In “25 Hot Tips in 75 Minutes,” one of the most popular panels at the recent AAML/BVR National Divorce Conference in Las Vegas, attorneys and valuation experts shared tips on how to succeed in litigation as well as in managing client relations and workflow.
This session, moderated by attorney David Levy (Berger Schatz), illustrated how attorneys and experts can benefit from a joint conference. For one, it showed how a tip may be smart from the valuator’s perspective but may raise issues for the attorney and vice versa. It also made clear that many of the strategies the practitioners proposed are applicable in any practice area, not just in the divorce context. Here’s a sample.
Fee disputes: Few financial experts (and attorneys) are able to avoid fee disputes with litigants. Worse, a dispute can easily escalate into a professional negligence suit against the appraiser. Appraiser Tracy Katz (Gursey Schneider LLP) suggests that, to minimize the risk, include language in the firm’s engagement letter with the litigant that fee disputes will go to arbitration and that the client must raise malpractice claims during arbitration, as an affirmative defense. Her firm asks the litigant and the retaining attorney to sign the agreement. If the litigant still insists on suing in state court for malpractice, the appraiser will introduce the arbitration agreement in that proceeding against the litigant to argue the malpractice claim is barred. According to her, the California Court of Appeal found the arbitration agreement valid and enforceable (in an opinion that’s not citable).
But the tip raised some questions. Does this approach negatively affect the attorney-client relationship? Can the client sue the attorney for cosigning the engagement letter that governs relations between the litigant and the appraiser?
Financial affidavit: Attorney David Griffin (Rutkin, Oldham & Griffin) suggests annotating financial affidavits. By using footnotes, the attorney may be able to engage in a subtle form of advocacy on the client’s behalf. For example, the notes may propose to the court what money is or is not available as income for the determination of spousal or child support.
An audience member pointed out, however, that the opposing side may challenge the admissibility of this type of affidavit in a motion in limine.
S corp tax affecting: All valuators, no matter their area of expertise, must know the recent Kress gift tax decision, says appraiser Jim Hitchner (Financial Valuation Advisors). The importance of Kress cannot be overstated because, for the first time, all the valuation experts (including the expert testifying for the government) applied a C corporation tax rate to value a very successful family business that was organized as an S corporation. The court, without ado, accepted the practice. Regardless of the precise precedent value of the court’s decision, valuators and attorneys should use it as persuasive authority in any S corp-related valuation case, the appraiser says.
A recording of this session (along with selected other sessions) will be available soon from BVR. Stay tuned for more conference coverage in the coming weeks here and in Business Valuation Update. A digest of Kress v. United States, 2019 U.S. Dist. LEXIS 49850, 2019 WL 1352944, and the district court’s opinion are available at BVLaw.