The Greliers spent the last two years of their 12-year marriage litigating their divorce, fighting primarily over the husband’s 25% interest in a closely held real estate development company (owned with his father, his brother, and a family friend). In response to the wife’s request, the trial judge appointed a special master to determine the “fair market value” of the minority interest. After his audit and examination, the special master concluded that the husband’s interests were worth just over $1 million, without application of any marketability or minority discounts.

Each of the parties contested the valuation. The wife’s financial expert testified that the special master had “seriously” undervalued the interests by relying on outdated real estate appraisals, but he agreed that discounts were not appropriate in this case. In contrast, the husband’s expert said that discounts should apply—25% for lack of marketability and 25% for the minority interest, which, when combined, would reduce the value of the husband’s interest to just over $350,000. Moreover, he said that by neglecting to apply discounts, the special master failed to comply with his court-ordered directive to determine fair market value. The trial judge agreed, and applied a combined discount of 40% to the special master’s value.

The wife appealed the application of discounts, arguing that they were inappropriate when valuing business interests in the context of a divorce. But in Grelier v. Grelier (December 19, 2008), the Alabama Civil Court of Appeals held that it needn’t decide which standard—fair market value or statutory fair value—applied in divorce cases. Instead, it found that after having instructed the special master to determine fair market value at trial, the wife could not assert on appeal that the trial court should have applied a different standard. In other words, a party may not win a reversal based on an error it invited the trial court to make, the court said, and upheld the lower court’s valuation.

Look for a complete abstract of Grelier v. Grelier in the March 2009 Business Valuation Update™. The opinion will also join the nearly 1,500 matrimonial cases posted to the BVLaw™ database—the single largest compilation of BV-specific case law available to legal researchers, financial analysts, and attorneys.