What to Do When You Have Too Little Information

A recent California appeal of a divorce case demonstrated a proper way of managing a situation where the valuation analyst has received insufficient information to allow for a conclusion of value as to an asset or assets. In the Hembree1 case, the trial court engaged the expert, Brian Brinig, CPA, Esq., as a neutral.

The parties voluntarily attended a mediation, which led to a settlement agreement and a stipulated judgment. In August 2020, the wife filed a request for order to set aside the judgment. The wife claimed that assets had been omitted, that the husband had misstated the value of certain of those assets and had failed to disclose others, and that the division of assets was one-sided in favor of the husband. The husband filed his own request for an order. 

After initially valuing certain business interests of the party, Brinig’s assignment changed in May 2021 when he was asked to value each of the assets in the marital settlement agreement (MSA). In late May, Brinig sent the parties his preliminary valuation analysis. He left blank spaces for most of the assets because he never had information on those assets. Based on the May 2021 order, Brinig asked the parties to provide “evidence of value” for each of the assets. In June 2021, Brinig notified the parties and the trial court that he was limiting his valuation of the MSA assets to the husband’s pawnshop business. “His decision resulted from the parties' ongoing ‘significant disputes’ regarding the division of their estate; the lack of evidence of values for certain assets and the conflicting evidence for others; and the parties' suggestion that the scope of his new assignment included valuing ’all assets’ in existence on the date of mediation, 'whether or not they were previously disclosed,' in order to obtain a ‘true value’ of their estate.”2 He also listed 11 assets supposedly not divided in the MSA. He could not value these since he had no evidence of value or even of their existence.  

There was a lot more to the case and the appeal, but the key point here is the deft manner in which Brinig managed the hand the trial court’s engagement dealt him. He simply informed the trial court that he did not have sufficient information to value or even determine the existence of some of the alleged assets. Paragraph 30 of the VS100 states that “[t]he valuation analyst should read and evaluate the information to determine that it is reasonable for the purposes of the engagement.” Brinig did that and determined that the information obtained was not sufficient nor reasonable enough to determine a value for many of the alleged marital assets. Instead of withdrawing from the engagement, he simply and impliedly informed the trial court that he did not have sufficient information to determine a value.

His other alternative would have been to formally resign from the engagement. One of these two options is required by VS100, and there is a similar USPAP provision.3 My experience has been that valuation analysts tend to “solve” lack of information problems by adjusting the discount rate or some other manipulation of the methods used to determine a value. What should happen, in my opinion, is to make the effort needed to cure the lack of information or, if unable to do so, to resign from the engagement.

1 In re Hembree, 2024 Cal. App. Unpub. LEXIS 196; 2024 WL 135942.
2 Ibid.
3 “An appraiser must maintain the data, information and analysis necessary to support his or her opinions for appraisal and appraisal review assignments.”—USPAP Preamble.