Court-appointed attorney can’t testify on stock gift valuation

BVWireIssue #265-5
October 30, 2024

estate and gift taxation
expert witness, appraisal, rule 702, stock, reliability, gift, qualifications, motion in limine

In a Hawaii estate matter, one of the founders of the Foodland grocery chain made lifetime gifts of company stock to some of her children. Her attorney had valuations prepared that were filed with the gift tax returns. After she died, her other children were to get cash based on the value of the gifted stock so that all the children were treated equally.

Shortchanged? One child who was to get cash claimed the stock was undervalued, so she believed that she did not get all the cash she deserved. She sued the attorney for malpractice and breach of fiduciary duty, but he maintained that the valuations were reliable. The state probate court appointed another attorney as a special representative to review the stock valuations, and he concluded that they were not up to standards and, therefore, unreliable. The plaintiff wanted to call that attorney to testify, but the defendant challenged his qualifications.

The district court found that the court-appointed attorney was not qualified to testify as an expert witness under Federal Rule of Evidence 702. He himself acknowledged that he was not an expert in business valuation but that he consulted with a valuation expert to prepare the report for the probate court.

The case is Sullivan v. Loden, 2024 U.S. Dist. LEXIS 180494, and a case digest and full opinion are available on the BVLaw platform.

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