Piemonte v. New Boston Garden Corporation

Supreme Judicial Court of Massachusetts · Corporations

CorporationsAppraisal rightsFair value of dissenting sharesdissenters' rightsappraisalfair valuemarket valueearnings value

Facts

The plaintiffs were stockholders of Boston Garden Arena Corporation who preserved their statutory appraisal rights after the corporation voted to merge with the defendant on July 19, 1973. The corporation owned the Boston Bruins franchise through a subsidiary, the Boston Braves franchise through another corporation, Boston Garden, and a food and beverage concession business. At trial, both sides introduced extensive documentary evidence and expert testimony concerning the value of the stock as of July 18, 1973. The judge valued the shares by separately determining market value, earnings value, and net asset value and then weighting those components to reach $75.27 per share.

Issue

How should a Massachusetts court determine the fair value of dissenting shareholders' stock under G. L. c. 156B, § 92, and did the trial judge properly value and weight market value, earnings value, and net asset value here? The case also asked whether the judge erred in certain asset valuations and in awarding 8% interest.

Rule

In an appraisal proceeding under G. L. c. 156B, a judge may appropriately determine fair value by considering market value, earnings value, and net asset value and assigning each factor such weight as the circumstances justify. Market price is not conclusive even when there is trading, and where there is no established market a judge may, but need not, reconstruct market value. In valuing earnings, the judge may use average recent earnings and a discretionary multiplier reflecting the corporation's prospects and risks, and the judge is not bound to accept expert valuations but must exercise independent judgment.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Cascade Harbor Entertainment, a Massachusetts corporation based in Portland, Maine, merged into another company after a shareholder vote. In a dissenters' appraisal action, the stock had traded on a regional exchange only a few times each year, and the last pre-vote arm's-length sale six weeks before the vote was $31 per share.

Which is the strongest argument for the trial judge's use of $31 as a market-value component in determining fair value?

Explanation. The majority approved use of actual market value even where trading was thin, so long as the judge reasonably concludes market value can be determined. Market price is not conclusive, but it may be considered alongside earnings value and net asset value, with weights assigned as circumstances justify. (Derived from Piemonte v. New Boston Garden Corporation (n.d.).)