Durio Gets Writ in Cannon v. Bertrand
With a unanimous vote, the Louisiana Supreme Court recently granted a Writ of Certiorari to review the decision in Cannon v. Bertrand,No. 2008-C-1073 at the request of counsel for the plaintiff, Steven G. “Buzz” Durio, a founding partner of Durio, McGoffin, Stagg and Ackermann. The Court granted the writ on September 19, 2008 to address the issue of whether corporate shares owned by someone with a relatively smaller interest in a company should be worth less per share than shares belonging to the majority shareholder.
The Supreme Court will review the decision of the Third Circuit Court of Appeal in Cannon v. Bertrand, 07-1278 (La.App. 3 Cir. 4/16/08); 981 So.2d 169. In that decision, the Third Circuit reviewed and affirmed the decision of the 27th Judicial District in St. Landry Parish, Louisiana. The trial court’s decision was favorable to the plaintiff, Kenny Cannon, who is Durio’s client. The trial court awarded plaintiff $224,885.84 for his “value” in a Louisiana Limited Liability Partnership, but after deducting $123,649 as a “minority discount.” The Third Circuit’s opinion held that the trial court did not abuse its discretion in deducting the “minority discount.”
“We’re very happy for Kenny” said Durio, “He’s been a great, very understanding client. It’s hard to explain, much less expect a client to understand, a trial court decision in which his equal one-third interest in a partnership is worth almost $125,000 less than one-third of the value of the whole partnership, or less than the one-third interests of the remaining partners.”
The trial court and Third Circuit decisions followed the conventional interpretation of the Supreme Court decision in Shopf v. Marina del Ray Partnership, 549 So.2d 833 (La. 1989), which has been widely read to allow, if not require, judicial imposition of “minority discounts.” “A lot of credit goes to our expert, A. Anderson “Andy” Hartiens, CPA/CVA, who had the courage to testify, against conventional wisdom, that a discount was not appropriate in this case,” said Durio.
Durio also credits his arguments in the lower court and in the writ application to the academic opinions of LSU law professors Glen Morris and Wendell Holmes, who have criticized “minority discounts” in general, and the Shopf decision in particular, in their Louisiana Civil Law Treatise, Volume 8. Durio also commented that, “Actually, the first Louisiana jurist to criticize the disproportionate nature of minority discounts ‘on record’ was Justice Jeanette Knoll in her 1985 dissent in Combs v. Howard, while she was on the Third Circuit”.
The Supreme Court briefs will be filed by mid-November, and oral argument has not yet been set. If successful, the case will mean more than the $123,649 direct benefit to Durio’s client. “If the Supreme Court decision is favorable to Mr. Cannon, it should have application beyond partnerships to closely held corporations as well,” says Durio, “We think this may mean the end of judicially imposed discounts as a practical matter.” Durio said such judicially imposed discounts may be responsible for reductions in minority interest cases, including domestic partnerships,of “almost $19,000,000 per year in Louisiana alone, not counting closely held corporations.”
Durio’s practice has focused on commercial and business plaintiff’s cases, including minority shareholder’s rights.