Opinion ID: 77883
Heading Depth: 2
Heading Rank: 4

Heading: Compensation for Past Misconduct

Text: Cox's cross appeal challenges the district court's refusal to readjust its fair value calculation to compensate for past misconduct by NJC management. As previously discussed, we review a court's determination of fair value for abuse of discretion. See G&G Fashion Design, 870 So.2d at 873; In re Walt's Submarine Sandwiches, 569 N.Y.S.2d at 493, 173 A.D.2d at 980; In re Blake, 486 N.Y.S.2d at 347, 107 A.D.2d at 146; Morley, 915 F.2d at 1523. Entry of an order directing the purchase of minority shareholdings pursuant to Fla. Stat. § 607.1436 requires the dismissal of the underlying petition for dissolution pursuant to § 607.1430. § 607.1436(6). However, courts have clarified that fair value still ought to take into account any effect thereupon of corporate asset waste or other harm caused by mismanagement. See, e.g., In re Gerzof v. Coons, 563 N.Y.S.2d 458, 459, 168 A.D.2d 619, 620 (N.Y.App.Div.1990); Cavalier Oil Corp. v. Harnett, 564 A.2d 1137, 1143 (Del. 1989). The district court determined, largely in accordance with Cox's expert's report, that the best approximation of the fair value of Cox's shares would be 47.5% of fair market value as calculated according to a comparable sales analysis. Although Van Essen did not specifically consider any corporate waste in the course of his comparable sales valuation, he did effectively adjust for any impact previous waste or mismanagement would have had on the value of the shares through normalizing the operating margin to the average level of comparable publicly traded newspapers. The district court slightly adjusted this calculation, normalizing instead to the operating margin of the independent newspapers comparable to the News-Journal. Inefficiencies caused by mismanagement or waste are no less addressed by the court's normalization. In a comparable sales analysis, corporate waste would affect the estimation of fair value in that it would result in higher expenses, which would, in turn, yield a lower operating margin. Normalizing the operating margin according to that of comparable daily newspapers accounts for any distortion caused by greater than normal expenses. Accordingly, Cox's request that a pro-rata share of approximately $31.7 million in waste be added to the court's comparable sales-based estimate of fair value would have the effect of adjusting twice for mismanagement and waste. Accordingly, we find no error in the court's refusal to include it.