In response to our recent item on DLOM methods and the potential challenge of Daubert, Jim Hitchner (Financial Valuation Advisors) offers that he did not purport to say whether the current DLOM models would fail under Daubert. “That is for a judge to decide,” Hitchner writes. However, “I did say something on the order that there was a court case out there that allowed something [under the Daubert standard] that was not prevalent in the valuation profession.”
The case: Alamar Ranch LLC. v. City of Boise, 2010 WL 5055917 (D.Idaho), in which the federal district court assessed the Butler Pinkerton Calculator™--Total Risk Calculator (BPC) under Daubert and concluded that the standard is inherently flexible. Peer-reviewed literature “may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert’s particular expertise, and the subject of his testimony,” the court said, citing 9th Circuit precedent. “Peer-reviewed literature may not be available for a number of reasons,” it added, “including that the issue may be too new, or lack sufficiently wide interest.” Quoting from the same precedent, the court also found that when the expert’s knowledge has a “valid connection” to the inquiry and a “reliable basis in the knowledge and experience of the relevant discipline,” the opinion is admissible—as was expert Pete Butler’s (Valtrend), which relied in part on the BPC. The complete case digest of Alamar Ranch (the source of quoted materials) appeared in the December 2010 Business Valuation Update; the federal court’s opinion is posted at BVLaw.