Sipko v. Koger, Inc.Annotate this Case
In 2013, the New Jersey Supreme Court affirmed the Appellate Division’s holding that Koger Distributed Solutions, Inc. (KDS) and Koger Professional Services, Inc. (KPS) had value as independent entities rather than being solely dependent on their parent company, Koger Inc. (Koger). The Court also held that Robert Sipko’s relinquishment of his 50 percent interests in KDS and KPS in 2006 was void for lack of consideration. The matter was remanded the trial court to determine what, if any, remedy was appropriate to compensate Robert for his interests in KDS and KPS -- companies that were rendered valueless by the time the matter reached the Supreme Court. In 2016, the trial court held that the appropriate remedy was a buyout of Robert’s interests in the companies given the court’s finding that George and Rastislav Sipko deliberately stripped the companies of value for the specific purpose of putting the money beyond Robert’s reach. The trial court accepted Robert’s expert’s valuation of the companies and found that KDS and KPS, at the time Robert filed the complaint in 2007, were worth approximately $1.5 million and $34.9 million, respectively. Accordingly, Robert’s 50 percent ownership in both companies totaled over $18 million, plus interest. On appeal, the Appellate Division agreed that a buyout was the appropriate remedy given the record. The court, however, remanded the matter for the trial court to determine whether a marketability discount should be applied. In light of all the defendants’ conduct regarding KDS and KPS to strip Robert of his rightful interests, “equity cannot abide imposing a marketability discount to the benefit of defendants.” The trial court’s acceptance of Robert’s expert’s valuation of the company fell within its broad discretion and was fully supported by the record. Defendants were given the opportunity to present an expert valuation of the companies on remand but made the strategic decision not to do so. Therefore, the Supreme Court declined to provide defendants with “another bite of this thoroughly chewed apple,” and reinstated the judgment of the trial court.