Athlon Sports Communications, Inc. v. Stephen C. Duggan
549 S.W.3d 107
Tenn.2018Background
- Athlon, a closely held publishing company, underwent a takeover-style merger in August 2012 that excluded certain minority shareholders (including Duggan and the Grogans); Athlon paid dissenters $0.10/share which they rejected and demanded appraisal under Tenn. Code §§ 48-23-101 et seq.
- Athlon retained a valuation (Collins) concluding the company’s fair value was $0 (or essentially nil) at the time of the merger; dissenters’ expert (d’Almeida) produced higher valuations (Delaware Block $6.48; DCF results ranged up to $22.32 using a CIM).
- At bench trial, the court credited Athlon’s expert, discredited the dissenters’ expert, and concluded fair value was no greater than $0.10/share; the Court of Appeals affirmed, relying on Blasingame’s adoption of the Delaware Block method.
- The Tennessee Supreme Court granted review to decide whether Blasingame requires exclusive use of the Delaware Block method or whether courts may consider other generally accepted valuation techniques (e.g., DCF) and to address whether remand was needed given the trial court’s approach.
- The Supreme Court held that Tennessee should follow Weinberger’s more open approach: Delaware Block is permissible but not exclusive; forward‑looking evidence may be considered if not speculative; because the trial court may have been constrained by Blasingame, the Court vacated the trial judgment and remanded for reconsideration.
Issues
| Issue | Plaintiff's Argument (Athlon) | Defendant's Argument (Dissenters) | Held |
|---|---|---|---|
| Whether Blasingame requires exclusive use of Delaware Block method to determine "fair value" under Tennessee dissenters’ rights statutes | Athlon conceded courts may consider other methods but argued forward‑looking projections here are speculative and would yield the same zero valuation | Dissenters argued Blasingame did not mandate exclusivity and that forward‑looking methods (e.g., DCF) should be allowed and would produce higher value | Court overruled Blasingame to the extent it implied exclusivity; adopted Weinberger approach permitting any generally accepted methods admissible in court; excluded only speculative merger‑accomplishment projections |
| Whether the trial court erred substantively in valuing the shares (i.e., whether DCF or CIM should have controlled) | Athlon urged the trial court correctly discredited the dissenters’ projections as speculative and properly credited Collins | Dissenters argued the trial court’s reliance on Delaware Block (and rejection of the company’s February 2012 forecasts) improperly discounted legitimate forward‑looking evidence | Court did not resolve the valuation on the merits; because trial court’s opinion suggested it may have been constrained by Blasingame, the Court vacated and remanded for reconsideration under the new standard |
| Whether remand for further proceedings or new evidence is required | Athlon said no—record supports trial court’s credibility findings and no new discovery necessary | Dissenters sought reversal or remand for reevaluation using modern valuation methods | Court held remand appropriate to permit the trial court to reassess valuation in light of the ruling; trial court may (in its discretion) allow further discovery or accept existing record |
Key Cases Cited
- Blasingame v. American Materials, Inc., 654 S.W.2d 659 (Tenn. 1983) (Tennessee case that previously adopted the Delaware Block method for dissenters’ valuation)
- Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) (Delaware Supreme Court overruling exclusivity of Delaware Block; permits any generally accepted valuation methods and consideration of non‑speculative future prospects)
- Tri-Continental Corp. v. Battye, 74 A.2d 71 (Del. 1950) (origin of the Delaware Block/weighted‑average approach combining market, asset, and earnings values)
- Keller v. Estate of McRedmond, 495 S.W.3d 852 (Tenn. 2016) (reference for Tennessee courts’ practice of looking to corporate law developments in other jurisdictions)
- Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988) (Delaware decisions reflecting evolution in appraisal valuation practice)