Valuation Of A Company Should Be Determined By The Shareholders Agreement And Not A Jury
In the business law and business litigation case of Opielski v. Teeling, PICS Case No. 15-1094 (Pa. Super. July 8, 2015) the Honorable Jack A. Panella, writing on behalf of the Pennsylvania Superior Court, ruled that the trial court did not err in molding the verdict in a suit arising from disputes among shareholder/officers and directors of a company. The shareholders agreement signed by the parties clearly covered the issues relating to valuation of the company shares and the interest due and trial court’s jury instructions were not confusing or misleading.
Opielski joined a company as a shareholder, director and officer. Opielski and the two other shareholders signed a merger agreement, a shareholders’ agreement and a compensation agreement that gave Opielski 20 percent ownership, set a base salary for all three shareholders and named all three to the company’s board of directors. After one shareholder died, disputes arose concerning the purchase price of his shares, his insurance benefits and the accounting for the company. Eventually Opielski was terminated and sued the remaining shareholder. At trial, jury held that the shareholder violated the terms of the compensation agreement and breached his fiduciary duty to Opielski. Opielski was awarded damages. Both parties filed post-trial motions which the court denied and the court subsequently molded the jury’s verdict from $676, 106 to $133,952 inclusive of pre-judgment interest. Both parties appealed.
Opielski argued that while the selection of the appraiser for valuing the company was binding and conclusive in accordance with the shareholders’ agreement, the valuation itself was not and the trial court erred in not allowing the jury to assess valuation. Courts, not juries, interpreted contracts. The shareholders’ agreement provided the method for choosing an independent appraiser and that the independent appraiser would determine the share price in the event of a disagreement such as that presented in this case.
The trial court correctly determined that the issue of share pricing was a matter of contract interpretation and not for the jury’s consideration. Opielski’s reliance on Viener for the argument that the jury should have been allowed to make an award of the fair market value of the shares was misplaced because the shareholders’ agreement, unlike in Viener, clearly provided for the determination by an independent appraiser. Additionally, the court did not violate the coordinate justice rule because previous denials of remaining shareholder’s motions to preclude or limit findings were not findings of fact on the ultimate legal issue of the proper share value.
Opielski argued that the trial court’s jury instruction on punitive damages was inadequate because it did not mention the deterrent effect of such an award. The trial court’s instructions were not confusing, misleading or prejudicial and the issue was without merit. Opielski also challenged the trial court’s order molding the verdict arguing that the court used the incorrect prejudgment interest percentage. However, the court used the percentage in the shareholders’ agreement and Opielski ignored the fact that the parties had discussed and reached an agreement on the issue of prejudgment interest.
Opielski also argued that the trial court erred in not molding the verdict to compensate for the jury’s alleged “mathematical miscalculation” when it awarded him 20 percent of certain managerial fees and pension payments rather than the one half Opielski claimed. However, the trial court correctly found that the jury’s award for damages was a proper compromise verdict based on the credibility of the witnesses and the evidence.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 38 PLW 695 (July 28, 2015)
Filed Under: Business Litigation; Shareholders’ Agreement; Valuation
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