Robert M. Levine v. Seven Pines Associates Limited Partnership (App Div., 1st Dep’t)

Robert Levine (hereafter “the petitioner”) has an interest in the Marion Levin Revocable Trust (hereafter “the Trust”), which in turn had an interest in Seven Pines Associates Limited Partnership (hereafter “the LP” or the “respondent”).  The litigation was a result of the LP’s special proceeding to determine the dissenting limited partner’s (i.e. the Trust) interest in the LP.  The LP’s sole asset was a building and thus, both Robert Levine, on behalf of the Trust, and the LP engaged real estate appraisers to set forth the fair value of the building.

The real estate appraisers for both the petitioner and the respondent disagreed as to certain key points.  The petitioner’s expert did not discount the value of the Trust’s interest for lack of marketability, while the respondent’s expert did include a discount for lack of marketability, in addition to a discount for lack of control.

The Supreme Court, Appellate Division 1st Dep’t (hereafter “the Court”) ruled that in this matter, it was appropriate to apply discounts for lack of marketability when valuing a real estate holding company, however, the Court ruled that the application of a minority interest discount, as applied by the Respondent’s business valuation expert, was impermissible.  The Court’s ruling is in line with the “fair value” standard of business valuation methodology, which, rejects the use of a discount for lack of control in a shareholder/partnership dispute.