Preview:

a0825-10.opn.html
Original Wordprocessor Version
(NOTE: The status of this decision is Unpublished.)
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0825-10T4
A-0826-10T4
PATRICIA WISNIEWSKI,
Plaintiff-Appellant/
Cross-Respondent,
v.
FRANCIS J. WALSH, JR.,
Defendant-Respondent,
and
NORBERT J. WALSH,
Defendant-Respondent/
Cross-Appellant.
NORBERT J. WALSH,
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Plaintiff-Respondent/
Cross-Appellant,
v.
DONNA WALSH, Executrix of the
Estate of Francis J. Walsh, Jr.,
and NATIONAL RETAIL TRANSPORTATION,
INC., a Pennsylvania Corporation,
Defendants-Appellants/
Cross-Respondents,
and
PATRICIA WISNIEWSKI,
Defendant-Respondent,
and
COHEN EXPRESS CORPORATION, a New
Jersey Corporation,
Defendant.
April 2, 2013
Argued December 11, 2012 - Decided
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Before Judges Fisher, Alvarez and Waugh.
On appeal from the Superior Court of New Jersey, Chancery Division, Hudson
County, Docket Nos. C-171-95 and C-13-96.
Michael S. Meisel argued the cause for appellant/cross-respondent Patricia
Wisniewski (Cole, Schotz, Meisel, Forman & Leonard, attorneys; Mr. Meisel and
Warren A. Usatine, of counsel and on the brief; Lauren T. Rainone, on the brief).
Eric D. McCullough argued the cause for appellants/cross-respondents Donna
Walsh, Executrix of the Estate of Francis J. Walsh, Jr. National Retail
Transportation, Inc. (Waters, McPherson, McNeill, attorneys; James P. Dugan
and Mr. McCullough, of counsel; Mr. McCullough, on the brief).
Eric I. Abraham and Jeffrey J. Greenbaum argued the cause for
respondent/cross-appellant Norbert J. Walsh (Hill Wallack and Sills, Cummis &
Gross, attorneys; Mr. Abraham and Mr. Greenbaum, of counsel and on the brief;
Christina L. Saveriano, on the brief).
PER CURIAM
In this appeal, we consider a variety of issues in this long-standing oppressed shareholder suit. Concluding
that the trial judge erred in not applying a marketability discount and that he may have double-counted by
adhering to an error made by one of the experts, but finding no other error or abuse of discretion, we
affirm in part and remand in part.
This suit, involving various disputes among shareholders in National Retail Transportation, Inc., a close
corporation once equally owned by three siblings, was commenced in the Chancery Division on September
21, 1995, nearly eighteen years ago. The action was commenced by plaintiff Patricia Wisniewski against her
brothers, Norbert and Frank Walsh, regarding the company's acquisition of certain property. On January 31,
1996, Norbert filed a complaint against Patricia and Frank, alleging their attempts to oust him from the
company made him an oppressed shareholder entitled to the remedies outlined in N.J.S.A. 14A:12-7;
Patricia filed a counterclaim, seeking similar relief. These actions were consolidated and, to preserve the
status quo during the litigation, the Chancery judge at the time appointed an attorney as special agent and
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
later as provisional director, to monitor the company and mediate any disputes among the parties that
might arise during the ordinary course of business.
In 2000, following a lengthy trial, the Chancery judge rendered a decision (the Phase I decision), finding
that Norbert was the oppressing shareholder and that his actions harmed the other shareholders but not
the company. On March 21, 2000, the judge ordered Norbert to sell his one-third interest back to the
company, or to Frank and Patricia, at fair value to be determined after receipt of expert reports. The judge
set the valuation date at January 31, 1996, to coincide with the date Norbert filed his complaint.
The parties later submitted their expert reports regarding valuation. Without conducting a hearing, the
judge issued an opinion on November 7, 2001 (the Phase II decision), by which he fixed the fair value of
Norbert's interest in the company at $12,400,000. Final judgment was entered on January 3, 2002, followed
by a series of amended judgments, the last of which was entered on April 25, 2002. Pursuant to these
orders, the parties had a closing on the purchase of Norbert's interest, which called for a down payment
and a four-year note for the balance secured by mortgages on company-owned real property; the closing
occurred without prejudice to the parties' right to appeal the final judgment.
An appeal was filed, and on March 23, 2004, we reversed the Phase II decision and remanded for
reconsideration of the valuation date and the fair value of Norbert's interest at an evidentiary hearing.
Wisniewski v. Walsh, No. A-3477-01 (App. Div. Mar. 23, 2004).
Pursuant to our mandate and with the retirement of the first judge, a different Chancery judge conducted
an eleven-day evidentiary hearing on sporadic days between February 24, 2005 and June 9, 2005. On
November 15, 2005, the judge fixed a valuation date of November 29, 2000, the day Norbert departed the
company.
The judge then conducted a twelve-day hearing on the question of valuation that ended on February 28,
2007; he issued decisions on October 11, 2007 and July 22, 2008, which explained why he determined that
the fair value of Norbert's one-third interest was approximately $32,200,000. He later heard testimony
regarding the company's financial circumstances and the propriety of proposed payment terms over the
course of a number of days between November 2009 and March 2010. An order was entered on June 30,
2010, which fixed the payment terms, and a final judgment entered on October 16, 2010.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Patricia and Frank's Estate1 appeal, and Norbert cross-appeals. In her appeal, Patricia argues:
I. THE TRIAL COURT ERRED IN FAILING TO APPLY A MARKETABILITY
DISCOUNT TO DETERMNINE THE FAIR VALUE OF THE COMPANY.
II. THE TRIAL COURT ERRED IN ACCEPTING NORBERT WALSH'S EXPERT'S
DEFINITION OF FAIR VALUE AS BEING SYNONYMOUS WITH "INTRINSIC
VALUE."
III. THE TRIAL COURT ERRED IN ACCEPTING NORBERT WALSH'S EXPERT'S
UNRELIABLE INCOME (DISCOUNTED CASH FLOW) APPROACH, INCLUDING
SPECULATIVE REVENUE PROJECTIONS AND THE ERRONEOUSLY CALCULATED
DISCOUNT RATE.
A. The Trial Court Should Have Rejected Trugman's Speculative
Revenue Projections.
B. The Trial Court Should Have Rejected Trugman's Erroneously
Calculated Discount Rate.
IV. THE TRIAL COURT ERRED IN REJECTING THE MARKET APPROACH AS A
METHODOLOGY INCON-SISTENT WITH FAIR VALUE.
V. THE TRIAL COURT ERRONEOUSLY ACCEPTED NORBERT WALSH'S EXPERT'S
ANALYSIS OF EXCESS COMPENSATION PAID TO THE SHAREHOLDERS
/OFFICERS OF THE COMPANY.
VI. THE TRIAL COURT ERRED IN REFUSING TO CORRECT UNDISPUTED ERRORS
IN NORBERT'S EXPERT REPORT, WHICH OVERSTATED THE VALUE OF HIS
INTEREST BY $1,321,000.
VII. THE TRIAL COURT IMPOSED INEQUITABLE PAYMENT TERMS, INCLUDING
TERMS RELATING TO INTEREST, COLLATERAL, AND PAYMENT FLEXI-BILITY.
A. Norbert Has "Adequate" Col-lateral Without Junior Mortgages On
Properties That Will Create A Covenant Default By The Company
Under Its Existing Senior Mort-gages.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
B. The Trial Court Abused Its Dis-cretion By Imposing Fixed Rather
Than Flexible Payments.
Frank's Estate argues in its appeal:
I. THE TRIAL COURT ERRED IN DEPARTING FROM THE STATUTORY
PRESUMPTIVE VALUATION DATE AND SELECTING NOVEMBER 29, 2000 AS THE
VALUATION DATE.
A. The Basis For Moving The Valuation Date Proposed By Norbert
And Adopted By The Trial Court Is Legally Flawed, And Warrants
Reversal.
1. Shareholder Status and the status quo orders do not
warrant a new valuation date.
2. Frank and Patricia did not act inequitably after 2000.
3. Norbert's alleged parti-cipation has been compen-sated
by other means.
B. Critical Findings Of The Trial Court Relevant To The Valuation
Date Are Barred By The Law Of The Case Doctrine And Not
Supported By The Record.
C. Using The Complaint Date Is Fair And Equitable.
II. THE TRIAL COURT ERRED IN REJECTING THE DEFENDANTS' REQUEST FOR
A CREDIT TOWARD THE PURCHASE PRICE TO ACCOUNT FOR $2,530,264 IN
"NON-SHARHEOLDER COMPENSATION" PAID TO NORBERT PURSUANT TO THE
REVERSED 2002 JUDGMENT.
A. The Defendants Have Not Waived Their Right To Seek A Credit
For Non-Shareholder Compensation Paid To Norbert.
B. The Non-Shareholder Compensa-tion Is Unnecessary With The
New Valuation Date.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
C. Norbert Performed No Services For The Company In 2 000 And
2001 To Justify A Court-Awarded $1,265,312 A Year Salary
Enhance-ment.
III. THE TRIAL COURT ERRED IN REJECTING THE DEFENDANTS' REQUEST TO
ADJUST THE PURCHASE PRICE TO ACCOUNT FOR NORBERT'S SHAREHOLDER
LOAN BALANCE.
IV. THE TRIAL COURT ERRONEOUSLY AWARDED NORBERT INTEREST, OR,
ALTERNATIVELY, ABUSED ITS DISCRETION IN SETTING THE INTEREST RATE.
A. Norbert, An Oppressing Share-holder Who Was Ordered To Sell
His Interest In The Company For Being A "Most Disruptive Factor,"
Is Not Entitled To Interests.
B. Alternatively, The Trial Court Abused Its Discretion In Setting
The Interest Rate.
And, in his cross-appeal, Norbert argues:
I. THE TRIAL COURT ERRED IN FAILING TO ADD TO THE FAIR VALUE OF THE
COMPANY APPROXIMATELY $20 MILLION IN IMPROVEMENTS MADE TO OGDEN
II TO CONSTRUCT A STATE OF THE ART DISTRIBUTION CENTER, A PROJECT
THAT WAS UNDER CONSTRUCTION AS OF THE VALUATION DATE, BUT NOT
YET COMPLETED AND FINANCED OUT OF CASH THAT OTHERWISE WOULD
HAVE BEEN DISTRIBUTED TO SHAREHOLDERS.
II. THE TRIAL COURT ERRED IN APPLYING A SEPARATE 15% "KEY MAN"
DISCOUNT TO REDUCE THE VALUE OF THE COMPANY TO ACCOUNT FOR
FRANK'S IMPORTANCE WHEN THE COMPANY'S DEPENDENCE ON KEY
MANAGEMENT WAS ALREADY TAKEN INTO ACCOUNT IN THE DISCOUNTED
CASH FLOW VALUATION, THEREBY DEPARTING FROM THE "FAIR VALUE"
STANDARD BY VALUATING NORBERT'S SPECIFIC SHARES INSTEAD OF HIS PRO
RATE INTEREST IN THE WHOLE COMPANY AND DOUBLE PENALIZING NORBERT
FOR FRANK'S IMPORTANCE.
A. The Discount Rate Selected By The Trial Court In Adopting Trug-
man's Discounted Cash Flow Valuation Already Adjusted Fair Value
To Reflect The Value Of Frank's Historical Contribution; Any
Additional Discount For The Same Factor Is An Impermissible
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Double Counting.
B. The Law Does Not Support The Use Of A Key Man Discount In
An Oppressed Shareholder Case.
C. In Any Event, Frank's Death Proves The Inappropriateness Of
The Use Of A Key Man Discount.
III. THE TRIAL COURT ERRED IN FAILING TO APPLY A 20% "CONTROL
PREMIUM" TO THE VALUE OF THE COMPANY, THEREBY FINDING THE VALUE
OF A MINORITY INTEREST AND NOT THE "FAIR VALUE" OF NORBERT'S
PROPORTIONATE INTEREST IN THE ENTIRE COMPANY.
IV. THE TRIAL COURT ERRED IN NOT GRANTING POST-JUDGMENT INTEREST
ON THE ENTIRE JUDGMENT AMOUNT, AWARDING IT ONLY ON THE PRINCIPAL
PORTION OF THE JUDGMENT AMOUNT AND NOT ON THE PRE-JUDGMENT
INTEREST WHICH BECAME PART OF THE FINAL JUDGMENT.
A. Post-Judgment Interest Is Awarded Under R. 4:42-11 Essen-
tially As Of Right.
B. Pre-Judgment Interest Is An Integral Element Of The Final
Judgment.
C. New Jersey Case Law Requires Post-Judgment Interest Be Paid
On The Pre-Judgment Interest Com-ponent Of The Final Judgment.
D. The Oppression Shareholder's Act Implicitly Requires That Post-
Judgment Be Paid On The Entire Portion Of The Unpaid Purchase
Price.
V. ONCE THE TRIAL COURT DETERMINED THE AMOUNT DUE NORBERT IN
SEPTEMBER 2008, BUT HAD NOT YET SET THE TERMS AND CONDITIONS OF
PAYMENT, THE COURT ERRED IN AWARDING INTERIM INTEREST ON ONLY
THE PRINCIPAL AMOUNT DETERMINED OUTSTANDING AS OF NOVEMBER 2000
AND NOT ON THE $12 MILLION OF INTEREST THAT THE COURT FOUND HAD
ACCRUED FROM 2000 TO THE COURT'S DETERMINATION OF VALUE IN 2008.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
VI. THE TRIAL COURT ERRED IN SETTING THE POST-JUDGMENT INTEREST
RATE AT THE CASH MANAGEMENT FUND RATE PROVIDED BY RULE 4:42-11(a)
PLUS TWO PERCENT, INSTEAD OF USING THE COMPANY'S BORROWING RATE
OF PRIME RATE PLUS ONE PERCENT.
The parties' arguments require our consideration of whether the trial judge abused his discretion: (1) in
departing from the presumptive valuation date; (2) in rejecting a market value approach; (3) in accepting
Norbert's expert's income approach; (4) in declining to apply a marketability discount; (5) in declining to
apply a control premium; (6) in applying a key-person discount; (7) in failing to account for improvements
to property with funds that would otherwise have been distributed to shareholders; (8) in failing to adjust
the purchase price for certain non-shareholder compensation paid to Norbert pursuant to a judgment later
set aside; (9) in the manner in which he imposed payment terms; and (10) in awarding interest.
Before examining these issues, we first outline the factual circumstances and the nature of the hearings
conducted in the trial court.
The record reveals that each sibling owned one-third of the company their father, Francis J. Walsh, Sr.,
founded in 1952 as a one-truck operation. The business has since expanded to include such services as
freight consolidation, line-haul, and even dedicated fleets for retail stores throughout the country. Frank,
the oldest of the three siblings, joined the company in 1964 at age seventeen, and assumed leadership by
1973, the same year the younger Norbert joined the company as a truck driver. Frank continued to lead the
company following his father's death in 1978, although, by the time of this litigation, Norbert served as an
officer as well, along with Raymond Wisniewski, Patricia's husband. Patricia never worked for the company.
The company enjoyed considerable success over the years, affording its shareholders generous
distributions and loans, though that success has not been consistent. The company sought bankruptcy
protection in the 1980s, and took several years to reorganize. The company took yet another financial
downturn when Frank left in 1992 to serve a prison sentence for commercial bribery and bank fraud,
among other things. He left Norbert in control during his absence, though Norbert testified that he believed
himself to have already been in control of the company.
In any event, during that period, Norbert discontinued payment of Patricia and Raymond's bills that
the company had routinely paid on their behalf, requiring them to take out a second mortgage on their
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
home and sell assets to meet their obligations. Norbert further ordered an accounting transfer of billings
from a company in which all parties had a nominal interest to a subsidiary in which Patricia then had no
interest. He did this without consulting or compensating Patricia. Norbert further attempted to exclude
Patricia from a company real estate deal until Frank objected, and then excluded both by purchasing the
property through an entity owned by his immediate family. Those acts would later constitute the basis of
the trial judge's finding that Norbert was an oppressing shareholder and that this oppression continued until
Frank returned and reacquired control of the company with Patricia and Raymond's support.
The parties substantially disagree about the extent of Norbert's participation in the family business
thereafter. Norbert testified that his involvement in the company was generally active until his departure in
2000. According to Norbert, he maintained a separate office from Frank and continued all of his duties
during the litigation. He maintained contact with customers, participated in contract negotiations, including
new contracts with K-Mart and Best Buy and renewals with Marshall's and Federated Stores, and signed all
contracts as president. Moreover, he made tens of millions of dollars in personal guarantees to obtain
financing for the company.
Frank and Raymond, on the other hand, disagree. Raymond in particular testified that Norbert's
involvement in the company was minimal once Frank returned and only nominal once the litigation began,
asserting that all of the company's success arose from Frank's development of relationships with its major
customers, that Frank was responsible for negotiating all major contracts, and that the company suffered
financially during his absence. Even Norbert acknowledged that Frank had secured many of the company's
major customers.
Moreover, according to Raymond, once the litigation began, Norbert's only role at the company was
as an obstructionist. For example, in one instance, Norbert refused to cooperate with the company's efforts
to redevelop a parcel of property known as Ogden II near its North Bergen terminal. Eventually, the
company was able to make scheduled improvements in accordance with the state-approved redevelopment
plan using funds ordinarily distributed to the company's shareholders. It did so only over Norbert's
objection, but with approval of the provisional director and the trial judge.
No party has contested the Phase I conclusions that Norbert's conduct in withholding distributions
from Patricia and shifting the company's assets to her detriment constituted oppressive behavior or that
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Norbert should be bought out as a result. As noted earlier, however, we reversed the trial court's Phase II
decisions regarding valuation and the valuation date. Wisniewski, supra, slip op. at 12. With respect to
valuation, we concluded that the trial judge should not have resolved the issue, dependent on conflicting
expert testimony, without the benefit of a hearing to evaluate the relative credibility of the experts. Id. at 8-
11. As for the valuation date, though, we concluded that, as a matter of equity, Norbert, whose oppressive
behavior occasioned this litigation but had not, according to the trial court, harmed the company's success,
should not have been deprived of the benefit of the growth of the company between the filing of his action
and the end of his involvement with the company, though we declined to identify that date as an exercise
of original jurisdiction. Id. at 7-8. On remand, the trial judge, based largely on Norbert's testimony,
concluded that Norbert, while perhaps not as key to the company's success as Frank, had participated
sufficiently in the company to warrant extending the valuation date in the interest of equity until November
29, 2000.
At the valuation trial, Norbert elicited testimony from Gary R. Trugman, president of Trugman
Valuation Associates. Trugman used a discounted-cash-flow approach, which estimates the value of a
company as the present value of its expected future cash flow. To arrive at his calculation, Trugman
estimated the company's projected revenues based on data of the growth of its key clients, adjusted or
"normalized" its expenses to eliminate items such as excess officer compensation, and applied a discount
rate to the result to yield the present value of that income stream.
Defendants relied on Roger J. Grabowski, a partner and managing director of Duff & Phelps, LLC, in
Chicago. Grabowski undertook a market approach to valuation, estimating the value of the company as
extrapolated from data pertaining to sales of comparable entities.
Although not particularly trustful of either expert, concluding that each had designed his valuation to
exaggerate the company's value in his client's favor, the judge found Trugman's approach to valuation
relatively more reliable and more consistent with the applicable legal standard, concluding that it was more
conducive, under the circumstances, to yielding the value of a closely-held company for which there was no
ready market. Nonetheless, the judge also credited Grabowski's testimony in certain respects, including his
analysis of the key-person discount that Norbert disputes on appeal. All told, the judge fixed the value of
Norbert's interest in excess of $32,000,000.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
I
Frank's Estate argues that the trial judge should not have changed the valuation date from the date
Norbert filed his complaint, both as a matter of equity and because the judge's choice of a later date
conflicted with the findings in the first proceeding that Norbert never challenged on appeal.
N.J.S.A. 14A:12-7(8) authorizes a court, within its sound discretion, to order a sale of any
shareholder's stock to the extent fair and equitable under the circumstances. It specifies that "[t]he
purchase price of any shares so sold shall be their fair value as of the date of the commencement of the
action or such earlier or later date deemed equitable by the court, plus or minus any adjustments deemed
equitable by the court." N.J.S.A. 14A:12-7(8)(a). That is, the suit's commencement date is the presumptive
valuation date, though a court may select another date as demanded by fairness and equity. Musto v.
Vidas, 333 N.J. Super. 52, 60 (App. Div.), certif. denied, 165 N.J. 607 (2000). Such a determination should
not be disturbed absent an abuse of discretion. See id. at 64.
The first Chancery judge concluded that the statutory presumptive date -- the date that Norbert filed
his complaint -- was the most appropriate date for valuation because neither party presented any
compelling reason for changing it. We disagreed, noting that Norbert remained actively involved in the
company until he left in 2000, and concluded it would be inequitable to deny him his proportionate share of
that growth:
Since the trial court found that Norbert's oppression had not had any adverse
effects on the company, and since he remained active until May 31, 2000, the
equities suggest that that date should have been the earliest one chosen.
Although we are satisfied that the trial court abused its discretion in selecting
January 31, 1996, as the valuation date, rather than choose the date ourselves
as an exercise of original jurisdiction, we remand this issue for redetermination.
[Wisnewski, supra, slip op. at 8]
In complying with our mandate, the second Chancery judge credited Norbert's testimony and found
he had actively participated in the company's affairs until November 29, 2000, when he formally
relinquished his job responsibilities pursuant to a settlement. The judge noted that while Norbert's role was
"perhaps not as big as Frank's," he had nonetheless "contributed to the growth of the company."
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Notwithstanding our prior holding, Frank's Estate argues that the trial judge should not have changed
the valuation date from the presumptive date absent exceptional circumstances, relying in part on a
number of out-of-state cases to that effect. Our statute, however, explicitly permits such a change in the
interest of equity. N.J.S.A. 14A:12-7(8)(a). Indeed, in Torres v. Schripps, Inc., 342 N.J. Super. 419, 437-38
(App. Div. 2001), we approved the fixing of a valuation date to a point prior to the filing of the complaint so
the innocent party would not be penalized for the company's decline following his departure.
Frank's Estate argues that we have not previously authorized the selection of a valuation date later
than the presumptive date, reasoning that such an unprecedented approach to account for future growth of
the company would double count any growth already captured in the valuation, relying on Musto, supra,
333 N.J. Super. at 63-64. Frank's Estate misinterprets Musto. There, we warned against double counting
the company's growth by making equitable adjustments to the valuation as of a given valuation date, not in
moving the date itself. Ibid. Since the income capitalization approach used there already captured that
growth in the fair value reached, it would have been double counting to adjust that value for the same
growth. Ibid. The trial judge here made no adjustment of the fair value at the presumptive valuation date
to account for growth, but instead concluded that equity demanded a change in the date. It suffices here,
as it did in Musto, that the judge reached that conclusion on a thorough consideration of the equities. Id. at
63.
We also reject Frank's Estate's argument because it was considered and rejected in the earlier
appeal. Wisniewski, supra, slip op. at 7-8. We decline the Estate's invitation to revisit that determination.
See Lombardi v. Masso, 207 N.J. 517, 539-40 (2011).
II
Patricia contends that the trial judge abused his discretion in setting the value of Norbert's share of
the company by applying an incorrect legal standard in valuating the company. Specifically, she asserts that
the judge mistakenly favored Trugman's discounted-cash-flow analysis, which Patricia interprets as
conflating "fair value" with the notion of "intrinsic value," while rejecting Grabowski's reasonable market
approach as inconsistent with that standard. Although the judge found neither expert particularly credible,
he found Trugman's method relatively more reliable and consistent with the applicable fair-value standard
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
under the circumstances. That credibility determination is entitled to our deference. In addition, a review of
the judge's decision confirms that his consequent conclusions did not depart from the applicable valuation
standard.
Valuation, particularly of a closely-held corporation, is a fact-sensitive undertaking for which there is
no single correct approach. Steneken v. Steneken, 183 N.J. 290, 296-97 (2005). A judge may consider any
evidence of fair value "'generally acceptable in the financial community and otherwise admissible in court,'"
Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383, 397 (1999) (quoting 1 John R. MacKay II, New
Jersey Business Corporations ¶s 9-10(c)(1) (2d ed. 1996)), and may calculate an appropriate value using
any acceptable method, Torres, supra, 342 N.J. Super. at 434. The reasonableness of any particular
method depends "upon the judgment and experience of the appraiser and the completeness of the
information upon which his conclusions are based." Bowen v. Bowen, 96 N.J. 36, 44 (1984). The goal is the
fair value of the asset subject to valuation, which may obtain whether or not any ready market for the asset
exists. Brown v. Brown, 348 N.J. Super. 466, 487 (App. Div.) (quoting Lavene v. Lavene, 162 N.J. Super.
187, 193 (Ch. Div. 1978)), certif. denied, 174 N.J. 193 (2002).
A court's determination of fair value is entitled to great deference on appeal and should not be
disturbed absent an abuse of discretion. Balsamides v. Protameen Chems., 160 N.J. 352, 368 (1999). Any
of the findings of fact that underlie that determination are likewise entitled to deference on appeal so long
as they are supported by sufficient credible evidence in the record. Lawson Mardon Wheaton, supra, 160
N.J. at 403; see also Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). That is
particularly so where the findings depend on the judge's credibility determinations made after a full
opportunity to observe the witnesses testify. Balsamides, supra, 160 N.J. at 367-68. A judge may accept or
reject any expert testimony in whole or in part in evaluating its relative credibility. Maudsley v. State, 357
N.J. Super. 560, 586 (App. Div. 2003).
The trial judge found Trugman's discounted-cash-flow approach relatively more reliable because he
viewed that approach as more conducive than Grabowski's to ascertaining the company's "intrinsic value," a
term that Trugman had used, albeit not as one synonymous with fair value. Patricia seizes on the judge's
choice of words, claiming that choice demonstrates the judge departed from the fair-value standard
applicable in this action.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
In such matters, "intrinsic value" is a term of art referring to "an analytical judgment of value based
on the perceived characteristics inherent in [an] investment, not tempered by characteristics peculiar to any
one investor, but rather tempered by how these perceived characteristics are interpreted by one analyst
versus another." Shannon P. Pratt et al., Valuing a Business: The Analysis and Appraisal of Closely Held
Companies 31 (4th ed. 2000). Particularly with respect to an equity security, it is "'the amount that an
investor considers, on the basis of an evaluation of available facts, to be the "true" or "real" worth . . . that
will become the market value when other investors reach the same conclusions.'" Ibid. (quoting W.W.
Cooper and Yuri Ijiri, eds., Kohler's Dictionary for Accountants 285 (6th ed. 1983)). The resultant value
may or may not be consistent with the asset's fair value.
The phrase "intrinsic value" has a colloquial meaning as well and does not alone evoke a standard
independent of the statute's fair-value standard. Courts have often used the term to describe the statutory
standard. See, e.g., Tri-Continental Corp. v. Battye, 74 A.2d 71, 72 (Del. 1950); see also Pratt, supra, at 32
(observing that references to the phrase in case law "almost universally . . . do not define the term other
than by reference to the language in the context in which it appears," including "in cases where the
statutory standard of value is specified as fair value or even fair market value" (emphasis deleted)). In Tri-
Continental, the Delaware Supreme Court explained that
[t]he basic concept of value under [Delaware's] appraisal statute is that the
stockholder is entitled to be paid for that which has been taken from him, viz.,
his proportionate interest in a going concern. By value of the stockholder's
proportionate interest in the corporate enterprise is meant the true or intrinsic
value of his stock which has been taken by the merger. In determining what
figure represents this true or intrinsic value, the appraiser and the courts must
take into consideration all factors and elements which reasonably might enter
into the fixing of value.
[74 A. 2d at 72]
Delaware courts continue to follow this approach in ascertaining fair value, Weinberger v. UOP, Inc.,
457 A.2d 701, 713 (Del. 1983), and our standard is consistent, see Lawson Mardon Wheaton, Inc. v. Smith,
315 N.J. Super. 32, 47 (App. Div. 1998) (noting that the purpose of an appraisal is the determination of the
intrinsic worth or fair value of a shareholder's interest), rev'd on other grounds, 160 N.J. 383 (1999).
Indeed, the trial judge cited Tri-Continental in explaining that Trugman's discounted-cash-flow approach,
insofar as intended to yield the intrinsic worth of an asset that may well have no ready market, was
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
generally more reliable. Despite Patricia's forceful suggestion to the contrary, we do not interpret the
judge's opinion as using the phrase "intrinsic value" as defining a standard distinct from the applicable
statutory standard of fair value. The judge did not apply an incorrect standard in arriving at its
determination of value.
Nor did the trial judge, as Patricia asserts, reject the market valuation methodology as inherently
inconsistent with the applicable fair-value standard. Although the judge stated his view that the discounted-
cash-flow approach should generally be preferred over the market approach "in this type of litigation," he
never rejected the market valuation methodology out of hand, but only found Grabowski's approach less
appropriate than Trugman's under the circumstances. Moreover, the judge found that Grabowski's decision
not to perform a discounted-cash-flow valuation to corroborate his market valuation demonstrated that he
"took somewhat of an . . . ostrich approach," avoiding that methodology "for fear that the numbers [would]
not be suitable for what he was retained to do."
The judge's credibility determinations on these questions, at which he arrived following a full
opportunity to observe experts from both sides testify, must be accorded deference on appeal. Maudsley,
supra, 357 N.J. Super. at 586. So, too, should the judge's correctly identified and explained conclusion that
Trugman's approach to valuation was conducive to yielding a value more consistent with the applicable
legal standard.
III
Trugman's discounted-cash-flow approach required that he project the company's anticipated cash
flows, normalize its expenses, and calculate the present value of the resulting income stream by applying a
discount rate appropriate to the company. In first calculating the company's anticipated future cash flows,
Trugman extrapolated his projections from data pertaining to growth of the company's key clients,
consistently with guidelines set by the American Society of Appraisers. The judge faulted him for failing to
meet with the company's management to confirm the accuracy of those projections, but noted the company
had not made any internal projections available to him for that purpose and that Trugman had reviewed
Frank's depositions and the company's historical financial data. Based on that financial data, Trugman
concluded that the company was mature, that its operations were consistent, and that its growth was
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
steady over the five-year period preceding the valuation date. According to Trugman, that data
demonstrated the company had grown approximately 12.4% in 1996, 8.5% in 1997, 4.1% in 1998, 10% in
1999, and 8.5% in 2000. Consequently, he estimated the company's long-term growth rate at
approximately five percent, a figure the judge found reasonable.
The trial judge, however, generally rejected Trugman's approach to estimating the company's
expenses. Trugman had testified that expenses during the valuation year had been higher than prior years,
in part due to rising fuel costs, and rejected the company's actual expenses that year in favor of calculating
an average of normalized expenses over the prior three years; on the other hand, Grabowski testified that
the company's valuation-year expenses would be representative of the company's current operations and
should serve as the benchmark. The judge found Grabowski's testimony on this point more credible and
adopted his approach to estimating expenses.
Trugman arrived at his discount rate using the "build-up" method, which yields a rate from the sum
of a number of components each measuring the risk associated with some aspect of the entity being
evaluated. He began with the long-term treasury bond yield as of the valuation date and added a seven-
percent equity risk premium to account for the added risk of holding a share of a company. He then added
a size or small-company premium of approximately 3.5% to account for the added risk inherent in investing
in a company of this size, and a specific-company risk premium of four percent to account for the added
risk entailed in holding an interest in this particular company, including that attributable to its reliance on
Frank for its success. Reducing that, then, for the cost of the company's cost of debt and estimated taxes,
he arrived at a final discount rate of twelve percent, which the judge found reasonable as consistent with
industry-wide data on which even Grabowski had relied.
Patricia takes issue with Trugman's projections of the company's future revenue, relying largely on
unpublished authority declining to credit expert projections under the particular circumstances of each case.
But valuation is not an exact science, and the reliability of any particular valuation approach rests on the
quality of the evidence supporting it, subject, of course, to the court's relative credibility determinations.
Bowen, supra, 96 N.J. at 44. Here, although Trugman had no access to any company-prepared projections
of future revenue for use in his analysis, he calculated his own projections, extrapolating them from
available data relevant to the growth of the company's primary customers. Given his explanation of the
foundation of that aspect of his analysis in available evidence on which he could reasonably rely, his
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
testimony was certainly not so speculative as to be inadmissible. See Polzo v. County of Essex, 196 N.J.
569, 583-84 (2008).
Patricia does not argue that Trugman's testimony was so deficient as to be inadmissible; she asserts
the judge should not have found it reliable. Indeed, the judge did not find Trugman's analysis particularly
credible, but he generally found Trugman's methodology more reliable than Grabowski's, and largely
adopted it on that basis, revenue projections and all.
A court must ultimately arrive at a fair value based on the evidence that the parties present.
However "speculative" Patricia may view Trugman's analysis in this respect, the judge was entitled to find it
relatively more reliable than the expert testimony defendants presented. The judge's determination is
entitled to deference on appeal. Balsamides, supra, 160 N.J. at 367-68.
Patricia also argues Trugman calculated his discount rate using an incorrect equity-debt ratio for the
company. Specifically, Trugman calculated a 40% equity to 60% debt ratio justifying a discount rate of
12%, and Grabowski testified that the very sources that Trugman used to perform his calculations actually
supported a 70% equity to 30% debt ratio, warranting a much higher discount rate of 16.5%. Patricia
argues that Grabowski's calculation was more reliable.
The judge did not address the intricacies of those calculations, but he found that Trugman's estimate
was well within the range calculated for a sampling of trucking companies in a source on which Grabowski
had relied in his analysis. We must defer to the judge's finding that Trugman's estimate was more reliable.
We also defer to the judge's finding that Trugman's analysis of the excess compensation paid to
officers of the company was relatively more credible than Grabowski's, a conclusion Patricia also contests.
Trugman concluded, based on salary data from comparable publicly-traded companies, that the company
could replace Frank, Norbert, and Raymond for a combined salary of $1,047,000. Grabowski, on the other
hand, following an analysis undertaken in Exacto Spring Corp. v. Commissioner of Internal Revenue, 196
F.3d 833, 838-39 (7th Cir. 1999), concluded that the salaries were not excessive in relation to the rate of
return realized by the company under their management. Again, the judge found Trugman's conclusion
relatively more credible, and there was adequate support for his finding.
Lastly, Patricia challenges the trial judge's failure to correct certain miscalculations in Trugman's
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
valuation. Grabowski testified that, in consolidating the company's financial statements, Trugman double-
counted NRT's income and included Ogden II's income without including its operating expenses, decreasing
the expense ratio and increasing the resulting value of the company on both counts. The judge rejected
Grabowski's criticism but believed his concerns would be eliminated by adopting his general approach to
calculating the expense ratio, using data from the valuation year rather than an average of the prior three.
The judge agreed, and Norbert does not challenge, that Grabowski's approach was the more appropriate
one.
However, the judge later seemed to acknowledge that Trugman had made the double-counting
errors in his calculations, although it is not entirely clear whether the judge had actually earlier found the
calculations inaccurate or was merely acknowledging defendants' assertions that he had. The judge
ultimately maintained that his adoption of Grabowski's general approach eliminated his concerns, but using
only the last year's worth of inaccurate calculations, rather than an average of the prior three, does not
resolve the inaccuracy.
We remand for the judge's reconsideration of the argument and for clear findings on this point. The
judge's determination that Trugman's testimony was relatively more credible than Grabowski's is generally
entitled to deference on appeal; however, the conclusion that certain claimed inaccuracies in Trugman's
calculation of the company's expected expense ratio were eliminated by adopting Grabowski's general
approach to calculating that ratio may be incorrect, and the judge should further explore that issue on
remand.
IV
Patricia contends that a marketability discount should have been applied to the valuation of Norbert's
interest in the company. We agree.
A marketability discount adjusts the value of an interest in a closely-held corporation on the
understanding that demand for such a relatively illiquid interest is limited and its value consequently
diminished. Lawson Mardon Wheaton, supra, 160 N.J. at 398-99. In forced buy-out circumstances, such a
discount is not applicable except under extraordinary circumstances. Brown, supra, 348 N.J. Super. at 483.
As we explained, "[t]he unfairness of using [marketability] discounts lies in the potential for depriving
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
minority shareholders of the full proportionate value of their shares and enriching majority shareholders by
allowing a buy-out of minority interests at bargain prices." Id. at 484. The determination of whether
circumstances exist to warrant application of the discount in a particular matter must be guided by
considerations of fairness and equity. Balsamides, supra, 160 N.J. at 377. Whether the discount applies is a
matter of law subject to de novo review on appeal. Lawson Mardon Wheaton, supra, 160 N.J. at 398.
In Balsamides, as here, an oppressed shareholder was ordered to acquire the oppressing
shareholder's interest; there, the competing shareholders were equal owners. 160 N.J. at 355 n.2, 382. The
Court observed that "where the oppressing shareholder instigates the problems, . . . fairness dictates that
the oppressing shareholder should not benefit at the expense of the oppressed." Id. at 382. Further, any
less solution would permit the statute to become an instrument for oppression. Id. at 382-83.
In that light, the Court noted that, were the oppressed shareholder ordered to buy out the oppressor
at a value without any discount for marketability, the innocent party would inequitably be forced to
shoulder the entire burden of the asset's illiquidity. Id. at 378-79. The oppressing shareholder, whose
unlawful behavior occasioned the forced sale in the first place would have received the undiscounted
proportional value of his share of the company, while the oppressed shareholder would be forced to accept
a discounted price in any future sale to a third party. Ibid. The Court concluded that equity demanded
application of a marketability discount to the purchase price to ensure that the oppressing shareholder
would not be rewarded at the innocent shareholder's expense. Id. at 382-83.
Balsamides is directly applicable. Although the equities may not be as suggestive of the discount here
as in Balsamides -- for example, Norbert's actions, while oppressive, did not actually harm the company,
and, unlike the two veto-wielding equal partners in Balsamides, Norbert was a minority shareholder -- the
fact remains that Norbert should not be rewarded when his conduct not only harmed the other
shareholders but necessitated this forced buyout. 160 N.J. at 383.
The judge's failure to apply an appropriate marketability discount was erroneous. We remand for the
application of a marketability discount, although we do not foreclose the possibility, which the judge should
analyze on remand, that such a discount might not already be embedded in the discount rate used in the
discounted-cash-flow valuation the court adopted. In other words, absent a clear understanding of whether
a marketability discount was implicitly applied through adoption of the discounted-cash-flow valuation
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
approach, the judge should reconsider the award through application of an appropriate marketability
discount.
V
Norbert contends that a control premium should have been added to the value of the company. The
judge rejected this, concluding that the discounted-cash-flow approach that Norbert's own expert used and
that the judge largely credited already yielded a fair value of a controlling interest in the company without
the need for an additional premium.
A control premium is the "added amount an investor is willing to pay for the privilege of directly
influencing the corporation's affairs." Lawson Mardon Wheaton, supra, 315 N.J. Super. at 67. The objective
of a valuation is the fair value of the shareholder's proportional interest in the entire entity as a going
concern. Casey v. Brennan, 344 N.J. Super. 83, 113 (App. Div. 2001), aff’d, 173 N.J. 177 (2002); see also
Rapid-American Corporation v. Harris, 603 A.2d 796, 802 (Del. 1992). Application of a minority discount,
which adjusts the value of a minority interest for its lack of control, would be counterproductive to that end
absent extraordinary circumstances insofar as either discount might "depriv[e] minority shareholders of the
full proportionate value of their shares and enrich[] majority shareholders by allowing a buy-out of minority
interests at bargain prices." Brown, supra, 348 N.J. Super. at 483-84. On the contrary, application of a
control premium -- in some sense the opposite side of the same coin as the minority discount, Lawson
Mardon Wheaton, supra, 315 N.J. Super. at 67 -- insofar as necessary to reflect market realities may be
considered to ensure that minority shareholders duly and proportionately share in the fair value of the
entire company. Casey, supra, 344 N.J. Super. at 112-13. Whether the premium is applicable under
particular circumstances is a matter of law subject to de novo review on appeal. Lawson Mardon Wheaton,
supra, 160 N.J. at 398.
While our courts have not dealt extensively with application of the control premium, we have found
Delaware's jurisprudence instructive. See Casey, supra, 344 N.J. Super. at 106, 112-13. As particularly
pertinent here, Delaware courts have usually rejected application of the premium in a discounted-cash-flow
analysis. Montgomery Cellular Holding Co. v. Dobler, 880 A.2d 206, 217 n.19 (Del. 2005). So long as such
an analysis is designed to assess a company's full value, no minority discount inheres in it that would
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
necessitate adjustment by a control premium. In re Toys "R" Us, Inc. S'holder Litig., 877 A.2d 975, 1013
(Del. Ch. 2005). Shareholders, after all, are entitled to no more than their proportional share of the
company's value. Ibid.
The trial judge noted at the outset, relying on Toys "R" Us, that a discounted-cash-flow method
typically yields the value of a controlling interest in an entity, eliminating the need for a premium. The
judge then considered, but rejected, Trugman's testimony that his particular valuation approach did not
yield such an interest. Specifically, while Trugman had acknowledged that his discounted-cash-flow
valuation included some control level adjustments to account -- for example, for excessive officer
compensation -- he had maintained, with little elaboration, that application of an independent control
premium would nonetheless be justified on the premise that a third-party buyer could plausibly run the
company with greater efficiency even beyond the adjustments he had made. The judge found his assertions
that a new owner could cure those unspecified deficiencies in the company's management incredible,
particularly in light of Norbert's own testimony that Frank had been managing the company efficiently. The
judge concluded that Trugman's approach had already reached a control value and that no premium was
therefore appropriate. This conclusion was consistent with applicable legal principles and adequately
grounded in the record.
VI
Norbert argues that a key-person discount should not have applied. The judge determined that the
company's singular reliance on Frank for its success justified application of such a discount here.
A key-person discount adjusts for the risk of holding an interest in a company with an "unusually
concentrated dependence on one executive or on a small group of executives." Pratt, supra, at 431. We
have not previously addressed the applicability of this discount in a fair valuation proceeding, but, as with
other discounts or premiums, whether a key-person discount applies under particular circumstances is a
matter of law subject to de novo review on appeal. Cf. Balsamides, supra, 160 N.J. at 373.
The judge felt "quite strongly" that the discount should apply here. He recognized the prior finding in
the Phase I opinion that Frank was uniquely responsible for the company's success, as well as abundant
testimony regarding Frank's extensive relationships with customers, the company's relatively poor economic
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
performance during his absence, and its growth since his return. The judge credited Grabowski's testimony
that any buyer would demand a key-person discount under those circumstances, and adopted the fifteen-
percent discount Grabowski suggested would be appropriate.
Courts in other jurisdictions have often rejected application of the discount. Such was the case in
Hendley v. Lee, 676 F. Supp. 1317, 1330-31 (D.S.C. 1987), where the court doubted the discount's general
applicability to the value of an asset subject to a forced sale, but concluded it would be particularly
inapplicable there, where the key person remained employed with the company, and his departure would
likely not affect the efficient management of the company. The Georgia Supreme Court reached a similar
conclusion in Miller v. Miller, 705 S.E.2d 839, 844-45 (Ga. 2010), adding that, where an income approach
to valuation is undertaken, application of the discount could double-count the impact of the key person's
loss insofar as that impact is already accounted for in the calculation of the capitalization rate. See also
Hough v. Hough, 793 So.2d 57, 58-59 (Fla. Dist. Ct. App. 2001) (rejecting expert's evaluation as artificially
low where it both reduced expected annual income and increased capitalization rate to account for key
person's good will). The Massachusetts Supreme Judicial Court found the discount particularly inappropriate
in Bernier v. Bernier, 873 N.E.2d 216, 231-32 (Mass. 2007), where evidence revealed that the individual
was neither crucial to the company's success nor, as here, likely to leave the company in the near future.
On the other hand, in Nelson v. Nelson, 411 N.W.2d 868, 874-75 (Minn. Ct. App. 1987), a key-person
discount was applied in effecting an equitable distribution of the parties' marital property.
Regardless of the view of some courts that the discount should not be applied, ultimately its
application or rejection turns on what equity demands in a given situation. Here, Norbert does not
challenge the court's conclusion that Frank qualified as a key person of the company, except to assert that
Frank's death nonetheless did not impact the company's success, as even Raymond acknowledged, but that
circumstance was not knowable as of the valuation date and would be inappropriate for consideration now.
Moreover, Norbert acknowledges that it was appropriate for Trugman to account for the company's
dependence on Frank by increasing the discount rate in his analysis. He argues only that the trial judge
should not have applied a separate, independent key-person discount to the valuation.
We find no merit in Norbert's argument and defer to the judge's factual determination that the
discount was appropriate.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
VII
Norbert argues that the trial judge erred by failing to add in excess of $20,000,000 to the company's
valuation to account for improvements made to Ogden II during the litigation with funds that might
otherwise have been distributed to shareholders. He asserts that, because the property had not yet been
fully redeveloped by the valuation date, its worth could not be captured by Trugman's discounted-cash-flow
valuation and needed to be valued separately as if a non-operating asset of the company.
A non-operating asset is one that is "not necessary to ongoing operations of the business
enterprise." Pratt, supra, at 914. Insofar as such an asset "could be liquidated without impairing
operations," it may be valued independently from the rest of the business. Id. at 249-50.
The trial judge thoroughly recounted the company's history of ownership of Ogden II, including its
long use as a staging area, as well as its redevelopment. The judge noted in particular Norbert's own
acknowledgement that the property was "integral to the operations and growth of the company" and
concluded the property could not be classified as a non-operating asset whose value could be separately
calculated and added to that of the company.
Norbert does not challenge the judge's finding that Ogden II did not qualify as a non-operating
asset. He argues only that, due to the timing and circumstances of its redevelopment, the revenue that the
redeveloped property could expect to generate could not have been ascertainable as of the valuation date
so as to be included in Trugman's discounted-cash-flow analysis. He relies on Trugman's testimony to the
effect that treating the property merely as if it were a non-operating asset would ensure that its worth
would be adequately captured in the valuation.
The judge did not explicitly address that colorable contention, but generally found Trugman's
testimony on the issue incredible and "just not consistent whatsoever with the evidence." Moreover, the
judge's thorough findings with respect to Ogden II's history and operation amply demonstrate the
property's integrality to the company's business both prior to its redevelopment, during years for which the
company's revenues were known and considered in both experts' analyses, and would continue to be
integral to the company's expansion, which Trugman's valuation presumed. The trial judge's conclusion that
the value of Ogden II was already adequately accounted for in that valuation was sound.
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Insofar as Norbert's arguments may be taken to imply instead that, as a matter of equity, he should
be entitled to the value of the withheld distributions, the company's decision to withhold those distributions
was timely challenged by Norbert, approved by the provisional director, and upheld by the trial judge. Even
if appropriate to now collaterally revisit that long-resolved issue, it remains that the withheld distributions
funded an expansion of the company enhancing its value, for which Norbert is already otherwise
compensated. Indeed, had the company instead made the distributions, the loans it would have had to
acquire to timely complete redevelopment of the property would have affected the value.
VIII
Frank's Estate contends that defendants were entitled to credits against the purchase price of
Norbert's shares for certain non-shareholder compensation that the company paid him pursuant to the
reversed 2002 judgment and for Norbert's outstanding shareholder loan balance. The trial judge rejected
those arguments, concluding that defendants had waived the first issue by failing to raise it in the prior
appeal and that no evidence in the record supported the second. The judge was correct in both respects.
In the first respect, the trial judge ordered the company in the since-reversed judgment to pay
Norbert $1,265,372 per year for 2000 and 2001 with interest for non-shareholder compensation as a salary
enhancement. While addressing valuation issues, the judge allowed defendants a credit toward the
purchase price for shareholder distributions that the company had made to Norbert since January 31, 1996,
which was then the valuation date applied, pursuant to Musto, supra, 333 N.J. Super. at 59. In so doing,
the judge credited Trugman's analysis of the excess distribution that Norbert had received, and to which
defendants were therefore entitled reimbursement, by accounting for the difference between Norbert's
actual officer salary and that he would expect as consistent with industry standards -- two percent of the
company's gross sales. The judge used that figure not only in calculating defendants' credit pursuant to
Musto, but in concluding Norbert was owed the difference between what he should have expected his
salary to be and the $500,000 actually paid in each of 2000 and 2001. That difference is the sum Frank's
Estate now disputes.
Frank's Estate admits that, although defendants raised the issue in their notices of cross-appeal, they
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
never actually briefed it. On remand, the trial judge found defendants' failure to brief the issue to constitute
a waiver and that it should not consider the issue on remand. In so doing, the trial judge perceived no
direction to the contrary in our prior opinion by which we remanded the matter for a redetermination of the
valuation date and fair value of the company and, more broadly, of "such other matters as may be required
for full determination of the rights and liabilities of the parties." Wisniewski, supra, slip op. at 12.
Frank's Estate, however, seizes on that language and argues that we thereby intended to permit
consideration of any issue required for a full determination of the parties' rights. The Estate contends that
this issue was particularly appropriate for consideration, because the valuation date changed on remand,
obviating any need for the credit that occasioned Norbert's salary enhancement, and because Norbert never
provided any services to justify even the salary that he was paid in the first place. Although Frank's Estate
does not concede defendants waived this issue, asserting that Frank "reserved" it for remand without
actually briefing it, the Estate argues that the judge should have nonetheless considered the issue to avoid
an inequitable result.
Our rules require that an appellant identify and fully brief any issue raised on appeal. R. 2:6-2(a).
Consequently, a failure to brief an issue will be deemed a waiver. 539 Absecon Blvd., LLC v. Shan Enters.
Ltd. P'ship, 406 N.J. Super. 242, 272 n.10 (App. Div.), certif. denied, 199 N.J. 541 (2009). An appellant
may escape that waiver only in the interests of justice. Otto v. Prudential Prop. & Cas. Ins. Co., 278 N.J.
Super. 176, 181 (App. Div. 1994).
Defendants' conceded failure to brief the issue constituted a waiver. And, although our prior mandate
was broad, we did not suggest that the trial judge was required to consider this issue, which was initially
asserted on appeal but then waived. Norbert's award of an officer salary consistent with industry standards
was neither clearly inequitable nor so inextricably entwined in the prior valuation decision as to require
reconsideration along with the valuation itself on remand.
With respect to Norbert's shareholder-loan balance, the trial judge had initially adjusted the purchase
price to account for that balance, but Norbert appealed that determination. On remand, the trial judge
noted the first judge's findings that the company had made advances to Norbert during the bankruptcy
proceeding to facilitate reorganizing the company. Specifically, two new entities were created to acquire
certain of the company's intangible property, and Norbert, the sole shareholder of those entities -- PDR,
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
Inc., and Global Transportation, Inc. -- borrowed money from the company and lent it to them for that
acquisition. The judge found that he had never personally used that money, but put it back into the
company and wound up with a disproportionate loan balance. The judge also found no credible evidence of
Norbert's actual indebtedness for that balance, including any interest paid or payment schedule set for his
or other shareholder loan and concluded that Norbert should not be held responsible for the balance.
Frank's Estate acknowledges that a portion of Norbert's balance is attributable to the loans the
company made him during its reorganization, but argues that most of it, $6,422,046.28, is not, as
demonstrated by the company's records. The Estate emphasizes that the judge had ordered the company
to loan Norbert $615,000 as a condition of permitting the company to lease a new facility during this
litigation. The Estate contends the judge rejected any credit for the loan balance in reliance exclusively on
arguments in Norbert's brief about the loans' origins in the bankruptcy proceedings, which were not
competent evidence. Frank's Estate asserts that, to the extent the judge considered the matter disputed, it
should have instead held a hearing.
Of course, courts should not resolve disputed issues of material fact without a hearing. Williams
Scotsman, Inc. v. Garfield Bd. of Educ., 379 N.J. Super. 51, 62 (App. Div. 2005), certif. denied, 186 N.J.
241 (2006). Indeed, the first trial judge's earlier valuation decision was reversed for precisely that reason.
Wisniewski, supra, slip op. at 10-11. But, several hearings were held in this matter and the parties had
ample opportunity to present evidence bearing on this issue, and Frank's Estate points to no instance when
the court denied it that opportunity. The judge found, based on the evidence that the parties did present,
that there was never any intention to hold Norbert accountable for his loan balance and concluded that he
should therefore not be responsible for it now. We find no error or abuse of discretion in the judge's
conclusion.
IX
Patricia argues that the court abused its discretion by imposing inequitable terms for satisfaction of
the judgment that unduly rewarded Norbert, the oppressing shareholder, at defendants' expense.
When a buy-out is ordered, N.J.S.A. 14A:12-7(8)(e) authorizes a court to order payment "by the
delivery of cash, notes, or other property, or any combination thereof" and entrusts the selection of the
file:///C|/Users/Peter/Desktop/Opinions/a0825-10.opn.html[4/20/2013 2:09:55 PM]




a0825-10.opn.html
appropriate method of payment under the circumstances to the court's sound discretion. Specifically, the
statute permits the court, where an immediate cash payment is not feasible, to "determine the amount of
the cash payment, the kind and amount of any property, whether any note shall be secured, and other
appropriate terms." Ibid. The resultant order severs the selling shareholder's interest in the company except
the right to payment for the fair value of the shares and any other amounts due, "provided the corporation
or the moving shareholders post a bond in adequate amount with sufficient sureties or otherwise satisfy the
court that the full purchase price of the shares, plus whatever additional costs, expenses, and fees as may
be awarded, will be paid when due and payable." N.J.S.A. 14A:12-7(8)(f) (emphasis added).
Once valuation was determined, the judge heard again from Trugman and from Bernard Katz,
defendant's expert, as to the economic circumstances of the company and the consequent feasibility of the
parties' proposed payment terms. In light of that testimony, which the judge found credible, the judge
observed that the company's revenues were relatively healthy, increasing considerably from 2001 to 2007
and dropping only slightly in the following two years. The company had distributed over $116,000,000 to its
shareholders from 2002 to 2009, including more than $14,000,000 in 2008 alone and another $3,700,000 in
the beginning of 2009. It had increased its holdings of fixed assets during the same period from
$146,000,000 to $264,000,000, acquiring in the prior three years a $16,800,000 property in Savannah,
Georgia, and the "F-Yard," an undeveloped $36,400,000 property adjacent to the North Bergen terminal
purchased with a loan secured by mortgages on other company properties, so as to leave it unencumbered.
Moreover, the company saw substantial revenue growth from its top five customers in 2009 from
$168,00

Download a0825-10.opn.pdf

New Jersey Law