro rata portion of enterprise or by valuing the shares themselves based on their minority status. The debate is important because the use of discounts or their nonuse can result in the unfair enrichment of one of the parties.

For fair value, the issue centers on the definition of what the minority shareholders had prior to the valuation date and what they have lost because of the transaction. When the standard of value focuses on what was lost (i.e., a pro rata share of enterprise value), discounts would be detrimental to the minority shareholders.

If, instead, the standard of value becomes what the investor could reasonably realize in the market for a minority position (fair market value), then discounts for lack of control and lack of marketability would commonly be considered. The minority shares would have less value because buyers normally consider liquidity and the lack of control before purchasing minority shares. The argument for the use of fair market value is that if minority shareholders were to sell in the open market, they would receive a discounted price for their shares and that, in fact, these shareholders were aware of the minority status of their shares when they initially acquired them. The advocates of discounts assert that the failing to consider marketability and minority discounts unfairly enriches minority shareholders.

Probably the most popular argument against discounts for minority shareholders involves the original purpose of appraisal, which is to compensate minority shareholders for what was taken from them. If the appraisal statutes were created to protect minority shareholders from controlling and/or opportunistic shareholders, a minority discount would be contrary to logic, as the majority shareholders would obviously benefit from a reduction in the amount they would have to pay the minority after a squeeze-out.

With respect to marketability discounts, the argument against applying a discount for lack of marketability is that the judicial proceeding itself creates a market for the shares, and therefore no marketability discount is applicable. If the minority shareholders were to lose a pro rata portion of the corporation's value because they were forced out, penalizing the minority would reward rather than deter the controller. Indeed, controllers would be encouraged to engage in freeze-outs if by doing so, they could buy out the minority at a diminished price and thereby receive a premium for mistreating the minority.

On the other hand, adding control premiums to valuations of minority shares would enrich the minority at the expense of the majority. As Hamermesh and Wachter explain:

Control value does not exist in a corporation owned by a fluid, disaggregated mass of shareholders. Rather, it is created by the aggregation of shares. Such aggregation of shares entails a reduction in agency costs, resulting in the creation of value that fairly belongs to the entity aggregating the shares [emphasis added].224

Excluding value associated with control from the measurement of fair value does not impose a “minority discount”; it simply denies shareholders value that does not inhere in the firm in which they are invested. Thus, third-party sale value is an inappropriate standard for determining the fair value of dissenting shares because it incorporates elements of value—associated with acquisitions of control by third parties—that do not belong to the acquired enterprise or to shares of stock in that enterprise.225

Thus, in a majority of states, fair value in an appraisal now excludes any discount for lack of marketability or minority interest and any premium for control. Delaware explicitly took this position in Cavalier, and most states now concur.

Levels of Value

Levels of value have been presented and explained by two leading valuation authorities in recent editions of their books: Shannon Pratt's Valuing a Business226 and Christopher Mercer's Business Valuation: An Integrated Theory.227 Pratt's levels-of-value chart shows five levels of value for publicly traded companies: synergistic (strategic) value, value of control shares, market value of freely traded minority shares, value of restricted stock, and value of nonmarketable shares.228 Mercer describes the levels of value as strategic control value, financial control value, marketable minority value, and nonmarketable minority value.229

Discounts and premiums should also be viewed in light of the type of valuation methodology used and the resultant level of value arrived at based on that method. If indeed shareholder-level discounts (or premiums) are applicable, they should be applied after the valuation of the corporation itself.230

The levels of value are described as follows:

• Synergistic value or strategic control value—This is the highest value that would be paid for control shares by a buyer who expects to benefit from synergies.
• Value of control shares or financial control value—This value does not include anticipated synergies, but includes “the ability of a specific buyer to improve the existing operations or run the target company more efficiently.”231
• Marketable minority value—The next level is minority shares that may be publicly traded. Although lacking control, a marketable minority share is easily liquidated. For example, shares traded on the New York Stock Exchange are marketable minority shares.
• Nonmarketable minority value—The lowest level of value is the nonmarketable minority share of a privately held company. This share does not have control over management, the board of directors, or a company's direction without cooperation from the majority. The nonmarketable minority share is not traded on a public exchange, and, therefore, is not easily liquidated.232

The levels of value represent a conceptual framework, and the levels can in fact overlap. For example, unless one can extract more cash flow, the so-called minority marketable shares may be trading at or close to control value. As discussed ahead, many commentators believe that actively traded minority shares often trade at or close to financial control value. Indeed, Mercer's book presents a levels-of-value diagram that shows marketable minority value overlapping financial control value,233 as does a widely cited article by Mark Lee.234

Discounts at the Shareholder Level

As previously mentioned, the courts have frequently rejected the notion of discounting shares because of minority status in fair value cases. The courts generally view the appraisal as protecting the value of those minority shares in situations where that value is intentionally being diminished by the controlling shareholders.

As discussed earlier, Tri-Continental stated in 1951 that “under the appraisal statute . . . the stockholder is entitled to be paid . . . his proportionate interest in a going concern.” The Iowa Supreme Court cited Tri-Continental in its 1965 Woodward v. Quigley decision when it concluded that there should be no minority discount in an appraisal.235 Woodward also cited a 1942 Iowa decision that said, “[E]ach share is worth the figure found by dividing the net value of the corporate property by the total shares outstanding at the time of the arbitration.”236 In the same vein, the Missouri appellate court in Dreiseszun stated in 1979, “The statute does not . . . intend that a minority stockholder be in any way penalized for resorting to the remedy afforded thereunder.”237

As discussed earlier, the Delaware Supreme Court rejected shareholder-level discounts in Cavalier in 1989.238 The Maine Supreme Judicial Court cited Cavalier in McLoon Oil239 and explained why it rejected discounts:

In the statutory appraisal proceeding, the involuntary change of ownership caused by a merger requires as a matter of fairness that a dissenting shareholder be compensated for the loss of his proportionate interest in the business as an entity. The valuation focus under the appraisal statute is not the stock as a commodity, but rather the stock only as it represents a proportionate part of the enterprise as a whole. The question for the court becomes simple and direct: What is the best price a single buyer could reasonably be expected to pay for the firm as an entirety? The court then prorates that value for the whole firm equally among all shares of its common stock. The result is that all of those shares have the same fair value.

Our view of the appraisal remedy is obviously inconsistent with the application of minority and nonmarketability discounts.240

Some states reject discounts when shareholders are squeezed out by means of a reverse stock split. Kansas held in 1999 that minority and marketability discounts should not be applied when the fractional share resulted from a 1-for-400 reverse stock split intended to eliminate a minority shareholder's interest in the corporation.241 Iowa took the same position in 2001.242

Several states that previously permitted discounts have reversed their positions in recent years. For example, the Georgia Court of Appeals in 1984 had permitted minority and marketability discounts;243 the same court in 2000 changed its position and reversed a lower court decision that permitted these discounts:

[T]he majority of other jurisdictions with similar [appraisal] statutes have held that minority and marketability discounts should not be applied when determining the fair value of dissenting shareholders' stock. These courts have reasoned that using discounts injects speculation into the appraisal process, fails to give minority shareholders the full proportionate value of their stock, encourages corporations to squeeze out minority shareholders, and penalizes the minority for taking advantage of the protection afforded by dissenters' rights statutes.244

The Colorado Supreme Court reversed precedent in 2001, ruling that marketability discounts could no longer be applied in appraisal cases.245 Similarly, a 1982 Kentucky appellate decision had permitted a discount for lack of marketability,246 but a 2011 Kentucky Supreme Court decision overruled this precedent, ruling, “Once the entire company has been valued as a going concern, . . . the dissenting shareholder's interest may not be discounted to reflect either a lack of control or a lack of marketability.”247

In addition, several states, such as Connecticut, Florida, Illinois, Mississippi, Nevada, and South Dakota, have amended their appraisal statutes in recent years to bar discounts.

New York rejects minority discounts but accepts marketability discounts. The 1985 New York Blake case rejected minority discounts:

Business Corporation Law §1104 [a dissolution statute] was enacted for the protection of minority shareholders, and the corporation should therefore not receive a windfall in the form of a discount because it elected to purchase the minority interest pursuant to Business Corporation Law §1118 [election to purchase]. Thus, a minority interest in closely held corporate stock should not be discounted solely because it is a minority interest.248

Discounts for lack of marketability are often accepted in New York. In a 1987 New York case approving a buyout to avoid dissolution, the appellate court considered Blake, as well as decisions in other states that rejected discounts, but nonetheless allowed a marketability discount in determining the fair value of the minority shares. It stated, “A discount for lack of marketability accurately reflects the lesser value of shares that cannot be freely traded, whether they be a minority or a majority of the shares, and as such is an appropriate adjustment.”249 However, it added, “The companies' expert's proposed discount of 35% contains an element of discount for minority status and is excessive. A discount for lack of marketability of no more than 10% is appropriate in this case.”250

Other shareholder-level discounts that are customarily weighed in determining fair market value in non-appraisal cases are blockage (or illiquidity) discounts and discounts for nonvoting or low-vote shares. However, if the court awards the dissenting shareholder a pro rata portion of the value of a company, these discounts would not be relevant to fair value.

The “Implicit Minority Discount”

Several Delaware decisions have applied the impact of an “implicit minority discount”251 (IMD) to guideline company valuations, thereby adjusting them upward. In an article criticizing the court's use of IMD, Hamermesh and Wachter described the concept:

The financial/empirical assertion of the IMD is quite simple: no matter how liquid and informed the financial markets may be, all publicly traded shares persistently and continuously trade in the market at a substantial discount relative to their proportionate share of the value of the corporation. This discount, it is said, arises because the stock prices on national securities markets represent “minority” positions, and minority positions trade at a discount to the value of the company's equity. The consequence of the IMD in appraisal proceedings is limited in scope, but substantial in scale: in applying a valuation technique . . . comparable company analysis . . . that estimates subject company value by reference to market trading multiples observed in shares of comparable publicly traded firms, the result must be adjusted upward by adding a premium to offset the “implicit minority discount” asserted to exist in the comparable companies' share prices.252

The Court of Chancery accepted an IMD for the first time in Spectrum Technology (1992), where the respondent's expert added a 30% adjustment for an IMD adjustment in her guideline company valuation.253 The Chancery Court's next appraisal that accepted a guideline company analysis was Kleinwort Benson in 1995. Petitioner's expert added an 86% premium and respondent's expert testified that a minority discount of 10% to 15% was reasonable; the court applied a 12.5% adjustment.254 The court noted that although it had rejected an IMD in Interstate Bakeries,255 “our different conclusions result from differences in the [testimony] presented by the parties in the respective cases.”256

Since 2000, Delaware has adjusted guideline company valuations for an IMD whenever both sides did so, most often applying a 30% premium. In one case, the Court of Chancery added a premium where neither expert did so.257 Only once has Delaware adjusted for IMD over the respondent's objection.258 Otherwise, when neither side's valuation addressed IMD, Delaware has applied no adjustment for an IMD.

There are few decisions in other states regarding IMDs. New Jersey rejected an IMD, commenting, “Our research suggests that the concept of an inherent, or embedded, minority discount is not a concept generally accepted in the financial community.”259 The concept was also rejected in Nevada,260 but accepted in Maine.261

The first published challenge to the assumption that publicly traded share prices necessarily include an IMD preceded any Delaware cases using IMDs. Eric Nath posited in 1990 that the freely traded market prices of a company already incorporated the company's financial control positives or negatives and therefore reflected control value.262

Decisions since 2000 that adjusted for IMDs relied on citations that were outdated and that expressed views that the writers had modified or abandoned. When the Court of Chancery applied a control premium in Le Beau (1998), it cited then-current books by Shannon Pratt and Chris Mercer.263 By 1999, Pratt had expressed a different view, writing, “Valuation analysts who use the guideline public-company valuation method and then automatically tack on a percentage ‘control premium' . . . had better reconsider their methodology.”264 Pratt had included this comment in the fourth edition of Valuing a Business in 2000, but the Court of Chancery apparently was not aware of this change, as it again cited Pratt's 1996 third edition in its 2001 Agranoff decision. Indeed, Andaloro (2005) cited the third edition as support for IMD,265 even though the same decision cited the fourth edition in discussing DCF.266

In 2001, Pratt further clarified his position in the first edition of Business Valuation Discounts and Premiums. Pratt quoted an article by Mark Lee267 and then wrote that “given the current state of the debate, one must be extremely cautious about applying a control premium to public market values to determine a control level of value.”268 Similarly, Mercer's 2004 book agreed with Nath's 1990 article269 and explained that “unless there are cash flow–driven differences between the enterprise's financial control value and its marketable minority value, there will be no (or very little) minority interest discount.”270

Several professors of corporate law have questioned the assumption that most market prices include an IMD. Professor Richard Booth wrote in 2001 that “it is not necessarily the case that actual market price is always less than fair market price.”271 Professor William Carney argued in 2003 against assuming that market prices of most publicly traded shares include a significant IMD, concluding, “Even if all values, both present and potential, are valued in the market price for the firm's shares, one would not expect to find a discernible control premium in a widely held firm that is well managed and appears to offer little probability of a transfer of control.”272

The 2007 Hamermesh and Wachter article argued that premiums paid in acquisitions are not justification for assuming that market prices include IMD, stating, “[N]ot a single piece of financial or empirical scholarship affirms the core premise of the IMD—that public company shares systematically trade at a substantial discount to the net present value of the corporation.”273 They also pointed out the inconsistency of applying IMDs to guideline company valuations but not to terminal value multiples used in DCF analyses.274

Although Delaware courts have adjusted guideline company valuations for IMD on numerous occasions, they have never applied an IMD adjustment to a terminal value calculated by using guideline companies' multiples. The Court of Chancery has used multiples to calculate terminal value in four appraisal opinions, but no adjustments for IMDs were proposed by petitioners' experts in any of these cases.275 The inconsistency between adjusting for the IMD in guideline company valuations and not adjusting terminal values based on multiples derived from guideline companies was acknowledged in 2006, when the court stated that “an exit multiple based on minority trading data . . . [is] a less favored technique [for determining terminal value] that raises questions about whether it embeds a minority discount.”276

Later in 2007, Vice Chancellor Lamb recognized that there is a debate about the IMD, citing the Hamermesh/Wachter and Booth articles, which both “argu[e] that the implicit minority discount has not gained general acceptance in the financial community,”277 as well as a contrary 1999 article by John Coates278 that argued that adjusting for an IMD is sometimes appropriate.

IMDs was criticized from a business valuation point of view in Business Valuation Review in 2008. The article concluded, “The default assumption should be that publicly traded shares sell at a company's going-concern value. If petitioner's expert concludes that an IMD is appropriate in a given situation, its magnitude should be based on a comparison between acquisition multiples and market multiples.”279

No Premiums Are Applicable to DCF Values

When using control cash flows in a DCF valuation method, a control premium is not warranted. Delaware rejected a control premium in Radiology Associates because “[t]he discounted cash flow analysis, as employed in this case, fully reflects this value without need for an adjustment.”280 The view that the DCF value of a company should not be adjusted for a control premium is consistent with generally accepted practice in the financial community. Pratt explains that a DCF value based on projected cash flows does not require the addition of a control premium.281

It is undisputed in Delaware that no premium should be applied when terminal value is determined using a growth model (the academically preferred approach). Premiums to DCF valuations using growth models were explicitly rejected in 2004 in both Dobler and Lane, even though the court adjusted for IMDs in its guideline company valuations in both cases.282 The court in Dobler, citing Pratt, said:

[DCF] value should represent the full value of the future cash flows of the business. Excluding synergies, a company cannot be worth a premium over the value of its future cash flows. Thus, it is improper and illogical to add a control premium to a DCF valuation.283

It added, “A DCF is a final valuation that does not need any additional correction, such as a control premium.”284

Discounts at the Corporate Level

Corporate-level discounts are those that apply to the company as a whole. Since they apply to the company as a whole, corporate-level discounts should be deducted from the corporate valuation before considering shareholder-level discounts and premiums.285 The New Jersey Supreme Court stated in Balsamides, “Discounting at the corporate level may be entirely appropriate if it is generally accepted in the financial community in valuing businesses.”286

The Delaware courts have historically understood the necessity of corporate-level adjustments in certain limited circumstances. In Tri-Continental, the company being valued was a closed-end investment company. Because of this structure, shareholders of the company had no right to demand their proportionate share of the company's assets. For this reason and due to the company's various leverage requirements, the market value of the corporation as a whole was lower than its net asset value. The court therefore applied a discount at the corporate level before valuing the minority shares.

Several corporate-level discounts may be applied in a fair value determination. The valuator may consider, when applicable, application of a trapped-in capital gains discount, a portfolio (nonhomogeneous assets) discount, a contingent liabilities discount, or a key-man discount. In Hodas v. Spectrum Technology, a 1992 Delaware appraisal action, the court accepted the 20% key-man discount determined by the company's expert, concluding that the founder's “departure would mean the demise of the company.”287 The court rejected a 40% corporate-level lack of marketability discount applied by the appraiser because of the purported lack of a readily available market for the company as a whole.

Control Premiums at the Corporate Level

Most states reject control premiums in appraisals. Although several decisions discuss applying control premiums, a careful reading of most of these decisions leads to the conclusion that the courts are not actually adding a control premium to their valuations, but rather are merely making an adjustment to eliminate a perceived IMD. They are attempting to avoid applying an impermissible minority discount and often do so by making an adjustment by considering premiums paid in other transactions.

Only three states (Vermont, New Jersey, and Iowa) have actually applied control premiums at the corporate level in appraisals, and then only in certain cases. These cases effectively use third-party value.

Vermont courts have applied control premiums in two cases. In Trapp Family Lodge, the Vermont Supreme Court ruled:

[T]o find fair value, the trial court must determine the best price a single buyer could reasonably be expected to pay for the corporation as an entirety and prorate this value equally among all shares of its common stock.288

The control premium that was applied was based on comparable acquisitions of other hotels and motels. Another Vermont decision cited Trapp Family Lodge when it approved a control premium289 and noted that “the projected cash flow . . . was not adjusted to reflect decisions by a controlling purchaser.”290

The New Jersey Superior Court supported a limited control premium in Casey v. Brennan, concluding that “in a valuation proceeding a control premium should be considered in order to reflect market realities, provided it is not used as a vehicle for the impermissible purpose of including the value of anticipated future effects of the merger.”291

The 2007 Iowa Supreme Court decision in Northwest Investment permitted a control premium in a bank appraisal “[b]ecause the minority shareholders presented credible evidence the corporation could obtain a significant control premium in the event of a sale”; the court affirmed a control premium applied by the lower court.292 Interestingly, none of the other six appraisal decisions by the Iowa Supreme Court in the past two decades discussed control premiums.

Although no reported New Mexico appraisal has applied a control premium, the state's Supreme Court, stated that a control premium is a question of fact to be determined on a case-by-case basis assessment.293

Delaware does not apply control premiums at the parent company level. However, in its anomalous 1992 Rapid-American decision, the Delaware Supreme Court ruled that control premiums should be applied to the valuations of the holding company's subsidiaries.294 Rapid-American was a holding company whose three subsidiaries operated in widely different industries. The Delaware Supreme Court concluded that since the Court of Chancery had used guideline companies to value the subsidiaries, it had “treated Rapid as a minority shareholder in its wholly-owned subsidiaries.” The Supreme Court stated that guideline market prices “do not reflect a control premium,” but the inherent value of the parent included the control value of its subsidiaries.295 On remand, the Court of Chancery applied control premiums to each subsidiary based on petitioners' expert's testimony as to “the average p/e ratios of companies in the industry as well as the average p/e ratios of all companies and the average control premium applicable to companies in the industry and to all companies.”296 During the 1990s, control premiums were twice more applied to Delaware valuations of subsidiaries.297

However, there is no apparent reason for the value of an operating business to be higher if it operates as a subsidiary rather than as a division. This distinction elevates form over substance.298 In 2001, Vice Chancellor (now Chancellor) Leo Strine discussed expressed concern about this discrepancy, commenting, “It seems a fine point to conclude that the value of the entity as a going concern includes the potential to sell controlled subsidiaries for a premium but not the potential to sell the entity itself.”299

Hamermesh and Wachter criticized the discrepancy in a 2007 article:

It takes little imagination to see that this rationale, carried to its logical conclusion, compels the inclusion of a control premium, measured by a hypothetical third-party sale value, in all share valuation cases, not just in situations in which the corporation owns its operating assets through controlled subsidiaries. A corporation's control of directly owned assets is at least as great as it would be if those assets were held through controlled subsidiaries.300

Since 1998 there have been no cases that have explicitly applied a control premium to a subsidiary, despite the fact that several subsequent Delaware appraisal cases valued holding companies. Indeed, no control premiums were added to subsidiary values even in cases where several subsidiaries were separately valued by the court.301

Some States Permit Considering Extraordinary Circumstances in Determining Whether to Apply Discounts

Some states permit the application of a discount for lack of marketability in extraordinary circumstances. This requires more than just a lack of a public market, for the shares. The court will apply a discount only if merited by the specific facts and circumstances of the case. An example of an extraordinary circumstance is when an award would harm the continuing shareholders. In Advanced Communication Design, a minority shareholder sought dissolution as a counterclaim to the closely held company's suit against him for breach of fiduciary duty.302 The Minnesota Supreme Court chose not to apply a bright-line rule as to marketability discounts. It decided that not applying a marketability discount in this case would be unfair to the company because it would place unrealistic financial demands on it, resulting in an unfair wealth transfer from the remaining shareholders to the dissenter. Financial data presented in the record led to the conclusion that in all probability, the unfair wealth transfer would strip appellant corporation of necessary cash flow and earnings for future growth.

Devivo v. Devivo, a Connecticut oppression case, cited Advanced Communication Design when the court applied a 35% marketability discount to the value of a 50% interest because of the company's large debt, its required capital expenditures, and its declining growth rate.303

Another extraordinary circumstance is when a minority shareholder attempts to game the system. The ALI offers the example of a dissenting shareholder withholding approval of a merger in an attempt to exploit the appraisal-triggering transaction in order to divert value to the dissenter at the expense of other shareholders. In that case, the court may determine that the dissenter is entitled to an amount less than a pro rata portion on the company's value.304

Extraordinary circumstances are subject to review. In Lawson Mardon Wheaton,305 the New Jersey Supreme Court reversed the trial court's holding that an extraordinary circumstance existed in that the dissenters had exploited a change that they had previously supported. The Supreme Court stated that the dissenters wanted to sell their stock back to the corporation because they had no confidence in the new management and it decided that these stockholders were validly exercising their right to dissent. The court held that to find extraordinary circumstances in this case would be inconsistent with the purpose of the statute.

Court Decisions Have Moved toward Rejecting Discounts

The treatment of discounts is largely addressed by each state individually. Some states prohibit discounts in their statutes, and others leave the decision on discounts to the judgment of the courts. Precedents set by case law are not, however, set in stone and, as discussed earlier, some states have reversed earlier decisions regarding the application of minority or marketability discounts at the shareholder level.

Exhibit 3.4 summarizes many of the significant state and federal court decisions on the application of discounts. The published opinions that have addressed these issues vary considerably from state to state. Some reject discounts by statute, others by case law. Some apply discounts consistently, others on a case-by-case basis, depending on the specific circumstances of each case. Because appraisals and buyouts in oppression cases are under state law, federal courts follow state statutes and case law.

The decisions summarized in Exhibit 3.4 show that several states which formerly permitted discounts now reject them.306 No states have moved in the other direction. A few states have no published court decisions concerning shareholder-level discounts in dissent or oppression cases.307

EXHIBIT 3.4 Significant Court Decisions Regarding Discounts

EQUITABLE ADJUSTMENTS TO FAIR VALUE

Consideration of Wrongdoing in Calculating Fair Value

In states that have both dissenters' rights and oppression statutes, the definition of fair value is usually stated in the dissenters' rights statute unless the oppression statute differs in valuation standard of value in oppression is different.308 Although fair value in dissent and oppression cases is often thought of as being the same, the valuation can be impacted by how the state's statute is written and how the court determines what is fair. For example, New Jersey's dissolution statute permits equitable adjustments to fair value in cases of oppression, but not for appraisal.

The RMBCA's definition of fair value asserts that although the new definition denies the application of discounts, fair value in appraisal should be seen as different from fair value in dissolution because of the differing circumstances of majority conduct in oppression and dissent cases. The RMBCA's comment to § 14.34 (oppression) states:

The two proceedings [appraisal and oppression] are not wholly analogous . . . and the court should consider all relevant facts and circumstances of the particular case in determining fair value. For example, liquidating value may be relevant in cases of deadlock but an inappropriate measure in other cases. If the court finds that the value of the corporation has been diminished by the wrongful conduct of controlling shareholders, it would be appropriate to include as an element of fair value the petitioner's proportional claim for any compensable corporate injury [emphasis added]. In cases where there is dissension but no evidence of wrongful conduct, fair value should be determined with reference to what the petitioner would likely receive in a voluntary sale of shares to a third party, taking into account his minority status. If the parties have previously entered into a shareholders' agreement that defines or provides a method for determining the fair value of shares to be sold, the court should look to such definition or method unless the court decides it would be unjust or inequitable to do so in light of the facts and circumstances of the particular case.309

The comment suggests that in contrast to an appraisal proceeding (where a dissenter receives an undiscounted proportionate value of the company as a going concern), an oppression action permits consideration of the degree and circumstances of oppression and misconduct by the majority.

The corporation may elect to buyout dissenters' shares at their fair value within the statutory time frame if it fears liability for oppression, abuse, fraud, or mismanagement, or if the corporation anticipates a court-ordered dissolution, or if it simply wishes to avoid any legal proceeding.310 The dissenters' dissolution proceeding will be stayed until an equitable settlement has been negotiated. Electing a buyout may also help the corporation avoid the “equitable adjustments” the court might make in a case where wrongdoing is found, as well as other costs associated with a court proceeding. For example, the corporation in a Connecticut case avoided equitable adjustments by electing to purchase the petitioners' shares. The family members who were 30.83% minority owners had petitioned to company. The court agreed that there was dissension but found there was no oppression. It determined that the failure to continue the employment of family members was not oppressive because they continued to receive compensation and benefits.311

An equitable adjustment may be the award of damages, expert fees, and attorney fees. In other circumstances, the courts may adjust a fair value determination by using discounts and premiums to raise or lower the value of the shares to achieve what is perceived to be an equitable result. In attempting to reach an equitable conclusion, the court may or may not strictly adhere to all of the underlying assumptions that valuation professionals commonly associate with fair value.

The New Jersey dissolution statute312 allows the court to adjust the valuation date or make inclusions or exclusions of certain elements in the calculation of fair value. In Balsamides,313 a marketability discount was used to reduce the value of the shares in the corporation because the oppressed shareholder would be remaining with the corporation. The very same day, however, a complementary decision handed down in a dissenting shareholder case, Lawson Mardon Wheaton, rejected all discounts.314 In both cases, the court considered the equities of the circumstances before making its decision.

The valuator needs to be aware that discounts may be considered by the court because of improper conduct, as in Balsamides, or where a damage claim for the loss of a job or other forms of wrongdoing can be brought in conjunction with the judicial valuation. Accordingly, the practitioner should consult with counsel and obtain direction as to the applicability of extraordinary adjustments in connection with a claim of improper conduct.

Although sometimes employed as punishment in oppression cases, discounts are generally a poor calibration of what the actual recompense for damages should be. Some commentators have suggested that there are more appropriate punishments for malfeasance, such as payment of court fees, the award of damages, or the use of injunctions.316

Damage Claims

The loss of salary can be a significant issue in many oppression cases. Since a characteristic of a closely held business is that its shareholders are often its key employees, those shareholders have the expectation of income from employment (salary and benefits) as well as the benefits associated with ownership. In such a case, behavior by the majority to eliminate that job might be more damaging to the minority shareholder's interest than the elimination of the profits from the ownership. Here we are referring only to the difference between the amount paid to the shareholder-employee and the salary that would be paid for similar work at a comparable company if such work is available. For example, consider a situation where a shareholder-employee of a corporation earned a salary of $175,000 and perks worth $25,000. A nonshareholder employee with a comparable position at a comparable company would earn $125,000. The termination of the shareholder-employee causes him or her to lose the ability to receive an incremental $75,000 per year. If the fair value of the shareholder's investment included compensation for the loss of his or her job, he or she would have to receive the $75,000 annual difference from the time of termination to the time of the trial. In addition, that $75,000 may continue for a given or specified period of years after the date of trial, depending on the judgment of the court.317

Several cases have addressed the fact that minority shareholders often rely on their salary as the principal return on their investment.318 The violation of the shareholder's expectation to continue employment in a close corporation may be sufficient to incur damages, back pay, or other adjustments to the value of his or her shares.319 It is often difficult to ascertain the appropriate value and it may largely become a judgment call for the court.320 The New Jersey Superior Court, for instance, in Musto v. Vidas321 suggested that after the petitioning shareholder's termination, the shareholder should continue to receive the same compensation as the defendants, as provided for in the initial shareholder agreement, for a period of two years after the shareholder was frozen out.

SUMMARY

We have traced the development of fair value from the time when majority rule was instituted in place of the unanimity requirement that had previously existed. While fair market value evolved to mean the value arrived at in a hypothetical transaction between willing participants, fair value was created for the purpose of shareholder dissent and oppression in order to protect a minority shareholder and to compensate the shareholder for that which has been taken.

The attempt to establish exactly what has been taken is the basis for the controversy over fair value. The ABA, the ALI, state legislatures, case law, and the valuation profession itself all provide guidance for the valuation professional. As we have discussed, in many cases these sources also specify certain elements of the valuation, such as choice of valuation date and the application of discounts and premiums, that must be followed. However, the valuator must still determine the type of economic enterprise he or she is valuing, the context in which the valuation arises, and the best methods to perform the valuation.

Although dissenters' and oppressed shareholders' rights have developed throughout the twentieth century, fair value litigation was infrequent until Delaware's 1983 Weinberger decision. That seminal decision established that DCF and other customary valuation techniques, rather than a formula based solely on historic data, should be used for valuing a business under the relevant statutes. In the past three decades, fair value litigation has substantially increased in both appraisal and oppression cases.

Delaware's courts' appraisal and other corporate law decisions have significantly influenced courts in other states. Since the Delaware Supreme Court's 1989 Cavalier decision, many states have adopted Delaware's position that dissenting shareholders are entitled to going-concern value, a pro rata share of enterprise value, with no minority or marketability discounts and no control premium. A Delaware appraisal values a company based on the way the company is currently being run, not on how an acquirer might run it. However, normalizing adjustments to eliminate the impact of usurped opportunities and improper benefits to controllers are permitted. Dissenters are not entitled to any benefit from cost savings and synergies that could not be achieved without the transaction.

Only three states do not currently use fair value as a standard. Definitions and treatments of fair value differ somewhat, but the Delaware standards are increasingly accepted in other jurisdictions. State courts now generally accept and utilize contemporary valuation techniques in appraisal and oppression cases.

When a court reviews the facts and circumstances of a case, it attempts to compensate the parties involved equitably. Courts' concern with equity is the underlying basis for “extraordinary circumstances,” the award of damages, and any “adjustments” to value that would not normally be applied. Ultimately, a court may not be as concerned with strict adherence to the assumptions underlying fair value and, instead, may simply intend to find a means of fairly compensating the minority shareholder for that which has been taken.

The authors thank Michael A. Graham, Ph.D., for his assistance in editing this chapter.

1 Since shareholders who dissent from a transaction are entitled to appraisal of their shares, the terms dissenters' rights and appraisal rights are interchangeable.

2 Douglas K. Moll, “Shareholder Oppression and ‘Fair Value': Of Discounts, Dates, and Dastardly Deeds in the Close Corporation,” 54 Duke L. J. 293, 310 (2004). In this chapter, we extensively cite Professor Moll's expert writings in the area of oppression and fair value. For a fuller discussion of these standards, see the section below entitled “Fair Value as Defined by Various Authorities and Statutes.”

3 Id.

4 The ABA's Model Business Corporation Act is a model code designed for use by state legislatures in revising and updating their corporation statutes. It was initially published by the ABA in 1950, and revised in 1971, 1984, and 1999. There were amendments with respect to appraisals in 1969 and 1978.

5 “The American Law Institute . . . drafts, discusses, revises, and publishes Restatements of the Law, model statutes, and principles of law.” www.ali.org/index.cfm?fuseaction=about.overview.

6 Tri-Continental v. Battye, 74 A.2d 71 (Del. 1950).

7 Tri-Continental, 74 A.2d 71, 72.

8 Alabama By-Products Corp. v. Neal, 588 A.2d 255, 256 (Del. 1991).

9 “The terms ‘majority' and ‘minority' . . . distinguish those shareholders who possess the actual power to control the operations of the firm from those who do not.” J.A.C. Hetherington & Michael P. Dooley, Illiquidity and Exploitation: A Proposed Statutory Solution to the Remaining Close Corporation Problem, 63 Va. L. Rev. 1, 5, n. 7 (1977).

10 Moll, “Minority Oppression and the Limited Liability Company: Learning (or Not) from Close Corporation History,” 54 Wake Forest L. Rev. 883, 894 (2005).

11 Id., at 895, quoting Robert B. Thompson, “The Shareholder's Cause of Action for Oppression,” 48 Bus. Law. 699, 739 (1993).

12 Delaware is preeminent in establishing standards for corporate law because a majority of large publicly traded companies are incorporated in Delaware and because of Delaware's well-developed body of law regarding corporations.

13 See “Most States Now Reject Minority and Marketability Discounts” below.

14 Lawrence A. Hamermesh and Michael L. Wachter, “Rationalizing Appraisal Standards in Compulsory Buyouts,”50 B.C. L. Rev.1021 (2009). In this chapter, we extensively cite the expert writings of Professors Hamermesh and Wachter in the area of appraisal and fair value.

15 See “Discounts at the Shareholder Level” below.

16 Michael Aiken, “A Minority Shareholder's Rights in Dissension: How Does Delaware Do It and What Can Louisiana Learn?” 50 Loyola L. Rev. 231, 235 (Spring 2004).

17 John D. Emory, “The Role of Discounts in Determining Fair Value under Wisconsin's Dissenter's Rights Statutes: The Case for Discounts,” 1995 Wisc. L. Rev. 1155, 1163 (1995).

18 Mary Siegel, “Back to the Future: Appraisal Rights in the Twenty-First Century,” 32 Harvard J. of Legislation 79, 87 (Winter 1995).

19 Wheeler v. Pullman Iron & Steel Co., 32 N.E. 420, 423 (Ill. 1892): “Every one purchasing or subscribing for stock in a corporation impliedly agrees that he will be bound by the acts and proceedings done or sanctioned by a majority of the shareholders, or by the agents of the corporation [directors] duly chosen by such majority, within the scope of the powers conferred by the charter.”

20 Charles W. Murdock, “The Evolution of Effective Remedies for Minority Shareholders and Its Impact upon Valuation of Minority Shares,” 65 Notre Dame L. Rev. 425, 429 (1990).

21 Siegel, “Back to the Future,” at 88.

22 Mansfield, Coldwater and Lake Michigan Railroad Co. v. Stout, 26 Ohio St. 241, 1875 Ohio LEXIS 397 (Ohio 1875).

23 Siegel, “Back to the Future,” at 89.

24 Barry M. Wertheimer, “The Shareholders' Appraisal Remedy and How Courts Determine Fair Value,” 47 Duke L. J. 613, 619 (1998).

25 Voeller v. Neilston Warehouse Co., 311 U.S. 531 (1941).

26 Id., at 536, n. 6, citing SEC Report on the Work of Protective and Reorganization Committees, Part VII (Washington, D.C.: U.S. Government Printing Office, 1938), pp. 557, 590.

27 The National Conference of Commissioners on Uniform State Laws was formed in 1892 for the purpose of providing states with nonpartisan, well-conceived, and well-drafted legislation that brings clarity and stability to critical areas of the law.

28 Aiken, at 237.

29 Robert B. Thompson, “Exit, Liquidity, and Majority Rule: Appraisal's Role in Corporate Law,” 84 Georgetown L. Rev. 1 (1995), Appendix Table 2: New York 1890; Maine 1891; Kentucky 1893; New Jersey 1896; Delaware 1899; Connecticut and Pennsylvania 1901; Alabama, Massachusetts, Nevada, and Virginia 1903; Montana and New Mexico 1905; Ohio 1906; Tennessee 1907; Maryland 1908; Vermont 1915; Illinois and New Hampshire 1919; Rhode Island 1920; Arkansas, Florida, North Carolina, and South Carolina 1925; Minnesota and Oregon 1927; Louisiana 1928; Idaho and Indiana 1929; California, District of Columbia, and Michigan 1931; Washington 1933; Hawaii 1937; Georgia 1938; Arizona and Kansas 1939; Colorado and Nebraska 1941; Missouri 1943; Iowa, Oklahoma, Wisconsin, and Wyoming 1947; Mississippi 1954; South Dakota and Texas 1955; Alaska and North Dakota 1957; Utah 1961; West Virginia 1974.

30 Thompson, at 3. See discussion in Thompson at 3-5.

31 Id., at 3-4.

32 Id.

33 Id.

34 As discussed in “Appraisal Rights in Publicly Traded Corporations: The Market Exception” ahead, eight states deny appraisal rights to shareholders of companies that are publicly traded, and 27 states deny appraisal rights in most situations to shareholders of such companies who receive publicly traded shares in a stock-for stock transaction.

35 Id., at 4-5.

36 Jeff Goetz, “A Dissent Dampened by Timing: How the Stock Market Exception Systematically Deprives Public Shareholders of Fair Value,” 15 Fordham J. of Fin. and Corp. L. 771, 773 (2009). Two states (Colorado and Kansas) provide a market exception if the shares received are marketable even if the shares held by the investor before the transaction were not marketable.

37 Ariz. Rev. Stat. § 10-1302(D).

38 Mary Siegel, “An Appraisal of the Model Business Corporation Act's Appraisal Rights Provisions,” 74 J. of Law and Contemporary Problems 231, 247 (2011).

39 Id., at 248.

40 In addition, Louisiana and Maryland provide for appraisal rights if shareholders receive anything but shares of the surviving corporation, but they do not specify that those shares must be listed.

41 8 Del. Code Ann. tit. 8, § 262(b)(2).

42 In addition, the New Jersey statute reads similarly but specifies listed securities rather than shares. Securities is a broader term that includes debt and warrants.

43 Fla. Stat. Ann. § 607.1302(2)(c).

44 Cal. Corp. Code § 1300(b)(1).

45 15 Pa. Cons. Stat. § 1571(b)(2)(ii).

46 In Exhibit 3.1, “listed” means listed on a national securities exchange (which now includes NASDAQ), and “NYSE” means the New York Stock Exchange and the NYSE MKT LLC (formerly the American Stock Exchange).

47 Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134 (Del.Ch. 1994), aff'd in part, Cede, Inc. v. Technicolor, Inc., 663 A.2d 1156 (Del. 1995). Similarly, a New Jersey court called market price a valuable tool for corroborating fairness (Dermody v. Sticco, 465 A.2d 948, 951 (N.J. Super. 1983)).

48 M.P.M. Enterprises, Inc. v. Gilbert, 731 A.2d 790, 797 (Del. 1999).

49 Gearreald v. Just Care, Inc., 2012 Del. Ch. LEXIS 91, at *15, n.26.

50 “Since the [appraisal] remedy provides going concern value and the shareholders [in an arms'-length transaction] are in fact receiving the higher amount, third-party sale value, the likely award in appraisal will be a lower amount than the dissenting shareholder will receive by voting in favor of the merger and taking the merger price.” Hamermesh and Wachter, “The Fair Value of Cornfields in Delaware Appraisal Law,” 31 J. Corp. Law 119, 142 (2005) (hereinafter, “Cornfields”).

51 Finkelstein v. Liberty Media, Inc., 2005 Del. Ch. LEXIS 53 (Apr. 25, 2005), at *84.

52 Union Ill. 1995 Investment Ltd. P'ship v. Union Financial Group, Ltd. 847 A.2d 340, 364 (Del. Ch. 2003).

53 Gearreald v. Just Care, 2012 Del. Ch. LEXIS 91, at *1.

54 Murdock, at 440.

55 Comment, “Oppression as a Statutory Ground for Corporate Dissolution,” 1965 Duke L. J.128, n. 2 (1965).

56 Central Standard Life Insurance v. Davis, 141 N.E.2d 45, 51 (Ill. 1957).

57 In re Kemp & Beatley, Inc., 473 N.E.2d 1173, 1179 (N.Y. 1984).

58 Balsamides v. Protameen Chemicals, Inc., 734 A.2d 721, 736 (N.J. 1999).

59 Robblee v. Robblee, 841 P.2d 1289, 1294 (Wash. Ct. App. 1992).

60 Connector Service Corp. v. Briggs, 1998 U.S. Dist. Lexis 18864 (N.D. Ill., Oct. 30, 1998), at *18. Because appraisal and oppression cases are under state laws, federal courts follow state statutes and case law.

61 Metropolitan Life Ins. Co. v. Aramark Corp., 1998 Del. Ch. LEXIS 70 (Feb. 5, 1998).

62 Murdock, at 441.

63 If the action to which the oppressed shareholder objects is a forced sale of his or her shares, the appraisal remedy may be available.

64 The terms freeze-out and squeeze-out are commonly considered to be synonyms.

65 Moll, “Minority Oppression and the Limited Liability Company,” at 889–891.

66 The case law and concepts we address in this chapter deal exclusively with oppression in corporations and focus mainly on close corporations. Partnerships are not subject to the same remedies because of the withdrawal rights available by statute in most states. For LLCs, case law is in its infancy because of the relative newness of the corporate form. For more information on the remedies for minority mistreatment in all three corporate forms, see Moll, “Minority Oppression and the Limited Liability Company,” at 892–895.

67 An exception is Michigan, where an action citing oppression can be brought by the shareholder outside the dissolution statute, although dissolution (among others) may still be the remedy.

68 Delaware and Indiana allow shareholder dissolution only in the case of deadlock. Kansas and Louisiana allow shareholder dissolution in the case of deadlock, but only if irreparable damage is being done to the corporation or shareholders. Massachusetts requires that no less than 40% outstanding shareholders can file for dissolution, but only in cases of shareholder or management deadlock. Michigan allows shareholders to file if they cannot agree on management and the corporation is not able to function properly. Nevada and Ohio allow shareholder dissolution only if petitioned by a majority. Oklahoma, Texas, and the District of Columbia do not allow shareholders to petition for dissolution.

69 Alaska Plastics, Inc. v. Coppock, 621 P.2d 270, 274 (Alaska 1980).

70 Murdock, at 453.

71 1941 Cal. Stat. 2058-59 (codified as amended at Cal. Corp. Code § 2000 (West 1977 & Supp. 1989)).

72 Murdock, at 461.

73 Baker v. Commercial Body Builders, Inc., 507 P.2d 387, 395 (Ore. 1973).

74 Id., at 396.

75 John H. Matheson and R. Kevin Maler, “A Simple Statutory Solution to Minority Oppression in the Closely Held Business,” 91 Minn. L. R., 657, 680–681 (2006).

76 The Oregon Supreme Court listed several “alternative remedies”:

Baker v. Commercial Body Builders, 507 P.2d 387, 395–396.

77 Moll, “Shareholder Oppression and‘Fair Value,'” at 360.

78 In re Friedman, 661 N.E. 2d 972, 976 (N.Y. 1985).

79 Moll, “Shareholder Oppression and ‘Fair Value,'” at 69.

80 Recognizing the unique issues presented by close corporations, 21 jurisdictions permit companies to elect statutory close corporation status. Four states—California, Maine, Ohio, and Rhode Island—permit corporations to elect statutory close corporation status pursuant to their regular corporation statutes. In addition,17 jurisdictions have enacted close corporation statutes permitting the election: Alabama, Arizona, Delaware, District of Columbia, Georgia, Illinois, Kansas, Maryland, Missouri, Montana, Nevada, Pennsylvania, South Carolina, Texas, Vermont, Wisconsin, and Wyoming. These entities can be run pursuant to their shareholder agreements, which is permitted to set forth and limit the duties and obligations of its shareholders.

Despite the ability to bypass some of the procedures required for close corporations, the great majority of corporations that otherwise would qualify to make a statutory close corporation election have not chosen to do so. Empirical studies have shown that only a very small percentage of corporations have ever registered as statutory close corporations. (Harwell Wells, “The Rise of the Close Corporation and the Making of Corporation Law,” 5 Berkeley Bus. L.J. 263 (2008)).

To be eligible to elect statutory close corporation status in those states that provide that choice, corporations must meet certain criteria, such as size. To qualify, corporations cannot have more than a particular number of shareholders, typically a maximum of 30 or 50. In addition, shareholders usually must agree unanimously to statutory close corporation status and a written shareholders' agreement governing the affairs of the corporation must be drafted. It usually is also required that certain transfer restrictions appear on the corporation's stock certificates. Typically, where the close corporation statute, or shareholder agreement, is silent on a matter, the provisions of the state's regular business corporations statute will fill in the gaps.

81 For example, Missouri explicitly provides statutory close corporation shareholders with dissenters' rights. § 351.870 R.S. Mo. (2012).

82 Matheson and Maler, at 664.

83 Topper v. Park Sheraton Pharmacy, 433 N.Y.S.2d 359 (N.Y. Supr. 1980).

84 It should be noted that although the courts were empowered to award fair value by N.Y. Statute § 1118, the court used the term fair market value as a substitute. It is unclear whether that substitution was intentional.

85 Stone v. R.E.A.L. Health, P.C., 2000 Conn. Super. LEXIS 2987 (Nov. 15, 2000).

86 Matheson and Maler, at 664.

87 Donahue v. Rodd Electrotype of New England, 328 N.E.2d 505 (Mass. 1975).

88 Massachusetts does not have a dissolution statute.

89 Compton v. Paul K. Harding Realty Co., 285 N.E.2d 574 (Ill. App 1972).

90 Id., at 581.

91 Hamermesh and Wachter, “Rationalizing Appraisal Standards,” at 1021.

92 Id., at 1022.

93 Wisconsin uses fair value for all purposes other than business combinations, for which it uses fair market value. Wis. Stat. Ann., §§ 180.1301, 180.1130(9)(a).

94 1969 RMBCA.

95 1984 RMBCA.

96 Alabama, Arizona, Arkansas, Colorado, Hawaii, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, Oregon, South Carolina, Vermont, Washington, Wyoming.

97 American Bar Association, A Report of the Committee of Corporate Laws, “Changes in the Revised Model Business Corporation Act: Amendments Pertaining to Close Corporations,” 54 Bus. Lawyer, 209 (November 1998).

98 Colorado, Minnesota, New Jersey, Arizona, Connecticut, Utah.

99 ALI, Principles of Corporate Governance, at § 7.22.

100 1999 RMBCA.

101 § 13.02(a)(5) of the 1999 RMBCA states that “any other amendment to the articles of incorporation, merger, share exchange or disposition of assets to the extent provided by the articles of incorporation, bylaws or a resolution of the board of directors [emphasis added].” The official comment to the 1999 RMBCA states that if the corporation grants appraisal rights voluntarily for certain transactions that do not affect the entire corporation, the court can use its discretion in applying discounts.

102 Connecticut, D.C., Florida, Idaho, Iowa, Maine, Mississippi, Nevada, South Dakota, Virginia, West Virginia.

103 Balsamides, 734 A.2d 721, 736.

104 La. R.S. 12:140.2.C. (2012).

105 2010 Cal. Corp. Code, Chapter 13, Dissenters' Rights § 1303 (a). Given this definition, dissent does not appear to be an attractive option for shareholders, and it is not surprising that there are no reported California dissent cases.

106 Cal. Corp. Code, § 2000(a); Alas. Stat. § 10.06.630(a).

107 Alaska, Louisiana, Maryland, Michigan, Missouri, New Mexico, New York, Ohio, and Rhode Island.

108 Tri-Continental, 74 A.2d 71, 72.

109 Lane v. Cancer Treatment Centers of America, Inc., 1994 Del. Ch. LEXIS 67 (May 25, 1994), at *10–11.

110 Lawson Mardon Wheaton v. Smith, 716 A.2d 550 (N.J. Super. 1998), rev'd, 734 A.2d 738 (N.J. 1999).

111 Cede & CO. v. Technicolor, 1990 Del. Ch. LEXIS 259 (Oct. 19, 1990), aff'd in part and rev'd in part on other grounds, 634 A.2d 345(Del. 1993).

112 Lawson Mardon Wheaton, 734 A.2d 738, 751–52.

113 Moll, “Shareholder Oppression and ‘Fair Value,'” at 366–367. For a comprehensive and informative discussion on valuation dates in oppression cases, see the commentary entitled “The Valuation Date,” at 366–381.

114 RMBCA § 14.34(d).

115 New York uses the day before the date the petition was filed and Rhode Island uses the date of filing. California and New Jersey suggest the date of filing, but leave the door open for the court to designate an alternative date if more equitable.

116 Moll, “Shareholder Oppression and ‘Fair Value,'” at 371.

117 Id., at 372–373.

118 Id., at 369.

119 Id., at 375.

120 Prentiss v. Wesspur, Inc., 1997 Wash. App. LEXIS 637 at *1–2 (Apr. 28, 1997).

121 Hendley v. Lee, 676 F. Supp. 1317, 1327 (D.S.C. 1987).

122 Moll, “Shareholder Oppression and ‘Fair Value,'” at 373.

123 Id., at 377.

124 Id., at 368.

125 In re General Realty & Utilities Corp., 52 A.2d 6, 11 (1947).

126 Gilbert E. Matthews and M. Mark Lee, “Fairness Opinions and Common Stock Valuations,” in The Library of Investment Banking, Vol. IV, R. Kuhn, ed. (Homewood, IL: Dow Jones Irwin, 1990), at 386.

127 Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (“Weinberger”).

128 Id., at 714.

129 Id., at 713.

130 Weinberger v. UOP, Inc., 1985 Del. Ch. LEXIS 378 (Jan. 30, 1985), at *31; aff'd, 497 A.2d 792 (Del. 1985).

131 ALI, Principles of Corporate Governance, at 318.

132 Kleinwort Benson Limited, 1995 Del. Ch. LEXIS 75 (June 15, 1995), at *28.

133 Grimes v. Vitalink Communications Corp., 1997 Del. Ch. LEXIS 124 (Aug. 26, 1997), at *3.

134 Gholl v. eMachines, Inc., 2004 Del. Ch. LEXIS 171 (July 7, 2004), at *20.

135 When guideline transactions are utilized, adjustments are necessary to eliminate the effect of impermissible premiums.

136 Paskill Corp. v. Alcoma Corp., 747 A.2d 549 (Del. 2000).

137 Ng v. Heng Sang Realty Corp., 2004 Del. Ch. LEXIS 69 (Apr. 22, 2004).

138 Balsamides, 734 A.2d 721, 730.

139 Neal v. Alabama By-Products Corp., 1990 Del. Ch. LEXIS 127 (Aug. 1, 1990), at *36, aff'd, Alabama By-Products Corp. v. Neal, 588 A.2d 255 (Del. 1991).

140 Yuspeh v. Klein, 840. So.2d 41, 53 (La. App. 2003).

141 Steiner Corp. v. Benninghoff, 5 F. Supp. 2d 1117 (D. Nev. 1998).

142 Andaloro v. PFPC Worldwide, Inc., 2005 Del. Ch. LEXIS 125 (Aug. 19, 2005), at *78.

143 In re U. S. Cellular Oper. Co., 2005 Del. Ch. LEXIS 1 (Jan. 6, 2005), at *77.

144 Dobler v. Montgomery Cellular Holding Co., 2004 Del. Ch. LEXIS 139 (Oct. 4, 2004), at *73; aff'd in part, rev'd in part on other grounds, Montgomery Cellular Holding Co. v. Dobler, 880 A.2d 206 (Del. 2005).

145 Cede & Co. v. Technicolor, 2003 Del. Ch. LEXIS 146 (Del. Ch. Dec. 31, 2003), at *13–14.

146 In re Hanover Direct, Inc. Shareholders Litig., 2010 Del. Ch. LEXIS 201 (Sept. 24, 2020), at *6.

147 Borruso v. Communications Telesystems Intl., 753 A.2d 451, 455 (Del. Ch. 1999).

148 Doft & Co. v. Travelocity.com, Inc., 2004 Del. Ch. LEXIS 75 (May 21, 2004), at *21.

149 Id., at *44.

150 Connector Service Corp., 1998 U.S. Dist. LEXIS 18864, at *4–7.

151 Some statutes add the phrase “unless exclusion would be inequitable.”

152 8 Del. C. § 262(h).

153 See discussion of Tri-Continental in “Fair Value as Defined by Various Authorities and Statutes” above.

154 Sterling v. Mayflower Hotel Corp., 93 A.2d 107 (Del. 1952).

155 See discussion of Weinberger in “Customary and Current Valuation Techniques”.

156 Cavalier Oil Corp. v. Harnett, 564 A.2d 1137 (Del. 1989) (“Cavalier ”). See discussion of Cavalier in “Fair Value Is Proportionate Share of Equity Value” ahead.

157 Sterling v. Mayflower, 93 A.2d 107, 110.

158 8 Del. C. § 262.

159 Hamermesh and Wachter, “Rationalizing Appraisal Standards,” at 1030, citing Rosenblatt v. Getty Oil Co., 493 A.2d 929, 940 (Del. 1985).

160 George P. Young, Vincent P. Circelli, and Kelli L. Walter,“Fiduciary Duties and Minority Shareholder Oppression from the Defense Perspective: Differing Approaches in Texas, Delaware, And Nevada,” 2012 Securities Regulation and Business Law Conference, February 9–10, 2012 (available at http://www.haynesboone.com/files/Uploads/Documents/Attorney%20Publications/Minority_Shareholder_Oppression_Young.pdf).

161 Kahn v. Lynch Communication Systems, Inc., 669 A.2d 79, 84 (1995).

162 Weinberger, 457 A.2d 701, 711.

163 In re John Q. Hammons Hotels Inc. Shareholder Litig., 2009 Del. Ch. LEXIS 174 (Oct. 2, 2009), at *40–41.

164 ONTI, Inc. v. Integra Bank, 751 A.2d 904, 930 (Del. Ch. 1999).

165 Weinberger, 457 A.2d 701, at 713.

166 Id. The subsequent enactment of Del. Code § 102b(7) allows a corporate charter provision to limit or eliminate the personal monetary liability of directors.

167 Weinberger, 457 A.2d 701, 714.

168 Seagraves v. Urstadt Property Co., Inc., 1996 Del. Ch. LEXIS 36 (April 1, 1996).

169 Bomarko, Inc. v. International Telecharge, Inc., 794 A.2d 1161 (Del. Ch. 1999), aff'd, International Telecharge, Inc. v. Bomarko, Inc., 766 A.2d 437 (Del. 2000).

170 Seagraves, at *12, citing at Weinberger, at 714.

171 Bomarko, at 1184, citing Red Sail Easter Limited Partners, L. P. v. Radio City Music Hall Prods., Inc., 1992 Del. Ch. LEXIS 203 (Sept. 29, 1992), at *19.

172 8 Del. Code Ann. tit. 8, § 262(h).

173 Cavalier Oil Corp. v. Harnett, 1988 Del. Ch. LEXIS 28 (Feb. 22, 1988), at *27; aff'd, 564 A.2d 1137 (Del. 1989).

174 Cavalier, 564 A.2d 1137, 1145.

175 Id.

176 Hamermesh and Wachter, “Rationalizing Appraisal Standards,” at 1022.

177 Id.

178 Gearreald v. Just Care, Inc., 2012 Del. Ch. LEXIS 91 (Apr. 30, 2012), at *21, citing M.G. Bancorp., Inc. v. Le Beau, 737 A.2d 513, 525 (Del. 1999) and U.S. Cellular, 2005 Del. Ch. LEXIS 1, at *56.

179 Hamermesh and Wachter, “Cornfields,” at 143–144.

180 Crescent/Mach I Partnership, L.P. v. Dr Pepper Bottling Co. of Texas, 2007 Del. Ch. LEXIS 63 (May 2, 2007), at *16–17 and *38.

181 In re Radiology Assocs., Inc. Litig., 611 A.2d 485, 493 (Del. Ch. 1991).

182 Cede & Co. v. Technicolor, 684 A.2d 289, 298-9 (Del. 1996).

183 Delaware Open MRI, 898 A.2d 290, 316 (Del. Ch. 2006).

184 Id., at 313.

185 Id., 314-5.

186 Gearreald v. Just Care, 2012 Del. Ch. LEXIS 91, at *21–22.

187 Id., at *24.

188 Id., at *30.

189 Hamermesh and Wachter, “Cornfields,” at 151.

190 Montgomery Cellular, 880 A.2d 206, 220.

191 Allenson v. Midway Airlines Corp., 789 A.2d 572, 583 (Del. Ch. 2001).

192 Ng v. Heng Sang Realty Corp., at *18. The benefits of conversion to an S corporation were also excluded in In re Sunbelt Beverage Corp. Shareholder Litig., 2010 Del. Ch. LEXIS 1 (Jan. 5, 2010), at *53.

193 In re Emerging Communications, Inc. Shareholders Litig., 2004 Del. Ch. LEXIS 70 (Del. Ch. May 3, 2004), at *48–49.

194 Hamermesh and Wachter, “Cornfields,” at 159.

195 Cavalier, 564 A.2d 1137, 1143-44.

196 ONTI, 751 A.2d 904, 917-18.

197 Id., at 910.

198 Dobler, 2004 Del. Ch. LEXIS 139, at *69 (footnotes omitted). The court stated, “The management fee charged by [parent] can be reasonably interpreted to be a corporate charade by which the parent removed money from its subsidiary.”

199 Id., at *71.

200 In re Radiology Assocs., 611 A.2d 485, 491-2.

201 Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 472 (Del. Ch. 2011).

202 Cavalier, 564 A.2d 1137, 1146; Gentile v. SinglePoint Financial, 2003 Del. Ch. LEXIS 21 (Del. Ch. Mar. 5, 2003), at *17–21.

203 U.S. Cellular, 2005 Del. Ch. LEXIS 1, at *56.

204 Hamermesh and Wachter, “Cornfields,” at 158.

205 Normalizing adjustments include not only items classed as “extraordinary” under GAAP, but also nonrecurrent items in the income account such as gains or losses from litigation and (if truly nonrecurrent) restructuring costs.

206 Reis, 28 A.3d 442, 470.

207 Gonsalves v. Straight Arrow Publishers, 701 A.2d 357, 363 (Del. 1997).

208 Id.

209 Reis, 28 A.3d 442, 471.

210 Id., quoting Hamermesh and Wachter, “Cornfields,” at 154.

211 Paskill, 747 A.2d 549, 552.

212 Cede & Co. v. Technicolor, 684 A.2d 289, 298.

213 Cede & Co., Inc. v. MedPointe Healthcare, 2004 Del. Ch. LEXIS 124 (Aug. 16, 2004), at *29 (“The inquiry here is not one of hours, but of whether one two-step transaction, with all components occurring in a certain order and substantially simultaneously, may (or must) be divided for valuation purposes.”)

214 Reis, 28 A. 3d 442, 476.

215 Id.

216 Ohio Rev. Code Ann. §1701.85(b).

217 Ohio Rev. Code Ann. §1701.85(c).

218 Id.

219 Steven D. Gardner, “Note: A Step Forward: Exclusivity of the Statutory Appraisal Remedy for Minority Shareholders Dissenting from Going-Private Merger Transactions,” 53 Ohio St. L. J. 239, 246 (1992).

220 Armstrong v. Marathon Oil Co., 513 N.E.2d 776, 784 (Ohio 1987).

221 Armstrong v. Marathon Oil Co., 583 N.E.2d 462, 467 (Ohio App. 1990).

222 Wertheimer, “Shareholders' Appraisal Remedy,” at 656, n. 207.

223 English v. Artromick Intl., Inc., 2000 Ohio App. LEXIS 3580 (Aug. 10, 2000), at *14.

224 Hamermesh and Wachter, “Rationalizing Appraisal Standards,” at 1023–1024.

225 Id., at 1038.

226 Shannon P. Pratt, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, 5th ed. (New York: McGraw Hill, 2008), at 384.

227 Z. Christopher Mercer and Travis W. Harms, Business Valuation: An Integrated Theory, 2nd ed. (Hoboken, NJ: John Wiley & Sons, 2007).

228 Pratt, Valuing a Business, 5th ed., at 384. The restricted stock level (which is not shown separately by Mercer) is for shares that are not currently marketable but will become marketable with the passage of time.

229 Mercer and Harms, at 71.

230 David Laro and Shannon P. Pratt, Business Valuation and Taxes: Procedure, Law and Perspective (Hoboken, NJ: John Wiley & Sons, 2005), at 266.

231 Mercer and Harms, at 73.

232 Restricted stock moves from nonmarketable to marketable when the restriction is lifted.

233 Mercer and Harms, at 83.

234 Mark Lee, “Control Premiums and Minority Discounts: The Need for Economic Analysis,” Business Valuation Update, August 2001, p. 4.

235 Woodward v. Quigley, 133 N.W.2d. 38, 44-45 (Iowa 1965).

236 First National Bank v. Clay, 2 N.W.2d 85, 92-93 (Iowa 1942).

237 Dreiseszun v. FLM Indus., Inc., 577 S.W.2d 902, 906 (Mo. App. 1979).

238 See “Fair Value Is Proportionate Share of Equity Value” above.

239 In re Val. of Common Stock of McLoon Oil Co., 565 A.2d 997, 1005 (Me. 1989).

240 Id., at 1004.

241 Arnaud v. Stockgrowers State Bank, 992 P.2d 216, 217 (Kan. 1999).

242 Rolfe State Bank v. Gunderson, 794 N.W.2d 561, 569(Iowa 2011).

243 Atlantic States Construction, Inc. v. Beavers, 314 S.E.2d 245 (Ga. App. 1984).

244 Blitch v. Peoples Bank, 540 S.E.2d 667, 669 (Ga. App. 2000).

245 Pueblo Bancorp. v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003).

246 Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553 (Ky. App. 1982).

247 Shawnee Telecom Resources, Inc. v. Brown, 354 S.W.3d 542, 564 (Ky. 2011).

248 Blake v. Blake Agency,107 A.D.2d 139, 148.

249 Raskin v. Walter Karl, Inc., 129 A.D.2d 642, 644 (A.D.2d Dept. 1987).

250 Id.

251 Also called implied or inherent or embedded minority discount.

252 Lawrence A. Hamermesh and Michael L. Wachter,, “The Short and Puzzling Life of the ‘Implicit Minority Discount' in Delaware Appraisal Law,” 156 U. Pa. L. Rev. 1, 5–6 (2007).

253 Hodas v. Spectrum Technology, Inc., 1992 Del. Ch. LEXIS 252 (Dec. 7, 1992).

254 Kleinwort Benson Ltd. v. Silgan Corp., 1995 Del. Ch. LEXIS 75 (June 15, 1995), at *12.

255 Salomon Brothers Inc. v. Interstate Bakeries Corp., 1992 Del. Ch. LEXIS 100 (May 1, 1992).

256 Kleinwort Benson,1995 Del. Ch. LEXIS 75, at *9.

257 Doft, 2004 Del. Ch. LEXIS 75, at *46.

258 Prescott Group Small Cap, L.P. v. Coleman Co., 2004 Del. Ch. LEXIS 131 (Sept. 8, 2004).

259 Lawson Mardon Wheaton, 716 A.2d 550 (N.J. Super. 1998).

260 Steiner, 5 F. Supp.2d 1117, 1124.

261 In re: Val. of Common Stock of Penobscot Shoe Co., 2003 Me. Super. LEXIS 140 (May 30, 2003), at *63.

262 Eric Nath, “Control Premiums and Minority Interest Discounts in Private Companies,” 9 Bus. Val. Rev.59 (1990).

263 Le Beau v. M.G. Bancorp., Inc., 1998 Del. Ch. LEXIS 9 (Jan. 29, 1998), at *25, n. 15, citing Shannon P. Pratt, Robert F. Reilly, and Robert P. Schweihs, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, 3rd ed. (Chicago: Irwin, 1996), pp. 194–195 and 210, as well as Christopher Mercer, Valuing Financial Institutions (Homewood, IL: Dow Jones Irwin, 1992), pp. 198–200 and Chapter 13.

264 Pratt, “Control Premiums? Maybe, Maybe Not: 34% of 3rd Quarter Buyouts at Discounts,” Business Valuation Update (Jan. 1999), pp. 1–2; Pratt, Reilly, and Schweihs, Valuing a Business: The Analysis and Appraisal of Closely Held Companies, 4th ed. (New York: McGraw Hill, 2000), at 357 (citing Pratt's 1999 article).

265 Andaloro, 2005 Del. Ch. LEXIS 125, at *65. See the discussion of this case in Matthews, “A Review of Valuations in Delaware Appraisal Cases, 2004–2005,” 25 Bus. Val. Rev. 44, 59–60 (2006), comparing the discussion of control premiums in the third and fourth editions of Valuing a Business. Hamermesh and Wachter compare those two editions in “The Short and Puzzling Life” at 51–53.

266 Id., at *36.

267 Lee, “Control Premiums and Minority Discounts,” p. 4.

268 Pratt, Business Valuation Discounts and Premiums (Hoboken, NJ: John Wiley & Sons, 2001), at 40.

269 Mercer, The Integrated Theory of Business Valuation (Memphis, TN: Peabody, 2004), at 101.

270 Id., at 108.

271 Richard A. Booth, “Minority Discounts and Control Premiums in Appraisal Proceedings,” 57 Bus. Lawyer 127, 130 (2001).

272 William J. Carney and Mark Heimendinger, “Appraising the Nonexistent: The Delaware Courts' Struggle with Control Premiums,” 152 U. Pa. L. Rev. 845, 860 (2003).

273 Hamermesh and Wachter, “The Short and Puzzling Life,” at 5–6.

274 Id., at 6.

275 Gilbert v. MPM Enterprises, Inc., 709 A.2d 663 (Del. Ch. 1997), aff'd MPM Enterprises, Inc. v. Gilbert, 731 A.2d 790 (Del. 1999); Grimes v. Vitalink Communications Corp., 1997 Del. Ch. LEXIS 124 (Aug. 26, 1997); Gray v. Cytokine Pharmasciences, Inc., 2002 Del. Ch. LEXIS 48 (Apr. 25, 2002); U.S. Cellular, 2005 Del. Ch. LEXIS 1.

276 In re PNB Holding Co. Shareholders Litigation, 2006 Del. Ch. LEXIS 158 (Aug. 18, 2006), at *114–115. The court chose to use respondent's growth model rather than petitioner's exit multiple for determining terminal value.

277 Highfields Capital, Ltd. v. AXA Financial, Inc., 2007 Del. Ch. LEXIS 126 (June 27, 2007), at *67.

278 John C. Coates IV, “‘Fair Value' as an Avoidable Rule of Corporate Law: Minority Discounts in Conflict Transactions,”147 U. Pa. L. Rev., at 1251 (1999).

279 Matthews, “Misuse of Control Premiums in Delaware Appraisals,” 27 Bus. Val. Rev., at 107, 118 (2008).

280 Radiology Assocs., 611 A.2d 485, 494.

281 Pratt, Valuing a Business, 5th ed., at 228; Pratt, Business Valuation Discounts and Premiums, 2nd ed. (Hoboken, NJ: John Wiley & Sons, 2009), at 26.

282 Dobler, 2004 Del. Ch. LEXIS 139, at *72 and *65–66; Lane, 1994 Del. Ch. LEXIS 67, at *117–118 and *129.

283 Pratt, The Lawyer's Business Valuation Handbook (ABA, 2000), at 359, quoting Matthews, “Delaware Court Adds Control Premium to Subsidiary Value,” Business Valuation Update, May 1998, p. 9.

284 Dobler, 2004 Del. Ch. LEXIS 139, at *72.

285 Laro and Pratt, Business Valuation and Taxes, at 266.

286 Balsamides, 734 A.2d 721,733.

287 Hodas v. Spectrum Technology, 1992 Del. Ch. LEXIS 252, at *14.

288 In re 75,629 Shares of Common Stock of Trapp Family Lodge, Inc., 725 A.2d 927, 931 (Vt. 1999).

289 In re Shares of Madden, Fulford and Trumbull, 2005 Vt. Super. LEXIS 112 (May 16, 2005), at *35.

290 Id., at *25.

291 Casey v. Brennan, 780 A.2d 553, 571 (N.J. Super. 2001).

292 Northwest Investment Corp. v. Wallace, 741 N.W.2d 782 (Iowa 2007).

293 New Mexico Banquest Investors Corp. v. Peters Corp., 159 P.3d 1117, 1124 (N.M. App. 2007), aff'd, Peters Corp. v. New Mexico Banquest Investors Corp., 188 P.3d 1185 (N.M. 2008).

294 Harris v. Rapid-American Corp., 603 A.2d 796 (Del. 1992).

295 Id., at 804.

296 Harris v. Rapid-American Corp., 1992 Del. Ch. LEXIS 75 (Apr. 1, 1992), at *9.

297 Le Beau, 1998 Del. Ch. LEXIS 9, aff'd, M.G. Bancorp., 737 A.2d 513; Hintmann v. Fred Weber, Inc., 1998 Del. Ch. LEXIS 26 (Feb. 17, 1998).

298 Matthews, “Delaware Court Adds Premium to Control Valuation,” Business Valuation Update (May 1998), at 10.

299 Agranoff v. Miller, 791 A.2d 880, 898 n. 45(Del. Ch. 2001).

300 Hamermesh and Wachter, “The Short and Puzzling Life,” at 15.

301 E.g., Highfields Capital, 2007 Del. Ch. LEXIS 126; Gesoff v. IIC Industries Inc., 902 A.2d 1130 (Del. Ch. 2006).

302 Advanced Communication Design, Inc. v. Follett, 615 N.W.2d 285 (Minn. 2000).

303 Devivo v. Devivo, 2001 Conn. Super. LEXIS 1285 (May 8, 2001), at *34.

304 ALI, Principles of Corporate Governance, at 325.

305 Lawson Mardon Wheaton, 716 A.2d 550, 558.

306 Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Missouri, and New Mexico.

307 Alaska, Hawaii, Michigan, New Hampshire, Maryland, North Dakota, Pennsylvania, and Tennessee, have no cases or statute regarding discounts. The District of Columbia and West Virginia have no cases regarding discounts but have a statute barring discounts.

308 As shown in Appendix B, Alaska, California, and New Jersey have different definitions for dissent and oppression, and Wisconsin has different definitions for business combinations than for other transactions.

309 ABA, A Report of the Committee of Corporate Laws, “Changes in the Revised Model Business Corporation Act: Appraisal Rights,” 54 Bus. Lawyer 209 (1998).

310 Moll, “Shareholder Oppression and ‘Fair Value,'” at 321.

311 Johnson v. Johnson, 2001 Conn. Super. LEXIS 2430 (Aug. 15, 2001), at *16.

312 N.J. Statute 14(A):12-7(8)(a).

313 Balsamides, 734 A.2d 721, 736.

314 Lawson Mardon Wheaton v. Smith, 734 A.2d 738, 752.

315 It should be noted that although the language the court used is “intrinsic value,” it appears that in this instance intrinsic value was used synonymously with fair value.

316 Moll, “Shareholder Oppression and ‘Fair Value,'” at 360.

317 Id., at n. 180.

318 Wilkes v. Springside Nursing Home, Inc., 353 N.E.2d 657, 662 (Mass. 1976); Exadaktilos v. Cinnaminson Realty Co., 400 A.2d 554, 561 (N.J. Super. Ct. Law Div. 1979).

319 Mark A. Rothstein, et al., Employment Law, §9.24, at 593 (1994).

320 Moll, “Shareholder Oppression and Fair Value,” at 344, n. 185.

321 Musto v. Vidas, 658 A.2d 1305 (N.J. Super. Ct. App. Div., 2000), at *1312.