DEBORAH KYZER IVY, Individually and as a Derivative Plaintiff on behalf of the interests of CALAIS COMPANY, INC., and its SHAREHOLDERS, Appellant,
CALAIS COMPANY, INC., C.R. "KELLY" FOSS, Individually, and as a Shareholder and Former President and Board Member of CALAIS COMPANY, INC., JUDY FOSS, Individually and as President and Board Member and Shareholder of CALAIS COMPANY, INC., THE C.R. FOSS LIVING TRUST, McMAC FAMILY, LLP, THE RODNEY L. JOHNSTON TRUST, BRIAN W. DURRELL, Individually, and DURRELL LAW GROUP, PC, WELLS FARGO ALASKA TRUST COMPANY, NA, JOHN MCMANAMIN, as a Shareholder and Officer, and Former Officer and Board Member and General Manager of CALAIS COMPANY, INC. (but not individually), MATTHEW SWEENEY, Individually and as Putative Director of CALAIS COMPANY, INC., MICHAEL PETERSON, as a Board Member and Shareholder of CALAIS COMPANY, INC. (but not individually), and JANE/ JOHN DOE(S) I to XX CONSPIRATORS, Appellees.
from the Superior Court, No. 3AN-07-08813 CI of the State of
Alaska, Third Judicial District, Anchorage, William F. Morse,
Appearances: Phillip Paul Weidner and Lisa Rosano, Phillip
Paul Weidner & Associates, APC, Anchorage, and Charles E.
Cole, Law Offices of Charles E. Cole, Fairbanks, for
Jeffrey M. Feldman, Summit Law Group, Seattle, Washington,
and Susan Orlansky, Reeves Amodio LLC, Anchorage, for
Appellees Calais Company, Inc., J. Foss, The C.R. Foss Living
Trust, McMac Family, LLP, J. McManamin, M. Sweeney, and M.
Peterson. Notice of nonparticipation filed by Patrick B.
Gilmore, Atkinson, Conway & Gagnon, Anchorage, for
Appellees B. Durrell and Durrell Law Group, PC. Notice of
nonparticipation filed by Gary A. Zipkin and Michael S.
McLaughlin, Guess & Rudd P.C., Anchorage, for Appellee
Wells Fargo Alaska Trust Co., N. A. No appearance by Appellee
Rodney L. Johnston Trust.
Before: Stowers, Chief Justice, Winfree, Bolger, and Carney,
Justices. [Maassen, Justice, not participating.]
Ivy is a shareholder in Calais Company, Inc., a closely held
corporation. Ivy sued Calais in 2007 seeking dissolution of
the company. The parties settled, and Calais agreed to buy
out Ivy's shares of the company based on a valuation of
Calais conducted by a three-member appraisal panel. The
appraisers returned an initial valuation in 2009. The
superior court approved that valuation, but Calais appealed.
We reversed and remanded, concluding that the appraisers had
failed to understand their contractually assigned duty. The
appraisal panel returned a second valuation in October 2014,
which the superior court again approved. Ivy now appeals,
arguing (1) that on remand the superior court improperly
instructed the appraisers; (2) that the appraisers made
substantive errors in their valuation; and (3) that she is
entitled to post-judgment interest. For the reasons explained
below, we affirm the appraisal panel's valuation of
Calais, but we reverse the superior court's denial of
Ivy's request for post-judgment interest.
FACTS AND PROCEEDINGS
Prior Proceedings In Calais Co. v. Ivy
court summarized in Calais Co. v. Ivy,
filed suit against Calais in 2007 seeking involuntary
dissolution of the corporation under AS 10.06.628. Calais
owns several tracts of land in Anchorage and does business in
real estate acquisition, development, rental, and leasing.
The parties reached a settlement agreement (the Agreement) in
2009 in which Ivy agreed to dismiss all her claims and Calais
agreed to purchase Ivy's shares of the company's
stock based on a valuation of the company by a three-member
appraisal panel. The Agreement required the appraisers to
calculate the "fair value under AS 10.06.630(a)."
That statute provides that "[t]he fair value shall be
determined on the basis of the liquidation value, taking into
account the possibility of sale of the entire business as a
going concern in liquidation." After the panel was
assembled, two of the appraisers determined that the
"fair market value" of Calais was $92.5 million.
The third appraiser wrote a letter to the superior court
stating that he believed that the majority's methodology
failed to comply with the Agreement. He argued that the
majority had determined the "fair market value" of
Calais's real estate holdings and not, in his view, the
"fair value" of the corporation as required by the
Agreement. Specifically, he objected to the majority's
failure to account for any applicable capital gains taxes and
liquidation costs. The superior court upheld the
majority's valuation, and Calais appealed to this court.
first determined that the terms of the Agreement authorized
the superior court to review the appraisers' decision in
order to ensure that the appraisers complied with the
contractual terms of the Agreement. We distinguished this from
second-guessing the valuation reached by the appraisers,
which was expressly prohibited by the
Agreement. We then interpreted "fair value"
as used in the Agreement to mean not the "fair market
value" of the company's assets (as the majority
appraisers assumed), but the "liquidation value" of
the company, as that term is used in AS
10.06.630(a). We explained that the "liquidation
value" included deductions for any applicable capital
gains taxes and liquidation costs, and we reversed the
superior court's decision because the majority appraisers
had failed to take those taxes and costs into
B. Proceedings On Remand
remand the superior court instructed the appraisers to
calculate the fair value of Calais in accordance with our
opinion and to submit a report stating that value and
describing their reasoning. The panel members then completed
their appraisal and issued a report. The report explained
that the appraisers summed up the individual property values
of Calais's real estate holdings to arrive at a
"cumulative Market Value" of $87, 580, 000. The
report then explained how the appraisers subtracted
liquidation costs and capital gains taxes and accounted for
Calais's other assets and liabilities to reach a final
"fair value" of $54 million.
moved the superior court to reject the panel's
determination of fair value. Ivy's motion focused
primarily on the fact that the appraisers had calculated the
value of Calais based on a piecemeal sale of the
company's assets, rather than on a sale of the entire
company as a going concern. She contended that the value of
Calais in a sale of the entire company as a going concern
would have resulted in a much higher "fair value"
for the company, and that the appraisers were therefore
required to take this approach because they were required to
choose the valuation method that achieved the "maximum
return." Ivy also asserted various other errors in the
superior court rejected Ivy's arguments and accepted the
appraisers' report. Ivy moved for reconsideration,
largely repeating the arguments she had already made and also
requesting post-judgment interest. The superior court denied
reconsideration and also denied her request for interest.
appeals, arguing that (1) the superior court improperly
instructed the appraisers on remand; (2) the appraisers made
substantive errors in their valuation; and (3) she is
entitled to post-judgment interest.
The Appraisal Panel Was Properly Instructed.
Calais we remanded to the superior court to remand
to the appraisal panel with "explicit instructions to
calculate 'fair value' as defined by AS 10.06.630(a),
the other terms of the Agreement, and this
opinion." Ivy argues that the superior court failed
to comply with this mandate. We review de novo whether the
superior court correctly applied our mandate on
remand. For the reasons we are about to explain,
Ivy's argument is without merit.
remanded in Calais so that the superior court could
correct the majority appraisers' erroneous belief that
"fair value" was synonymous with "fair market
value." The superior court did exactly that on remand,
instructing the appraisers that" ' fair value'
is not synonymous with 'fair market value' " and
that "[t]he 'fair market value' of Calais's
assets is just one factor to be considered in determining the
'fair value' of Calais." The superior
court's instructions also quoted AS 10.06.630(a),
providing that "[t]he fair value shall be determined on
the basis of the liquidation value, taking into account the
possibility of sale of the entire business as a going concern
in a liquidation."
however, makes much of our requirement that the superior
court issue "explicit instructions." According to
Ivy, this language meant that the superior court was required
not only to instruct the appraisers to "calculate
'fair value' as defined by AS 10.06.630(a), the other
terms of the Agreement, and [our] opinion [in Calais],
" but also to provide detailed instructions on how
to make this calculation, including, for example,
"allow[ing] expert input from the parties regarding the
precise manner in which to take into account capital gains
taxes and costs of liquidation." Most notably, Ivy argues
that the superior court should have instructed the appraisal
panel that "[s]ince Calais is a profitable corporation,
you are required to determine the 'fair
value' of Calais on a going concern basis."
detailed instructions requested by Ivy, however, would have
violated the Agreement's requirement that "the
appraisers . . . exercise their expertise and judgment in
their determination [of the fair value of Calais] . . .
without input or communication from [the parties]."
Furthermore, Ivy's proposed instruction
requiring the appraisers to calculate the fair value
of Calais as a going concern would have been plainly
inappropriate. As we noted in Calais, the Agreement
specifically refers "to fair value under AS
10.06.630(a)." That statute provides that "[t]he
fair value shall be determined on the basis of the
liquidation value, taking into account the
possibility of sale of the entire business as a going
concern in a liquidation." As a California court
interpreting similar language has concluded,
"liquidation value" means either the
"valuation of the corporation as a going concern in
liquidation or the piecemeal valuation of the company's
assets and liabilities as of the valuation
date." The Agreement did not specify which of
these two valuation options the appraisers should use, and it
therefore placed the task of choosing between these two
options within the "expertise and judgment" of the
appraisers. In other words, the Agreement required the
appraisers to consider the possibility of a going concern
sale, and then, if they concluded that such a sale was
possible, to determine which of the two valuation options - a
sale of the company as a going concern or a piecemeal
valuation of the company's assets - would return a higher
value. Ivy's proposed instruction would have made these
determinations by judicial decree because it would have
required the appraisers to use a going concern
valuation as the basis for their "fair value"
determination. That instruction was properly rejected by the
B. Ivy Has Not Shown Any Error In The
also challenges the appraisal panel's determination of
the fair value of Calais. She argues that the appraisers
failed to consider a sale of Calais as a going concern, that
the appraisers' report was inadequately detailed, and
that the appraisers made various other errors in valuing the
company's assets and liabilities. For the reasons
explained below, we reject Ivy's arguments.
Ivy has not shown that the appraisers failed to "tak[e]
into account the possibility of sale of the entire business
as a going concern."
have already discussed, the Agreement required the appraisers
to determine the "fair value" of Calais "on
the basis of the liquidation value, taking into
account the possibility of sale of the entire
business as a going concern." Ivy argues that the
appraisers failed to even consider the possibility of a sale
of Calais as a going concern, that this failure demonstrates
"a lack of understanding or completion of the
contractually assigned task, " and that this court
should therefore set aside the panel's
argument rests on a factual assertion: that the appraisers
did not, in fact, "tak[e] into account the possibility
of a sale of the entire business as a going concern"
during their deliberations. But rather than support this
assertion with any direct evidence of the appraisers'
process, Ivy asks this court to make an inference. She argues
that the appraisers were required to choose the valuation
method - either a piecemeal sale of assets or a sale of the
company as a going concern - that returned the highest fair
value for the company. And according to Ivy, the value of
Calais in a going concern sale is much more than the $54
million valuation reached by the appraisers. Therefore,
Ivy reasons, the appraisers must have failed to consider the
possibility of a going concern sale during their
explained in Calais, however, "[t]he
court's role [under the Agreement] is not to determine
whether the third party [appraisers] accurately valued the
item . . . but whether the [appraisers] understood and
carried out the contractually assigned
task." Ivy's argument ignores that
distinction. She asks us to decide that the appraisers
must have failed to "carr[y] out the
contractually assigned task" because they
reached (according to Ivy) an inaccurate valuation. To
address this argument would require us to substitute our
judgment for the judgment of the expert appraisers in order
"to determine whether the third party [appraisers]
accurately valued" Calais. We reaffirm our prior holding
that the court's role under the Agreement is not to
determine whether the appraisers accurately valued the
company, but only whether they understood and completed the
contractually assigned task.
careful, however, to limit our holding by noting that
although apparent inaccuracies generally do not provide a
direct basis for rejecting an appraisal panel's
valuation, they may entitle a party to discovery into the
appraisal process. As the Wisconsin Supreme Court has noted,
review of an appraisal award is "usually, " but not
"always, " limited "to the face of the
award." This means that although mere
"[u]nhappiness with the amount of an appraisal award is
not enough to set it aside, " the amount of an award may
be so facially suspicious that "fraud, bad faith,
material mistake, or a lack of understanding of the process
are reasonably implicated." In such cases, "it
is within [the superior court's] discretion to allow
further inquiry or discovery" into the appraisers'
process. We do not address whether further
discovery would have been appropriate in this case because
Ivy has not raised any discovery issues on appeal.
The appraisers' report was ...