Must an expert’s 10-year old report comply with current BV standards?

“Does a valuation analyst have to update his/her report, which was prepared 10 years ago if s/he has to testify on that report in 2010? Do the current professional standards apply to that report?”

Analyst Nilufer Usta posed these questions in a recent discussion on LinkedIn (note: you may have to join the BV Professionals group to access the thread). Over sixteen comments have been posted so far, touching on the central topic (short answer: the report need only comply with the standards applicable as of the date of issuance).   The BV Professionals discussion also touches on the litigation exception contained in the current SSVS-1 and NACVA standards, litigation strategy in general—and how to challenge an aged report under Daubert and relevant disclosure standards.

The discussion reminds us of a recent federal district case, Lawton v. Bank of America Corp., (D.R.I.) (April 14, 2010), in which the plaintiffs intended to rely on a 2002 valuation of closely held stock, prepared by a CPA in connection with an earlier stage of the litigation. But after disclosing her report, they discovered her underlying workpapers had been destroyed in the normal course of her firm's document retention policy. A deposition revealed additional memory gaps (about her prior methods and data) that only her workpapers could have answered. The defendants challenged the report under Daubert (reliability) and Rule 26 F.R.C.P. disclosure standards (requiring experts to disclose all underlying support for their opinions). The court ultimately let the report in along with a revised supplemental report, but it also expressed some credibility concerns and exposed some weaknesses that the defendants will no doubt use at trial.

The complete digest of the Lawton case appeared in the June 2010 BVUpdate™, and the court’s opinion is one of nearly 3,000 valuation-specific cases currently available at BVLaw™.