Where the parties agreed that in order to value disputed property each party would select one appraiser as part of the settlement process, once selected the appraiser is not considered the agent of the party. Bell v. Pine Needles Country Club, Inc., et al., 2019 NCBC 26 (J. Bledsoe). As a result, the appraiser is no longer under the control of the party, and the party cannot be held liable for the appraiser’s failure to adhere to any instructions governing its work.
Plaintiff was a minority shareholder with Defendants in Pine Needles Country Club, Inc. (“Pine Needles”). A dispute arose between Plaintiff and Defendants concerning the value of Plaintiff’s interest in Pine Needles. After Plaintiff filed suite, the parties entered into various settlement agreements which set out the manner by which Plaintiff’s interest in Pine Needles would be valued; specifically, the parties agreed a three-appraiser panel would be selected (one chosen by Plaintiff, one by Defendants, and a third by the previously-chosen two appraisers) which would then calculate the fair market value of Plaintiff’s interest in Pine Needles. The agreement provided the appraiser would using a going concern premise, assuming no material changes in Pine Needle’s operations or the use of its assets. Plaintiff selected Ankura Consulting Group (“Ankura”) who, along with Defendants’ appraiser, then selected Mark Zyla (“Zyla”) as the non-party-appointment appraiser.
Ankura and Zyla then decided to value Pine Needles’ property at a “highest and best use” standard, rather than the “as is” standard required in the settlement agreement. Defendants filed a motion to show cause and asked the Court to direct Ankura and Zyla to follow the terms of the settlement agreement. The Business Court agreed, finding that the “highest and best use” standard was not the “as is” standard called for in the settlement agreement. The Court directed Ankura and Zyla to adhere to the agreement’s terms.
Defendants also sought an award of attorneys’ fees and costs for having to bring their motion. Although the Court found that the settlement agreement contained an attorneys’ fee provision should one party’s actions cause another party to have to pursue its rights under the agreement, the Court held that Ankura’s actions were not the result of Plaintiff’s conduct. Although Defendants had apparently insisted Plaintiff direct Ankura to abandon the “highest and best use” analysis, the Court found that once Ankura was hired as part of the settlement process, it was not Plaintiff’s agent but instead a “neutral and disinterested third party” that was bound only “by the terms of the engagement, the settlement agreement and its professional rules of conduct and ethics” as an appraiser. (Opinion, ¶¶40, 41). Because Plaintiff could not control Ankura’s valuation methodology, Plaintiff’s conduct did not necessitate Defendants’ need to file the motion in the cause. Defendants were therefore not entitled to have Plaintiff pay their legal fees.
Based upon this decision, a business should recognize that not only will the Business Court strictly adhere to the parties’ agreed-upon terms of a valuation procedure, but that an appraiser, once retained in certain matters, may no longer be under the control of the company that hires it. The business should therefore be certain that the appraiser will do her job correctly.
Categories: Key Business Court Decisions