Right of First Refusal Fair Market Value.

Byline: Derek Hawkins

WI Court of Appeals District II

Case Name: Country Visions Cooperative v. Archer-Daniels-Midland Company, et al.

Case No.: 2018AP960

Officials: Neubauer, C.J., Gundrum and Davis, JJ.

Focus: Right of First Refusal Fair Market Value

A right of first refusal (ROFR) is an agreement in which an owner of property (typically real estate) conveys a right to another party to match any offer made for the property. If the ROFR holder matches the offer, any sale must be to the holder. See MS Real Estate Holdings, LLC v. Donald P. Fox Family Trust, 2015 WI 49, 24, 362 Wis. 2d 258, 864 N.W.2d 83 (an ROFR "is a contractual right to be first in line should the opportunity to purchase or lease a property arise").

Ordinarily, exercise of such a right is straightforwardthe property owner receives an offer from a prospective buyer which it wishes to accept and communicates that offer to the ROFR holder, who then has a certain period of time to match it. Whether and how the right applies becomes more involved, however, when the property owner wishes to sell the property as part of a larger parcel or, as in this case, as part of a sale of multiple parcels in a single transaction. In these circumstances, Wisconsin precedent requires that the transaction be scrutinized to determine what portion of the purchase price is properly allocable to the property subject to the ROFR. Wilber Lime Prods., Inc. v. Ahrndt, 2003 WI App 259, 11-14, 268 Wis. 2d 650, 673 N.W.2d 339. That allocated portion becomes the price at which the ROFR may then be exercised as part of a specific performance remedy. Id., 12-13. Wilber Lime holds that in the event of a dispute on this point, the exercise price should be determined based on the subject property's actual "fair market value" (as opposed to a more formulaic, pro rata approach adopted in some jurisdictions, based on the percentage of acreage the subject parcel bears to the whole). Id., 8-14.

The proper application and breadth of that holding is at the heart of this appeal. Here we must apply Wilber Lime to a case involving some complicating twists, starting with the fact that the property owner, Archer-Daniels-Midland Company (ADM), and the offer single $25 million "package deal" for that parcel, three other parcels, and accompanying business assets. We say "purportedly" because the ROFR holder, Country Visions Cooperative (Country Visions), alleged at trial, and the trial court agreed, that the claimed...