And So The Court Ducks Having To Decide A “Close” Question
Our next case involves a dispute between minority and majority shareholders, and how to value the minority shares for purposes of a buyout by the majority. Minority shareholders argued that the arbitrator should have valued the shares under Operation Agreement requiring appraisal “without regard to any discount for minority interest in the Company or nonmarketability.” Majority shareholders argued that because minority shareholders ended up suing under Corporations Code section 17351, providing that members of an LLC may avoid dissolution by purchasing the minority shares “at their fair market value”, the appraisal could take into account the nonmarketability of minority shares. Khnkoyan v. Missakian, B248125 (2nd Dist. Div. 1 March 3, 2014) (Rothschild, Johnson, Miller) (unpublished).
“[A] close one,” opined the Court of Appeal. But no need to decide that question, “because even if the arbitrator erred in applying discounts for minority interest and lack of marketability in assessing the fair market value of plaintiff’s shares that error was one of law and is not judicially reviewable.” Moncharsh v. Heily & Blase, 3 Cal.4th 1, 11 (1992).