Berens is factually incorrect in his assertion that the Comptroller explicitly refused to consider the other appraisers' findings. In fact, the Comptroller explained in detail the discounted cash flow approach used by the other appraisers. Nonetheless, he chose to use his version of the Delaware Block method, and stated that the Comptroller does not use the discounted cash flow approach to valuing stock.
The court sees nothing unreasonable about the Comptroller's methodology. As the court in Beerly stated, "the fact that the Comptroller was following a conventional approach goes far to shield his results from judicial invalidation." Beerly, 768 F.2d at 945. Moreover, the Comptroller applied the same methodology in this case as he did in Beerly, and of which the Beerly court expressly approved. See also Yabsley, 644 F. Supp. at 693-95; Keeffe, 808 F.2d at 250; Boone, 972 F.2d at 1553-54 (all holding that Delaware Block method of appraisal, or some variation of it, was a reasonable method of appraisal). Thus, "mere use of the Delaware Block Method does not render the appraisal arbitrary and capricious." Boone, 972 F.2d at 1553.
Moreover, the Comptroller explained in great detail the basis of his appraisal, the calculations he used to reach his valuations, and his reasons for using his methodology. (See Admin. R. Ex. 28 at 1-9 and attachments.) For example, the Comptroller fully explained why he used investment value and adjusted book value as the two benchmarks of the stock's value, and why he weighted investment value three times greater than adjusted book value. (See Admin. R. Ex. 28 at 2-5, 8-9.) The Comptroller's explanation seems eminently reasonable.
Because of the thoroughness with which the Comptroller set forth the basis of and reasoning behind his appraisal, this case is far different from Simonds v. Guaranty Bank & Trust Co., 492 F. Supp. 1079 (D. Mass. 1979). In Simonds, the Comptroller simply based his appraisal on book value, market value, and investment value, and gave equal weight to the three considerations, but gave no explanation about why he gave the considerations equal weight. See id. at 1080.
The district court there found that the weighting of the various elements of value called for the exercise of judgment, and that it was inappropriate for the Comptroller to apply a rigid formula giving equal weight to all three factors. Id. at 1084. The court found that because the Comptroller gave the factors equal weighting without explaining his reason for doing so, and because of substantial disparity between investment value and the other two factors, it appeared that the Comptroller was applying a rigid formula rather than exercising his judgment. Id. The court therefore vacated the Comptroller's appraisal. Id.
In this case, in contrast, the Comptroller gave careful consideration to the different factors, and explained his reasons for weighting investment value more heavily than adjusted book value. Thus, it is clear that the Comptroller did not apply a rigid formula, as Berens contends, but was exercising his judgment in giving his appraisal.
Berens also argues that the Comptroller failed to consider the fact that the bank had excess capital of about $ 5,000,000, which is a relevant factor that the Comptroller is required to consider. Berens contends that the bank paid grossly inadequate dividends for 16 years, forcing the minority shareholders to suffer years of underpaid dividends, which resulted in the accumulation of the excess capital. Berens contends that because of the Comptroller's refusal to recognize these facts, Berens will not receive his share of the value of the excess capital accumulation from the forced sale of his shares.
The court notes again that the Comptroller recognized that Berens' private appraiser took into account the excess capital in reaching his appraised value of the stock. However, the Comptroller stated that he did not employ the excess capital method of appraisal. Therefore, the Comptroller did not totally disregard the possible existence of excess capital, as Berens suggests.
More important, the Comptroller's calculations accounted for the excess capital, at least indirectly. The Comptroller's determination of adjusted book value was based on the bank's total equity capital of $ 12,464,000, about $ 5,000,000 of which is the purported excess capital. Thus, the adjusted book value figure is based on total capital, including the excess capital. Obviously, if the bank has excess capital compared to other banks, all other things being equal, its adjusted book value should be higher than that of the other banks. Consequently, the court finds that the Comptroller considered the excess capital by considering total capital, and therefore did not fail to consider a relevant factor.
Moreover, the court in Beerly directly addressed the same argument and rejected it. The plaintiff in Beerly complained that his bank paid lower dividends than comparable banks, and apparently felt that the Comptroller should have taken that into account in appraising the plaintiff's stock. Beerly, 768 F.2d at 948. The Seventh Circuit stated that it did not understand this argument, since the bank's paying lower dividends "would just go to increase the bank's capital, and hence book value, and hence the valuation of" the plaintiff's stock. Id.
The court finds that the Comptroller sufficiently considered the relevant factors, including the amount of capital of the bank, in appraising Berens' stock. As the Eleventh Circuit noted, the court "do[es] not assess whether the appraisal was correct or utilized the best methods[, but] .... determine[s] only whether it was reasonable." Lewis v. Clark, 911 F.2d 1558, 1563 (11th Cir. 1990). Based on the administrative record, the court finds that the Comptroller's appraisal of Berens' stock was reasonable.
Accordingly, the court grants the Comptroller's motion for summary judgment.
For the foregoing reasons, the court denies defendant Comptroller of the Currency's motion to dismiss plaintiff Mark H. Berens' complaint for failure to state a claim, but grants defendant Comptroller of the Currency's motion for summary judgment, and enters judgment in favor of defendant Comptroller of the Currency and against plaintiff Mark H. Berens.
Date: FEB 13 1997
JAMES H. ALESIA
United States District Judge