A majority owner engineered a minority buyout down to zero. It cost him $10.4 million.

What happened

Maron Electric was a leading commercial electrical contractor in the Chicago area, and its chief executive, Jerry Nixon, was by the court's description an icon in the industry. Alan Kazemi had come to the company as an entry-level draftsman, been noticed, been mentored by Nixon, and worked his way up to executive vice president, building a profitable interior and remodeling practice along the way.

In 2008 Nixon told his executives he had incurable cancer and laid out a succession plan. His son Eric and Kazemi would run the company together. Kazemi would take a minority ownership stake and a reason to stay for the long term. In February 2009 Kazemi bought twenty-five shares, ten percent of the company, for $150,000. Nixon died six days later.

The agreement set out what would happen when Kazemi eventually left. In the first five years, the company would simply return his $150,000. In year six he would get the $150,000 plus half the value of his shares, and each year after that another ten percent of the value, up to the full amount.

Ten years on, the company was highly successful and Kazemi's stake was worth millions. He resigned.

What the company did next

At Eric Nixon's direction, the company's chief financial officer spent weeks working with the company's accountants. The court's word for what they did is brainstorming: inventing contingent liabilities that could be booked against the company's net worth.

Enough of them were found to reduce the value of Kazemi's ten percent stake to zero.

Kazemi sued for breach of contract and breach of fiduciary duty. The company and Eric Nixon denied wrongdoing and made the argument the agreement seemed to hand them: the contract obliged the company to direct its accountants to perform a valuation, that valuation was to be binding and conclusive, and the company had done exactly that. The company also countersued, claiming Kazemi had solicited one of its employees to leave with him.

What the courts did

The claims were tried. Kazemi won. He was awarded $6.3 million in compensatory damages under the buyout formula and $4.1 million in punitive damages, the latter consisting mostly of attorney fees. The company's counterclaim about employee solicitation failed against the manifest weight of the evidence.

The defendants brought more than a dozen arguments to the First District asking it to vacate and enter judgment for them. The court affirmed.

Why this matters if you own a business

Nearly every buy-sell arrangement in a closely held company works the way this one did. The agreement names a formula, delegates the calculation to accountants, and says the result is final. Owners on both sides read that as the end of any argument, which is the entire point of writing it that way.

What this case shows is what that clause actually covers. It governs who performs the calculation and that their output is not subject to relitigation. It does not warrant that the inputs handed to them were honest. Where a controlling owner constructs the liabilities that go into the model, the finality language stops protecting them, and the dispute stops being about contract interpretation. It becomes a fiduciary duty case, which is how a disagreement over a valuation turns into an award of punitive damages and fees.

Some practical consequences follow, in both directions.

• If you are the departing minority owner, a valuation that arrives at a number far below what the business plainly earns is worth investigating rather than accepting. What matters is the workpapers and the correspondence, not the final memorandum. Here, the manipulation was visible in how the number was built and who directed the building.
• If you control the company, the danger is that a buyout obligation looks like an accounting problem to be managed. Involving the accountants in reducing an obligation you owe is not a valuation exercise, and the record of that involvement is exactly what a court will read.
• If you are drafting one of these now, consider who selects the valuation firm, whether the departing owner sees the assumptions and can object before the number is final, and what happens if the parties disagree. A clause that names an independent appraiser and gives both sides visibility into the inputs is doing far more work than the word "conclusive."

A note on precedential status

This is an order under Illinois Supreme Court Rule 23 and is not precedent. Entered after January 1, 2021, it may be cited for persuasive value under Rule 23(e)(1). Its value here is less as authority than as a detailed account of how one of these schemes was built and how it was proven.