Hmo-W Inc. v. Ssm Health Care System

611 N.W. 2d 250 (2000)

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Nature of the Case

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Facts

In 1983, D and a number of other healthcare providers formed HMO-W (P). All the shareholders assumed minority status in this closely held corporation. D and the Neillsville Clinic together owned approximately twenty percent of P's shares. By the early 1990s, P had to explore the possibility of merging with another health care system. P proposed a joint venture with United Wisconsin Services (United). P retained Valuation Research Corporation (VR) to value the net assets both prior to and upon the merger. VR estimated the company's net value to fall within the range of $16.5 to $18 million. P's board voted to approve the proposed merger and to submit the merger to a shareholder vote. Proxy materials sent to the shareholders informed them of their statutory right to dissent to the merger. D and the Neillsville Clinic voted against the proposed merger. The merger was approved. P and the Neillsville Clinic then perfected a demand for the payment of their dissenting shares. P hired a new appraiser to value its assets. The appraiser arrived at a valuation of approximately $7.4 million. P sent d a check for almost $1.5 million as the value of P's shares. D claimed its fair value calculation yielded a figure of approximately $4.7 million. P instituted a special proceeding to determine the fair value of the dissenting shares. D asserted that P was estopped from claiming a company value that was lower than the $16.5 to $18 million value it had represented to the shareholders prior to the merger vote. At trial, P's expert testified that the value was $10,544,000. D's expert testified that value was $19,250,000. The court accepted D's valuation. The circuit court applied a minority discount of 30% to the value of the dissenting shares. The court ordered Ds to repay with interest the amount by which P's initial payment exceeded the court's fair value determination. The court of appeals affirmed in part and reversed in part. It held that dissenters' rights do not allow minority discounts to be applied in determining the fair value of a dissenter's shares. The court of appeals affirmed the circuit court's determination as to P's net asset value. This appeal resulted.