FORREST P. WALL, M.D., F.A.C.S. Plaintiff-Appellee
GREGORY W. BRYAN, DPM, MICHELLE R. RITTER, M.D., R. BLAIR DRUMMOND, DPM, JANNA CRUEY-ROARK AND AMBULATORY SURGERY CENTER OF LOUISIANA, L.L.C. Defendant-Appellant
Appealed from the First Judicial District Court for the
Parish of Caddo, Louisiana Trial Court No. 584344 Honorable
Michael A. Pitman, Judge
SHELTON, WILLIAMS, BENSON & PAINE By: Lee H. Ayers Jody
Todd Benson Stacey Smith Melerine Counsel for Appellant
BRADLEY, MURCHISON, KELLY By: David Richard Taggart Judith
Wilkinson Giorlando Brittany Jaudon Walker Counsel for
MOORE, STONE, and STEPHENS, JJ.
Gregory W. Bryan, DPM, Michelle R. Ritter, M.D., R. Blair
Drummond, DPM, Janna Cruey-Roark, and Ambulatory Surgery
Center of Louisiana, L.L.C., appeal judgments by the First
Judicial District Court, Parish of Caddo, State of Louisiana,
determining the valuation method and price to be paid to
plaintiff, Forrest P. Wall, M.D., F.A.C.S., for his ownership
interest in Ambulatory Surgery Center of Louisiana, L.L.C.
Plaintiff has answered the appeal and appeals the judgment
determining the price to be paid. For the following reason,
we affirm the trial court's judgments.
AND PROCEDURAL HISTORY
P. Wall, M.D., F.A.C.S., brought suit against Gregory W.
Bryan, DPM, Michelle R. Ritter, M.D., R. Blair Drummond, DPM,
Janna Cruey-Roark, and Ambulatory Surgery Center of
Louisiana, L.L.C. ("ASC"), in connection with his
imminent disqualification as a member of ASC and the forced
sale of his ownership interest in ASC that would follow.
a limited liability company medical practice. At the outset
of this litigation, Dr. Wall, Dr. Bryan, Dr. Ritter, and Dr.
Drummond were members of ASC's medical staff as well as
ASC's board, and Ms. Roark was an employee and the
administrator of ASC. In 2007, the members entered into an
agreement entitled Operating Agreement of Ambulatory Surgery
Center of Louisiana, L.L.C. ("the Operating
Agreement"), which governed the management of ASC. It
mandated that in order to maintain ownership in ASC, a person
must maintain full and unrestricted privileges on ASC's
professional staff. Dr. Wall was subsequently suspended from
ASC on April 15, 2015. Pursuant to the Operating Agreement,
this suspension not only disqualified Dr. Wall from
membership in ASC but also barred him from owning any
interest in ASC. The Operating Agreement contemplated several
scenarios for valuing a withdrawing member's interest,
and each of these scenarios required the value of the
interest to be calculated in accordance with either
"book value" or "computed value."
his suspension from ASC, Dr. Wall filed suit seeking damages
and injunctive relief to prevent ASC from denying him
privileges. A temporary restraining order was issued barring
ASC from taking any adverse action against Dr. Wall.
Thereafter, the attorneys for the parties signed an
agreement, the Confidential Agreement in
Principal ("the Agreement in Principle"),
which specifically contemplated the execution of final
settlement agreements by the parties. The Agreement in
Principle provided in pertinent part that "the value of
Dr. Wall's interest [is to be] determined in accordance
with the ASC Operating Agreement provisions for Voluntary
Separation." Voluntary Separation was one of the
scenarios contemplated in the Operating Agreement in which
either book value or computed value was to be used to value a
withdrawing member's interest.
parties subsequently signed an agreement, the Confidential
Settlement and Release ("Settlement Agreement"),
pursuantto which Dr. Wall's suspension was rescinded and
expunged and all ancillary disputes between the parties were
settled except for one: the price to be paid to Dr. Wall for
his 24.75% ownership interest in ASC. The Settlement
Agreement further provided that in the event the parties were
not able to agree on a price, they would seek a determination
by the trial court. However, the Settlement Agreement did not
specify the method for calculating the value of Dr.
Wall's interest, thus triggering the applicability of La.
R.S. 12:1325(C), which requires the use of fair market value
to determine the value of a withdrawing member's interest
when no method is otherwise specified.
hearing was subsequently held to determine which written
agreement between the parties should dictate the valuation
method used to calculate the price to be paid Dr. Wall for
his ownership interest in ASC. ASC contended that the
Operating Agreement and/or Agreement in Principle controlled
the method of valuation, which would result in a book or
computed value. Dr. Wall asserted the Settlement Agreement
controlled, and, therefore, in accordance with La. R.S.
12:1325(C), fair market value was the appropriate method of
valuation. A fair market value of Dr. Wall's interest
would be substantially higher than a book or computed value.
the trial court concluded that the Settlement Agreement
superseded all prior agreements between the parties,
specifically, the Agreement in Principle and the Operating
Agreement. The trial court reasoned that the following
language of the Settlement Agreement was clear and
unambiguous and left no room for an alternative
interpretation: "This agreement supersedes all prior
understandings, negotiations, and agreements between and
among the parties." The court further concluded that
since the Settlement Agreement did not specify the method for
calculating the value of Dr. Wall's interest in ASC, the
value should be fair market, in accordance with the
requirements of La. R.S. 12:1325(C).
hearing was held to determine the fair market value of Dr.
Wall's 24.75% interest in ASC. Dr. Wall presented expert
testimony from Benjamin C. Woods while ASC presented expert
testimony from Stuart Neiberg. Woods is a certified public
accountant, a certified valuation analyst, and accredited in
business valuation. He testified that approximately 90% of
his work consists of business valuation of closely-held
businesses, and over the last four or five years, he has
valued roughly 18 to 20 medical-field organizations,
including five or six surgery centers or related entities.
Here, Woods stated his assigned objective was to determine
the fair market value of a 24.75% interest in ASC as of April
2015. He testified that in doing so, he considered three
different valuation approaches: the asset approach, the
income approach, and the market approach. He explained that
he determined the income approach was the most appropriate
method in this case. Woods also calculated the value using
the market approach to use a "self-check" on the
income approach. He chose not to calculate the asset approach
at all, stating it rarely represented intangible assets.
Woods' opinion was that the fair market value of Dr.
Wall's interest was $873, 146.00. He did not apply any
discounts to this value. Regarding whether or not Dr.
Wall's interest should be subjected to any discounts,
Woods gave the following testimony:
I am aware that Louisiana courts and different courts have
different interpretations of what is equitable in the court
of law. My assignment is [to] determine the fair market value
to a hypothetical buyer and seller on an open market, with
both having knowledge of the facts. And then, you know, the
courts can apply what we do in any way they choose,
that's their discretion.
while not a stated "minority discount," Woods did
apply an embedded adjustment when initially calculating the
value of Dr. Wall's 24.75% interest. Woods testified that
this embedded minority discount accounted for the fact that Dr.
Wall's interest was a noncontrolling interest in ASC, and
the embedded discount was necessary in order to arrive at a
fair market value rather than just a fair value.
Additionally, he testified that the 15% minority discount
applied by Neiberg was reasonable.
the applicability of a lack of marketability discount, Woods
testified his research showed this type of minority interest
in ambulatory surgery centers sells readily in the
marketplace as there are numerous physician-owned entities
like ASC in existence and several big companies that are
consolidating these interests, as well as hospitals and other
physicians creating the market-a unique situation from other
closely-held entities. Accordingly, Woods elected not to
apply a lack of marketability discount. He testified that a
typical lack of marketability discount is usually 30-35% and
the 25% lack of marketability discount applied by Neiberg was
not egregious; rather, it was just in error because there
actually is a market for minority interests in surgical
centers. However, Woods did acknowledge that an investment in
any closely-held company contains a greater degree of risk
than one in publicly traded stocks due to lack of
marketability, size, diversity, and other factors. Notably,
part of the research relied on by ...