"No Award" outside possible range of awards for shareholder oppression
In an unpublished opinion dated September 27, 2012 in Ginnard v Advanced Design and Prototype Technologies, Inc., the Michigan Court of Appeals reversed the Oakland Circuit Court’s opinion and order denying plaintiff Mark Ginnard’s request for shareholder oppression damages.
Ginnard held 46.5% of shares in Advanced Design and Prototype Technologies, Inc. (ADAPT). Following a jury trial, Ginnard was awarded monetary damages for a breach of contract and breach of employment agreement against ADAPT. The jury also found that individual defendants committed shareholder oppression, but the trial judge was not satisfied by the expert witness regarding the value of ADAPT shares and appointed his own expert. The court’s expert testified that he could not value the shares because documentation he needed to perform a proper valuation did not exist, but estimated the shares were worth $600,000 to $1,000,000. He did not opine about who was responsible for providing the missing documents, and the trial court did not ask. Instead, the trial judge found this to be too speculative and declined to grant any remedy.
The Michigan Court of Appeals found that the trial court erred by concluding that the valuation of ADAPT was too speculative. Because of the difficulty in determining the value of stock in a closely held corporation, the trial court is given great latitude in determining the valuation. Damages are not precluded because of uncertainty, especially when it is the defendant’s actions or negligence that causes the uncertainty.
There is no error in the valuation if the determination falls within the range of the evidence presented. However, when presented with an estimate of the valuation and other remedies, such as a forced sale of the business, available, the determination of no award is outside any range or possible awards. MCOA remanded the case back to the trial court to decide if by not providing additional documents, the parties consented to the estimated valuation; if either party was at fault for the missing documentation; if another remedy would be appropriate; and what level of certainty would be required for determining the damages if not.
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