Court Opinion

ID: 9644979
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:09:40.430313+00
Date Added: 2024-06-11T18:11:20.880167
License: Public Domain

OPINION ON PETITION TO REHEAR
FONES, Chief Justice.
Plaintiff has filed a petition to rehear to which we find it appropriate to respond.
First, plaintiff says we have rejected the use of any period less than three years in determining the earnings value to be assigned in arriving at the value of plaintiff’s stock interest in defendant, American Materials. We have made no judgment whatever with respect to the merit or lack of merit of any of the expert testimony presented at the trial of this case. If the expert testimony had been such as to satisfy the requirements of the weighted average method1, as plaintiff seems to suggest, it was unacceptable because the valuation date used was November 10, 1978, and the stock should have been valued as of October 13, 1975. We have simply enunciated a guideline that says that the use of less than a three year corporate earnings experience is suspect, and should be rejected unless the expert opinion clearly and convincingly establishes the validity of a lesser period. That discretion remains open to the trial judge in this case.
Second, plaintiff questions whether the Court has directed the trial court to use the formula on page nineteen of the opinion, in assessing the weight to be given to the three values in the weighted average method. The answer is no. The percentages assigned there were the results reached by the Brown court, after weighing the expert testimony and the factors discussed in the quotation that precedes the mathematical computation. The Brown case merely provided an example of the use of the formula. There is no rigidity to the weighted average method in the proportion to be assigned the three value factors, and, of course, they may vary widely from one corporation to another.
Obviously, there are very significant differences between the Q B & R stock in Brown and the stock of American Materials. It appears from the expert testimony heretofore adduced that earnings are more significant in the instant case than in Brown and assets are less significant. The experts testifying in this case have all recognized that American Materials stock should be discounted for lack of marketability of a minority interest. The master applied a seventeen and one-half percent discount and the chancellor a twenty-five percent discount. Under the weighted average *669method it is up to the experts initially and the court ultimately, to assign a weight to market value, in relation to assets and earnings, that correctly reflects that negative factor of lack of marketability of a minority interest, along with the other factors relevant to the price for which a share is selling or could be sold to a willing buyer — the ultimate test of the market value prong of the three prong inquiry. Likewise, the other two values will vary widely from one corporation to another in the weight to be assigned in the formula.
Finally, plaintiff says we should not have adjudged all of the costs against plaintiff. We agree that that was a mistake. The costs incurred in the Supreme Court only, are adjudged seventy-five percent against defendant and twenty-five percent against plaintiff, the costs in the other courts to remain as adjudged, and costs on remand to be adjudged by the trial court.
Otherwise, the petition to rehear is denied.
COOPER, BROCK, HARBISON and DROWOTA, JJ., concur.

. The Supreme Court of Delaware has recently modified the use of the “Delaware block” or weighted average method in a case involving the rights of minority shareholders in a cash out merger between the corporation in which they held stock and its majority owner. See Weinberger v. U O P, Inc., 457 A.2d 701 (Del. 1983). The modification was, at least partially, in response to a Delaware statute directing that “the Court shall take into account all relevant factors.” See 8 Del.C. § 262(h) (Emphasis added.) We do not find anything in Weinberger that causes us to alter the adoption of the weighted average method.