Further new cases digested at BVLaw

Here's a sampling of new cases that have been added to BVLaw in the last month.  These are cases where appeals-level courts have ruled on methods and assumptions used by financial experts in business valuation litigation.

Brocade Communications Systems, Inc. v. A10 Networks, Inc., 2013 U.S. Dist. LEXIS 69335 (May 15, 2013)

On retrial, court finds EMVR is not necessary to present a viable lost profits theory and denies defendants’ motion to exclude plaintiffs’ damages evidence based on prior ruling that they had failed to show evidence to support an entire market value rule (EMVR) theory; further, defendants fail to support the argument that a Panduit­-based lost profits claim requires apportionment.

Key Words: Lost Profits, Damages, Reasonable Royalty, Panduit, Entire Market Value Rule, EMVR

Experts: James Malackowski (plaintiffs); Elizabeth Dean (defendants)

Judge:  Grewal

State/Jurisdiction:  Federal/California

Court: United States District Court

Type of case:  Intellectual Property

SIC code: 3577 Computer Peripheral Equipment

Goldfarb v. Yelton, 2013 Cal. App. Unpubl. LEXIS 4629 (June 27, 2013)

Appellate court affirms trial court’s decision to apportion most of the stock sale proceeds the husband reaped during marriage in connection with a company he set up before marriage to the community under Pereira, finding that during marriage, he became the “chief contributing factor” in the company’s eventual success.

Key Words: Community Property, Separate Property, Divorce, Marital dissolution, Apportionment, Pereira, Van Camp

Experts: Dana Grigg (wife); Michael Thompson (husband); Sally White (court-appointed)

Judge:  Lambden

State/Jurisdiction:  California

Court: Court of Appeals

Type of case:  Marital Dissolution

SIC code: 2836 Biological Products, Except Diagnostic

McCulloch v. McCulloch, 2013 R.I. LEXIS 113 (June 25, 2013)

Trial court abused its discretion when it assigned to wife stock in closely held company that made her a minority shareholder and when it failed to value the asset at issue; because the in-kind distribution left her with illiquid assets and no control over the company, a minority discount and marketability discount apply in valuing the assigned portions, court holds.

Key Words: In-kind distribution, Discount for Lack of Marketability, DLOM, Minority Discount, Divorce, Marital Dissolution,

Experts:  Peri Ann Aptaker (wife); John Brough, Jr. (husband); Jay Fishman (court-appointed)

Judge:        Flaherty

State/Jurisdiction: Rhode Island

Court: Court of Appeals

Type of case: Marital Dissolution

SIC code: 22 Textile Mill Products

Securities and Exchange Commission v. Tourre, 2013 U.S. Dist. LEXIS 87211 (June 18, 2013))

Under Daubert, federal court curtails trial testimony of defendant’s expert finding he lacked the appropriate qualifications; in a case centering on collateralized debt obligations (CDOs), his financial economics expertise is not even “sufficiently proximate” to the subject of testimony to overcome his lack of experience in the CDO industry, the court says.

Key Words: Daubert, Admissibility, Expert Testimony, Collateralized Debt Obligation (CDO)

Experts: Dwight M. Jaffee, Ira Wagner (plaintiff); Dr. Mukesh Bajaj (defendant)

Judge:  Forrest

State/Jurisdiction: Federal/New York

Court: U.S. District Court

Type of case: Securities

Versata Software, Inc. v. SAP America, Inc., 2013 U.S. App. LEXIS 8838 (May 1, 2013)

Federal Circuit affirms lost profits and royalty award finding defendants raised questions of admissibility of plaintiff expert testimony in the “improper context” because these are Daubert issues; also plaintiffs’ lost profits theory meets Panduit requirements because plaintiffs showed that there was demand for the technology during the damages period even if there were no actual sales of the specific software embodying it.

Key Words: Lost profits, Damages, Reasonable royalty, Daubert, Panduit

Experts: Neeraj Gupta, Chris Blackwell, Roy Weinstein (plaintiffs); Michael Wagner (defendants)

Judge:  Rader

State/Jurisdiction:  Federal

Court: United States Court of Appeals for the Federal Circuit

Type of case:  Intellectual Property

SIC code: 7372 Prepackaged Software (Software Publishing)

Ericsson Inc. v. D-Link Corp., 2013 U.S. Dist. LEXIS 71564 (May 21, 2013)

In IEEE 802.11n standard infringement case, district court denies defendants’ Daubert motion finding plaintiff expert’s damage model based on per unit royalty on sales of accused products included two levels of apportionment to properly capture only the value of the contribution of the asserted patents to end products and did not implicate entire market value rule.

Key Words: Daubert, Patent infringement, IEEE standard, Reasonable royalty, Apportionment, Entire Market Value Rule,  EMVR

Experts: John R. Bone (plaintiffs); unknown (defendants)

Judge:  Davis

State/Jurisdiction:  Federal/Texas

Court: United States District Court

Type of case:  Intellectual Property

SIC code: 4899 Communications Services N.E.C.

Sharp v. Sharp, 2013 Neb. App. LEXIS 58 (April 9, 2013)

In using the capitalization of earnings method to value husband’s medical practice, the wife’s expert did not improperly include personal goodwill, the appellate court finds; the valuation rested on actual earnings with some adjustment for reasonable compensation.

Key Words: Capitalization of earnings, Goodwill, Reasonable compensation, Marital dissolution

Experts:  Luke Northwall (wife); Chris Best (husband)

Judge:        Moore

State/Jurisdiction: Nebraska

Court: Court of Appeals

Type of case: Marital Dissolution

SIC code: 8011 Offices and Clinics of Medical Doctors

MyGallons LLC v. U.S. Bankcorp, 2013 U.S. App. LEXIS 11004 (May 31, 2013)

Fourth Circuit strikes down as “unsupportable” a $4 million lost profits award in a defamation suit; plaintiff’s first expert, a marketing professor, presented inadmissible growth projections that “ignore business realities”; as they formed the basis for the damage expert’s analysis, his testimony also is excludable.

Key Words: Lost profits, Damages, Defamation, Admissibility, Daubert

Experts: Paul Seitz (plaintiff); unknown (defendants)

Judge: Niemeyer

State/Jurisdiction:   Federal/North Carolina

Court: Court of Appeals

Type of case:  Damages

SIC code: 8699 Membership Organizations N.E.C.

Chesemore v. Alliance Holdings, Inc., 2013 U.S. Dist. LEXIS 80969 (June 4, 2013)

After determining defendants breached fiduciary ERISA duties in ESOP transaction, the federal court adjusts two nearly contemporaneous valuations of the target company to arrive at a “reasonable estimate” of the target’s fair market value and the plaintiffs’ overpayment.

Key Words: ESOP, ERISA, Damages, Discounted Cash Flow (DCF), Market Approach

Experts: Stout Risius Ross, Inc, (ESOP appraisers); Barnes Wendling (fairness opinion); RSM McGladrey, Inc. (BV consultant to ESOP trustees); Alpha Investment Consulting, LLC (independent advisors to ESOP trustees)

Judge: Conley

State/Jurisdiction: Federal/Wisconsin

Court: United States District Court

Type of case: ESOP

SIC code: 4225 General Warehousing and Storage (except self-storage and mini warehouses)

Metamining, Inc. v. Barnette, 2013 U.S. Dist. LEXIS 89446 (June 26, 2013)

Court says federal law, that is Daubert, controls admissibility of expert testimony in federal court and rejects defendants’ claim that expert was unqualified under state law; but it finds the opinion inadmissible because it resulted from an approach that does not align with income approach the expert said he used and cannot be compared to methods other experts in the field use.

Key Words: Daubert, Expert Testimony, Income Approach, Real Property, Discount

Experts:  Roger Daugherty (plaintiff); unknown (defendants)

Judge:        Jones

State/Jurisdiction: Federal/Virginia

Court: United States District Court

Type of case: Contract

SIC code: 1221 Bituminous Coal and Lignite Surface Mining