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Paul Mitchell (Mr. Mitchell or decedent) died on April 21,
1989. Among the assets included in Mr. Mitchell’s taxable estate
were 1,226 shares of John Paul Mitchell Systems common stock held
by the Paul Mitchell Trust (the trust), a revocable trust
established by Mr. Mitchell. It is our determination of the value
of those shares (at the moment of Mr. Mitchell’s death) that is the
subject of the remand.
In 1979, Mr. Mitchell and John Paul “Jones” DeJoria joined
together to market Mr. Mitchell’s hair care products (particularly
the sculpting lotion) through professional-only hair salons. On
March 31, 1980, Messrs. Mitchell and DeJoria formed Paul Mitchell
Systems, Inc. The name of the corporation was subsequently changed
to John Paul Mitchell Systems (JPMS). Messrs. Mitchell and DeJoria
granted JPMS all proprietary and distribution rights to the hair
and skin products that Mr. Mitchell had developed, including the
products’ trademark, service mark, or other intellectual property
rights.
JPMS’s bylaws provided for a board of directors (the board)
consisting of four directors and cumulative voting for the election
of directors. However, from 1984 until April 15, 1989, Mr.
Mitchell, Mr. DeJoria, and Peter Langenberg were the only board
members. On April 15, 1989, Mr. Langenberg resigned, and Jeanne
Braa was elected to replace him.
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