Business valuation on trial in Bankruptcy Court

BVWireIssue #47-3
August 16, 2006

First, back in December the U.S. Bankruptcy Court (E.D.N.Y.) threw out the defendant’s expert business valuation report for failing to satisfy federal requirements of reliability.  You’d think the plaintiff in In re Med Diversified, Inc. would sail all the way to court (or settlement)—but then just two weeks ago, the same Judge (Epstein) threw out the plaintiff’s expert report by Robert Cimasi, MHA, ASA, CBA, AVA , FCBI, CM&A, CMP, president of Health Capital Consultants (St. Louis) and one of the more notable authorities in the healthcare valuation field.  That leaves the Court to reach a valuation conclusion without any expert witness or report in the case.

Has the federal Judge gone too far?  “Perhaps this memorandum…may assist other bankruptcy courts in framing their decisions…under the evolving standards of disqualification of purported non-scientific expert witnesses.”  Statements such as these have bankruptcy bloggers citing the opinion for possible arrogance and a general disrespect for the BV profession.  Bob Cimasi was understandably more circumspect, as the litigation still remains unsettled.  This case “is putting business valuation on trial,” he said. "I fully stand by the validity of my report, conclusion, opinions and testimony in this case. I believe that any fair reading of the trial transcripts and documents on the record will support my opinion."

For a copy of the full-text court opinion, click here.

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