Court: Court of Appeals of Wisconsin; October 30, 2018; Wisconsin; State Appellate Court
The case involves a dispute between James Swiderski and his father, Alex Swiderski, over the redemption of James' shares in Swiderski Equipment, Inc. The court has addressed this matter multiple times. In a previous decision, the court affirmed that Mark Hanson, from the accounting firm Schenck, S.C., would conduct an appraisal as outlined in their corporate redemption agreement (CRA). However, the court erred by instructing Hanson to assume, based on a prior jury verdict, that Alex's compensation as president was not excessive, leading to a partial reversal and remand for a new appraisal. On remand, Hanson produced a new valuation report, termed the Second Appraisal. Swiderski Equipment and Alex sought court approval for this appraisal, which the court granted. James appealed, contending that the court misinterpreted the appellate mandate, that the Second Appraisal violated Wisconsin Statute 907.02 regarding expert testimony, and that the court should ensure the appraisal's fairness and correctness. The appellate court rejected all of James' arguments and affirmed the approval of the Second Appraisal. The procedural history indicates ongoing legal complexities initiated by Swiderski Equipment’s 2008 lawsuit to enforce the CRA and James' subsequent revaluation request. Ultimately, the circuit court found that the value of James' 510 shares was $615,000, contrary to the initial assertion of $1,000 per share.
The court ordered Swiderski Equipment to pay James $105,000, representing the difference between a valuation by Hanson and the $510,000 already paid to James. James appealed, raising several arguments: (1) the court incorrectly appointed Hanson for the appraisal; (2) it wrongly directed Hanson to presume Alex's compensation was not excessive; (3) Hanson valued only James' minority interest instead of the full corporation; (4) he improperly applied a minority discount; and (5) he incorrectly applied a marketability discount. The court affirmed the appointment of Hanson but reversed the presumption regarding Alex's compensation, requiring Hanson to reassess its impact on the valuation.
On remand, the court found that Hanson must evaluate the entire corporation rather than just James' interest and could not apply a minority discount. However, it allowed Hanson to independently determine the applicability of a marketability discount. Hanson subsequently appraised the total value of Swiderski Equipment at $1,809,977, valuing James' thirty-four percent interest at approximately $615,000, consistent with the previous appraisal.
Swiderski Equipment sought court approval for the Second Appraisal, which James opposed, arguing it did not meet the Daubert standard for expert testimony admissibility. After further submissions and a judicial substitution, the court approved the Second Appraisal, concluding that James' shares were worth $615,000, meaning no additional payment was owed to him. The court ruled that the Daubert standard did not apply and that, even if it did, the Second Appraisal complied with the statute. James appealed this order, claiming misinterpretation of the court's mandate and asserting that the Second Appraisal was fundamentally flawed, questioning the circuit court's discretion in accepting it.
The circuit court correctly interpreted the mandate from Swiderski II and found that the Second Appraisal complied with it. In Swiderski II, the court had reversed part of the decision and instructed Hanson to reappraise Swiderski Equipment with four specific directives: (1) assess the reasonableness of Alex's compensation; (2) value the entire corporation, not just James' minority interest; (3) avoid using a minority discount; and (4) independently decide on applying a marketability discount. James did not contest Hanson's adherence to these directives but instead argued that the Second Appraisal was flawed for other reasons, including: (1) not determining the fair market value of the corporation's assets; (2) failing to utilize available reports for valuing parts; (3) not adjusting the net asset value of used equipment; and (4) incorrectly treating a note from Swiderski Equipment to Alex as a liability despite Alex's indication he would not enforce it. James claimed that an appraiser must establish accurate fair market value regardless of the chosen valuation method and argued that the circuit court should have rejected the Second Appraisal due to these flaws. He asserted that the court had discretion to address new issues not covered in Swiderski II. However, James did not raise these arguments in his prior appeal, which forfeited his right to present them now, as established by precedent that questions that could have been raised in a previous appeal are barred. Additionally, James forfeited his arguments related to WIS. STAT. 907.02, which requires expert testimony to be based on sufficient facts and reliable methods, necessitating the circuit court to determine the reliability of such evidence before it is presented to factfinders.
James argues that the Second Appraisal lacks reliability under WIS. STAT. 907.02(1) due to "fundamental flaws" and methodology issues used by appraiser Hanson. However, the court finds that James has forfeited his arguments related to this statute, as he could have raised them during prior proceedings concerning Hanson's first appraisal. The court notes that Hanson employed the same methodology for both appraisals. Additionally, the court rejects James' claim of inherent discretion to dismiss the Second Appraisal for three reasons: the cited cases pertain solely to circuit court authority; James' arguments have already been deemed either meritless or forfeited; and his claim of a breach of good faith by Swiderski Equipment was not presented in the circuit court, thus cannot be considered now. Consequently, the court affirms the order, stating that this opinion will not be published and referring collectively to actions by Swiderski Equipment and Alex. James' argument regarding prejudgment interest is deemed irrelevant to the current appeal. The court independently reviews legal questions regarding forfeiture and interpretations of its own mandates.
