The plaintiffs’ business was allegedly damaged by the actions of the defendant. The plaintiffs engaged an expert in economic damages and lost profits. The defendants engaged their own expert to provide his opinions as to why he believed the plaintiffs’ expert’s opinions were unreliable. The court ultimately excluded this portion of the defendants’ expert’s testimony.
View Case Digest View CaseCourt Issues Partial Summary Judgment in Favor of Party Alleging Breach of Contract
This case resulted in the court issuing a partial summary judgment in favor of the defendant (and counterclaimant) in a matter regarding a sale/purchase contract between the plaintiff and the defendant. The cross-allegations resulted from the defendant allegedly breaching the purchase contract, while the defendant alleged that the plaintiff first breached the contract and committed fraud in entering into the contract.
Yaquinto v. Thompson St. Capital Partners (In re Stone Panels, Inc.)
Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.
Property Transfer Was Not Fraudulent Because Debtor Was Not Insolvent
Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.
Mohen v. Mohen
In the trial court (TC), the wife was awarded $4,360,158 of mostly unaccrued interest on the corpus of trusts the husband set up unilaterally for the children. The TC took the value of those trusts, $9,291,372, as part of the marital estate. The TC also added $990,945 of interest that the trusts had received and the remaining unaccrued future interest for a total value of “distribution” paid to the husband of $14,642,475 related to the trusts. The appellate court (AC) determined that the future interest was future interest and, thus, not part of the marital estate. However, the AC let stand the determination that the value of the trusts were to be treated as a distribution to the husband.
Husband Dissipates Assets by Placing Them in Trusts for the Children, but the Appellate Court Does Not Allow Unaccrued Interest
In the trial court (TC), the wife was awarded $4,360,158 of mostly unaccrued interest on the corpus of trusts the husband set up unilaterally for the children. The TC took the value of those trusts, $9,291,372, as part of the marital estate. The TC also added $990,945 of interest that the trusts had received and the remaining unaccrued future interest for a total value of “distribution” paid to the husband of $14,642,475 related to the trusts. The appellate court (AC) determined that the future interest was future interest and, thus, not part of the marital estate. However, the AC let stand the determination that the value of the trusts were to be treated as a distribution to the husband.
Walsh v. Bowers
A district court has ruled “decisively” against the Department of Labor (DOL) in an ESOP valuation case, stressing that the DOL failed to follow standard valuation practices.
District Court Rules ‘Decisively’ Against the DOL in an ESOP Overvaluation Case
The Department of Labor sued the defendants, which included two individual owners, Bowers & Kubota Consulting Inc. and the Bowers & Kubota ESOP, alleging that the defendants had violated ERISA laws by manipulating data to induce the ESOP to pay $40 million for the shares of the individual shareholders that the DOL claimed was in excess of the fair market value of the shares. After extensive testimony of valuation experts and analysis of the facts of the case, the court determined that no ERISA violations have been established.
Larchick v. Pollock
The trial court (TC) in this case excluded the evidence of a business valuation expert because he had submitted a calculation of value report and was then asked to testify to it. The expert self-admitted that he would not testify to a calculation of value and had explained in his engagement letter that a valuation engagement would be required for testimony. Despite the exclusion by the TC and the self-admission of the inadequacy of a calculation of value for testimony purposes, the appellate court nevertheless remanded the case in part to determine whether the calculation of value met the requirements of Arizona Rule 702 for allowable evidence.
Arizona Appeals Court Says a Calculation of Value Is Not Per Se Unacceptable
The trial court (TC) in this case excluded the evidence of a business valuation expert because he had submitted a calculation of value report and was then asked to testify to it. The expert self-admitted that he would not testify to a calculation of value and had explained in his engagement letter that a valuation engagement would be required for testimony. Despite the exclusion by the TC and the self-admission of the inadequacy of a calculation of value for testimony purposes, the appellate court nevertheless remanded the case in part to determine whether the calculation of value met the requirements of Arizona Rule 702 for allowable evidence.
Cheng v. Coastal Lb Assocs.
This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.
California Court of Appeal Allows a Discount for Lack of Control in the Buyout of 25% Interests in an LLC
This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.
Pourmoradi v. Gabbai
This California appellate case reviewed the trial court’s decision that discounts for lack of control and lack of marketability were not appropriate in determining the value to be paid to the plaintiffs in this corporate dissolution case where the remaining 50% owners exercised their right to purchase the plaintiff’s 50% interest in the LLC.
California Appellate Court Remands for Application of Trial Court of Wrong Standard of Value Denying Discounts
This California appellate case reviewed the trial court’s decision that discounts for lack of control and lack of marketability were not appropriate in determining the value to be paid to the plaintiffs in this corporate dissolution case where the remaining 50% owners exercised their right to purchase the plaintiff’s 50% interest in the LLC.
Malpractice Insurer Not Required to Defend Valuation Firm for Claim Alleging Securities Fraud
This case featured a motion to dismiss a claim from an insured that the plaintiff, Great American, was required to defend the defendant, Stout, against a claim by ESOP plaintiffs that Stout committed “federal securities fraud.” While the Great American policy covered valuation services, the policy also featured an exclusion for claims against the insured for securities violations.
Great Am. Fid. Ins. Co. v. Stout Risius Ross, Inc.
This case featured a motion to dismiss a claim from an insured that the plaintiff, Great American, was required to defend the defendant, Stout, against a claim by ESOP plaintiffs that Stout committed “federal securities fraud.” While the Great American policy covered valuation services, the policy also featured an exclusion for claims against the insured for securities violations.
Aureus Holdings, LLC v. Kubient, Inc.
In this civil action, the defendant/counterclaim plaintiff (Kubient) filed a partial motion to dismiss the claims of unjust enrichment and tortious interference with business relations by the plaintiff/counterdefendant (Lo70s). The complaint showed that Kubient took actions not covered in the LOI, such as taking without permission the business and assets of Lo70s and persuading specific customers away from Lo70s and to Kubient. As a result of this and other actions of Kubient, the court did not allow a dismissal at this point in the process. The motions were denied.
Court Denies a Partial Motion by Defendant to Dismiss Claims of Unjust Enrichment and Tortious Interference With Business Relations
In this civil action, the defendant/counterclaim plaintiff (Kubient) filed a partial motion to dismiss the claims of unjust enrichment and tortious interference with business relations by the plaintiff/counterdefendant (Lo70s). The complaint showed that Kubient took actions not covered in the LOI, such as taking without permission the business and assets of Lo70s and persuading specific customers away from Lo70s and to Kubient. As a result of this and other actions of Kubient, the court did not allow a dismissal at this point in the process. The motions were denied.
Cela v. Cela
The Appellate Court (AC) upheld the trial court’s decision to accept the value under the income approach adjusted for the exclusion of personal goodwill. The expert for the wife (business owner) had used the asset approach reasoning that all goodwill was personal. The trial court and the AC rejected that approach.
Appellate Court Upholds Decision to Use Income Approach and Reduce Personal Goodwill
The Appellate Court (AC) upheld the trial court’s decision to accept the value under the income approach adjusted for the exclusion of personal goodwill. The expert for the wife (business owner) had used the asset approach reasoning that all goodwill was personal. The trial court and the AC rejected that approach.
Strougo v. Tivity Health, Inc.
In this case regarding alleged fraud in the purchase or sale of securities, the defendants pled a motion to dismiss the plaintiffs’ claims. The parties categorized the defendants’ alleged misstatements into two groups: (1) the Nutrisystem claim, where the defendants allegedly misled investors as to the success of the Nutrisystem acquisition; and (2) the goodwill claim, where the defendants allegedly impaired goodwill by carrying goodwill at a value that exceeded its implied fair value. The court denied the motion to dismiss.
Court Denies a Motion to Dismiss Plaintiffs’ Claims That Defendants “Hid” Losses and Impaired Goodwill
In this case regarding alleged fraud in the purchase or sale of securities, the defendants pled a motion to dismiss the plaintiffs’ claims. The parties categorized the defendants’ alleged misstatements into two groups: (1) the Nutrisystem claim, where the defendants allegedly misled investors as to the success of the Nutrisystem acquisition; and (2) the goodwill claim, where the defendants allegedly impaired goodwill by carrying goodwill at a value that exceeded its implied fair value. The court denied the motion to dismiss.
Kakollu v. Vadlamudi
In this marital dissolution case, the Indiana Appellate Court affirms the trial court’s decision that no DLOM is allowed in the valuation of a control interest. The husband’s expert failed to provide sufficient evidence that a DLOM was appropriate at the level the wife’s expert claimed. The court also affirmed the decision that $50,000 of legal and expert fees the husband paid in advance is not part of the marital estate and thus not subject to offset.
Court Affirms No DLOM in Valuation of a Control Interest, Wife’s Legal Fees Are Not Part of Marital Estate
In this marital dissolution case, the Indiana Appellate Court affirms the trial court’s decision that no DLOM is allowed in the valuation of a control interest. The husband’s expert failed to provide sufficient evidence that a DLOM was appropriate at the level the wife’s expert claimed. The court also affirmed the decision that $50,000 of legal and expert fees the husband paid in advance is not part of the marital estate and thus not subject to offset.
Cont'l Investors Fund LLC v. TradingScreen Inc.
The defendant did not breach its redemption agreement because a committee of directors, “properly engaged in the judgment-laden task of determining the amount of funds that the company could use for redemptions … [and] determined that using a greater amount of cash to redeem more shares threatened the company's ability to continue as a going concern.” As a result, interest on the asserted obligation back to 2013 was not allowed at 13%, the amount per the agreement.
Company Did Not Breach Its Redemption Agreement Because of Diligence of Directors
The defendant did not breach its redemption agreement because a committee of directors, “properly engaged in the judgment-laden task of determining the amount of funds that the company could use for redemptions … [and] determined that using a greater amount of cash to redeem more shares threatened the company's ability to continue as a going concern.” As a result, interest on the asserted obligation back to 2013 was not allowed at 13%, the amount per the agreement.