                                  IN THE
             ARIZONA COURT OF APPEALS
                               DIVISION ONE


         THE VORTEX CORPORATION, an Arizona corporation,
                 Plaintiff/Counterdefendant/Appellee,

                                     and

  CODY RAMSEY and MARGARET RAMSEY, husband and wife; TED
    LAMB and SHERENE LAMB, Third-Party Defendants/Appellees

                                      v.

 RAY P. DENKEWICZ and CAROL ANN DENKEWICZ, husband and
wife; ROLF ENGELHARD and LINDA ENGELHARD, husband and wife,
       Defendants/Counterclaimants/Third-Party Claimants//Appellants.

                           No. 1 CA-CV 12-0269
                            FILED 09-16-2014


            Appeal from the Superior Court in Yavapai County
                         No. P1300CV20080285
                 The Honorable Kenton D. Jones, Judge

                                AFFIRMED


                                 COUNSEL

Gammage & Burnham, P.L.C., Phoenix
By Richard K. Mahrle
Counsel for Plaintiff/Counterdefendant/Appellees and Third-Party Defendants

Tiffany & Bosco, P.A., Phoenix
By Robert A. Royal, Aaron T. Lloyd
Counsel for Defendants/Counterclaimants/Third-Party Claimants/Appellants
                VORTEX v. DENKEWICZ/ENGELHARD
                        Opinion of the Court



                                OPINION

Judge John C. Gemmill delivered the opinion of the Court, in which
Presiding Judge Samuel A. Thumma and Judge Randall M. Howe joined.


G E M M I L L, Judge:

¶1             Ray and Carol Ann Denkewicz and Rolf and Linda Engelhard
(collectively “Appellants”) appeal portions of the judgment entered against
them in favor of The Vortex Corporation (“Vortex”), Cody and Margaret
Ramsey, and Ted and Sherene Lamb (collectively “Appellees”). For the
following reasons, we affirm.

                             BACKGROUND

¶2           Vortex was formed in 1993 by Appellant Rolf Engelhard. As
an inventor in the area of water purification technology, Engelhard
envisioned Vortex as the corporate vehicle by which he could both generate
income and fund his projects. Appellees Lamb and Ramsey were
introduced to Engelhard in 2003, and shortly thereafter, the three of them
entered into business together. Lamb and Ramsey had become majority
shareholders in Vortex by 2005.

¶3            Appellant Ray Denkewicz was hired in September 2005 to
serve as Chief Executive Officer of Vortex. Soon after Denkewicz was hired,
Rolf Engelhard was given the position of Chief Technology Officer of
Vortex. As part of their employment compensation, Denkewicz and
Engelhard were to each receive “3% of the company’s outstanding stock, in
the form of stock grants, each year for 5 years, based on [their]
performance.” After unsuccessful attempts to generate sales and develop
manufacturing capabilities for their water purification products,
Denkewicz and Engelhard were terminated as Vortex employees in
September 2007.

¶4            Soon thereafter, Lamb and Ramsey formed a new business,
Vortex Pure Water, LLC, which later changed its name to Zuvo, LLC
(hereinafter “Zuvo”), in the hope of attracting new investors to what was
previously the Vortex endeavor. Lamb and Ramsey formed Zuvo to pay
off Vortex’s debt and reinvigorate the possibility of production and sales of
the products previously in development.


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                VORTEX v. DENKEWICZ/ENGELHARD
                        Opinion of the Court


¶5            Vortex sued Appellants in February 2008 for claims related to
the return of corporate property and alleged violations by Denkewicz and
Engelhard of their employment agreements with Vortex. Appellants
counterclaimed, seeking stock in accordance with their employment
agreements and alleging a series of other claims related to their terminated
relationship with Vortex. Appellants’ counterclaims alleging fraud,
racketeering, and formation of a de facto corporate entity or partnership
were dismissed on motion, but their remaining claims, along with Vortex’s
claims, proceeded to trial. The jury returned multiple verdicts, including:

      An award of a three percent stock interest in Vortex to Ray
       Denkewicz.
      An award of a three percent stock interest in Vortex to Rolf
       Engelhard.
      A determination that Appellants were not entitled to additional
       stock on the basis of a three-page document entitled “Proposed
       Vortex Operating Structure” — referred to by Appellants as the “VIP
       Agreement.”
      Damages of $11,482.24 in favor of Vortex for its successful claims.
      Damages of $3,250 each for Ray Denkewicz and Rolf Engelhard for
       their successful claims.

¶6            Because the jury awarded Denkewicz and Engelhard each a
three percent stock interest in Vortex, Appellants then asserted dissenter’s
rights regarding the transfer of Vortex’s assets and liabilities to Zuvo. The
trial court agreed that Appellants were entitled to dissenter’s rights and
instructed the parties to “engage in the statutory process” to determine fair
value of the Appellants’ stock.            Vortex subsequently tendered
approximately $2,000 to both Denkewicz and Engelhard, representing the
fair value of a three percent stock holding, including interest. Appellants
disagreed with Vortex’s valuation, and Vortex requested a valuation
hearing in accordance with Arizona Revised Statutes (“A.R.S.”) section 10-
1330 to determine the fair value of their shares at the time they were
transferred from Vortex to Zuvo in August 2008.

¶7            At the valuation hearing, both sides presented expert
testimony and evidence about Vortex’s value. Appellants sought to
establish that Vortex was worth somewhere between $15 million and $20
million. Appellees asserted Vortex was worth $61,682 at the time of the
action to which Appellants dissented. The trial court ultimately adopted
Appellees’ valuation and awarded Denkewicz and Engelhard each


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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

$2,054.85 for their respective three percent shares including interest. The
trial court also awarded Appellees costs and attorneys’ fees. Appellants
timely appealed, and we have jurisdiction pursuant to A.R.S. §§ 12-120.21
and -2101(A)(1).

                                 ANALYSIS

I.     Personal Jurisdiction Over Appellant Carol Ann Denkewicz

¶8            Appellants argue that the trial court abused its discretion by
denying their Rule 60(c)(1) and (6) motion arguing that Appellant Carol
Ann Denkewicz should not be subject to the judgment in this case because
“her sole contact with [Arizona] is a contract that her husband entered with
an Arizona corporation.” We review the denial of a motion under Rule
60(c) for an abuse of discretion. Searchtoppers.com, LLC v. TrustCash LLC,
231 Ariz. 236, 241, ¶ 20, 293 P.3d 512, 517 (App. 2012).

¶9             Appellants rely on this court’s opinion in Sigmund v. Rea, 226
Ariz. 373, 248 P.3d 703 (App. 2011), to argue that, because Rhode Island,
where Carol Ann Denkewicz resides, does not recognize a “marital
community,” Carol Ann Denkewicz lacks the requisite minimum contacts
for her to be subject to a judgment in Arizona. Sigmund dealt with whether
“Arizona courts can exercise personal jurisdiction over residents [of
another state] who have no contacts with Arizona apart from the unilateral
business dealings of their spouses.” Id. at 374, ¶ 1, 248 P.3d at 704.
Ultimately, the Sigmund court held that personal jurisdiction cannot be
exercised when one spouse’s “unilateral actions cannot be attributed” to the
other spouse and the couple does not reside in a state that recognizes the
marital community. Id. at 377, ¶¶ 13–14, 248 P.3d at 706.

¶10             Although Appellants’ legal analysis of Sigmund and Rhode
Island’s property law may be correct, Carol Ann Denkewicz consented to
the jurisdiction of the Arizona courts by not asserting her personal
jurisdiction defense until well after the conclusion of the major events of
this litigation – the trial and the valuation hearing. In contrast, the spouses
in Sigmund sought immediate relief from involvement in the Arizona
proceeding by motions to dismiss. By allowing the claims against her to
proceed until just before entry of judgment without objecting, Carol Ann
Denkewicz waived her potential defense that she was merely a bystander
caught up in her husband’s unilateral actions. See Nat’l Homes Corp. v. Totem
Mobile Home Sales, Inc., 140 Ariz. 434, 438, 682 P.2d 439, 443 (App. 1984)
(holding that “[w]e do not need here to determine when a ‘timely’



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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

application for ruling on the jurisdictional defense must be presented.
Suffice it to say, that after a judgment on the merits has been entered, it is
too late.”).

¶11        On these facts, the trial court did not abuse its discretion in
denying Appellants’ Rule 60(c) motion regarding Carol Ann Denkewicz.

II.    Appellants’ Application for a Court-Ordered Advance of
       Litigation Expenses

¶12            Appellants argue the trial court erred in denying their
application for an advance of litigation expenses pursuant to A.R.S. §§ 10-
851, -853, -854, and -856. We review de novo the trial court’s interpretation
of these statutes. See Bills v. Ariz. Prop. & Cas. Ins. Guar. Fund, 194 Ariz. 488,
491, ¶ 6, 984 P.2d 574, 577 (App. 1999).

¶13           These statutes essentially allow a corporation to indemnify a
corporate director or officer under certain conditions. See A.R.S. § 10-851.
Additionally, “[a] corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in advance
of final disposition of the proceeding” if certain conditions exist. A.R.S. §
10-853. Corporate officers may also be indemnified and advanced litigation
expenses. A.R.S. § 10-856(A). Appellants primarily rely on § 10-856(A) to
argue that, notwithstanding their status as former Vortex officers, Vortex
should have provided an advance of expenses because Appellants
“complied with all applicable statutory sections . . . as necessary to qualify
for the advance of expenses.”

¶14           Appellants admit that § 10-856(A) merely “permits” them “to
receive the same protections afforded to directors under A.R.S. § 10-853.”
No provision of the statutes identified by Appellants requires a corporation
to indemnify or provide an advance of litigation expenses to current
directors or officers, much less former officers asserting claims against their
former employer. See A.R.S. § 10-853(A) (“A corporation may pay for or
reimburse”) (emphasis added); A.R.S. § 10-854 (“On receipt of an
application [for indemnification], the court after giving any notice the court
considers necessary may order indemnification”) (emphasis added); A.R.S.




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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

§ 10-856 (“A corporation may indemnify and advance expenses”) (emphasis
added).1

¶15          The trial court did not err by denying Appellants’ application
for an advance of litigation expenses.

III.   Dismissal of Appellants’ Partnership Claim Under Rule 12(b)(6)

¶16           Appellants argue that the trial court erred in granting the
Appellees’ Rule 12(b)(6) motion to dismiss their counterclaim that alleged
certain evidence showed the parties formed “a de facto LLC or partnership.”
On appeal, Appellants abandon arguments that a de facto limited liability
company was established and focus exclusively on the alleged formation of
a partnership. As a result, we address only the dismissal of Appellants’
partnership claim. See BAC Home Loans Servicing, LP v. Semper Invs., LLC.,
230 Ariz. 587, 589 n.2, ¶ 3, 277 P.3d 784, 786 n.2 (App. 2012) (declining to
address an issue on appeal that was initially raised but not argued in the
opening brief).

¶17            Because dismissal on Rule 12(b)(6) grounds requires a finding
that claimants are “not entitled to relief under any interpretation of the facts
susceptible to proof,” we review de novo the trial court’s dismissal.
Coleman v. City of Mesa, 230 Ariz. 352, 355–56, ¶¶ 7–8, 284 P.3d 863, 866–67
(2012) (internal citation omitted). A court may only consider the pleading
itself in adjudicating a Rule 12(b)(6) motion, although it may refer to “[a]
complaint’s exhibits, or public records regarding matters referenced in a
complaint” without necessarily converting the Rule 12(b)(6) motion into a
motion for summary judgment. Coleman, 230 Ariz. at 356, ¶ 9, 284 P.3d at
867.

¶18          In dismissing the partnership claim, the trial court found that
Appellants had not pleaded a legally viable claim that a partnership existed
between the parties. The trial court noted that “every relevant factual


1 Although A.R.S. § 10-852 provides for mandatory indemnification, it only
applies when a director “was the prevailing party, on the merits or
otherwise, in the defense of any proceeding to which the director was a
party because the director is or was a director of the corporation[.]” It may
also apply if the director was acting as an “outside director” as determined
by a court of competent jurisdiction in accordance with other well-defined
statutory provisions. Appellants make no argument, however, that § 10-
852 applies here.


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                VORTEX v. DENKEWICZ/ENGELHARD
                        Opinion of the Court

allegation” within the counterclaim “reflects the apparent intention of the
principals to create something other than a partnership.” Appellants argue
that they pleaded sufficient facts to properly allege a claim under A.R.S. §
29-1012(A). They emphasize the final clause of subsection (A), which
indicates a partnership can be formed “whether or not the persons intend
to form a partnership,” in arguing that sufficient facts were alleged to
support allowing the claim to proceed beyond the pleading phase. They
rely on the three-page VIP Agreement to establish their claim. Because the
VIP Agreement was included as an exhibit in their counterclaim, the trial
court was entitled to consider it and the other exhibits included with
Appellants’ counterclaim. See Coleman, 230 Ariz. at 356, ¶ 9, 284 P.3d at 867.
At the time the VIP Agreement was drafted, Appellants and Appellees were
already conducting business together through a corporate association,
Vortex, and an LLC association, RCT Technologies, LLC. The VIP
Agreement proposed the formation of VIP Holdings, LLC, which
ultimately was not formed.

¶19           Subsections (A) and (B) of A.R.S. § 29-1012 provide:

       A. Except as otherwise provided in subsections B and C, the
       association of two or more persons to carry on as co-owners
       of a business for profit forms a partnership, whether or not
       the persons intend to form a partnership.

       B. An association formed under a statute other than this
       chapter, a predecessor statute or a comparable statute of
       another jurisdiction is not a partnership under this chapter.

This statue was enacted as part of Arizona’s adoption in 1996 of the Revised
Uniform Partnership Act. See A.R.S. §§ 29-1001 to -1111. In interpreting
this statute, we focus on the statute’s plain language as the most reliable
indicator of its meaning. See Powers v. Carpenter, 203 Ariz. 116, 118, ¶ 9, 51
P.3d 338, 340 (2002). We conclude that because the parties were already
working together through a corporate association and an LLC association,
A.R.S. § 29-1012(A) does not apply to create a new association – specifically,
a partnership – when the parties intended or attempted to change their
business structure but did not express an intent to create a partnership. This
interpretation is bolstered by comment 2 to section 202 of the Revised
Uniform Partnership Act:

       [B]usiness associations organized under other statutes are not
       partnerships.      Those statutory associations include



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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

       corporations, limited partnerships, and limited liability
       companies. That continues the [Uniform Partnership Act]
       concept that general partnership is the residual form of for profit
       business association, existing only if another form does not.

(Emphasis added.) Section 29-1012(A) may apply to create a partnership
when the parties do not already have an established form of business entity
or association. Subsection (B), which confirms essentially that corporations
and LLCs are not partnerships under Arizona law, further supports our
interpretation.

¶20           Appellants’ amended counterclaim alleges that the parties
“negotiated and entered into [the VIP Agreement]” and that the agreement
was “executed.” Yet the VIP Agreement does not purport or propose to
create a partnership. On the alleged facts, coupled with the language of the
VIP Agreement itself and the interpretation of A.R.S. § 29-1012(A)
explained above, the VIP Agreement did not create a new association in the
form of a partnership but rather sought to modify the already existing
business relationships between the parties. We agree with the trial court
that the pleadings do not allege facts sufficient to find that a partnership
was formed in accordance with A.R.S. § 29-1012. Accordingly, the
partnership allegations were properly dismissed under Rule 12(b)(6).

IV.    Exercise of Dissenter’s Rights and Corporate Valuation

¶21            Appellants contend that the trial court incorrectly applied the
fair value standard established in A.R.S. §§ 10-1330(E)(1) and -1301(4). The
trial court’s application of the dissenter’s rights statutes is an issue of law
that we review de novo. See Blankenbaker v. Marks, 231 Ariz. 575, 577, ¶ 6,
299 P.3d 747, 749 (App. 2013). In reviewing the trial court’s valuation
determination, we will abide by the trial court’s factual findings unless they
are clearly erroneous. See Standage v. Standage, 147 Ariz. 473, 481, 711 P.2d
612, 620 (App. 1985).

¶22            After Appellants made a demand for payment pursuant to
A.R.S. § 10-1328 and rejected an offer of payment based on a fair value
determination by Vortex, and after the trial court determined that
Appellants were entitled to exercise dissenter’s rights, Vortex petitioned the
trial court to hold a valuation hearing. Although Vortex initially argued
that Appellants were not entitled to exercise dissenter’s rights, on appeal
neither party challenges the trial court’s determination that the dissenter’s
rights statutes applied.



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                VORTEX v. DENKEWICZ/ENGELHARD
                        Opinion of the Court


¶23          At the valuation hearing, Appellees sought to establish that at
the time Vortex transferred its assets to Zuvo in August 2008 — the action
to which Appellants dissented — Vortex was worth $61,682. This valuation
was based on an assessment performed by Bruce Raben, an investment
banker. Raben testified that he attempted “a variety of valuation methods”
to determine Vortex’s value. First, he used an “asset value” approach that
looked exclusively at Vortex’s balance sheet, showing assets and liabilities.
Using this method, Raben found that Vortex’s liabilities vastly
outnumbered its assets, noting that the corporation was “insolvent” and
had “no visible means of honoring its liabilities as they came due.”

¶24            Second, Raben considered a “market value” approach that
determined corporate value by comparing Vortex with other “comparable”
corporations, either from the same industry or from comparable merger
and acquisition activity.     This method, according to Raben, was
“problematic” in establishing value because Vortex had “no comparables .
. . in public companies” and “no statistics to compare.” When asked why
Vortex’s asset transfer to Zuvo was not sufficient to establish value under
this method, Raben replied:

      [W]hat I call the Zuvo transaction involved a new [company]
      being created, capital being raised around a new management
      team, a new plan, and part of proceeds were used to buy
      assets from Vortex. But whatever valuation is implied by that
      transaction valuing Zuvo in my opinion was a bit of an
      artificial construct and not usable. And the reason, again in
      my opinion, is that all the capital that came in, came in from .
      . . friends and associates of the founders of the company . . .
      [T]he new company received the benefit of personal
      guarantees of the founders. Without those guarantees that
      transaction would not have happened, so I just didn’t find it
      to be a third-party canceling transaction.

Raben went on to state that, in his professional opinion, the asset transfer
between Vortex and Zuvo was not “an arm’s length transaction between
strangers,” and because Vortex was not a “fundable operation,” Raben
determined that the market value approach either yielded a “value of zero”
or that it was “non-applicable.”

¶25         Finally, Raben conducted an “earnings approach” valuation
(also known as a “Discounted Cash Flow” method (“DCF”)), in which he



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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

“created a projection that came up with a number for capital to do basically
. . . a cold restart or relaunch of [Vortex] and then the projected performance
of that [restart].” Raben’s valuation report noted that, using a DCF method,
a series of “highly favorable” pro forma projections result in a valuation of
$61,682, which is “the average between a Discounted Cash Flow Model . . .
and a Venture Model” that assumed different discount rates Raben
considered reasonable. Relying on this valuation, Ray Denkewicz and Rolf
Engelhard were each entitled to $2,054.85 in satisfaction of their respective
three percent holdings (including accrued interest).

¶26           Appellants countered by presenting the testimony of John
White, a certified public accountant and business appraisal consultant. In
his analyses, White testified that he understood “the contribution
agreement required that all the assets and liabilities of the Vortex
Corporation be contributed to [Zuvo] and essentially continue to operate
under the new entity name.” As a result, throughout White’s testimony, he
repeatedly pointed to the Zuvo private placement memorandum as a
source for his valuation analysis. White also testified that, among other
methods, he also used a DCF analysis that:

       [B]egins with management’s forecast of net income and
       discounts that back to the present value using a discount rate
       that I develop in my report. And those discounted values that
       are brought back to the present value are used to determine
       the value of invested capital from which I subtract at to arrive
       at equity.

White’s report indicated that, in performing this analysis, he relied on
“[t]wo sets of forecasts . . . presented in the [Zuvo] Private Placement
Memorandum,” one of which was “more consistent” with the forecasts that
Miller Capital performed for Vortex in 2007. Ultimately, White concluded
that “the fair value of a one hundred percent equity interest in the Vortex
Corporation as of August the 11th, 2008, is $20,303,000.00.”

¶27           The trial court adopted the Raben valuation, expressly finding
that “the Vortex to Zuvo transfer of assets and liabilities cannot be
considered an arm’s length[] third-party transaction.” Additionally, the
court concluded that “[Appellants’] approach to ‘fair value’ does not
comply with the legal standard for determining fair value in the context of
dissenter’s rights.” The court further explained that “as between a
determination that, on August 11, 2008, Vortex was worth $20,303,000.00 or
$61,682.00, the Court is compelled to find the latter.” The court concluded



                                      10
                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

that Appellees’ payment of $2,054.85, respectively, to Ray Denkewicz and
Rolf Engelhard represented payment in full of their stock interest in Vortex.

¶28            The question before us is whether the trial court erred in
accepting the Raben valuation as establishing the fair value of Vortex stock
at the time immediately before the transfer of assets to the new business.
The statutes at issue require, in relevant part: “Each dissenter made a party
to the proceeding is entitled to judgment . . . [f]or the amount, if any, by
which the court finds the fair value of his shares plus interest exceeds the
amount paid by the corporation.” A.R.S. § 10-1330(E)(1). “’Fair value’ with
respect to a dissenter’s shares means the value of the shares immediately
before the effectuation of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of the corporate
action unless exclusion is inequitable.” A.R.S. § 10-1301(4). In interpreting
statutes, we start with the plain language of the statute. New Sun Bus. Park,
LLC v. Yuma County, 221 Ariz. 43, 46, ¶ 12, 209 P.3d 179, 182 (App. 2009).

¶29           Only one Arizona case has previously interpreted these
statutes. See Pro Finish USA, Ltd. v. Johnson, 204 Ariz. 257, 259–60, ¶¶ 4, 11,
63 P.3d 288, 290–91 (App. 2003). In Pro Finish, the superior court received
conflicting expert valuations of a corporation. See id. at ¶ 5. The similarities
to the instant case end there, however, because the competing valuations
expressly concerned a third-party arm’s length transaction, in which an
outside buyer agreed to a purchase price for the corporation at issue. See
id. at ¶ 3. Thus, the Pro Finish court’s conclusions regarding the factors a
trial court may consider in making a valuation determination for a third
party transaction provide guidance only to the extent that we rely on some
of the same secondary sources that informed that decision. See id. at ¶¶ 12-
13. We therefore do not read Pro Finish as broadly as Appellants, who argue
that Pro Finish compels us to view the transfer agreement between Vortex
and Zuvo as the best evidence of Vortex’s existing value. Instead, we
conclude that the evidence supports the trial court’s finding that the Vortex-
to-Zuvo asset transfer was not an arm’s length transaction, which makes
the instant case significantly different from Pro Finish.

¶30           Pro Finish favorably cited Principles of Corporate Governance:
Analysis and Recommendations (1994) (“Principles”). See id. at ¶ 13. Similarly,
we have considered Principles to assist us in reviewing the trial court’s
determination of corporate value. See AMERCO v. Shoen, 184 Ariz. 150, 155,
907 P.2d 536, 541 (App. 1995) (relying on Principles as authoritative in a
different context). Section 7.22 of Principles provides, in relevant part:




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                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

       (a) The fair value of shares under [corporate transactions
           giving rise to appraisal rights] should be the value of the
           eligible holder’s proportionate interest in the corporation,
           without any discount for minority status or, absent
           extraordinary circumstances, lack of marketability.
           Subject to Subsections (b) and (c), fair value should be
           determined using the customary valuation concepts and
           techniques generally employed in the relevant securities and
           financial markets for similar businesses in the context of the
           transaction giving rise to appraisal.

(Emphasis added.) See also Weinberger v. UOP, Inc., 457 A.2d 701, 713 (Del.
1983) (holding that determining corporate value may be done by
“includ[ing] proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court”).

¶31            Both parties here cite a rule of law regarding corporate
valuation in the exercise of dissenter’s rights, established in other
jurisdictions, that “fair value be determined by taking ‘into account all
relevant factors.’” Weinberger, 457 A.2d at 714 (citations omitted); see also
Matthew G. Norton Co. v. Smyth, 51 P.3d 159, 163 (Wash. Ct. App. 2002)
(authoritatively citing this rule in Washington); Brown v. Arp & Hammond
Hardware Co., 141 P.3d 673, 682 n.18 (Wyo. 2006) (applying this rule in
Wyoming); HMO-W Inc. v. SSM Health Care System, 611 N.W.2d 250, 259
(Wis. 2000) (applying this rule in Wisconsin). This approach is essentially
what Arizona courts have employed when performing valuations in
different contexts. See Mitchell v. Mitchell, 152 Ariz. 317, 323, 732 P.2d 208,
214 (1987) (affirming in a family law context that trial courts must
determine a business entity’s value based on each case’s facts and
circumstances); Kelsey v. Kelsey, 186 Ariz. 49, 51, 918 P.2d 1067, 1069 (App.
1996) (asserting that “[t]he valuation of [business] assets is a factual
determination that must be based on the facts and circumstances of each
case.”). We adopt this rule for Arizona in the context of dissenters’ rights:
fair value must be determined by taking into account all relevant factors.

¶32           To measure all relevant factors in this case, we note that
Principles comments that fair value is determined by “customary valuation
concepts.” As one commentator observed about such concepts, “[t]he
valuation technique used by a court is highly dependent on the valuation
evidence presented by the parties. ‘The parties, not the court, establish the
record and the court is limited by the record created.’” Barry M.



                                      12
                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

Wertheimer, The Shareholder's Appraisal Remedy & How Courts Determine Fair
Value, 47 Duke L.J. 613, 629 (1998) (quoting Cede & Co. v. Technicolor, Inc.,
No. CIV.A.7129, 1990 WL 161084, at *8 (Oct. 19, 1990), reversed on other
grounds, 684 A.2d 289 (Del. 1996)). Any review by a court of “all relevant
factors” necessarily depends on the evidence presented at the fair value
hearing.

¶33            Although each party’s expert analyzed valuation using
multiple techniques, each expert’s ultimate value determination was based
on a form of DCF method (what Raben also called an “earnings approach”).
It was from these respective DCF analyses that the trial court made its
determination. Commentators have observed that DCF is “probably the
most prominent and frequently used post-Weinberger method of appraisal.”
Wertheimer, 47 Duke L.J. at 628. In different legal contexts, Arizona courts
have long recognized DCF as a viable valuation method. See, e.g., Pima
County v. American Smelting & Refining Co., 115 Ariz. 175, 177, 564 P.2d 398,
400 (App. 1977); Crystal Point Joint Venture v. Ariz. Dep’t of Revenue, 188
Ariz. 96, 101, 932 P.2d 1367, 1372 (App. 1997). Although the DCF method
is by no means the only appropriate corporate valuation method, the trial
court did not err by relying on the DCF method evidence presented at the
valuation hearing on the record presented by the parties in this case. See
Maricopa County v. Barkley, 168 Ariz. 234, 239, 812 P.2d 1052, 1057 (App.
1990) (holding that a trial court has discretion to qualify experts and rely on
various methods in making a valuation determination).

¶34           Appellants do not so much contest Raben’s use of the DCF
valuation method as they do the data he used to produce his fair value
determination. Indeed, Appellants’ own expert acknowledged that Raben
had performed a DCF analysis with different data and projections.
Appellants assert that the trial court erred in accepting the Raben DCF
valuation because they believe Raben “failed to consider all factors [that]
might reasonably factor into the fair value valuation.” Appellants also
contend that the trial court mistakenly “focused on the value of Vortex as a
stand-alone entity” while “ignoring the value of the Vortex [a]ssets relied
upon by Miller Capital and Mr. White.” “Everyone knew,” Appellants
surmise, “that the fair value of Vortex was far greater than $61,682.00 prior
to August 12, 2008.” Thus, Appellants conclude that the investment of
capital into Zuvo establishes that Vortex’s assets, which were transferred
into Zuvo, must have been worth more than indicated by the Raben
valuation.




                                      13
                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

¶35             The inference that Appellants’ seek to establish – that the
projected value of Zuvo indicates greater value for Vortex – is undermined,
however, because the action they believe illustrates Vortex’s true value is
the action to which they dissented. Appellants’ expert testified that his DCF
calculations relied upon the Zuvo private placement memorandum, which,
in turn, had partially relied on the 2007 Miller Capital assessments.
Appellants ask this court to view the transfer of assets from Vortex to Zuvo
as nothing more than a continuation of Vortex under a new name. But this
conclusion is unwarranted in light of the factual distinctions between the
two entities. Zuvo was created with a new management team and new
investors, wholly apart from Vortex. Zuvo’s receipt of Vortex’s assets and
liabilities, though integral to Zuvo’s potential future success, was only a
component part of creating Zuvo and sustaining it.

¶36            Appellants emphasize the terms of the transfer between Zuvo
and Vortex to argue that Vortex’s value was clearly higher than Raben’s
valuation. In this sense, they seek to frame the transfer as an arm’s length,
third-party transaction. In such transactions, this court has observed that
“[t]he common-sense answer to the question of an asset’s value is what a
third-party is willing to pay for it.” Pro Finish, 204 Ariz. at 261, 63 P.3d at
292. But here, the trial court specifically found that the transfer of assets
from Vortex to Zuvo was not an arm’s length transaction, and this finding
is fully supported by the evidence. See Standage, 147 Ariz. at 481, 711 P.2d
at 620 (noting that a trial court’s factual findings will not be set aside unless
clearly erroneous). Thus, the concept of what a willing buyer would pay a
willing seller is not applicable to the Vortex-to-Zuvo transfer.

¶37            The approach taken by the Supreme Court of Delaware in a
slightly different context is helpful here:

       “The underlying assumption in an appraisal valuation is that
       the dissenting shareholders would be willing to maintain
       their investment position had the merger not occurred.”
       Accordingly, the corporation must be valued as a going
       concern based upon the “operative reality” of the company as
       of the time of the merger.

M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 525 (Del. 1999) (citations
omitted); see also In re Marriage of Malloy, 181 Ariz. 146, 151, 888 P.2d 1333,
1338 (App. 1994) (asserting that in determining the value of a partnership’s
assets, “valuation must be based on realizable benefits.”). The “operative
reality” of Vortex was wholly distinct and significantly less valuable apart
from the impending transfer with Zuvo. Whatever value or benefit Zuvo


                                       14
                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court

ultimately receives from the infusion of Vortex’s assets and liabilities, the
plain language of A.R.S § 10-1301(4) does not require the trial court to
superimpose Zuvo’s value after the transfer onto Vortex’s value before the
transfer. Indeed, A.R.S. § 10-1301(4) requires that a fair value determination
focus on the value that exists “immediately before the effectuation” of the
dissented-to corporate action, and therefore the value of Vortex as of
August 11, 2008 had to be separated from whatever Zuvo would be worth
on August 12, 2008, once the transfer of assets from Vortex had occurred.

¶38             Although we review the trial court’s legal conclusions de
novo, once the trial court accepts the qualifications of any experts proffered
by the parties and finds their valuation methods are supported by the
evidence, the “ultimate selection of a valuation framework is within the
[trial court’s] discretion.” M.G. Bancorporation, Inc., 737 A.2d at 524; see also
Kelsey, 186 Ariz. at 51, 918 P.2d at 1069 (“The valuation of [business] assets
is a factual determination that must be based on the facts and circumstances
of each case.”). We conclude the trial court considered all the relevant
factors based on the evidence presented; and we also conclude the evidence
in this record sufficiently supports the trial court’s reliance on the Raben
valuation. We therefore affirm the trial court’s findings and conclusions
regarding the stock’s fair value.

V.     Attorneys’ Fees

¶39            Appellants also argue that the trial court erred in awarding
attorneys’ fees to Appellees pursuant to A.R.S. § 12-341.01. The application
of this statute to Appellees’ claims is a question of statutory interpretation
that we review de novo. Ramsey Air Meds, LLC v. Cutter Aviation, Inc., 198
Ariz. 10, 13, ¶ 12, 6 P.3d 315, 318 (App. 2000). Appellants do not question
the applicability of this statute, but they instead challenge the trial court’s
decision that Appellees were the “successful parties” and therefore eligible
for an award of fees. Determining the prevailing party for the purposes of
attorneys’ fees is within the trial court’s discretion and “will not be
disturbed on appeal if any reasonable basis exists for it.” Berry v. 352 E.
Virginia, LLC, 228 Ariz. 9, 13, ¶ 21, 261 P.3d 784, 788 (App. 2011) (quoting
Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 178 Ariz. 425, 430, 874 P.2d 982,
987 (App. 1994)). Likewise, the trial court has “broad discretion” to award
and determine the amount of attorneys’ fees under A.R.S. § 12-341.01(A).
Associated Indem. Corp. v. Warner, 143 Ariz. 567, 570, 694 P.2d 1181, 1184
(1985). We will not disturb an award of attorneys’ fees absent an abuse of
discretion. State Farm Mut. Auto. Ins. Co. v. Arrington, 192 Ariz. 255, 261, ¶
28, 963 P.2d 334, 340 (App. 1998).



                                       15
                 VORTEX v. DENKEWICZ/ENGELHARD
                         Opinion of the Court


¶40            Both sides in this litigation brought claims arising from their
contractual relationships, and both prevailed on some of their claims, with
damages awarded. In fact, both sides sought large sums of money from the
other and both fell significantly short of their financial goals in the
litigation. For cases involving claims and counterclaims in which both sides
receive a favorable judgment in part, our supreme court has applied the
“net judgment” approach, by which the “prevailing party” for attorneys’
fees purposes is the party that, when both sides are awarded judgments, is
awarded a greater amount than the other party. Ocean West Contractors, Inc.
v. Halec Const. Co. Inc., 123 Ariz. 470, 473, 600 P.2d 1102, 1105 (1979); but see
Murphy Farrell Development, LLLP v. Sourant, 229 Ariz. 124, 134, ¶ 36, 272
P.3d 355, 365 (App. 2012) (noting that trial courts “may use a ‘percentage of
success’ factor or a ‘totality of the litigation’ rubric to determine which party
prevailed” when the “net judgment rule” is inapplicable). Because each
side recovered less than the amounts sought, we conclude the net judgment
rule is applicable. See Ocean West Contractors, 123 Ariz. at 473, 600 P.2d at
1105. Appellants received awards in their favor for a cumulative amount
of $10,609.70 while Appellees received cumulative awards for $11,482.24,
resulting in a “net judgment” in Appellees’ favor of $872.54. After
reviewing this record and the arguments of the parties, we discern no abuse
of discretion by the trial court in awarding attorneys’ fees to Appellees.

                               CONCLUSION

¶41           We affirm the trial court’s judgment. We deny Appellants’
request for attorneys’ fees on appeal. Appellees request an award of
attorneys’ fees on appeal pursuant to A.R.S. § 12-341.01 and Arizona Rule
of Civil Appellate Procedure (“ARCAP”) 21. In our discretion, we decline
to award attorneys’ fees to Appellees. As the prevailing party on appeal,
however, Appellees are entitled to an award of taxable costs on appeal upon
compliance with ARCAP 21.




                                      :gsh



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