Athlon Sports Communications, Inc. v. Stephen C. Duggan

06/08/2018
IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
October 11, 2017 Session

ATHLON SPORTS COMMUNICATIONS, INC.
v.
STEPHEN C. DUGGAN ET AL.

Appeal by Permission from the Court of Appeals
Chancery Court for Davidson County
No. 12-1787-III Ellen H. Lyle, Chancellor
___________________________________

No. M2015-02222-SC-R11-CV
___________________________________

We granted permission to appeal in this case to address the methods by which a trial
court may determine the “fair value” of the shares of a dissenting shareholder under
Tennessee’s dissenters’ rights statutes, Tennessee Code Annotated sections 48-23-101, et
seq. In doing so, we overrule Blasingame v. American Materials, Inc., 654 S.W.2d 659
(Tenn. 1983), to the extent that Blasingame implicitly mandates use of the Delaware
Block method for determining the fair value of a dissenting shareholder’s stock. We
adopt the more open approach espoused in Weinberger v. UOP, Inc., 457 A.2d 701, 712-
13 (Del. 1983), in which the Delaware Supreme Court departed from the Delaware Block
method and permitted trial courts to determine fair value by using any technique or
method that is generally acceptable in the financial community and admissible in court.
This approach allows trial courts to utilize valuation methods that incorporate projections
of future value, so long as they are susceptible of proof as of the date of the corporate
action and not the product of speculation. In this dissenters’ rights case, the defendant
minority shareholders were forced out of the corporation as a result of a merger, and the
corporation petitioned the trial court to determine the fair value of the minority
shareholders’ stock. Both parties presented expert testimony regarding the valuation of
the dissenting shareholders’ stock, and both experts assumed that Blasingame required
use of the Delaware Block method to value the stock. However, both experts also valued
the dissenting shareholders’ stock under more modern approaches, such as the discounted
cash flow method. After a bench trial, the trial court discredited the testimony of the
dissenting shareholders’ expert and credited the testimony of the corporation’s expert.
The trial court’s order indicates that it may have based its decision on the premise that
Blasingame compelled use of the Delaware Block method to determine stock value.
Consequently, we remand to the trial court to reconsider its determination on valuation in
light of our decision to partially overrule Blasingame.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of Court of Appeals
Reversed; Judgment of Trial Court Vacated; Case Remanded to Trial Court

HOLLY KIRBY, J., delivered the opinion of the Court, in which JEFFREY S. BIVINS, C.J.,
and CORNELIA A. CLARK, SHARON G. LEE, and ROGER A. PAGE, JJ., joined.

John R. Jacobson and W. Russell Taber III, Nashville, Tennessee, for the
Defendant/Appellants, Stephen C. Duggan, Daniel R. Grogan, and Robert Kelly Grogan.

Paul S. Davidson and Laura P. Merritt, Nashville, Tennessee, for the Plaintiff/Appellee,
Athlon Sports Communications, Inc.

OPINION
FACTUAL AND PROCEDURAL BACKGROUND1

Plaintiff/Appellee Athlon Sports Communications, Inc. (“Athlon”), was formed in
1967 and incorporated in 1972. It is a private, closely-held corporation with its principal
place of business in Nashville, Tennessee. Athlon publishes special-interest consumer
sports magazines, websites, and other branded products, including sports annuals,
newsletters, and handbooks. It also sells authenticated sports memorabilia to consumers
and wholesale clients. For over fifty years, Athlon enjoyed steady profits until it fell
victim to the global economic downturn of the late 2000s.2 In re Fannie Mae 2008
Securities Litigation, 742 F. Supp. 2d 382, 391 (S.D.N.Y. 2010) (describing the “well
documented” events surrounding the Great Recession).

1
The trial court made thorough, detailed factual findings in its decision below, which were
quoted at length by the Court of Appeals. See Athlon Sports Commc’s, Inc. v. Duggan, No. M2015-
02222-COA-R3-CV, 2016 WL 6087667, at *2-*9 (Tenn. Ct. App. Oct. 17, 2016) (hereinafter referred to
as “Athlon Sports”) (quoting trial court decision), appeal granted (Tenn. Mar. 9, 2017). In this opinion,
we include only a broad summary of the facts to give context to the analysis of the legal issues.
2
According to an April 2010 valuation of the company, Athlon’s “sales were flat for the years
ended September 30, 2006 through 2008; however, sales fell by approximately 31% from the year ended
September 30, 2008 to 2009. Operating profits fell substantially from the year ended September 30, 2008
to 2009 due to the sharp decline in revenues contrasted with stable fixed costs.”

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 Defendant/Appellant Stephen Duggan is a certified public accountant and an
executive with magazine publishing experience.3 After learning of Athlon’s financial
difficulties, Mr. Duggan conceived a turnaround plan for the company. He proposed a
monthly sports publication called “Athlon Sports,” which would be inserted and
distributed in newspapers. Like Athlon’s other sports publications, the proposed insert
would generate revenues through advertising sales.

In March 2010, Athlon accepted Mr. Duggan’s proposal and hired him to
implement the Athlon Sports newspaper-insert project. In addition, Mr. Duggan invested
$1.5 million in the company and in return received 15% of the company’s ownership
shares, or 222,100 shares of Athlon stock. He was also eligible to receive additional
shares of restricted stock amounting to an additional 10% ownership in Athlon; the
number, timing, and vesting of the restricted shares were based upon EBITDA (earnings
before interest, taxes, depreciation, and amortization) performance targets from 2010 to
2014.4

Around the same time, Athlon retained a CPA firm, Lattimore Black, Morgan &
Cain (“Lattimore Black”), to conduct a valuation of Athlon. The valuation was obtained
in part to establish a basis price for Mr. Duggan’s restricted shares for tax purposes. The
valuation was intended to be available for other purposes as well, since there had been no
valuation of Athlon since its business began to decline.

In a report dated April 22, 2010, Lattimore Black placed Athlon’s enterprise value
at $8.1 million. It determined that the fair market value of Athlon’s common share
equivalents was $1.85 per share, and the fair market value of the restricted stock was $.98
per share.5 Lattimore Black’s valuations were based in part on probability estimates of
the success of the Athlon Sports project.

3
The trial court stated: “Mr. Duggan is a sophisticated, experienced and knowledgeable investor,
and [an] analyst of companies and their operations and finances.” Athlon Sports, 2016 WL 6087667, at
*4 (quoting trial court decision).
4
The Restricted Stock Award Agreement shows that Mr. Duggan’s potential award was 131,732
shares of restricted stock.
5
These values were based, to some extent, on Athlon meeting its projected goals over the next
several years.

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 Over the next several months, Athlon secured the new infrastructure necessary to
support the Athlon Sports newspaper-insert project. It found a manufacturer for the
insert, negotiated contracts, and made other preparations for the new endeavor. Finally,
the Athlon Sports launch took place in October 2010. It was a success, and Athlon Sports
became a nationally-distributed sports magazine with a monthly rate base of 7 million
copies. During 2011, while Mr. Duggan was still President and CEO, the Athlon Sports
rate base grew to over 9 million copies per month, a figure that was touted in Athlon
company documents. Media Industry Newsletter named Mr. Duggan 2011
Publisher/CEO of the Year.

Unfortunately, the increased circulation and other successes did not translate into
higher advertisement revenue for Athlon; the ad revenue lagged substantially behind pre-
launch projections. This precipitated a significant cash-flow shortfall for Athlon.

To raise the capital necessary for payroll and other operating expenses, Athlon
was forced to take extraordinary measures. By October 2011, a year after the launch of
Athlon Sports, Athlon had sold its main asset—the building that had housed the business
for twenty years—for about $3.9 million. The building had served as the collateral for
Athlon’s approximately $1 million line of credit, so the proceeds of the sale were used to
pay off the line of credit. The remaining proceeds of the building sale were retained for
working capital and to fund the ongoing business. All of Athlon’s key employees, except
Mr. Duggan, took pay cuts.6 As a further measure, Athlon surrendered its key-man life
insurance policies on seventy-five-year-old Spencer Hays, the chairman of the board and
controlling shareholder. This decision relieved the company from the obligation of
paying the hefty insurance premiums and also allowed it to recover the cash value of the
policies.7

The parties dispute whether Mr. Duggan was hindered from pursuing outside
capital to address Athlon’s cash flow issues during early 2011. Regardless, it is
undisputed that, beginning in October 2011, Mr. Duggan was permitted to do so.

In connection with his effort to seek outside capital, Mr. Duggan oversaw the
preparation of a Confidential Information Memorandum (CIM) for Athlon to use to

6
Spencer Hays, the chairman of the board and controlling shareholder, had actually refused
compensation from Athlon for several years.
7
Athlon had already borrowed over $500,000 against the cash value of the life insurance policies,
so the amount of capital actually realized from the liquidation of the policies is unclear in the record.
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attract would-be investors. In the CIM, the projections for Athlon’s future were quite
optimistic: “Based on the investments made since 2010, Athlon is poised for strong
multi-year double-digit revenue growth.” The CIM also asserted that Athlon was
“forecasted to generate total revenue of $14.3 million in fiscal 2012, which represents
year-over-year growth rate of 34.6%.” Despite these rosy forecasts, the record shows
that, by the time the CIM was prepared, Athlon’s financial circumstances had
deteriorated substantially.

On November 28, 2011, at a board of directors meeting, Athlon effectively
terminated Mr. Duggan’s employment. Mr. Hays asked Mr. Duggan to resign as CEO of
Athlon, and Mr. Duggan did so. However, after resigning from his employed position,
Mr. Duggan remained on Athlon’s board of directors.

Around that same time, Mr. Hays, along with Charles Allen (chief operating
officer) and Mary Dunn Vanderkooi (chief financial officer), formed an Ad Hoc Strategic
Alternatives Committee (“the Committee”) to explore options for returning Athlon to
profitability. The Committee devised a so-called “Plan of Merger” to form a new
corporation. Under the merger plan, Athlon would merge with a newly-created
Tennessee corporation, Athlon Merger Subsidiary, Inc. (“Merger Sub”). Another newly-
created Tennessee corporation, Athlon Acquisition, Inc. (“Newco”), would be the sole
shareholder of Merger Sub. After completion of the planned merger, the separate Merger
Sub would cease to exist, leaving the Newco, also referred to as “New Athlon,” as the
only surviving corporation. Shares in New Athlon would be purchased via proportional
investments by Mr. Hays and certain other Athlon employees. Under the merger plan,
the total investment in the new corporation was expected to be $2 million, which was to
provide a much-needed infusion of capital for New Athlon’s ongoing business.

The Plan of Merger contemplated that some Athlon shareholders would not be
invited to participate in the new corporation.8 For this reason, the Committee anticipated
that some shareholders would dissent from the planned merger. Accordingly, for the
purpose of determining the value of dissenting shareholders’ stock, the Committee sought
a new valuation of Athlon prior to the planned merger. The Committee retained Michael
Collins at 2nd Generation Capital, an investment firm in Nashville, Tennessee, to
perform the valuation.9

8
According to some evidence, only shareholders who were employees of Athlon were invited to
participate in the new corporation.
9
The record reflects that Mr. Collins was retained around December 2011.
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 Mr. Collins completed his valuation of Athlon by February 29, 2012. In it, Mr.
Collins opined that the fair market value of the company was “$NIL,” meaning zero. Mr.
Collins also rendered a fairness opinion. In his fairness opinion, he recommended that all
shares of Athlon stock not converted into shares of the new corporation be canceled and
that the owners of those shares be compensated at the rate of 1¢ per share.

During March 2012, the Athlon board of directors convened three times. Over the
course of those meetings, Mr. Collins presented his valuation of Athlon, and Mr. Hays
presented the Plan of Merger. Initially, Athlon offered the recommended 1¢ per share to
those not participating in the new corporation, but this was ultimately increased to $.10
per share. Mr. Hays’ proposed Plan of Merger was accepted by the board.10

Mr. Duggan was not invited to participate in ownership of the new corporation.
Along with Mr. Duggan, the other Defendants/Appellants in this appeal, minority
shareholders Daniel R. Grogan and Robert Kelly Grogan, were also not invited to
participate in the new corporation.11 Although the plan was not described as a “squeeze
out” or “take out” merger, this was in fact its effect on Mr. Duggan and the other
shareholders who were not invited to participate in the new corporation.12

On August 10, 2012, the planned merger was consummated. Pursuant to the
Tennessee dissenters’ rights statutes, Tennessee Code Annotated sections 48-23-101, et

10
Mr. Duggan had made a counter-proposal in which he offered to buy Athlon for as much as
$.25 per share. None of the other board members supported the counter-proposal.
11
Brothers Dan and Kelly Grogan were pioneers in the Fantasy Football industry. They formed
Grogan Sports, Inc., through which they sold an informational publication to Fantasy Football enthusiasts.
In January 2006, Athlon purchased the Grogans’ business by giving the Grogans Athlon stock—each of
them received $175,000 in Athlon stock, priced at $12.85 per share, plus $50,000 in cash to enable the
Grogans to pay taxes on the stock. They were hired by Athlon, and they were each given a performance
bonus in shares of stock, 198 shares valued at $12.85 per share. They were also permitted to purchase
1,000 more shares at $12.85 per share, all before 2008. The Grogans resigned from Athlon in March
2010.
12
“The take-out merger is a device by which majority shareholders can obtain the entire
proprietary interest of a corporation and force minority shareholders to take payment for their shares.”
Rand D. Richey, Note, Balancing the Rights of Majority and Minority Shareholders in Take-Out
Mergers: Trends in Delaware Law, 25 New Eng. L. Rev. 699, 703 (Winter 1990).

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seq., Athlon was required to compensate Mr. Duggan, the Grogans, and the other non-
participating shareholders for the fair value of their shares.

In October 2012, Mr. Hays, on behalf of Athlon, sent the dissenting shareholders a
fair value payment check for $.10 per share plus interest. Mr. Duggan and the Grogans,
rejected the offer and demanded $6.18 per share.13 See Tenn. Code Ann. § 48-23-209
(2012). Their demand was rejected. After reaching an impasse, Athlon filed the instant
lawsuit against Mr. Duggan and the Grogans14 for judicial appraisal of “the fair value of
the shares and accrued interest” as of the date of the merger pursuant to Tennessee Code
Annotated section 48-23-301 (2012).15

The matter was tried before the Honorable Ellen Hobbs Lyle over the course of six
days in August and September 2015. The only issue at trial was the fair value of Athlon
stock at the time of the August 2012 merger.16

The trial court heard testimony from several lay witnesses on Athlon’s operations
and the events leading up to the merger. The witnesses included Mr. Allen and Ms.
Vanderkooi, as well as Mr. Duggan and the Grogans. In connection with the witnesses’
testimony, about 160 exhibits were submitted. The primary evidence, however, was the
testimony of the parties’ competing experts. They testified extensively on the fair value
of Athlon stock at the time of the merger, and presented detailed reports and exhibits as
well.

The valuation expert hired by Athlon in advance of the merger, Mr. Collins, gave
expert testimony on behalf of Athlon.17 In his Trial Report and his testimony, Mr.

13
Mr. Duggan was paid for the stock he purchased plus the stock he would have received in
incentives, a total of 353,832 shares of Athlon stock, about 21.43% of the total number of Athlon shares.
The Grogans owned a much smaller amount, about 8,000 shares of stock each, which amounted to about
.54% of the total shares of Athlon stock.
14
Initially, another minority shareholder, Mark A. Miles, was included in this lawsuit as a
defendant. The trial court granted Mr. Miles’ pro se motion to dismiss because he formally withdrew his
protest to the share valuation.
15
Pursuant to section 48-23-301, if a dissenting shareholder and the corporation do not agree on
fair value, “the corporation shall commence a proceeding . . . and petition the court to determine the fair
value of the shares and accrued interest.” Tenn. Code Ann. § 48-23-301(a) (2012 & 2017 Supp.).
16
The dissenting shareholders did not file counterclaims against Athlon.

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Collins explained the methodologies he employed, the evidence he considered, and the
assumptions he made in forming his expert opinion on the fair value of Athlon stock. He
relied to a great extent on the valuation he performed for Athlon in February 2012,
updated to the time of the August 2012 merger. Regarding the valuation methodologies
used, Mr. Collins’ Trial Report stated:

I have employed the Delaware Block Method of valuation compliant
with the requirements of TENNESSEE CODE ANNOTATED Title 48
Corporations and Associations For-Profit Business Corporations Chapter
23 Dissenters’ Rights and relevant Tennessee court precedents. Plaintiff’s
counsel assisted my familiarization with the applicable law, regulation[s],
rules, and other relevant legal principles. . . .

....

In conducting my work, I have applied the Delaware Block Method
as required; and have also separately considered (and applied where I
determined them to be applicable and their results reasonable without
resorting to undue speculation) multiple techniques or methods that are
generally considered acceptable in the financial community and appraisal
profession considering all relevant factors. I present these multiple
approaches in order to best inform the [Trier] of Fact and to serve as a
reasonableness cross check of my calculations and opinions.

Mr. Collins’ Trial Report also included a disclaimer about the Delaware Block method of
valuation: “Generally accepted appraisal practice, as well as Delaware and other courts,
reject the Delaware Block [method] as unreliable and not in accordance with modern
valuation science.” It noted the “recognized shortcoming” of the Delaware Block
method, namely, that it looks to a company’s historical operating results and then uses
simple mathematical averaging formulas that “can yield highly misleading results,”
oftentimes a lower valuation for the dissenting shareholder. Modern methods of
valuation such as the Discounted Cash Flow (DCF) approach, Mr. Collins’ Trial Report
stated, “place more emphasis on a company’s future prospects to the extent that they can
be reasonably forecasted without resorting to undue speculation.”

17
The trial court detailed Mr. Collins’ extensive qualifications. See Athlon Sports, 2016 WL
6087667, at *5 (quoting trial court decision).
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 In this case, Mr. Collins concluded that the fair value of Athlon stock at the time
of the merger was zero or “$NIL” under either the Delaware Block method or alternate,
forward-looking, valuation methods. Mr. Collins explained that, at the time of the
merger, “Athlon was insolvent or at the minimum operating in the Zone of Insolvency
with unreasonably small capital. Athlon’s liabilities were highly likely to exceed its
assets and thus the interest of creditors as well as the equity interests would be impaired.”
He further opined that, “absent the external funding provided by the [merger], it would
not be possible for Athlon to achieve the liquidity necessary to compensate a Dissenter.”
Mr. Collins felt that the DCF valuation method was “not practical, useful, or reliable
when projections of future results cannot be made without resorting to undue
speculation.”

Expert witness Jaime C. d’Almeida testified on behalf of the dissenting
shareholders about the value of their stock.18 Mr. d’Almeida also used the Delaware
Block method based on Tennessee law, even while describing that method as “not
currently a common valuation method.” Because the Delaware Block method is not
commonly used, Mr. d’Almeida used two other valuation methods—the guideline
companies method and the DCF method—to benchmark his Delaware Block method
appraisal.

Under the Delaware Block method, Mr. d’Almeida valued the fair value of the
dissenting shareholders’ stock at $6.48 per share.19 Using the guideline companies
method, under which Athlon was compared to publicly-traded companies in similar lines
of business, Mr. d’Almeida determined that the fair value of Athlon stock would be in the
range of $4.55 to $9.58 per share. Under the DCF method of valuation based on Athlon’s
February 2012 projections, Mr. d’Almeida valued the stock at $6.48 per share. Finally,
using the DCF method based on the projections included in the CIM, Mr. d’Almeida
placed the fair value at $22.32 per share.

Mr. Collins submitted a Rebuttal Report in which he challenged the assumptions
and methods Mr. d’Almeida used. Mr. Collins’ Rebuttal Report described Mr.
d’Almeida’s valuation as “speculative, based on conjecture and fail[ing] to adequately
support the Defendant dissenters’ claim for Fair Value[,] . . . and contain[ing] numerous

18
The trial court detailed Mr. d’Almeida’s extensive qualifications. See Athlon Sports, 2016 WL
6087667, at *6 (quoting trial court decision).
19
Mr. d’Almeida determined that the net asset value was $6.20, market value was $6.09, and
earnings value was $7.16, and he assigned equal weight to each value.
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fundamental flaws.” The Rebuttal Report detailed Mr. Collins’ criticisms of Mr.
d’Almeida’s report and his deposition testimony in a line-by-line fashion.

After closely considering the evidence, in October 2015, the trial court entered a
final order in which it concluded that the fair value of the dissenting shareholders’ stock
at the time of the merger was “no greater than the $0.10 per share amount paid by
[Athlon].” At the outset, the trial court stated, “As well explained in the trial briefs of
each attorney in this case, Tennessee uses the Delaware Block method to determine fair
value for dissenters.” Athlon Sports Commc’s, Inc. v. Duggan, No. M2015-02222-COA-
R3-CV, 2016 WL 6087667, at *3 (Tenn. Ct. App. Oct. 17, 2016) (hereinafter referred to
as “Athlon Sports”) (quoting trial court decision), appeal granted (Tenn. Mar. 9, 2017).
It explained: “While there is this [Delaware Block] formula under Tennessee law, the
ultimate value of the stock is not formulaic. The [Delaware Block] formula is a tool to
assist [in] rendering a judgment of share value customized to the unique features and
facts of individual companies.” Id. (quoting trial court decision).

The trial court specifically credited the testimony of Mr. Collins and discredited
the testimony of Mr. d’Almeida.20 Id. at *6-9. The trial court then outlined its reasons
for finding that the fair value of the Athlon shares was no more than $.10 per share:

The reason the Court finds the value to be $0.10 and not the zero
determined by Mr. Collins is that the evidence established that Athlon’s
trade name had existed for 44 years and had obtained recognition. The
evidence established that while this recognition was not of such an extent
that it could be used as collateral or be sold for an appreciable amount or
had a trademark value, it had some very, very minimal value as an
intangible asset. Also, the $9 million [sic] in circulation of the Sports Insert
(discussed in more detail below), the Court finds, had some very, very
minimal asset value. Given the great disparity between advertising
revenue, which was still insufficient, and circulation, and absence of
Company assets and earnings, there was great uncertainty and risk as of the
August 2012 Merger date. The Court finds there was not just a liquidity or
cash flow problem; the Company was hovering around the zone of
insolvency. Thus, the Court finds that the recognition of the Athlon name
or brand and the [ ]9 million in circulation, while very, very minimal,
provide a $0.10 per share value.

20
For more a more detailed recitation of the trial court’s analysis, see Athlon Sports, 2016 WL
6087667, at *2-*9 (quoting the decision of the trial court).
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Id. at *6. The dissenting shareholders appealed.

In the Court of Appeals, the dissenting shareholders argued that the trial court
erred in relying exclusively on the Delaware Block method for determining the value of
their Athlon shares. The appellate court identified the dissenting shareholders’ “chief
objection to the Delaware Block Method” as “their claim that [the method’s] focus on
past rather than prospective performance is particularly unreliable for a company
embarking upon a new venture like Athlon.” Id. at *10. Alternatively, the dissenting
shareholders argued that, even if the Delaware Block method were the proper valuation
method for the shares of Athlon stock, the trial court erred in how it applied that method
under the facts and circumstances of this case. Id. at *9.

The Court of Appeals rejected both of those arguments. As to the first issue, the
appellate court held that “[t]he Trial Court correctly followed Tennessee case precedent
in utilizing the Delaware Block Method for valuation,” referring to this Court’s holding
in Blasingame v. American Materials, Inc., 654 S.W.2d 659 (Tenn. 1983).21 Id. at *11.
Blasingame adopted the Delaware Block method for determining share value in a
dissenter’s rights case. Blasingame, 654 S.W.2d at 667. The Court of Appeals noted that
Blasingame adopted the Delaware Block method even though the Delaware Supreme
Court that originally adopted that method had ended up criticizing it:

Our Supreme Court’s 1983 decision in Blasingame adopting the
Delaware Block Method never has been revisited or overturned by our
Supreme Court. In Blasingame, our Supreme Court acknowledged the
Delaware Supreme Court’s decision in Weinberger which was critical of
the Delaware Block Method, yet adopted that method nevertheless. While
the Tennessee case law available to the Trial Court and to us in the years
since Blasingame has refined further the approach to judicial valuation, it
never has departed utterly from the Delaware Block Method as a baseline.

Athlon Sports, 2016 WL 6087667, at *11 (referencing Weinberger v. UOP, Inc., 457
A.2d 701, 712-13 (Del. 1983)). Based on Blasingame, the intermediate appellate court
approved of the trial court’s adherence to the Delaware Block valuation method, even
though Delaware itself has “long since departed from a strict application of” that

21
Another holding in Blasingame, unrelated to its holding on the method for determining the fair
value of a dissenting shareholder’s stock, was later superseded by statute, as recognized in Wakefield v.
Crawley, 6 S.W.3d 442, 449 (Tenn. 1999).
- 11 -
valuation method. Id. at *10. The Court of Appeals added that, “[i]f the holding of
Blasingame . . . is to be reversed or modified by a Tennessee Court, it is the Tennessee
Supreme Court that will have to do it and not this Court.” Id. at *11.

The Court of Appeals also rejected the dissenting shareholders’ challenge to how
the trial court’s applied the Delaware Block method. It held that the trial court findings of
fact were supported by the evidence in the record, although it agreed with the dissenting
shareholders “that it seems an odd circumstance, to say the least, that forecasts made by
Athlon and represented as reliable at the time are now dismissed by Athlon as
unreliable.” Id. at *12. Regardless, the intermediate appellate court commented that the
trial court was justified in lending “little or no credence to Athlon’s forecasts.” Id.
Accordingly, the appellate court affirmed the trial court’s decision in its entirety. Id.

We granted the dissenting shareholders’ application for permission to appeal to
address our holding in Blasingame and to consider whether the Delaware Block method
should be the exclusive method for determining the fair value of stock held by dissenting
shareholders.

ISSUES ON APPEAL

The dissenting shareholders first argue that the lower courts erred in holding that
Blasingame required use of the Delaware Block method to determine the fair value of
their Athlon shares. They argue that Blasingame did not hold that the Delaware Block
method was the exclusive method for valuing shares in all dissenters’ rights cases; rather,
it approved that method of valuation for the specific circumstances presented in that case.
If Blasingame did hold that the Delaware Block method was the exclusive method for
valuation, the dissenting shareholders argue, it should be overruled and trial courts should
be permitted to allow such valuations by any generally accepted method. Under the facts
of this case, they claim, a valuation method that takes into account future profits would
have led to a more fair valuation. Alternatively, if the Delaware Block method was
appropriate in this case, they contend that the trial court applied it in an erroneous manner
by disregarding evidence of anticipated profitability at the time of the merger.

In response, Athlon does not disagree that trial courts should not be restricted to
the Delaware Block method as the only valuation method for determining fair value.
Rather, it argues that any forward-looking method of valuation would yield the same
result in this case, because projections of Athlon’s future profits at the time of the merger
were speculative and should not be considered. Therefore, Athlon maintains, under any
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valuation method, the fair value of its stock at the time of the merger was zero, and the
trial court’s decision should be affirmed in its entirety.

ANALYSIS

As we noted in Keller v. Estate of McRedmond, 495 S.W.3d 852 (Tenn. 2016),
“Corporations are creatures of state law.” Id. at 866 (quoting Cort v. Ash, 422 U.S. 66,
84 (1975)). Therefore, issues related to corporations are typically controlled by state law.
Id.
“While many issues regarding corporations are governed by state statute, some
issues are instead decided by the state courts.” Id. (citing 12B Fletcher Cyc. Corp. §
5911). In this appeal, we consider the methods by which the fair value of a dissenting
shareholder’s stock may be determined. Tennessee’s statutes do not address the methods
of valuation, so that issue must be decided by this Court.

A. Dissenters’ Rights and the Appraisal Remedy

General

Under the common law, fundamental corporate changes such as a merger could be
implemented only upon a unanimous vote of the corporation’s shareholders. This
common law rule protected minority shareholders by giving veto power to any single
shareholder as to such corporate changes. See Robert B. Thompson, Exit, Liquidity, and
Majority Rule: Appraisal’s Role in Corporate Law, 84 Geo. L.J. 1, 3 (Nov. 1995) (“The
nineteenth-century common law required unanimous shareholder consent before a
corporation could make radical changes, such as mergers.”); Pueblo Bancorporation v.
Lindoe, Inc., 63 P.3d 353, 358 (Colo. 2003).

Over time, corporations evolved into more “democratic organizations, subject to
majority rule.” Barry M. Wertheimer, The Shareholders’ Appraisal Remedy and How
Courts Determine Fair Value, 47 Duke L.J. 613, 613 (Feb. 1998); Lindoe, 63 P.3d at 358.
Now, unanimous shareholder consent is not required; corporations may effect
fundamental changes by majority approval.22 Wertheimer, 47 Duke L.J. at 614. This
evolution left minority shareholders “vulnerable to abuse at the hands of the majority
[shareholders],” particularly in closely-held corporations. Id at 613.

22
For a detailed account of the evolution of the appraisal remedy, see Mary Siegel, Back to the
Future: Appraisal Rights in the Twenty-First Century, 32 Harv. J. on Legis. 79, 86-91 (Winter 1995).
- 13 -
 “When unanimous approval was no longer required, and shareholders effectively
lost their individual right to veto corporate changes, the appraisal remedy was provided to
them in return.” Id. at 614-15. The so-called appraisal remedy protects minority
shareholders who dissent from certain corporate actions by allowing them to force the
corporation to purchase their shares at a judicially determined price. Id. at 614; Michael
R. Schwenk, Note, Valuation Problems in the Appraisal Remedy, 16 Cardozo L. Rev.
649, 649 & n.1 (1994) (citing statutes). Every state now has statutes that provide some
form of appraisal remedy; these are referred to as “dissenters’ rights” statutes. Schwenk,
16 Cardozo L. Rev. at 649 & n.1; see Shawnee Telecom Resources, Inc. v. Brown, 354
S.W.3d 542, 556 (Ky. 2011) (“Dissenters’ rights statutes . . . exist in some form in every
state, and in the vast majority of the states protection is accorded by an appraisal remedy .
. . .”).

As initially conceived, the appraisal remedy was intended to address concerns that
a shareholder could be forced into continued ownership in a corporation fundamentally
different from the one the shareholder had joined. Historically, the goals of the appraisal
remedy were to give minority shareholders a “quid pro quo” for the loss of veto power as
well as liquidity “and a ‘way out’ of an involuntarily altered investment.” Wertheimer,
47 Duke L.J. at 615; see also Barry M. Wertheimer, The Purpose of the Shareholders’
Appraisal Remedy, 65 Tenn. L. Rev. 661, 667-68 & n.32 (Spring 1998).

In modern times, the purpose of the appraisal remedy has shifted away from
giving minority shareholders a “way out” of the corporation and towards protecting them
from being forced out without due compensation:

Most of the current appraisal litigation involves cash-out mergers, often
instituted by a controlling shareholder. The appraisal remedy today serves
a minority shareholder protection role, sometimes providing liquidity to
shareholders, but most often operating to protect minority shareholders who
are cashed out of their investment. The remedy fulfills this function ex
ante, deterring insiders from engaging in wrongful transactions, and ex
post, providing a remedy to minority shareholders who are subjected to
such transactions.

Wertheimer, 47 Duke L.J. at 615-16.

- 14 -
 Tennessee

Tennessee’s dissenters’ rights statutes can be found at Tennessee Code Annotated
sections 48-23-101, et seq.23 Under Tennessee’s statutory scheme, “[a] shareholder is
entitled to dissent from, and obtain payment of the fair value of the shareholder’s shares
in the event of, . . . a plan of merger” such as the one in the instant case.24 Tenn. Code
Ann. 48-23-102(a) (2012 & Supp. 2017).

Part 2 of chapter 23 sets forth Tennessee’s procedures for the exercise of
dissenters’ rights.25 Id. §§ 48-23-201 –209. Once the merger or other proposed corporate
action is effectuated, the corporation must pay the dissenters “the amount the corporation
estimates to be the fair value of each dissenters’ shares, plus accrued interest,”
accompanied by certain documentation regarding its calculation of the amount paid. Id. §
48-23-206 (2012 & Supp. 2017). If a dissenting shareholder disagrees with the “fair
value” paid by the corporation, the dissenter may retain the amount received and notify
the corporation in writing of his own estimate of “fair value,” or the dissenter may simply
reject the offer and demand payment of fair value. Id. § 48-23-209. If the shareholder’s
demand for “fair value” remains unresolved, “the corporation shall commence a

23
Title 48, chapters 11 through 27, of the Tennessee Code Annotated is known as the “Tennessee
Business Corporation Act.” Tenn. Code Ann. § 48-11-101 (2012). Chapter 23 includes the provisions on
dissenters’ rights.
24
Tennessee Code Annotated section 48-23-102(a) provides:

(a) A shareholder is entitled to dissent from, and obtain payment of the fair value of the
shareholder’s shares in the event of, any of the following corporate actions:

(1) Consummation of a plan of merger to which the corporation is a party:

(A) If shareholder approval is required for the merger by § 48-21-104 or the
charter and the shareholder is entitled to vote on the merger if the merger is submitted to
a vote at a shareholders’ meeting or the shareholder is a nonconsenting shareholder under
§ 48-17-104(b) who would have been entitled to vote on the merger if the merger had
been submitted to a vote at a shareholders’ meeting; or

(B) If the corporation is a subsidiary that is merged with its parent under § 48-21-
105 . . . .
25
In the instant case, it is undisputed that there was substantial compliance with the provisions
regarding requisite notices and procedures.
- 15 -
proceeding within two (2) months after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued interest.” Id. § 48-23-301(a).

It is worth noting that dissenters’ rights statutes use the term “fair value,” not “fair
market value.” “Fair value” in this context is not the same as fair market value. Lindoe,
63 P.3d at 361. “Fair market value is typically defined as the price at which property
would change hands between a willing buyer and a willing seller when neither party is
under an obligation to act.” Id. at 362. “However, in a dissenters’ rights action, the
dissenting shareholder is not in the same position as a willing seller on the open market—
he is an unwilling seller with little or no bargaining power.” Id. at 361 (citing Swope v.
Siegel-Robert, Inc., 243 F.3d 486, 492 (8th Cir.2001)). Moreover, “‘[f]air value’ carries
with it the statutory purpose that shareholders be fairly compensated, which may or may
not equate with the market’s judgment about the stock’s value.” HMO-W Inc. v. SSM
Health Care Sys., 611 N.W.2d 250, 255 n.5 (Wis. 2000) (quoting Joseph W. Anthony &
Karlyn V. Boraas, Betrayed, Belittled ... But Triumphant: Claims of Shareholders in
Closely Held Corporations, 22 Wm. Mitchell L. Rev. 1173, 1186 (1996)). “This is
particularly appropriate in the close corporation setting where there is no ready market
for the shares and consequently no fair market value.” Id. Perhaps because minority
shareholders in a publicly traded corporation can readily sell their shares for market
value, shares that are traded on an organized security exchange are not subject to
minority shareholders’ right to dissent and obtain “fair value.” See Tenn. Code Ann. §
48-23-102(c); see also Don S. Clardy, Comment, Valuation of Dissenters’ Stock Under
the Appraisal Remedy—Is the Delaware Block Method Right for Tennessee?, 62 Tenn. L.
Rev. 285, 289 & n.24 (Winter 1995) (listing state statutes that eliminate the appraisal
remedy for some publicly-traded stocks).

In Tennessee, the term “fair value” is defined by statute: “‘Fair value’ with
respect to a dissenter’s shares means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action.” Tenn. Code Ann. §
48-23-101(4) (2012 & Supp. 2017). As noted above, Tennessee’s dissenters’ rights
statutes do not specify how “fair value” price is ascertained.26 See Blasingame, 654
S.W.2d at 665. When statutes do not prescribe a method for ascertaining fair value, “the

26
The dissenters’ rights statutes in some jurisdictions include statutory guidance on how to
determine fair value. See Clardy, 62 Tenn. L. Rev. at 286 (noting that some statutes require courts to
appoint a number of appraisers, while others grant courts the discretion to appoint appraisers). As we
have indicated, Tennessee is not one of those jurisdictions.
- 16 -
determination of a company’s value is generally left to the discretion of the courts or
appraisers or both.” Clardy, 62 Tenn. L. Rev. at 286.

B. Determining “Fair Value”

General

There are several methods for determining the “fair value” of a dissenting
shareholder’s stock. The question of which method is most appropriate in a given case is
the subject of much debate. A review of the development of the law in this area is
helpful to an understanding of the issue presented in this case.

In early years, litigation over the value of a dissenting shareholder’s stock was
infrequent, and the valuation methods used in such cases had little commonality. Some
courts viewed asset value or capitalized earnings of corporations as the strongest
indicators of value. Clardy, 62 Tenn. L. Rev. at 290 n. 30 (citing as examples Allied
Chem. & Dye Corp. v. Steel & Tube Co. of Am., 122 A. 142 (Del. Ch. 1923); Nat’l Bank
of Commerce v. City of New Bedford, 29 N.E. 532 (Mass. 1892); Int’l & G.N. R.R. v.
Bremond, 53 Tex. 96 (1880)). “Other courts relied on the prices quoted on the exchange
or the market price if reliable figures were available.” Id. “[M]ost courts concluded that
no single formula should be used exclusively to value dissenters’ shares, but that a
number of factors should be considered together.” Id. (footnote omitted).

In 1950, the Delaware Supreme Court decided a significant case on valuation of
dissenting shareholders’ shares, Tri-Continental Corp. v. Battye, 74 A.2d 71 (Del. 1950).
Tri-Continental is often cited for its description of what later became known as the
“Delaware Block” method of valuation, also called the “the Delaware Rule” or “the
weighted average method” of valuation. See Weinberger, 457 A.2d at 712; see also
Hubbell v. Sumner Anesthesia Assocs., Inc., No. M2008-01736-COA-R3-CV, 2009 WL
1162650, at *4 (Tenn. Ct. App. Apr. 29, 2009). In Tri-Continental, the Delaware
Supreme Court explained the valuation method in this way:

The basic concept of value under the appraisal statute is that the
stockholder is entitled to be paid for that which has been taken from him,
viz., his proportionate interest in a going concern. By value of the
stockholder’s proportionate interest in the corporate enterprise is meant the
true or intrinsic value of his stock which has been taken by the merger. In
determining what figure represents this true or intrinsic value, the appraiser
and the courts must take into consideration all factors and elements which
- 17 -
 reasonably might enter into the fixing of value. Thus, market value, asset
value, dividends, earning prospects, the nature of the enterprise and any
other facts which were known or which could be ascertained as of the date
of merger and which throw any light on future prospects of the merged
corporation are not only pertinent to an inquiry as to the value of the
dissenting stockholders’ interest, but must be considered by the agency
fixing the value.

The rule as stated requires that certain obvious conclusions be
drawn. Thus, since intrinsic or true value is to be ascertained, the problem
will not be settled by the acceptance as the sole measure of only one
element entering into value without considering other elements. For
example, as was specifically held in Chicago Corporation v. Munds, supra,
market value may not be taken as the sole measure of the value of the stock.
So, also, since value is to be fixed on a going-concern basis, the liquidating
value of the stock may not be accepted as the sole measure.

Tri-Continental, 74 A.2d at 72. Thus, Tri-Continental rejected the use of any single
method for determining the value of a dissenter’s shares. Instead, it required “the
averaging of the three most popular methods of valuation [at the time]: market value,
asset value, and earnings value.” Clardy, 62 Tenn. L. Rev. at 290 & n.37 (citing In re
Delaware Racing Ass’n, 213 A.2d 203, 209 (Del. 1965); Sporborg v. City Specialty
Stores, Inc., 123 A.2d 121, 124 (Del. Ch. 1956)).

Under the basic application of the Delaware Block method, an appraiser first
determines the value of the subject corporation under each of the three valuation methods
identified in Tri-Continental: (a) market value, (b) asset value, and (c) earnings value.
Once these three values are ascertained, each is “multiplied by a weighted factor
expressed as a percentage of the whole so that the products of the calculations[,] when
added together[,] will equal one hundred percent and represent the total value of each
share.”27 Elk Yarn Mills v. 514 Shares of Common Stock of Elk Yarn Mills, Inc., 742

27
For example, the Delaware Block method uses a formula similar to this:

Asset value $100.00 x 50% = $50
Market value $ 80.00 x 25% = $20
Earnings value $ 0.00 x 25% = $ 0

Total value per share = $70

- 18 -
S.W.2d 638, 640 (Tenn. Ct. App. 1987). “The weight to be given the particular values
takes into consideration the type of business, the objectives of the corporation, and other
relevant factors.” Id. (citing Blasingame, 654 S.W.2d at 666).

From 1950 until 1983, Delaware Block was the exclusive method Delaware used
to value a corporation in an appraisal proceeding. See Paskill Corp. v. Alcoma Corp.,
747 A.2d 549, 555 (Del. 2000); Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1186-87
& n.7 (Del. 1988). In 1983, however, the Delaware Supreme Court moved decisively
beyond Delaware Block as the exclusive method for valuation. In the landmark case of
Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983), the defendant corporation presented
evidence of stock valuation using the Delaware Block method in accordance with
Delaware caselaw, while the dissenting shareholder presented a different valuation using
the discounted cash flow (DCF) method.28 Weinberger, 457 A.2d at 712. The Court
noted that, although Delaware Block had been the method used “for decades” for stock
valuation, that method “excludes other generally accepted techniques used in the
financial community and the courts, [and] it is now clearly outmoded.” Id. The
Delaware Supreme Court concluded, “It is time we recognized this in appraisal and other
stock valuation proceedings and bring our law current on the subject.” Id. The
Weinberger Court held:

[T]he standard “Delaware block” or weighted average method of
valuation, formerly employed in appraisal and other stock valuation cases,
shall no longer exclusively control such proceedings. We believe that a

28
The discounted cash flow (DCF) method is a forward-looking valuation technique based on
cash flow and earnings forecasts:

A proper DCF analysis follows a well-defined sequence:

First, one estimates the values of future cash flows for a discrete
period, based, where possible, on contemporaneous management
projections. Then, the value of the entity attributable to cash flows
expected after the end of the discrete period must be estimated to
produce a so-called terminal value, preferably [by] using a perpetual
growth model. Finally, the value of the cash flows for the discrete period
and the terminal value must be discounted back using the capital asset
pricing model or ‘CAPM.’

In re PetSmart, Inc., No. 10782-VCS, 2017 WL 2303599, at *32 (Del. Ch. May 26, 2017) (quoting
Andaloro v. -PFPC Worldwide, Inc., No. Civ. A. 20336, Civ. A. 20289, 2005 WL 2045640, at *9 &
n.370 (Del. Ch. Aug. 19, 2005) (citation omitted)).
- 19 -
 more liberal approach must include proof of value by any techniques or
methods which are generally considered acceptable in the financial
community and otherwise admissible in court, subject only to our
interpretation of [the relevant statutes and rules]. This will obviate the very
structured and mechanistic procedure that has heretofore governed such
matters.

Id. at 712-13. Thus, the Court rejected Delaware Block as the exclusive method of
valuation in appraisal proceedings and paved the way for other techniques and methods.
Hearkening back to the language in Tri-Continental, the Weinberger Court emphasized
that “[f]air price obviously requires consideration of all relevant factors.” Id. at 713.
Specifically, it noted, facts related to “future prospects of the merged corporation are not
only pertinent to an inquiry as to the value of the dissenting stockholders’ interest, but
must be considered by the agency fixing the value.” Id. at 713 (emphases added by
Weinberger Court) (quoting Tri-Continental, 74 A.2d at 72). However, the Weinberger
Court cautioned against consideration of “speculative elements of value that may arise
from the ‘accomplishment or expectation’ of the merger.” Id. The Court elaborated:

We take this to be a very narrow exception to the appraisal process,
designed to eliminate use of pro forma data and projections of a speculative
variety relating to the completion of a merger. But elements of future
value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered.

Id. Thus, Weinberger embraced valuation methods that take into consideration the future
prospects of the subject corporation, so long as the evidence of future value did not
amount to speculation.

Turning to the facts presented in that case, the Weinberger Court surmised that the
trial court may have disregarded the plaintiff’s DCF valuation based on past Delaware
practice of using only the Delaware Block method. Id. at 714. For this reason, the Court
remanded the case for reconsideration of the plaintiff’s proof under the new standard. Id.
(“While we do not suggest a monetary result one way or the other, we do think the
plaintiff’s evidence should be part of the factual mix and weighed as such.”).

Although Weinberger described the Delaware Block method of valuation as
“outmoded” and “mechanistic,” see id. at 712-13, it “did not prohibit use of the Delaware
block method, and this method has continued to be used in Delaware and elsewhere.”
- 20 -
Wertheimer, 47 Duke L.J. at 628 n.82 (citing cases); see Note, Using Capital Cash Flows
to Value Dissenters’ Shares in Appraisal Proceedings, 111 Harv. L. Rev. 2099, 2101
(May 1998) (footnote omitted) (“[A]n examination of recent cases in the Delaware courts
reveals that the Delaware Block Method is alive and well.”); see also Rosenblatt v. Getty
Oil Co., 493 A.2d 929, 940 (Del. 1985). One commentator has noted that “[l]itigants and
the chancery court [in Delaware] were slow to take advantage of Delaware’s new
openness to a broader spectrum of financial evidence.” Schwenk, 16 Cardozo L. Rev. at
666. Nevertheless, over time, many jurisdictions have recognized the limitations of the
Delaware Block method and have adopted Weinberger’s more open approach to
determining the “fair value” of a dissenting shareholder’s stock. See Clardy, 62 Tenn. L.
Rev. at 300 (“As a result of Weinberger’s liberalization of its valuation methods, many
courts have begun to question the reliability and validity of the Delaware Block
Method.”).

Since Weinberger, to determine fair value, courts in most states will take into
consideration any evidence that may be relevant, including lay and expert testimony. In
re Appraisal of Dole Food Co., 114 A.3d 541, 553 n.7 (Del. Ch. 2014). This led one
Delaware court to comment that, “[l]ike driving, the valuation field does not lend itself to
metes-and-bounds demarcations of expert-only territory.” Id. at 553. Indeed a number of
courts have observed that “those knowledgeable about valuation recognize that the field
is as much art as science.” Id. at 553 n.7 (citing In re Shell Oil Co., 607 A.2d 1213, 1221
(Del. 1992) (“Valuation is an art rather than a science.”); In re Smurfit-Stone Container
Corp. S’holder Litig., No. 6164-VCP, 2011 WL 2028076, at *24 (Del. Ch. May 20,
2011) (“[U]ltimately, valuation is an art and not a science.”); Peter E. Bronstein & David
A. Typermass, Business Valuation Reports—The Importance of Proactive Lawyering, 82
N.Y. St. B.J. 11, 12, 16 (Feb. 2010) (“[T]he appraisal process is not an exact science . . . .
Business valuation is often described as part art and part science because many of the
techniques used by business appraisers require the use of subjective assumptions.”);
Kenton K. Yee, Control Premiums, Minority Discounts, and Optimal Judicial Valuation,
48 J.L. & Econ. 517, 536 (2005) (“The practice of valuation is an inexact art, not a
precise science.”); Wertheimer, 47 Duke L.J. at 629 (“Each appraisal technique is but a
way of estimating the fair value or true value or intrinsic value of a company, and
undeniably, valuation is an art rather than a science.” (internal quotation marks omitted)).

Tennessee and Blasingame

The ink on Delaware’s Weinberger decision was barely dry when this Court issued
its opinion in Blasingame v. American Materials, Inc., only a few weeks later. As we
- 21 -
have already indicated, Blasingame formally adopted the Delaware Block method to
determine the fair value of a dissenting shareholder’s stock. 654 S.W.2d at 667 (“We
adopt the Delaware rule requiring the use of [asset value, market value, and earnings
value] in determining the fair value of a dissenting minority stockholder’s shares.”). The
Blasingame Court noted that several of our sister states with similar statutes used the
Delaware Block method in assessing share value. Id. at 665. The Court quoted
extensively from Brown v. Hedahl’s-Q B & R, Inc., 185 N.W.2d 249, 259 (N.D. 1971), in
which the North Dakota Court explained the Delaware Block method of valuation in
detail. Id. at 665-67. It also noted that experts may consider “numerous other factors” in
determining “the weight to be given each of the three methods, but the courts must make
the final determination of the appropriate weight to be given each method as well as the
ultimate value of the stock interest.”29 Id. at 667.

Interestingly, Weinberger was neither mentioned nor discussed in the Blasingame
opinion. However, the Blasingame Court briefly acknowledged Weinberger in a footnote
in its response to the plaintiff’s petition to rehear.30 In that footnote, the Court recognized
the change in Delaware law but said that it did “not find anything in Weinberger that
cause[d it] to alter the adoption of the weighted average method.” Blasingame, 654
S.W.2d at 668 n.1 (response to petition to rehear).

Perhaps because of Blasingame’s unqualified adoption of the Delaware Block
method and its dismissive footnote comment about Weinberger, some courts apparently
perceived Blasingame as holding that Delaware Block is the only permissible valuation
method for a dissenting shareholder’s stock in Tennessee. See, e.g., Hubbell, 2009 WL
1162650, at *4 (applying the Delaware Block method in accordance with Blasingame);
Elk Yarn Mills, 742 S.W.2d at 640 (noting that “the correct method for calculating the
value of the shares in this case is the Delaware Block method adopted by our Supreme

29
Following Brown, the Blasingame Court outlined some general guidelines for assigning weight
to the different values under the Delaware Block method. For example, “where there is an established
market for the stock of a corporation[,] the market price is given great weight.” Blasingame, 654 S.W.2d
at 666 (quoting Brown 185 N.W.2d at 259). The asset value is given proportionally greater weight “in
cases where the primary purpose of the corporation is to hold assets, such as real estate, for the purpose of
allowing them to appreciate in value,” and it is given less weight when the assets held are inventories that
will depreciate over time. Id. (quoting Brown, 185 N.W.2d at 259). The earnings value is to be given
greater weight when “the primary purpose of the business is to generate earnings and not to hold assets
that will appreciate in value.” Id. (quoting Brown, 185 N.W.2d at 259).
30
The Blasingame Court appended its response to the petition to rehear at the end of its opinion.
Blasingame, 654 S.W.2d at 668.
- 22 -
Court in [Blasingame]”); see also Wertheimer, 47 Duke L.J. at 628 n.82 (noting that
Tennessee “may still insist on the exclusive use of the Delaware block method even after
Weinberger”). Other Tennessee courts have been less definitive, sanctioning use of the
Delaware Block method only after determining that the facts were well-suited to that
methodology.31 See MS Holdings, LLC v. Malone, No. W2006-01609-COA-R3-CV,
2008 WL 1700156, at *2 (Tenn. Ct. App. Apr. 14, 2008) (rejecting the use of the
valuation methods in Weinberger because the evidence of future performance was
entirely speculative); Genesco, Inc. v. Scolaro, 871 S.W.2d 487, 490 (Tenn. Ct. App.
1993) (concluding that the Delaware block method is neither required nor prohibited
when valuing preferred stock, but that its use was appropriate in the instant case); East
Tenn. Transp., Inc. v. Ketron, No. 295, 1991 WL 28943, at *4 (Tenn. Ct. App. Mar. 7,
1991) (affirming use of Delaware Block method and rejecting argument that the
capitalized earnings method should have been used, but not based on Blasingame).

To be clear, Blasingame did not explicitly mandate the use of Delaware Block as
the exclusive method for determining the value of a dissenting shareholder’s stock.
However, the assumption that this was the intent of the Blasingame holding is not
without basis. Indeed, Blasingame’s decisive adoption of the Delaware Block valuation
method lends itself to such an interpretation. Blasingame, 654 S.W.2d at 667 (“We adopt
the Delaware rule requiring the use of all three methods in determining the fair value of a
dissenting minority stockholder’s shares.”).

In the interim since Blasingame was decided, it has become clear that Delaware
Block should not be viewed as the exclusive valuation method in dissenters’ rights cases
and that the view espoused in Delaware’s Weinberger decision is the better approach to
determining the value of a dissenting shareholder’s stock in dissenters’ rights cases. Our
dissenters’ rights statutes do not require any particular valuation method for a dissenting
shareholder’s stock, and neither should this Court.

There are now several widely-recognized valuation methods in addition to
Delaware Block, a few of which were identified and applied by the experts in this case.
In the trial court below, both of the parties’ experts noted the unpopularity of Delaware
31
The question of business valuation frequently arises in divorce cases, and in those cases
Tennessee courts have not felt constrained to use the Delaware Block method. See Wallace v. Wallace,
733 S.W.2d 102, 107 (Tenn. Ct. App. 1987) (noting that “[t]here are a number of acceptable methods
available to determine the value of a corporation” and that the Blasingame Court identified three of them);
see also Edenfield v. Edenfield, No. E2004-00929-COA-R3-CV, 2005 WL 2860289, at *8-9 (Tenn. Ct.
App. Oct. 31, 2005) (following Wallace and opining that “the court should [choose] an acceptable method
[of valuation] that best fits the characteristics of the business at issue”).
- 23 -
Block as a valuation technique. The Weinberger approach of giving trial courts the
flexibility to choose the valuation method that best fits the circumstances is most likely to
result in an equitable calculation of “fair value.” We see no reason to restrict trial courts
to using only the Delaware Block method in determining fair value.

Also militating in favor of our adoption of Delaware’s Weinberger approach is the
fact that, in matters of corporate law, Tennessee courts often look to Delaware law.
Keller, 495 S.W.3d at 876 (adopting a Delaware ruling); Rock Ivy Holding, LLC v. RC
Props., LLC, 464 S.W.3d 623, 635 (Tenn. Ct. App. 2014) (citing McCarthy v. Middle
Tenn. Elec. Membership Corp., 466 F.3d 399, 409-10 (6th Cir. 2006)); see RSL
Commc’ns PLC v. Bildirici, 649 F. Supp. 2d 184, 206 (S.D.N.Y.2009) (stating that
“many courts—including this one—appropriately look to the views of Delaware’s
learned jurists when analyzing issues of corporate law”), cited with approval in Sanford
v. Waugh & Co., 328 S.W.3d 836, 846 n.4 (Tenn. 2010). As the Court of Appeals below
recognized, Delaware has “long since departed from a strict application of the Delaware
Block Method.” Athlon Sports, 2016 WL 6087667, at *10; see, e.g., Shawnee Telecom
Resources, 354 S.W.3d at 556 (overruling long-standing Kentucky case to the extent that
it required adherence to the Delaware Block method). It is time we did so as well.32 See
Wertheimer, 47 Duke L.J. at 628 n.82. By following Weinberger, “our lawyers and our
courts [will be able] to utilize the rich body of law in other jurisdictions for guidance” in
determining what valuation methods would be appropriate in a given case. Keller, 495
S.W.3d at 876 (noting that Delaware ruling adopted had “been cited and applied in a host
of other jurisdictions,” quoting Lightner v. Lightner, 266 P.3d 539, 548 (Kan. Ct. App.
2011)).

As we have recognized, “the law must change ‘when necessary to serve the needs
of the people.’” Dedmon v. Steelman, 535 S.W.3d 431, 451 (Tenn. 2017) (quoting
Powell v. Hartford Accident & Indem. Co., 398 S.W.2d 727, 732 (Tenn. 1966)). “Where
the reason fails the rule should not apply.” Id. (quoting Brown v. Selby, 332 S.W.2d 166,
169 (Tenn. 1960)). It is time to “bring our law current on th[is] subject.” Weinberger,
457 A.2d at 712. Given the nearly universal approval the Weinberger approach has won
in the years since Blasingame, we overrule Blasingame to the extent that it implies that

32
In his article, Professor Wertheimer observes somewhat incredulously that “at least one state,
Tennessee, may still insist on the exclusive use of the Delaware block method even after Weinberger.”
Wertheimer, 47 Duke L.J. at 628 n.82 (citing Blasingame, 654 S.W.2d at 668 n.1 (opinion on petition to
rehear)). He then comments that “Tennessee’s strict adherence to the Delaware block method is certainly
not mandated by statutory language,” and it does not “make sense to prohibit other relevant appraisal
evidence as a matter of general policy.” Id. (citing Clardy, 62 Tenn. L. Rev. at 285 &n.3).
- 24 -
trial courts are allowed to use only the Delaware Block method of valuation. We adopt
the more open Weinberger approach, which allows “proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court.” Weinberger, 457 A.2d at 712-13. As in Weinberger,
“[o]nly the speculative elements of value that may arise from the ‘accomplishment or
expectation’ of the merger are excluded.” Id. at 713. This exception is “designed to
eliminate use of pro forma data and projections of a speculative variety relating to the
completion of a merger. But elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the merger and not
the product of speculation, may be considered.” Id. The Delaware Block method of
valuation remains available where appropriate, but trial courts may now choose to use
another valuation method to determine the fair value of a dissenting shareholder’s shares
of stock.

C. Application of Holding to Facts

Given our holding that trial courts are not required to use the Delaware Block
method to determine the fair value of a dissenting shareholder’s stock, we must determine
whether it is necessary in this case to remand for further proceedings.

In this appeal, the dissenting shareholders argue: “[T]he Trial Court’s decision to
rely exclusively upon the Delaware Block Method infected the entire proceeding with
error. Applying the wrong standard affected how the parties to the litigation discovered
evidence, how the parties’ respective experts prepared their reports, and how the parties
offered testimony to the Trial Court.” Appellants’ Brief at 32. In addition, they argue
that “applying the wrong standard fundamentally altered how the Trial Court evaluated
the evidence submitted by the parties.” By using the “backwards-looking lens” of the
Delaware Block method, the dissenting shareholders contend, the trial court “failed to
account for the single best evidence of the value of Athlon’s stock—its management’s
February 2012 forecast of profitability.” Id. For this reason, they ask us to either (1)
reverse the trial court and value their stock at $6.48 per share, as opined by their expert
Mr. d’Almeida, or (2) vacate the trial court’s order and remand for further proceedings or
for a new trial based on modern valuation techniques.

In response, Athlon argues that a remand is not necessary because “[t]he Trial
Court did not reject Dissenters’ expert’s DCF calculations because of some mistaken
belief that it was required to mechanically apply the Delaware Block method.” Rather,
Athlon maintains, the trial court rejected Mr. d’Almeida’s analysis under both the
Delaware Block method and the more forward-looking methods because his comparisons
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were flawed and the projections on which he relied were speculative. They insist that the
dissenting shareholders were not limited in their discovery efforts and that the trial court
did not over-rely on the Delaware Block method. Under these circumstances, Athlon
argues that we should conclude that the trial court correctly credited the testimony of its
expert Mr. Collins, discredited the testimony of Mr. d’Almeida, and properly valued the
fair value of the dissenting shareholders’ stock at $.10 per share.

To determine whether a remand is necessary, we have closely reviewed the record
in this case. At the outset, the trial court’s remarks indicate that it viewed Blasingame as
having designated the Delaware Block method as the only method appropriate for use in
Tennessee to determine the fair value of the dissenting shareholders’ stock. See Athlon
Sports, 2016 WL 6087667, at *3 (“Tennessee uses the Delaware Block method to
determine fair value for dissenters.”) (quoting the trial court, which cited Blasingame).
The trial court then explained how the Delaware Block valuation method works to
combine and weigh the three underlying approaches, the market value approach, the asset
value approach, and the earnings value approach. Id.

After this general description of the Delaware Block method, the trial court
emphasized that Tennessee law and Delaware Block required it to “take[] into account
the individual circumstances of the company being valued.” The trial court then went on
to carefully evaluate the opinions proffered by both parties’ experts. As noted above,
both experts framed their opinions in part based on the Delaware Block method based on
the language in Blasingame. However, both experts’ testimony also included alternate
opinions based on forward-looking valuation methods. The trial court closely considered
the experts’ assertions and underlying assumptions under the Delaware Block method
and under the alternate methods as well.

After a detailed review of the evidence, the trial court decided to credit the opinion
of Athlon expert Mr. Collins and reject the opinion of the dissenting shareholders’ expert
Mr. d’Almeida. The trial court offered an “inexhaustive but sufficient” list of the reasons
for its credibility assessment. Id. at *7-9. As explained below, in its list of reasons, the
trial court in effect dismantled the individual components of Mr. d’Almeida’s analysis.

The trial court first found that the evidence in the record did not support Mr.
d’Almeida’s valuation of the company’s assets, particularly the amounts assigned to
distributor relationships and trademark value. Id. at *7-8. Importantly, the trial court
found that Mr. d’Almeida had erred in counting Althon’s net operating loss (NOL)
carryovers as an asset, because the value of NOLs “is contingent upon generating future
profits.” Id. at *7. To this point, the trial court observed: “Based upon the evidence of
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the Company’s history of significant losses, its further deteriorating financial condition
from 2010-2012, and the evidence of the macro decline in the publishing and print media
industry, the Court finds it is speculative to assume or conclude future profits of the
Company.” Id. For a variety of reasons, the trial court also found that Mr. d’Almeida’s
earnings and market valuations were either erroneous or unsupported by the evidence.
Id. at *8-9.

Portions of the trial court’s assessment indicate that it rejected Mr. d’Almeida’s
forward-looking valuations based on the speculative nature of the evidence of future
profits. The trial court first turned to the CIM and Mr. d’Almeida’s valuation using the
CIM contained under his Trial Report headnote “DCF Using Confidential Information
Memorandum Projections.” In deeming the CIM an unreliable basis for informing share
value, the trial court accredited the trial testimony of Athlon experts Mr. Allen and Mrs.
Vanderkooi, who described the statements in the CIM as “aspirational” and intended to
attract potential investors. Id. at *9. The trial court explained, “[T]he CIM is not
accorded weight by the Court because its hope for future profits was not in keeping with
the macro conditions of the industry and the track record of the Company. The CIM was,
at most, puffery.” Id. Noting that Mr. Duggan prepared the CIM, the trial court found
the CIM to be an unreliable marker of Athlon’s value and declined to view it as “some
sort of concession of value by the Company.” Id.

The trial court also rejected Mr. d’Almeida’s valuation set forth under the
headnote “DCF Using February 2012 Projections.” This valuation was based primarily
on Athlon’s February 2012 projections and a statement Athlon gave to Mr. Collins in
response to a questionnaire submitted to Athlon during the February 2012 valuation of
the company. In response to the questionnaire, Athlon stated that the “most probable
outcome” of profitability would be in 2013. This statement was supported by a February
2012 “Five Year Forecast with Four year History,” in which it was projected that Athlon
would become profitable by 2013. The trial court characterized Athlon’s statement of the
“most probable outcome” as “an outlier,” an “isolated statement” that was “an exception
to the greater weight and preponderance of the evidence,” and concluded that it did not
substantially detract from the court’s other findings.

On one hand, these findings seem to indicate that the trial court evaluated the
evidence without regard to the method of valuation. On the other hand, the trial court
cited Blasingame for the proposition that “Tennessee uses the Delaware Block method to
determine fair value for dissenters.” Blasingame, 654 S.W.3d at 667 (cited at p. 7 of trial
court’s order). Indeed, throughout its order, the trial court repeatedly referred to the
Delaware Block method and its three component valuation methods. These references
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may indicate that the trial court felt constrained under Blasingame to apply the Delaware
Block method and, importantly, that it may have evaluated the evidence on valuation
through this prism.33 Since we cannot exclude this possibility based on this record, the
more prudent course is to vacate the trial court’s order and remand to permit the trial
court to reevaluate its decision on valuation in light of our ruling on Blasingame.

From our careful review of the record, we see no indication that either Athlon or
the dissenting shareholders were hindered from conducting discovery or from proffering
expert testimony based on valuation methodologies other than the Delaware Block
method. However, like the trial court, the parties may have been operating under the
assumption that Delaware Block was the only valuation method available to them. On
remand, the trial court is not required to permit the parties to conduct additional
discovery or to allow the parties to put on additional proof, but it may choose to do so.
Concomitantly, the trial court may decide, in its discretion, to reevaluate the question of
valuation based on the evidence in the record as it now stands. We leave these decisions
to the sound discretion of the trial court on remand.

33
For example, on pages 7-9 of the order, the trial court described how to apply the Delaware
Block method and stated, “In these ways, the Delaware Block formula Tennessee uses takes into account
the individual circumstances of the company being valued. Accordingly, . . . the Court turns to the
evidence . . . to make those findings and determine the outcome for valuing the Company’s stock under
Tennessee law.” On page 14, the trial court indicated that its findings of fact “inform[ed] valuation under
the Delaware Block Method.” On page 16, after outlining the Delaware Block calculations of both
experts, the trial court stated: “As to these varying valuations, the Court adopts, for the most part, as its
findings, [Mr. Collins’] expert and rebuttal reports. . . . The Court finds that the greater weight and
preponderance of the evidence and application of Tennessee valuation law supports [Mr. Collins’]
determinations.” At pages 16-19 of the order, the trial court explained the “one modification” it was
making to asset value, and it explained why it was rejecting the use of net operating losses to increase
asset value. Asset value, of course, is one of the three components of the Delaware Block method of
valuation. As to earnings value (another component of the Delaware Block method), the trial court, on
page 20, criticized Mr. d’Almeida’s Report because it “does not actually apply the requirement of the
Delaware Block Method that three to five years of earnings is the predictor of future earnings.”

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 CONCLUSION

In sum, we overrule Blasingame v. American Materials, Inc., 654 S.W.2d 659
(Tenn. 1983), to the extent that it implies that trial courts are allowed to use only the
Delaware Block method to determine the fair value of the shares of a dissenting
shareholder. We adopt the more open Weinberger approach, which allows “proof of
value by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court.” Weinberger, 457 A.2d at 712-
13. This approach allows a trial court to consider valuation methods that incorporate
projections of future value, so long as they are susceptible of proof as of the date of the
merger and are not the product of speculation. The Delaware Block method of valuation
remains available where appropriate, but trial courts may now choose to use another
valuation method to determine the fair value of a dissenting shareholder’s shares of stock.

Because we cannot determine on this record whether the trial court’s evaluation of
the evidence was affected by its perception that Blasingame mandated use of the
Delaware Block valuation method, we vacate the trial court’s order and remand for
reconsideration the valuation of the dissenting shareholders’ shares in light of our
decision herein.

The decision of the Court of Appeals is reversed, the decision of the trial court is
vacated, and the case is remanded for further proceedings consistent with this opinion.
Costs on appeal are to be taxed to the Appellee Athlon Sports Communications, Inc., for
which execution may issue, if necessary.

_________________________________
HOLLY KIRBY, JUSTICE

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