haven't seen dash two one one three land and buildings investment management l l c versus telamon centers inc at all argument fifteen minutes per side mr landau for the appellant may please the court i'm chris landau and i'm here today for appellant land and buildings i'd like to reserve three minutes for rebuttal this case involves both a contract claim and a section fourteen a claim that turned on the interpretation of a corporate charter that charter requires the company's board of directors to determine in good faith the market price of stock that's not publicly traded defendants take the position and the district court agreed that the market price of such stock is necessarily the same as its liquidation value which the charger sets at one tenth of a cent for its conversion value which the charter said fourteen thousand to one share of common stock that's wrong as a matter of law the purely nominal liquidation and conversion values have no bearing here because no one is liquidating or converting the preferred stock rather the issue here is the capital m capital p market price of that stock and nothing in the charter purports to set that price to the contrary the charter specifically declines to set the market price in contrast to the conversion and liquidation values and the signs  that's really the critical provision here because the ownership limit is set in terms of value it's eight point two three percent of the value of the capital stock that term and the market price that well the charter assigns that price to the board and the board has to make a good faith determination of again we're talking with shares that are not publicly traded so they have to look at you know when you have if when the shares give you a thirty percent control over the value of the over the company it has some market price that is different that something can't be traded on the markets correct and that's exactly what the charter contemplates your honor the charter says the board must make this  termination in good faith the problem here and this i think is back to judge clay's question which is absolutely the critical point here the board can't simply say that the market price is necessarily the same as the nominal liquidation their conversion values because that's not a determination of the market price it is certainly true your honor that there may be difficulties and one of the things that we would like to do on remain and if we live to fight another day which we should is to prove a good faith but the problem is the basic problem is there was never a determination of market price by the board because the board simply assumed and this was their legal error i think that the market price was necessarily the same as the it in response to something but to do it all the time to be sure they stayed within the ownership your honor the charter answers that question it says all the relevant data it says market price means and again remember the charter tells us what the liquidation value in the conversion value are but it doesn't tell us what market price is a size that has to the board in good faith and it says with respect to any class or shares of regular capital stock if such shares are not then traded on any exchange then the market price that they have not your honor they assess it or audit it or in some way oversee it your honor the rule of government has enforcement discretion they have not come after this but that doesn't mean that everything is ok they certainly have not bless this but to go back i think to judge clay to your question which i think is the central question here is if there's nothing else i get across today it's i'd like to underscore that there isn't one general valuation formula which i think is the track that the district  if i can try to clarify your honor in the article that the charter does not set market price it asked that it tells the board to determine that in good faith so that's a very important point that we come in and give the board the authority to set the stock price if it can't do it do so in bad faith but i don't see in these papers an indication of excess what's the what's the bad that's going on here well let me make that point there are the if you look at the paragraphs twenty eight and thirty of the of the amended complaint we say that the company is recognizing that these shares have a value these these these non voting is in these voting faith the board we have allege in our complaint facts that the board has recognized that the company has recognized that these non vote that these shares have value and i quote here from paragraph twenty eight commensurate with the economic interests in the underlying partnership assets in other words what happened here is that the taliban's have a thirty percent control over thirty percent ownership of the underlying assets that are owned by the company and they got the series b preferred stock and again i'm quoting what they're saying that the series b preferred shares or class of money shares and give the taliban family the ability to vote commensurate with their economic interest in the partnership and ensure one share one unit one vote they were partnership now you know there are many possibilities i take it certain certain economics textbooks would say corporate control but less than a majority is worth something but who knows what right i mean if you're right if it were fifty one percent we have a some theory about it right here your underlying argument is there was an election and you los t that if the electorate had been different you would have won but it wasn't a rigged election that is you could have won if your theory was good enough to attract more votes we could win the non taliban that coun so you got x percent more than fifty of these other here's if you had gotten seventy percent of these other shares you were one that's absolutely correct right so then how does that give us any kind of way of assessing the price other than what's in the charter well it's it's not your job nor our job to assess the value it's the board's job and you have an evaluation theory that is if your valuation theory isn't valid legally then where do we go our valuation theory is simply something we put forth in the complaint because our task is to challenge the good faith determination a good faith the termination by the board and what we're saying is we think this should be the valuation even if our valuation theory is not correct there may be different valuation theories at least we should live on remand to be able to say that the board's valuation theory which again is is at that there's been no determination by the board other than to look to the conversion of liquidation values and  liquidation or conversion values are necessarily the same as the market price we don't think that qualifies in the terminations we have two steps of argument but even if we're wrong on that and there were a determination we're entitled to challenge whether that is a good faith determination given that the board is simultaneously saying these but not these voting shares were flecked the value that's commensurate with the taliban's interest in the underlying assets it's like for instance if you have an airplane found sure that might have a  cash surrender value of a penny that but that doesn't mean that it's economic value is only a penny it might allow you to fly round trip to hawaii economic value the question is what it what the market  what i don't think legally i can sell my delta airlines that are i mean it would be restricted i mean maybe some you can drink i don't know but if it is restricted such that i can only sell it to people who set forth here is necessarily the same as the purely nominal conversion liquidation value and that ever led the district court to say well your theory doesn't make any sense because how can it not be in good faith if this is the valuation for that set forth in the charter and our point that the charter itself on its face your honor draws a distinction between a determination of capital and capital p market price that's a determination that said for the board what the charter also does is it sets the conversion liquidation the i don't want to miss them no but in so about i think our position is totally consistent with that because our position is that the charter here are all the board has to do is make it a good faith determination we don't think there's been a determination we certainly think that the twelve b six stage we have alleged enough facts to give rise to an inference that any such determination assuming it occurred which we of course don't think it does was not in good faith because the charter simultaneously saying these voting rights oh really important because they're meant to reflect the taliban's interests in the underlying ownership of the underlying assets which is a thirty percent ownership so they're talking out of both sides of their mouth and i think my question then i remembered is there a distinction in your mind between a good determination and the right determination because it seems to me like you are saying look they just assumed that this they may let's say we get have that one did they make a determination let's say the answer to that is yes they made a determination that the liquidation what you would call the liquidation price in your view that's wrong that's not the right answer but is there a difference between it being right and it being in good  voting rights have value commensurate with the taubman ownership of the underlying assets you can't at the same time say these are really important things and say they have purely nominal value based on what's on the website not only what's on the website but on their statement to the f c c this is in the solicitation materials where i think there's one paragraph twenty eight if you look there's a little box that we got in this is material that submitted to the  is one piece of the facts that we have alleged in our complaint it will be six it's enough to show the bad the lack of the faith we have other ones that i could prefer if you look at it we call it in the complaint we say that this is an artifice we say that  right or wrong on that this is a twelve b six appeal and so all we're asking you to decide the district court in footnote two said oh you didn't say bad faith are only point is you don't have to use magic words again our position is that there was no determination thank you good morning may please the court on joseph of the vin i'm here today for the defendant appellee tom and centers and for the relief defendants this is a garden variety breach of contract case i agree with with counsel that all this court needs to do and all that the district court did is construe the contract which is an issue of law and read the allegations of the complaint plaintiff's theory is based that family was permitted by the corporation to retain the bulk of their series b shares that was issued to them by the corporation twenty years ago and the theory is that the value of the stock is greater than the value of the stock itself that its value includes the value of the units of partnership interests that the family members separately own in another entity and this claim is not plausible it's not even coherent because what plaintiff theory would mean is that the stock that the articles required the corporation to issue to the top one family was void on the question not only did the s c see not have an issue with these descriptions and this description is the same description that the company has reported on its forms ten k annually for the last twenty years but there's another agency that hasn't had any problem with this and that's the internal revenue service because if plaintiff's theory is correct then the recruit is being violated and this company is not not the claim is refuted by the articles which set the relative rights preferences and limitations of the stock which it is required to do by the michigan business corporation act and not only is there a liquidation preference that's designated the the the the stock has no right to any of the assets of the corporation it's not entitled to any dividends or distributions in other words the stock does just ordinary parlance we would think about a stock price in various different ways one might be mr landover liquidation value and another might be the market price why does  harder use the word market price than have the board make a determination of the market price if it's not different then the liquidation value would judge larson that death rates are very technical animals and  that provision that you're quoting comes directly from the internal revenue code which provides that that stock should be based on on its traded on its market price and what market price means in the articles and in the code is that the value of the stock should be determined by reference to the market and a market exists for this series b stock the market price may be realized through it's contractually provided conversion value into publicly traded stock that's why there is that conversion value to create the market price and that's it that's what the that's what the contract provides pla doesn't like that conversion value he doesn't like one to fourteen thousand he has his own conversion and his conversion ratio is one to one but that's not what the article say and the shares so the common shares have the market price to determine the market price of the series b shares you take the common shares price which fluctuates with the market and you divide by fourteen thousand and  the fact of like nominal it's effectively it's effectively nominal if this if it were fifty one percent rather than thirty percent would that make any difference that is i would think in a real world  control even though i don't get any of the asset value is that a fair question and that it is a fair question and that is essentially what plaintiff argues but the problem with that alternative valuation theory this control theory is number one you have to put aside the fact that this is a twenty nine percent control interest and one of control interest means exactly what you're saying that that's what i'm asking you if it were a control interest would we have a different case well it invests particular case fifty one percent wouldn't do it because the articles provide that any action any corporate action requires two thirds majority except for the election of directors which is  you know fifty one percent won't do it but putting that aside electing all my directors would eat again in reality except the directors would the directors don't have the power to amend the articles so in the article but to do what i i know do lots of funny things but this seems to be the kind of thing that corporate lawyers might do although this is pretty common shares this particular reed is called an upbeat which is an operating machine which is managed by a public corporation and the public corporation owns the majority of the operating of the operating partnership and thomas centers who is actually the first  operate and it has created an entire industry and there are many many many up reached out there as matter fact most real estate reads are up rates and the internal revenue service has looked at this up restructure and has never found a problem with it and all of these up reads have series b shares which are given to the owners of the operating partnership and the series b shares have nominal value because otherwise the five a few rule would be violated and when you when you determine the calculation value and here you have to determine the answer is this is a way that's not play around but a way of addressing the buy fifty rule that a lot of people seem to do i don't know what to make you go any further than that but is that your fair representation that it that is my reputation but i want to give some of the reasons why the whether it's twenty nine percent or fifty one percent really misses the point because the calculation of relative value between the class of stock that the articles require is the value of the class of the series of stock not the value of the number of shares held by a particular shareholder because if that were the case then the stock held by one shareholder the same stock may have a different value than the stock held by another shareholder you value the class you know value the number of shares held by by the shareholders and for the purposes of the five or fewer rule while it is true that wit family like the top and family they are deemed to constructively own the stock by each family member plaintiff doesn't allege nor it could could it allege that this construct of ownership requires the corporation to assume that the family members will vote together is a bloc there's no allegation like that and there can't be an allegation and in fact the private letter ruling from the internal revenue service the plaintiff cites a peach twenty eight of its brief says rules this is the service that for purposes of the five or fewer rule any premium that may be allocatable to an individual block of stock is determined with reference to the number of shares owned by that individual without attributing start from the family members for purposes of such a five four four which is the constructive ownership  rule so in that dispute the taxpayer contended that family attribution constructive ownership should not applied to result in a control premium innes much as the taxpayer had no economic or other rights in shares held by his family members and the internal revenue service agreed with the taxpayer and did not apply a control premium so you have to look at every single member of the todman family to determine what their stock is and what their number of stock is and it's not going to be twenty nine percent it's going to be much much smaller and you can't construct can't use the construct of ownership provision  n the record anywhere they are in the ten k s which are referred to in the pleading but let me give you the what i think is the most cogent reason why a control premium one to one ratio does and doesn't make any sense and that's it because it would create i think an absurd catch twenty two if the stock is worth more based on the control premium the approximately thirty percent of the corporation's outstanding stock and that's why in his amended complaint plaintiff asks the court and i quote to reduce the todman family's holdings from thirty percent to eight point two three percent and others twenty two percent reduce it so that twenty two percent that control premium will make will will void the stock over which the premium was added so why would anyone anyone in a rich situation pay a control premium for a block of stock if under the ownership limit the acquisition of that control would void the stock it just isn't coherent and that the the construction of this of the articles that plaintiff asterisk or to adopt would make the articles inherently contradictory because one provision of the article says that the corporation must issue to each unit holder one share of series b preferred stock for each unit so that's an obligation on the other hand his interpretation would be that the value of that stock that it must issue is in excess of the of the ownership limit and therefore it's void so the articles require the corporation under his interpretation to issue stock that on the day of its issuance is void and this court has said many times that you read contract provisions harmoniously you don't go to find conflicts in contract provisions and the second theory that plaintiff uses to evaluate the state pulling theory and again what this is a breach of contract case and what plaintiff is essentially arguing is that the corporation breached the contract because it did not apply his theory of values versus what the articles provide and his theory of value is the control premium that i just spoke about and the stapling theory and what he says in paragraph thirty nine of this complaint is and i quote stapled reach securities should be considered a single entity under the tax code plaintiff is wrong he's just wrong and for several reasons number one there is no authority in the tax code there is no authority in the regulations for the proposition that a return must value it's stock based on interests that are owned not by the read but by shareholders not by the corporation itself but by its shareholders and one thing that demonstrates that and we get this from the articles one simple thing demonstrates that these shares are not stapled interests as defined in the code is that if the corporation is required to void a share b stock because it is in excess of the ownership limit the corporation does not receive both the shareholder stock and his or her t r g units what happens is that the series b shares become x as the corporation the corporation gets back the series b stop but the shareholder retains his or her t r g units if they were stapled they would both go back to the corporation here if the shareholder retains the t r g units and staple staple doesn't mean that somebody took a stapler and stapled these two to instruments it's a very technical term and the code only uses the term stapled interests as an internal term in the definition of stapled entities that's the bets the key stapled entities and stapled entities are two or more entities that have more than fifty percent common ownership of the corporation and t r g cannot possibly be stapled interest because plaintiff alleges in the complaint that the to family does not own fifty percent of either entity or certainly not of both entities so they can't be stapled entities and most important and i see my time is up the value of the articles measures the values of of the outstanding capital stock of the corporation which is defined as the common stock and the preferred stock of top and senders not the value of the corporation stock in a shareholder stock in another entity so what plaintiff is doing he wants you to read words into the articles that simply are not there thank you thank you very much and there are a b yes your honor if i may very quickly two quick points first i agree one hundred percent with my colleague that you have to read these with a b a statute or a charter contract as a whole that works in our favor because what they are saying is that although the charter expressly assigns the determination of capital and capital p market price to the board to determine in good faith that it is nonetheless controlled adam adequately by the surely nominal conversion or liquidation values that are set forth in the charter itself those that is the fundamental flaw in their reasoning once you understand that those two things are different one is decided in the terms of the chart the other is assigned to the board to determine in good faith and we are here in a twelve b six motion where we have made factual allegations that give rise to the inference that these are not in good faith we may w or we may lose in the district court in trying to prove that any such determinations are not in good faith and i think a lot of this back and forth a lot of the questions that were just answers they were just given by my friend to judge abbas question about the structure of reeds and how much this will affect and everything there was can be worked out in determining whether or not this was in fact a good faith market price the termination by the board if any such determination were in good faith our problem is we were dismissed six before we got in the door because the district court eroni slee conflated the market price of terminations design to the board with the charters purely nominal definition of what the liquidation or y your theory not just that there are theories we happen to think that our theory is correct as if i could what they said but the point is our complaint still states a viable claim here even if our valuation theory is not correct that there is not in good faith even if we're wrong on the stapled you can still assign some we have a fallback theory which is to assign some valuation to these control the two these shares to these voting shares given thirty percent of the voting and the ability for the nine board directors they're saying that that is that that clearly changed the result of this past election for the board of directors because we got a majority of the non talban folks to say that that is purely nominal as a matter of law is just wrong and all we want to do it again we are here in twelve b six there could be in our with the same kind of discussion you had back in fact might have been the only bill twelve percent or five percent or three percent should think about wouldn't it rise or fall by how good your voting is with everybody else because if you're going to lose anyway your honor i think these questions can all go into the determination that the question whether or not there has been a good faith valuation by the board that's the only question we get we may not win on the merits because there may be these other things our point is the district court here thought as a matter of law that the marketplace and i think frankly they seem to be constitute a good three determination you say that simply putting it in the article of the marketplace in the articles isn't sufficient but they didn't put it in the article say they clearly said it goes to the board yeah i understand i  understand so what would be a good determination what what do they need to do what are you hoping to show in the trial court on result we were hoping to show that they are determined to get to the extent that they have made intermissions they are insisting that they have and that there is a debt that is up for one minute and that so doesn't your amended complaint say the t c o board the board touted this alleged advantage that is there thirty percent share in it proxy materials causing further harm to plaintiff so doesn't that attribute that to the board the board made that determination your honor it we have argued certainly here in appeal that there has been no determination even if you disagree with us and say that there has been a determination now and say well yes i'm certainly we yes and that is fundamentally the issue here which is to say they have equated they continue to this day to equate market price absolutely with the liquidation conversions i hope that the idea of the plane ticket that might have a a liquidation or a cash under value of a penny doesn't mean that that's the market price it may not be the full price of a round trip ticket to hawaii it may only be two hundred defend that i mean they certainly from day one i mean not just your theory there's nobody that says that they've ever determined a fluctuating market value i think that is certainly true but let me to the extent that that one  hundred thousand one for one to the extent that that might be the seeds of your question might include a statue limitations kind of issue they certainly make ok i don't want to be overly defensive on that but i certainly want to make sure that you know just in terms of  committed an evil it is in not somehow somewhere sometime in a reasonable way making this determination between these two poles i think that is true let me just underscore that the definition of apologized again i just we asked this court to to remain on this case so at least we can try to put forth evidence that the issues that have been discussed here this morning about what the proper valuation should be and whether that was in good faith can actually be decided that the district court preacher middled that inquiry by simply equating market price capital and capital p with the nominal liquidation conversion values thank you