The Sound of Music inspires this third installment in my series on the lessons our favorite holiday movies can teach us about the law governing business disputes.  (Check out my earlier installments exploring the business tort of conversion in It’s a Wonderful Life, and the elements of a fraud claim in White Christmas.)

First, you may ask:  how does a movie set during summer qualifies as a holiday movie classic?  I submit that “somewhere in my youth or childhood” I developed a strong association between the Family Von Trapp and the most wonderful time of the year.  Apparently, this was by design.    

Our lesson comes from the real Von Trapp family:  the one that escaped Nazi-occupied Austria to become a touring musical sensation in the United States.  When their tour brought them to where “the hills are alive” in Stowe, Vermont, they were reminded of home.  (For more on that, I strongly recommend Maria Von Trapp’s riveting autobiography.) 

Fast forward a few decades, and members of the family were shareholders in The Trapp Family Lodge, Inc.—a Vermont corporation, which held assets including a resort complex in Stowe.  In 1995, the corporation merged into a new corporation.  As part of that merger deal, shareholders received $33.84 per share. 

A majority of the shareholders voted in favor of the deal.  But, for a minority of the shareholders (holding roughly 75,000 shares), the deal was not one of their “favorite things.”  They wanted more money for their shares. 

The minority shareholders made their dissent known by filing a lawsuit under the Vermont Business Corporation Act.  The issue for the court was whether the shareholders received “fair value” for their shares, defined in the Act as “the value of shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.”    

At the trial, each side had their experts testify to fair value.  In the end, the trial court sided with the majority shareholders.  The Vermont Supreme Court affirmed.

There’s a lot to be learned here, but a few takeaways are as simple as “do-re-mi”:

1.    Minority shareholders in corporations have rights in certain transactions involving their shares, including to have a court weigh in on whether they received fair value. 

2.    The exact contours of those rights depend on the state where the corporation was incorporated.  Many states—like Vermont and Virginia (where we do much of our work)—have adopted some version of the Model Business Corporation Act.   But each state statute is unique.  Thus, dissenting minority shareholders would be wise to seek the advice and counsel of a lawyer on developing a strategy that squares with the governing statute.

3.    As is often the case with business disputes, experts are really important.  “Fair value” has a unique definition in dissenters’ rights statutes.  Methods experts use to value stock in other kinds of legal proceedings, like tax or probate cases, may not apply.  Ideally, minority shareholders will have an expert who can walk the walk and talk the talk of the statute’s definition of fair value.

Tune in next week for my final installment on holiday movie classics and the lessons they teach us about business disputes.  Until then:  “so long, farewell, auf wiedersehen, goodbye!”