Country Visions Coop. v. Archer-Daniels-Midland Co.

396 Wis.2d 470

958 N.W.2d 511

2021 WI 35

COUNTRY VISIONS COOPERATIVE, Plaintiff-Appellant-Cross-Respondent-Petitioner,

v.ARCHER-DANIELS-MIDLAND COMPANY and United Cooperative, Defendants-Respondents-Cross-Appellants.

No. 2018AP960

Supreme Court of Wisconsin.

Oral Argument: February 25, 2021

Opinion Filed: April 21, 2021

For the plaintiff-appellant-cross-respondent-petitioner, there were briefs filed by David G. Peterson, J. Bushnell Nielsen, Bridget M. Hubing, Malinda J. Eskra, and Reinhart Boerner Van Deuren S.C., Waukesha. There was an oral argument by J. Bushnell Nielsen.

For the defendants-respondents-cross-appellants, there was a brief filed by Ryan J. Walsh, Amy C. Miller, and Eimer Stahl LLP, Madison; with whom on the brief was John C. O'Quinn, Megan M. Wold and Kirkland & Ellis LLP, Washington, D.C.; with whom on the brief was Michael B. Slade, Yates M. French, and Kirkland & Ellis LLP, Chicago, Illinois. There was an oral argument by Ryan J. Walsh.

ZIEGLER, J., delivered the majority opinion for a unanimous Court. ROGGENSACK, C.J., filed a concurring opinion.

ANNETTE KINGSLAND ZIEGLER, J.

¶1 This is a review of a published decision of the court of appeals, Country Visions Cooperative v. Archer-Daniels-Midland Co., 2020 WI App 32, 392 Wis. 2d 672, 946 N.W.2d 169, affirming in part, reversing in part, and remanding with directions the Fond du Lac County circuit court's order¹ granting Country Visions Cooperative ("Country Visions") specific performance of its right of first refusal to a property that Archer-Daniels-Midland Co. ("ADM") was attempting to sell to United Cooperative ("United"). This case requires us to determine whether the circuit court properly set the price at which Country Visions may exercise its right of first refusal.

¶2 "A right of first refusal is a contractual right to be first in line should the opportunity to purchase or lease a property arise." MS Real Est. Holdings, LLC v. Donald P. Fox Fam. Tr., 2015 WI 49, ¶24, 362 Wis. 2d 258, 864 N.W.2d 83. Country Visions held a right of first refusal to a parcel of property with a grain facility in Ripon, Wisconsin ("Ripon Property"), which ADM owned. Unbeknownst to Country Visions, ADM entered into negotiations with United to sell the Ripon Property, along with three other parcels throughout Wisconsin. When Country Visions learned of these negotiations, Country Visions informed ADM of its right of first refusal. In response, ADM and United attempted to sever the transaction into two separate transactions. As part of this severance, one of the new transactions became an offer from United to ADM to purchase the Ripon Property alone for $20 million. Country Visions did not match this purchase price, and ADM and United closed on their deal.

¶3 Country Visions brought this lawsuit against ADM and United (collectively, "Defendants") claiming that the $20 million sale was a sham and sought specific performance of its right of first refusal at a lower price. Specifically, Country Visions claims that Defendants artificially inflated the price to overcome Country Visions' right of first refusal. The circuit court held a bench trial and concluded that the $20 million sale of the Ripon Property was a sham. As such, the circuit court determined that the price for the Ripon Property was actually $16.6 million and granted Country Visions 15 days to exercise its right of first refusal at that price.

¶4 Country Visions and Defendants cross-appealed the circuit court's decision to the court of appeals on a variety of issues. The court of appeals affirmed in part, reversed in part, and remanded the case to the circuit court. Country Visions, 392 Wis. 2d 672, ¶64, 946 N.W.2d 169. As relevant to the issue before us—whether the circuit court properly set the price at which Country Visions may exercise its right of first refusal—the court of appeals concluded that the circuit court did not err in how it determined the appropriate right of first refusal exercise price. Id., ¶37. Despite this conclusion, the court of appeals remanded the case to the circuit court to determine whether the $16.6 million exercise price included personal property, which the right of first refusal contract excluded from Country Visions' purchase rights. Id., ¶43.

¶5 Country Visions petitioned this court seeking to set the exercise price at $7.7 million—the price that Country Visions' expert determined as the "fair market value" of the Ripon Property.² Country Visions argued that we should do so because the circuit court violated basic right of first refusal principles when it set the exercise price based on United's willingness to pay more than the appraised value of the Ripon Property. We disagree.

¶6 We conclude that the circuit court did not err in considering the unique synergies that the Ripon Property provides to United when it set the exercise price higher than the appraised value. For rights of first refusal, a prospective buyer may choose to offer significantly more than the appraised value of a property, especially in the context of a package deal. Thus, depending on the terms of the right of first refusal contract and the facts of the case, a circuit court may set an exercise price that exceeds the appraised value of the burdened property. However, we conclude that remand is necessary to determine whether the $16.6 million exercise price includes more than is called for in the right of first refusal contract. Accordingly, we affirm the court of appeals' decision and remand to the circuit court for proceedings consistent with this opinion.

I. FACTUAL BACKGROUND

¶7 This case centers on a right of first refusal contract between Country Visions and ADM.³ The right of first refusal contract provides as follows:

1. For a period of ten (10) years from the date hereof (the "ROF Period"), [ADM] hereby grants to [Country Visions] a right of first refusal to purchase the [Ripon Property] or applicable portion thereof, but only on the terms and conditions as provided in this Agreement. During [the] ROF Period, [ADM] shall not sell, convey or in any way convey or transfer any part [of] the [Ripon Property] without first complying with the provisions of this Agreement.

2. If at any time during the ROF Period, [ADM] desires to sell any part of the [Ripon Property] to a party ..., pursuant to a bona fide written offer from a third party (the "Third Party Offer"), [ADM] shall first notify [Country Visions] of [ADM's] desire to sell the [Ripon Property] or applicable portion thereof (the "Offered Property") and such notice (the "Notice") shall be deemed an offer to sell the Offered Property upon the terms set forth in the Third Party Offer. The Notice shall identify the bona fide prospective purchaser of the Offered Property in addition to specifying the purchase price and other terms and conditions of such proposed sale (such price and other terms being referred to as "the Third Party Terms") and shall be accompanied by a copy of the Third Party Offer. [Country Visions] shall have the right and option to purchase the Offered Property on the Third Party Terms but only if [Country Visions] shall provide written notice of such election to [ADM] within fifteen (15) days after [Country Visions'] receipt of the Notice....

The parties do not dispute that the right of first refusal contract outlines the following obligations for the exercise of the right of first refusal: ADM cannot sell the Ripon Property without first offering it to Country Visions; Country Visions has a right to purchase the Ripon Property at the third party's purchase price; and Country Visions has 15 days to exercise the right of first refusal and provide notice of its intent to match the third-party offer for the Ripon Property after receiving notice of the third party's offer.

¶8 In May 2015, and unbeknownst to Country Visions, ADM started negotiations to sell its Wisconsin grain business assets to United. Defendants reached a tentative agreement for United to purchase the Ripon Property and three other grain storage facilities around Wisconsin⁴ from ADM for a total price of $25 million. The tentative agreement included the land, improvements, and personal property of each facility; it did not include the inventory of grain that ADM had in storage at each facility.

¶9 Sometime in early October 2015, Country Visions learned of the proposed sale of the Ripon Property. On October 8, 2015, Country Visions informed ADM that it held a right of first refusal to the Ripon Property. Country Visions, pursuant to the right of first refusal contract, requested a copy of the third-party offer to purchase so that it could determine whether it wanted to exercise its right of first refusal.

¶10 At this point, Defendants had not executed their tentative agreement. Upon learning of Country Visions' right of first refusal, Defendants restructured their tentative agreement. Defendants severed the tentative agreement into two separate transactions. One transaction called for United to purchase the Ripon Property from ADM, excluding all inventory and personal property, for $20 million. The other transaction called for United to purchase from ADM the other three properties and all personal property for $5 million and all inventory at its market value. Defendants assigned such a high value to the Ripon Property in part due to the unique synergies the Ripon Property would provide to United's business.⁵

¶11 On October 13, 2015, United provided ADM with a formal offer to purchase the Ripon Property for $20 million, triggering ADM's obligations under the right of first refusal contract. The next day, consistent with its contractual obligations, ADM notified Country Visions of United's formal offer and provided Country Visions with a copy of the offer. Country Visions claimed this $20 million purchase price was a sham and elected not to meet the terms of the third-party offer.

¶12 On October 16, 2015, Defendants closed on the other transaction, purchasing the...