All the cases you need to read on the discount rate in damages calculations, and more

BVWireIssue #93-1
June 9, 2010

The item in the last BVWire on “the power of the discount rate” prompted numerous subscriber inquiries and requests for the “dirty dozen” cases on determining the discount rate in economic damages cases. Although a few of the opinions are too old (pre-Internet era, circa 2000) to be posted online, we did a search of BVLaw and found two very recent bankruptcy cases to add to the list, for a total of 14 “must read” decisions for appraisers and attorneys alike. A full write-up of all the decisions—including the competing expert determinations and the courts’ ultimate holdings—will appear in the next Business Valuation Update™ (July 2010). In the meantime, the cases are:

  1. Energy Capital Corp. v. United States, 302 F.2d 1314 (Fed. Cir. 2002) Reminder: This case is currently available as a free download.
  2. Franconia Associates. v. United States, 61 Fed. Cl. 718 (2004)     
  3. AlphaMed Pharmaceuticals, Inc. v. Arriva Pharmaceuticals, Inc., 432 F. Supp. 2d 1319 (S.D. Fla. 2006)
  4. In re Magna Cum Latte, Inc., 2008 WL 2047937 (Bankr. 2008)
  5. Miller Bros. Coal v. Consol of Kentucky, Inc., 2009 WL 4904032 (Bkrtcy. E.D. Ky.)          
  6. Purina Mills, L.L.C. v. Less, 295 F. Supp. 2d 1017 (N.D. Iowa 2003)
  7. Munters Corp. v. Swissco-Young Industries, Inc., 100 S.W.3d 292 (Tex. App. 2003)
  8. Kool, Mann, Coffee & Co. v. Coffey, 300 F.3d 340 (3d Cir. 2002)
  9. Diesel Machinery, Inc. v. B.R. Lee Industries, Inc., 418 F.3d 820 (8th Cir. 2005)
  10. Fairmont Supply Co. v. Hooks Industrial, Inc., 177 S.W.3d 629 (Tex. App. 2005)
  11. Olson v. Nieman's, Ltd., 579 N.W.2d 299 (Iowa 1998)
  12. Knox v. Taylor, 992 S.W.2d 40 (Tex. App. 1999)
  13. Burger King Corp. v. Barnes, 1 F. Supp.2d 1367 (S.D. Fla. 1998)
  14. American List Corp. v. U.S. News and World Report, 75 N.Y.2d 38 (1989)

Where can you get even more authority on developing the discount rate? Look for The Comprehensive Guide to Lost Profits Damages For Experts and Attorneys, 2010 Edition, by noted expert and author Nancy Fannon (Fannon Valuation Group). Newly updated and expanded, the 2010 edition contains two chapters on developing the discount rate (in valuation practice and in case law), plus chapters on the reasonable certainty standard, calculating damages for early-stage companies; patent infringement and trademark damages; special considerations for measuring lost profits in physician practices, and more. Contributors included Neil Beaton (Grant Thornton), Mark Dietrich, Prof. Robert Lloyd (Univ. Tenn. School of Law), plus notable financial experts and attorneys. The 2010 Comprehensive Guide to Lost Profits will be available this summer at

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