Court opts not to split the difference in disparate valuations

BVWireIssue #260-2
May 8, 2024

marital dissolution/divorce
discount for lack of marketability (DLOM), marital dissolution, trial court

Often, courts take the middle ground when faced with two disparate valuations, but, in an Ohio divorce case, the court did not do that. The expert for the husband valued his business, a relatively new, niche firm, at $290,000, while the wife’s expert valued it at $840,000. The court sided with the husband’s expert and expressly rejected the valuation of the expert for the wife.

Inputs and assumptions: As with any case where there are valuations that are very far apart, the differences are due to inputs and assumptions the analyst makes (assuming there is no improper bias). In this case, the wife’s expert included in the valuation large amounts of cash the husband withdrew from the business right before the divorce proceedings. Also, it appears that the husband’s expert took a much larger discount for lack of marketability (DLOM) than the wife’s expert, driving the valuations further apart. The court did not split the difference and accepted the lower valuation from the husband’s expert.

On appeal, the wife could not present any argument or information that the lower court had not already considered, so the appellate court affirmed the decision. The lower court noted that the large amounts of cash withdrawals were done during the marriage, so it was income and not part of the marital estate. With reference to the DLOM, the lower court noted that this was a new business that “offers a niche service indicating a lack of secondary market.” The lower court considered everything, so it was “entitled” to choose one expert’s valuation over the other, i.e., there was no abuse of discretion.

The case is Granada v. Rojas, 2024-Ohio-1272; 2024 Ohio App. LEXIS 1199; 2024 WL 1451236, and a case analysis and full court opinion are on the BVLaw platform.

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