Opinion ID: 2630535
Heading Depth: 2
Heading Rank: 1

Heading: The Error of a Case-by-Case Approach

Text: Holding Company urges this court to adopt a case-by-case approach to the meaning of fair value. This approach would leave the decision of whether to apply a marketability discount in the discretion of the trial court. The interpretation of statutory language is a question of law which we consider de novo. See People v. Terry, 791 P.2d 374 (Colo.1990). We conclude that the meaning of fair value is a question of law, not a question of fact to be opined on by appraisers and decided by the trial court. See Balsamides v. Protameen Chemicals, Inc., 160 N.J. 352, 734 A.2d 721, 736 (1999). A case-by-case interpretation of fair value results in a definition that is too imprecise to be useful to the business community. Under a case-by-case approach, the parties proceed to trial without knowing what interest the trial court is valuing. In some cases, the trial court may determine that it is fair to award the shareholder his pro rata ownership interest in the corporation; in other cases, the court may conclude that it is fair to award only the fair market value of the shareholder's specific allotment of shares. Although the difference between the two measures is the single largest variable in the appraisal process, the court's choice of which interpretation to adopt is largely determined by whichever expert the court finds more persuasive. [5] Both the corporation and the dissenting shareholder are disadvantaged because of the subjective and unpredictable nature of the case-by-case approach. A case-by-case interpretation encourages unnecessary litigation; it is a costly and inefficient means to settle disputes between a corporation and a dissenting shareholder. A definition of fair value that varies from one courtroom to another is no definition at all; this could not be the scheme the legislature intended. We conclude that a case-by-case approach to the definition of fair value is untenable. Fair value must have a definitive meaning; either it is the value of the shareholder's proportionate interest in the value of the corporation as an entity, or it is the value of the specific shares in the hands of that particular shareholder. To the extent M Life and WCM embraced a case-by-case determination of the meaning of fair value, they are overruled. We now turn to the language and purpose of the statute to determine which of these two interpretations the legislature intended.