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Goles v. Sawhney

California Court of Appeals, Second District, Sixth Division

November 22, 2016

MARK GOLES et al., Plaintiffs and Appellants,
v.
UDAY SAWHNEY et al., Defendants and Respondents

          Superior Court of Ventura County, No. 56-2013-00446212-CU-MC-VTA, Vincent J. O'Neill, Jr., Judge.

Page 1015

[Copyrighted Material Omitted]

Page 1016

         Ferguson Case Orr Paterson, John A. Hribar, Wendy C. Lascher; Law Offices of Larry D. Webb Larry D. Webband for Plaintiffs and Appellants.

         Glaser Weil Fink Howard Avchen & Shapiro, Andrew Baum and Elizabeth G. Chilton for Defendants and Respondents.

         Opinion by Yegan, Acting P. J., with Perren and Tangeman, JJ., concurring.

          OPINION

          [210 Cal.Rptr.3d 263] YEGAN, Acting P. J.

          Mark and Karen Goles appeal from an order specifying $139,666.67 as the buyout value of their 36.7 percent minority shareholder interest in Katana Software, Inc. (Katana), pursuant to Corporations Code section 2000, subd. (c).[1] The statutory buyout provision is a special proceeding. We construe the order as an alternative decree which is appealable pursuant to section 2000, subdivision (c). ( Cotton v. Expo Power Systems, Inc. (2009) 170 Cal.App.4th 1371, 1380, fn. 4 [89 Cal.Rptr.3d 112].) Appellants contend that the trial court undervalued their shares when it " confirmed" three disparate court-ordered appraisals and averaged the appraisals to determine the fair value of the company. We reverse.

Page 1017

         Procedural History

         Katana, a closely held corporation, is a software development company. As indicated, appellants owned 36.7 percent of the company. Respondent Robert F. Woodward owned 31.7 percent, and respondent Uday Sawhney owned 31.6 percent. Appellants were founding shareholders and employed by Katana in key positions. In 2013, appellants were terminated after they solicited a company executive to take Katana's intellectual property and client lists for a new start-up company.

         Appellants sued for the involuntary dissolution of Katana (§ 1800) and sought an accounting, injunctive relief, damages for breach of fiduciary duty, and $60,000 due on a promissory note. To avoid dissolution, respondents brought a motion to appraise the fair value of the company and buy out appellants' shareholder interest pursuant to section 2000. Respondents requested a stay of the dissolution action and the causes of action for breach of fiduciary duty.[2] The trial court stayed the proceedings and appointed three disinterested appraisers to ascertain the fair value of Katana and appellants' shares. The order stated: " There shall be no direct or indirect contact or communication between any appraiser, on the one hand, and any party or their counsel, on the other hand, without a showing of good cause and prior order of the Court." The appraisers were instructed to base the appraisals on the company's " 'liquidated value as of December 20, 2013 but taking into account the possibility, if any, of the sale of the entire [210 Cal.Rptr.3d 264] business as a going concern in liquidation.'"

         Appraisers Carl L. Sheeler, Jason E. Forsyth, and Burton H. Marcus submitted appraisal reports valuing appellants' shares at $69,000, $150,000, and $200,000 respectively. Respondents requested a hearing to finalize the valuation and shareholder buyout. Appellants questioned the appraisals and requested that the trial court set a briefing schedule. The trial court denied the request and found that the fair value of appellants' interest ...


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