HMO-W Inc. v. SSM Health Care System

In 1983, SSM Health Care System (SSM) (defendant), together with other healthcare providers, formed HMO-W Inc. (HMO-W) (plaintiff), a closely held corporation with only minority shareholders. HMO-W proposed a merger with United Wisconsin Services (United) and retained Valuation Research Corporation (VR) to value HMO-W’s assets prior to and upon the potential merger. HMO-W accepted VR’s valuation report, which estimated HMO-W’s net value at between $16,500,000 and $18,000,000. HMO-W’s board voted to approve the merger with United. The VR report and proxy materials were sent to the shareholders. At the shareholder meeting, SSM and another shareholder, Neillsville Clinic (Neillsville), voted against the proposed merger. The merger was still approved. SSM and Neillsville demanded payment for their dissenting shares, and HMO-W hired a new appraiser, which valued HMO-W’s assets at $7,400,000. Based on the second valuation, HMO-W sent SSM a check for approximately $1,500,000. SSM disputed the valuation based on unfair dealing, claiming that the fair value of SSM’s shares totaled $4,700,000. HMO-W instituted appraisal proceedings to determine the value of the dissenting shares. At trial, HMO-W and SSM presented experts with differing valuations, but the trial court accepted the valuation offered by HMO-W’s expert. The trial court then applied a 30 percent minority discount to the value of the dissenting shares and ordered SSM and Neillsville to repay with interest the excess amount of HMO-W’s initial payment. SSM appealed. The court of appeals affirmed the trial court’s valuation in part, but reversed and remanded for a fair-value determination without the minority discount. The state supreme court granted review.