Brown v. Arp and Hammond

Scott W. Meier

Case Conclusion Date:August 29, 2006

Practice Area:Corporate / Incorporation

Outcome:Holding for Appellant; Reversed and Remanded

Description:Corporation, which executed reverse stock split from which minority shareholders dissented, filed an appraisal proceeding to determine fair value of minority shareholders' shares. Following a bench trial, the District Court applied a minority discount and a discount for trapped-in capital gains tax liability, and determined the fair value of minority shareholders' shares. Minority shareholders appealed. The Supreme Court held that: (1) minority discount could not be applied in determining fair value of minority shareholders' shares; (2) discount for trapped-in capital gains tax liability could not be applied in determining fair value of minority shareholders' shares; and (3) trial court's failure to include non-ranch corporate assets in its determination of fair value of minority shareholders' shares was clearly erroneous.