Shareholder Dispute

Summary: A corporation comprised of three divisions — agriculture, timber and aviation — was owned by three brothers (40%-40%-20%).  One of the 40% owners sued the other two and the company in 1994, seeking to dissolve the business. He simultaneously sued to dissolve a related family partnership.  

Over the next 13 years, we successfully defeated the minority shareholder’s repeated lawsuits and obtained judgments against him on cross-complaints.  Eventually, in a dissolution action, the court held a two-week valuation evidentiary hearing under California Corporations Code § 2000 to determine the value of the minority shareholder’s interest in the company. In addition to ascertaining the value of thousands of acres of farm and timberland, a major legal issue in the case involved whether the minority shareholder’s interest should be valued before or after hypothetical income taxes had been deducted.  

Result: We successfully convinced the court that income taxes were required to be deducted, thereby saving our client approximately $9 million. The case settled by virtue of a tax-free spin-out of assets to the minority shareholder. 

Martin H. DoddJamie L. Dupree