"Bet the Company" Litigation Trial Win Saves Company, Shareholder Value, and the Employees' Jobs

Apr 24, 2014

OUTCOME: Successful trial outcome leading to maximization of shareholder value and protection of employees' jobs

The case was centered on a shareholder dispute regarding a scientific and technical manufacturing company (the "Company"). The litigation grew out of a twenty-year-old shareholder agreement originally ... designed to support a valuation of each founder's interest in the Company upon their deaths. That valuation formula had been adopted to justify the large amounts of life insurance each founder desired for estate planning. The life insurance was originally titled such that, when buying back the shareholders' interests, the Company benefited from the life insurance proceeds. Subsequently, the founders changed the beneficiaries and the policies no longer funded the buyout set forth in the the shareholder agreement. As a result, the agreement called for the company to pay an inflated amount for shares, but the intended source of funds to support the buyout had been taken away. Then, unfortunately, the founders passed away within months of one another leaving the Company with an obligation to buyout both estates under a formula that far-exceeded the value of the Company. After repeated negotiations, one of the estates refused to accept anything other than the value set forth in the decades-old agreement. The Company was forced to litigate over the validity of the shareholder agreement and anything other than a win would have resulted in the end of the Company and the loss of over 40 jobs. Our team had the difficult position of proving that a contract entered into by two sophisticated businessmen was unenforceable. Our strategy to do so was to distill decades of shareholder transactions, financial records, and corporate conduct into a easily understood presentation of evidence. Through the presentation of documentary evidence, witness and expert testimony, we proved that the founders intentionally refused to follow the shareholders agreement and that the other shareholders acquiesced in that abandonment. After victory at trial, we oversaw the marketing and sale of the Company in a manner to maximize shareholder value, assure continuity of its operations, and protect the jobs of its employees.