New York’s Largest Corporate Dissolution Case | AriZona Iced Tea
Tea’d Up for Appellate Review, But It Won’t Happen
After several years of litigation involving a number of hearings and trials on various issues, a trial to conclude the collective fair value of a group of related companies known as the AriZona Entities (also referred to as “AriZona” or “the Company”), occurred. The trial was held in the Supreme Court, State of New York, Nassau County, New York, the Hon. Timothy Driscoll, presiding. The trial lasted from May 22, 2014 until July 2, 2014.1
The Court’s decision in what I will refer to as “the AriZona matter” (or “the matter”) was filed on October 14, 2014. I have not previously written about the AriZona matter because I was a business valuation expert witness on behalf of one side.2 I was asked not to publish anything while the matter was still pending. The parties recently closed a private settlement of the matter, so there will be no appeal. There are numerous quotes from the Court’s decision in Ferolito v. Vultaggio throughout this article. However, in an informal article of this type, I will not cite specific pages for simplicity and ease of reading.
Background about the Case
The overall litigation had numerous complexities; however, the valuation and related issues were ultimately fairly straightforward. The Court had to determine the fair value, under New York law, of a combined 50% interest in the AriZona Entities as of two valuation dates. The first date, October 5, 2010, pertained to a portion of the 50% block, and the remainder of the block was to be valued as of January 31, 2010.
The Court’s decision focused on the first valuation date, or October 5, 2010, and we will do the same in this analysis of the case.
The case citation in the footnote below provides the names for all plaintiffs and defendants in the matter. For purposes of this discussion, we simplify the naming of the “sides” in the litigation, following the Court’s convention.
- The group of plaintiffs, led by John M. Ferolito, is referred to as “Ferolito” herein. I worked on behalf of Ferolito.
- Similarly, the group of defendants, led by Dominick J. Vultaggio, is referred to as “Vultaggio.”
Expert witnesses for Ferolito included Z. Christopher Mercer (Mercer Capital), Basil Imburgia (FTI Consulting), Dr. David Tabak (NERA Economic Consulting), Christopher Stradling (Lincoln International), and Michael Bellas (Beverage Marketing Corporation). Mercer was the primary business valuation expert. Imburgia testified on developing adjusted earnings for AriZona. Stradling, an investment banker, also testified regarding the value of AriZona. Finally, Bellas testified regarding the revenue forecast he developed for AriZona and that was employed by Mercer in the discounted cash flow method.
Expert witnesses for Vultaggio included Professor Richard S. Ruback (Harvard Business School and Charles River Associates), who was the primary valuation expert, and Dr. Shannon P. Pratt (Shannon Pratt Valuations). Pratt testified on the topic of the discount for lack of marketability but did not offer an independent valuation opinion. Other experts worked on behalf of Vultaggio, but their opinions received little treatment in the Court’s decision.