Wednesday, March 20, 2019

Burford Abstention in Dissenter Rights Case Reversed

Burford Abstention in Dissenter Rights Case Reversed

            Previously I reviewed a decision in which the federal district court, on the basis of Burford Abstention, indicated that a state, and not a federal, court should hear a dissenter rights action involving a Kentucky corporation. That decision has now been reversed.
            Initially, Judge Van Tatenhove ruled that a dissenter rights action should be heard by a state, and not a federal, court.  See Kentucky, and Not Federal, Court to Hear Dissenter Rights Action (April 16, 2019); HERE IS A LINK to that posting.

In a second opinion rendered in March, Judge Van Tatenhove reversed himself and determined that abstention was not appropriate in this case. Henley Mining, Inc. v. Parton, Civ. No. 6:17-CV-00092-GFVT, 2019 WL 1048839 (E.D. Ky. March 5, 2019).
Ruling on a motion for reconsideration under Rule 59(e), Judge Van Tatenhove wrote that he had not in making his prior ruling undertaken the balancing test outlined in Cleveland Housing Renewal Project v. Deutsche Bank Trust Co., 621 F.3d 554, 562 (6th Cir. 2010). Applying that test, and giving weight to the benefit of federal diversity jurisdiction, it was held that a dissenter rights action is different than the corporate dissolution at issue in the Caudill case. Rather, all that is at issue is the fair value of the defendant's interest in the company.
As Henley Mining points out, the law that governs the fair value determination in Kentucky is well settled. See Shawnee Telecom Resources, Inc. v. Brown, 354 S.W.3d 542 (Ky. 2011). In Shawnee Telecom, the Kentucky Supreme Court elucidated the meaning of “fair value” as used in Subtitle 13 of Kentucky’s Business Corporation Act, and explained how such a determination is to be made. See id. at 548. Mr. Parton posits no reason, and the Court cannot think of none, why this Court should be unable to follow the law as explained in Shawnee Telecom in the same manner as a Kentucky state court.

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