An otherwise “supremely qualified expert cannot waltz into the courtroom and render opinions unless those opinions are based on some recognized scientific method and are reliable and relevant under the test set forth by the Supreme Court in Daubert,” said the federal district court (S.D. Indiana), in the latest decision to consider a financial expert under the by-now familiar standard. The first strike: the expert “cherry-picked” his data, relying solely on information fed to him by the attorney.
“When an expert ignores critical data in forming his opinions, he fails to satisfy Daubert,” the court ruled. In addition, the expert also: 1) failed to independently verify the data; 2) ignored the one-year termination clause in the parties’ contract; 3) excluded reasonable business expenses in his calculation of lost profits; and 4) used an incorrect markup on sales. The final blow: Although the expert spent years valuing public companies, he admitted no experience in valuing closely held businesses. Faced with all these factors, the court could not “conclude with any confidence that he qualifies as an expert.”
For the complete case abstract of MDG International v. Australian Gold, Inc., 2009 WL 1916728 (June 29, 2009), see the September 2009 Business Valuation Update™. The full-text court opinion will be available to subscribers at BVLaw™.