Opinion ID: 2071492
Heading Depth: 2
Heading Rank: 1

Heading: Oppressive Conduct Claim and Use of 1992 as Base Year

Text: Where a court finds that the acts of the directors or those in control of the corporation are ... oppressive, the court may liquidate the assets of the business. 11 V.S.A. § 2067. [2] Defendants do not challenge the trial court's determination that their actions oppressed Waller. AIDC's issues on appeal focus on the remedy fashioned by the court. Remedies provided under 11 V.S.A. § 2067 do not specifically include a buyout of a minority shareholder who alleges oppressive conduct by the majority interest in a corporation. Some courts in other states, however, have construed similar statutes and found the buyout remedy appropriate where there has been oppressive conduct but dissolution is not necessary to provide the plaintiff with a suitable remedy, and dissolution would needlessly harm a functioning business. See, e.g., Alaska Plastics, Inc. v. Coppock, 621 P.2d 270, 274-75 (Alaska 1980); Sauer v. Moffitt, 363 N.W.2d 269, 274-75 (Iowa Ct. App.1984). We need not reach this question because defendants here concede that the court did not err in mandating a buyout under 11 V.S.A. § 2067. Defendants argue rather that it was error for the court to base its valuation on AIDC's 1992 financial performance because the prevailing law in other jurisdictions is that valuation should be determined as of the date the complaint is filed, in this case 1991. Because 11 V.S.A. § 2067 is silent regarding the proper date of valuation, the standard to be applied in weighing the validity of the court's order is whether it abused its discretion in exercising its general equitable powers. See Kanaan v. Kanaan, 163 Vt. 402, 407, 659 A.2d 128, 132 (1995) (valuation of closely held business within discretion of trial court); see also Hendley v. Lee, 676 F.Supp. 1317, 1327 (D.S.C.1987) (proper date of valuation for forced buyout purposes was date of trial on merits); Taxy v. Worden, 181 Ill. App.3d 97, 129 Ill.Dec. 851, 854, 536 N.E.2d 901, 904 (1989) (fair value of dissenting shareholder's stock is determined for buyout purposes by court's judgment after consideration of relevant factors). We do not agree that the court lacked the authority to consider 1992 as the focal year for its analysis. Defendant cites 11A V.S.A. § 20.15(b), which provides that the court shall ... determine the fair value of such shares as of the close of the business on the day on which the petition for dissolution was filed. This section of the Vermont Business Corporation Act became effective on January 1, 1994, after the complaint was filed in the present action. Moreover, the purpose of § 20.15 makes its application inappropriate for the present case. The purpose of § 20.15 is to allow shareholders of a close corporation who desire continuation of the business to purchase the shares of the petitioner for dissolution at fair value. 11A V.S.A. § 20.15(b). The statute encourages electing shareholders to calculate whether it is in their interests to buy out the petitioner or risk entry of a dissolution order. Once they make an election, several results ensue, each requiring a determinable focal date, including the posting of a bond, the commencement of interest payable to the minority on the value of the shares to be purchased, and the loss of the minority rights as shareholders. Id. The trial court's decision to base share value on 1992 financial performance is reasonable under the circumstances and is supported by the record. The trial court sought to value the shares as of the approximate date of trial and decision, rather than the date Waller filed his complaint. Noting that complete financial data were not available for 1993 or 1994, the trial court chose 1992 because it was the year closest in time to the trial for which reliable data on the company's economic performance were available. The court's use of 1992 was thus not an abuse of discretion. Moreover, in its June 1, 1995 order, the trial court expressly invited the parties to submit motions under V.R.C.P. 59 to provide the court with additional evidence of the company's financial performance in preceding years. That opportunity remained open for over a year until this Court's August 14, 1996 entry order. Defendants' failure to file a timely Rule 59 motion evidenced assent to the use of 1992 as the base year. We will not disturb the trial court's resolution of this issue.