Thursday, February 21, 2013

Piemonte v. New Boston Garden Corp. case brief

Piemonte v. New Boston Garden Corp. case brief summary
377 Mass. 719
Subject: Valuation

SYNOPSIS: Plaintiffs filed an action against defendant under Mass. Gen. Laws ch. 156B, § 90, for a judicial determination of the "fair value" of plaintiffs' shares, and each party appealed from the trial court's determination of the shares' fair value.


- Plaintiffs were stockholders in a Massachusetts corporation whose stockholders voted to merge with defendant.. 
-Plaintiffs were entitled to demand payment for their stock and an appraisal in accordance with Mass. Gen. Laws ch. 156B, § 85, as amended by St. 1969, ch. 392, § 22. 
-Plaintiffs commenced action under Mass. Gen. Laws ch. 156B, § 90, seeking a judicial determination of the "fair value" of plaintiffs' shares under Mass. Gen. Laws ch. 156B, § 92, inserted by St. 1964, ch. 723, § 1. 
-Each party appealed from a judgment determining the fair value of plaintiffs' stock. 

The court on appeal, concluded that the trial judge followed acceptable procedures in valuing plaintiffs' stock; that his determinations were generally within the range of discretion accorded a fact finder; but that the judge's treatment of the evidence was, or may have been, in error on three points.


-The Delaware courts have adopted a general approach to the appraisal of stock which a Massachusetts judge might appropriately follow. The Delaware procedure, known as the "Delaware block approach," calls for a determination of the market value, the earnings value, and the net asset value of the stock, followed by the assignment of a percentage weight to each of the elements of value
-Delaware case law, which the Supreme Judicial Court of Massachusetts regards as instructive but not binding, has established a method of computing value of stock based on corporate earnings. The appraiser generally starts by computing the average earnings of the corporation for the past five years. Extraordinary gains and losses are excluded from the average earnings calculation. The appraiser then selects a multiplier -- to be applied to the average earnings -- which reflects the prospective financial condition of the corporation and the risk factor inherent in the corporation and the industry. In selecting a multiplier, the appraiser generally looks to other comparable corporations. The appraiser's choice of a multiplier is largely discretionary and will be upheld if it is "within the range of reason."  

 OUTCOME: The court concluded that the judge's method of valuing plaintiff's stock was essentially correct, but remanded the determination for clarification and further consideration on the record of three matters: the trial court's valuation of the sports arena, the professional sports franchise, and the concession operation. 

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