Table of Contents

Introduction

PART I. Latest Insights

Chapter 1. Management Projections: Business Valuation’s ‘Dirty Little Secret’

Chapter 2. When Is a ‘Projection’ a Forecast?
By Rod P. Burkert, CPA/ABV, CVA

Chapter 3. The Valuation Paradigm of COVID-19: Using the DCF Method After an Economic Crisis
By Craig Jacobson, Dan Korczyk, and Richard Peil (B. Riley Advisory Services)

Chapter 4. Amid Market Data Volatility, the Best Option Is a More Rigorous DCF

Chapter 5. Flaws in North Carolina Court’s Appraisal of Reynolds American
By Gilbert E. Matthews, CFA, Sutter Securities, Inc. (San Francisco, Calif., USA)

Chapter 6. The Use of Financial Projections in Solvency Opinions
By Craig Jacobson, B. Riley Advisory Services (New York, N.Y., USA)

Chapter 7. Valuation and Forensics: Economic Benefit Streams
By Darrell D. Dorrell, CPA/ABV, MBA, ASA, CVA, CMA, DABFA, and Gregory A. Gadawski, CPA/ABV, CVA, CFE

Chapter 8. The Most Prevalent Projection Issues Raised in ESOP Litigation

Chapter 9. Valuation Guidance Related to Prospective Financial Information (PFI)

Chapter 10. Deviations From Historical Cash Flow and Their Implications to Effective Discount Rates for Lost Profits Analyses
By Josh Shilts, CPA/ABV/CFF/CGMA, CFE, and Jeff Robison, Shilts CPA, PLC (Jacksonville, Florida, USA)

PART II. Court Case Digests

Court Case Summary Table

Court Case Digests

Acosta v. Reliance Trust Co.

Acosta v. Wilmington Trust, N.A. (I) (Graphite)

Acosta v. Wilmington Trust, N.A. (II) (Graphite)

Acosta v. Wilmington Trust, N.A. (HCMC)

ACP Master, Ltd. v. Sprint Corp.

Adelphia Recovery Trust v. FPL Group, Inc. (In re Adelphia Corp.)

Albert Trostel & Sons Co. v. Notz

American Classic Voyages Co. v. JP Morgan Chase Bank (I)

Andaloro v. PFPC Worldwide, Inc.

In re AOL Inc.

Blueblade Capital Opportunities LLC v. Norcraft Cos.

In re Body Transit

Brundle v. Wilmington Trust N.A. (I)

Brundle v. Wilmington Trust N.A. (II)

Brundle v. Wilmington Trust N.A. (III)

Bruno v. Bozzuto’s, Inc.

Burtch v. Opus, LLC (In re Opus East, LLC) (I)

Cargotec Corp. v. Logan Industries

Cede & Co., Inc. v. MedPointe Healthcare, Inc.

Charron v. Sallyport Global Holdings, Inc.

Chesemore v. Alliance Holdings, Inc. (I)

Chesemore v. Alliance Holdings, Inc. (II)

Christopher v. Hanson

City of Hialeah Emples. Ret. Sys. v. FEI Co.

Crescent/Mach I Partnership v. Turner

In re Appraisal of Dell Inc.

Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. (II)

In re DFC Global Corp.

DFC Global Corp. v. Muirfield Value Partners, L.P. (II)

Doft & Co. v. Travelocity.com Inc.

In re Dole Food Co. (Dole III)

In re EM Lodgings, LLC

In re Emerging Communications, Inc. Shareholders Litigation

Finkelstein v. Liberty Digital, Inc.

Fish v. GreatBanc Trust Co.

Fox v. CDx Holdings

Gallagher v. Commissioner (I)

Gearreald v. Just Care Inc.

Gholl v. eMachines, Inc.

In re Global Technovations, Inc. (I)

Gray v. Cytokine Pharmasciences, Inc.

In re Greater Southeast Community Hospital Corp. (II)

Henke v. Trilithic, Inc.

Highfields Capital, Ltd. v. AXA Financial, Inc.

Huff Fund Investment Partnership v. CKx, Inc. (I)

IceMOS Tech. Corp. v. Omron Corp.

Insignia Systems, Inc. v. News America Marketing In-Store, Inc.

In re ISN Software Corp. Appraisal Litig.

Kendall Hoyd & Silver v. Trussway Holdings

In re Kinser Group LLC

Kohler et al. v. Commissioner of Internal Revenue

Kruse v. Synapse Wireless, Inc.

Lightbox Ventures, LLC v. 3 RD Home Ltd.

MacDermid Printing Solutions, Inc. v Cortron Corp.

Magarik v Kraus

Maric Capital Master Fund, Ltd. v. Plato Learning, Inc.

In re Mercury Companies, Inc. (I)

In re Merge Healthcare Inc. Stockholders Litigation

Merion Capital L.P. v. Lender Processing Servs.

Merion Capital LP & Merion Capital II LP v. BMC Software

Merion Capital, L.P. v. 3M Cogent, Inc.

Michael F. Taylor v. American Specialty Retailing Group, Inc.

MY Imagination v. M.Z. Berger & Co. (I)

Natural Balance Pet Foods, Inc. v. Chenango Pet Foods, Inc.

In re Nellson Nutraceutical (II)

Official Committee of Unsecured Creditors v. Calpers Corp. Partners, LLC

Parlour Enterprises Inc. v. The Kirin Group, Inc.

Perez v. Bruister (I)

Perez v. Bruister (II)

Perez v. First Bankers Trust Services, Inc.

In re PetSmart, Inc.

Pike v. Tex. EMC Mgmt., LLC

In re PLX Tech. Stockholders Litig.

Reynolds American Inc. v. Third Motion Equities Master Fund Ltd.

S. Muoio & Co., LLC v. Hallmark Entertainment Investments

Scalia v. Reliance Trust Co.

Smith v. Promontory Financial Group, LLC

In re Appraisal Solera Holdings, Inc.

In re Spansion

Structural Polymer Group, Ltd. v. Zoltek Corporation

In re Sunbelt Beverage Corp. Shareholder Litigation

In re Appraisal of SWS Group, Inc.

In re Appraisal of The Orchard Enterprises, Inc.

In re TOUSA, Inc.

Towerview LLC v. Cox Radio, Inc.

In re Trados Inc.

In re Tronox Incorporated

In re U.S. Cellular

U.S. Salt, Inc. v. Broken Arrow, Inc.

Union Illinois 1995 Investment Limited Partnership v. Union Financial Group, Ltd.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc.

Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)

In re Winstar Communication, Inc.

Wright v. Irish (Hudson Valley Clean Energy, Inc.)

In re Yellowstone Mountain Club, LLC

Look Inside the Guide

• Acosta v. Reliance Trust Co.
  In DOL’s overpayment case against company directors and ESOP trustee, court denies directors’ pretrial motion for dismissal of case, finding DOL advanced “plausible” case theories; court also finds ESOP defendants have no right to indemnification from estate of late owner/seller of company shares.
• Acosta v. Wilmington Trust, N.A. (HCMC)
  In ESOP discovery dispute, court orders disclosure of documents involving company’s independent financial advisor; there is no attorney-client privilege where parties’ engagement agreement expressly designated advisor as an “independent contractor with no fiduciary or agency to the Company.”
• Acosta v. Wilmington Trust, N.A. (I) (Graphite)
  In ESOP case pivoting on valuation, court denies parties’ Daubert challenges; court notes “gatekeeping” means focusing “on principles and methodology, not the conclusions that [the experts] generate”; parties’ objections are mostly quarrels with opposing expert’s conclusions, court finds.
• Acosta v. Wilmington Trust, N.A. (II) (Graphite)
  In ESOP case, court, citing Rule 26 of federal rules of civil procedure, denies defendant trustee’s motion to compel disclosure of information related to DOL expert’s prior work in valuation industry and expert’s other work for DOL on ESOP-related matters.
• ACP Master, Ltd. v. Sprint Corp.
  In joint fiduciary-appraisal action centering on Sprint’s acquisition of minority interest in related entity, Chancery says merger was entirely fair and adopts respondent expert’s DCF analysis; huge value gap is 90% due to experts’ choice of projections.
• Adelphia Recovery Trust v. FPL Group, Inc. (In re Adelphia Corp.)
  Court finds trust failed to prove insolvency; its expert’s use of DCF alone was inappropriate where there were no cash flow projections untainted by fraud, but competing expert’s market-based approach and value per subscriber analysis were solid.
• Albert Trostel & Sons Co. v. Notz
  Statutory fair value appraisal of automotive company turns on DCF inputs, including discount rate and management projections, plus one expert’s better industry experience and analysis.
• American Classic Voyages Co. v. JP Morgan Chase Bank (In re American Classic Voyages Co.) (I)
  Insolvency valuation relies on credibility of pre-9/11 projections and also credibility of experts.
• Andaloro v. PFPC Worldwide, Inc.
  PNC Financial Services Group, Inc. (PNC), the parent of PFPC Holding Corp. (Holding), had planned to take Holding's subsidiary, PFPC Worldwide, Inc. (PFPC), public via an initial public offering (IPO), but the opportunity did not arise.
• Blueblade Capital Opportunities LLC v. Norcraft Cos.
  Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.
• Brundle v. Wilmington Trust N.A. (I)
  Court finds ESOP trustee liable for allowing overpayment for company shares; trustee rushed transaction and failed to scrutinize financial advisor’s valuation ignoring red flags related to projections, use of control premium, beta, rounding up of values.
• Brundle v. Wilmington Trust N.A. (II)
  Notwithstanding errors related to the court’s liability and damages determinations, the court rejects trustee’s motion for reconsideration as an inappropriate effort to introduce new legal theories and a late attempt to present a competing damages methodo ...
• Brundle v. Wilmington Trust N.A. (III)
  In key ESOP case, 4th Circuit affirms liability and damages findings against ESOP trustee; court says trustee’s reliance on ESOP appraiser’s contemporaneous valuation was not “reasonably justified”; district court used correct measure of damages and justifiable methodology, 4th Circuit finds.
• Bruno v. Bozzuto’s, Inc.
  Court excludes plaintiffs’ DCF-based damages calculation, finding it suffers from “garbage-in, garbage-out” problem; plaintiffs’ experts based cash flow analysis on defendant’s preliminary projections rather than subsequently available actual sales data.
• Burtch v. Opus, LLC (In re Opus East, LLC) (I)
  In Chapter 7 case, Bankruptcy Court finds trustee expert’s liquidation valuation fails to meet insolvency tests; court says expert’s substantial discounting of debtor’s assets is based on mistaken assumption and incompatible with going-concern valuation.
• Cargotec Corp. v. Logan Industries
  Appeals court majority strikes down lost profits and diminished business value awards, finding plaintiff failed to show causation and its damages expert based his calculations on management’s business plan without substantiating the plan’s underlying (unreasonable) gross profit goals.
• Cede & Co., Inc. v. MedPointe Healthcare, Inc.
  The Delaware Court of Chancery determined the fair value of publicly held stock in this dissenting shareholders’ action. The shareholders dissented from a two-step merger. However the court treated the first step as completed in making its fair value dete ...
• Charron v. Sallyport Global Holdings, Inc.
  In a buyout case, the court finds that, in reselling company, defendants undervalued rollover equity interest by double counting risks specific to the company in order to avoid triggering windfall provision in prior sales agreement favorable to plaintiff.
• Chesemore v. Alliance Holdings, Inc. (I)
  : Federal district court makes extensive finding regarding breaches of fiduciary duties for ESOP trustees that caused company to enter heavily leveraged buyout despite falling forecasts and flawed valuations marred by manager conflicts of interest.
• Chesemore v. Alliance Holdings, Inc. (II)
  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 plaintif ...
• Christopher v. Hanson
  Court denies summary judgment motion, finding that the owner of an ESOP company ‘”strong-armed” its ESOP appraiser to provide a target value for repurchasing/redeeming his shares.
• City of Hialeah Emples. Ret. Sys. v. FEI Co.
  Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
• Crescent/Mach I Partnership v. Turner
  Delaware Chancery conducts thorough DCF analysis in breach of fiduciary duty/appraisal action, with emphasis on credible management projections and inputs.
• Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. (II)
  High Court rejects Chancery’s decision to disregard deal price entirely in favor of court’s DCF analysis; record belies Chancery’s finding that deal price undervalued company stock, High Court says, urging adoption of deal price as fair value on remand.
• DFC Global Corp. v. Muirfield Value Partners, L.P. (II)
  State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.
• Doft & Co. v. Travelocity.com Inc.
  A minority shareholder of Travelocity.com Inc. (Travelocity) brought a dissenting shareholder action contesting the $28 per share it received in a short-form merger of Travelocity and seeking a determination of the fair value of its shares.
• Finkelstein v. Liberty Digital, Inc.
  In this appraisal action, the only valuation issue was the value of only one of the merged company's assets.
• Fish v. GreatBanc Trust Co.
  Court says defense expert opinion provides “credible and persuasive” support for court’s conclusion that ESOP financial advisor produced sound fairness and valuation opinions prior to contested transaction; there was no overpayment for stock at issue.
• Fox v. CDx Holdings
  Chancery says major accounting firm’s merger-related appraisal represents “new low”; to achieve client’s goal of zero corporate tax liability, firm abandoned sound prior approaches and simply copied another accounting firm’s report and called it its own.
• Gallagher v. Commissioner (I)
  Tax Court dismisses guideline company comparable method in this case for lack of true comparables, and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.
• Gearreald v. Just Care Inc.
  Delaware Court of Chancery prefers supply-side equity risk premium over historical ERP in statutory appraisal action, but rejects “novel” liquidity adjustment to size premium.
• Gholl v. eMachines, Inc.
  The issue in this appraisal action was the value of the shares of eMachines Inc., a company that provided low-cost computer goods to consumers.
• Gray v. Cytokine Pharmasciences, Inc.
  The issue in this case was the fair value of the shares of PharmaSciences, Inc.
• Henke v. Trilithic, Inc.
  The Delaware Court of Chancery determined the fair value of an interest in a financially troubled closely held electronics manufacturer using a discounted cash flow method. In performing the valuation, the court considered issues involving management proj ...
• Highfields Capital, Ltd. v. AXA Financial, Inc.
  Delaware Chancery Court favors “shared synergies” and actuarial analysis in the fair value appraisal of an insurance conglomerate’s merger.
• Huff Fund Investment Partnership v. CKx, Inc. (I)
  In statutory appraisal action, Chancery finds experts’ comparable analyses and DCF analyses are unreliable techniques with which to determine the target’s fair value; instead, the court opts to adopt the merger price, which it says resulted from a sales p ...
• IceMOS Tech. Corp. v. Omron Corp.
  In contract dispute, court says claims for lost profits and lost business value fail because, for both, plaintiff is unable to determine damages with reasonable certainty; relying solely on projections of future performance, without any proof of profit, is not enough under New York law.
• IceMOS Tech. Corp. v. Omron Corp.
  In contract dispute, court denies defendant’s Daubert motions, finding plaintiff’s experts are qualified based on extensive experience in relevant industry; experts could provide testimony relevant to surviving lost development support costs claim and their testimony is not unreliable as of now.
• In re AOL Inc.
  In statutory appraisal, court finds sales process was not “Dell compliant” and declines to assign any weight to deal price; court agrees with parties’ experts that DCF best captures fair value on valuation date and arrives at final value below deal price.
• In re Appraisal of Dell Inc.
  For statutory appraisal, Chancery says sales process related to management buyout “functioned imperfectly as a price discovery tool” and gives no weight to final merger price; court relies exclusively on DCF analysis to derive fair value of the company.
• In re Appraisal of SWS Group, Inc.
  In statutory appraisal, Chancery relies solely on DCF analysis, noting the instant case involving a bank holding company raises a unique situation in terms of management projections and whether and how to account for creation of excess regulatory capital.
• In re Appraisal Solera Holdings, Inc.
  In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.
• In re Body Transit
  Court finds creditor’s interest in debtor’s property is “inconsequential” and says a valuation of debtor’s fitness club must account for dismal state of fitness industry due to COVID-19 shutdown; debtor’s projections related to reorganization plan are too optimistic given economic uncertainty.
• In re Dole Food Co. (Dole III)
  In joint fairness/statutory appraisal action, Chancery finds defendants’ fraud defeated financial advisor’s ability to produce reliable DCF, notwithstanding advisor’s “heroic” efforts to create “the most credible and reliable projections in the case.”
• In re EM Lodgings, LLC
  In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.
• In re Emerging Communications, Inc. Shareholders Litigation
  The court in this case placed a fair value of $38.05 per share on the stock of a company which was acquired in a two-step going private transaction at $10.25 per share based on a fairness opinion.
• In re Global Technovations, Inc. (I)
  Bankruptcy court voids $25 million acquisition based on valuations that used historic, 12 months' earnings prior to closing and rejecting expert who relied substantially on inflated, unreasonable management projections.
• In re Greater Southeast Community Hospital Corp. (II)
  Bankruptcy Court conducts extensive valuation findings of hospital in fraudulent transfer case.
• In re ISN Software Corp. Appraisal Litig.
  Chancery finds gap separating fair value determinations of three valuation experts in a merger involving a privately held company “alarmingly” wide; court says only the DCF, “a simple and powerful concept,” achieves a reliable indicator of fair value.
• In re Kinser Group LLC
  In § 506(a) hotel valuations, bankruptcy court finds creditor’s experienced expert premised appraisals on “fundamentally flawed” base assumption that hotels would be sold on the valuation date, where debtor’s plan said debtor would retain and operate hotels; court said replacement value applied.
• In re Mercury Companies, Inc. (I)
  For reasonably equivalent value determination, Bankruptcy Court finds contract price and values from experts’ discounted cash flow analyses are too limiting and applies totality of circumstances test, concluding stock transfer is not avoidable.
• In re Merge Healthcare Inc. Stockholders Litigation
  Chancery says proxy gave disinterested shareholders sufficient information about valuation analysis underlying financial advisor’s fairness opinion to enable informed vote, and it dismisses breach-of-fiduciary-duty claims under business judgment rule.
• In re Nellson Nutraceutical (II)
  Management deliberately manipulates projections, without experts’ knowledge; court determines enterprise value nonetheless, adjusting and weighting reports.
• In re PetSmart, Inc.
  In statutory appraisal, Chancery decides to “defer” to deal price, citing a robust sales process and well-functioning market; petitioners’ DCF analysis was not a useful valuation tool where it was based on, “at best, fanciful” management projections.
• In re PLX Tech. Stockholders Litig.
  Chancery says plaintiffs proved directors breached fiduciary duties and duty to disclose but failed to prove damages; court rejects plaintiff expert's DCF analysis, noting problematic projections and beta; “real-world market evidence” shows company was not worth more than deal price.
• In re Spansion
  Bankruptcy court finds billion-dollar total enterprise valuation of flash memory manufacturer supports finding that proposed reorganization plan is fair, but declines confirmation pending amendments to equity incentives for management.
• In re Sunbelt Beverage Corp. Shareholder Litigation
  Delaware Chancery court confirms its preference for a DCF analysis, discredits company-specific risk premium, discusses circular logic behind selection of small-firm risk premium, and rejects value adjustment for post-merger conversion to an S Corp.
• In re TOUSA, Inc.
  Bankruptcy court voids over $600 million in transfers to subsidiaries of bankrupt homebuilders based on teams of expert testimony regarding solvency opinions and lack of reasonably equivalent value.
• In re Trados Inc.
  Court of Chancery finds the defendant directors proved “entire fairness” despite a management incentive plan and large liquidation preference that rendered the sales process unfair to common stockholders and left them with no proceeds; defendant expert’s ...
• In re Tronox Incorporated
  Bankruptcy Court discredits defendant experts’ “self-contained,” market-oriented solvency analysis finding his DCF analysis relied on inflated, “sell-side” company projections and his comparable analyses used insufficiently similar companies and transacti ...
• In re U.S. Cellular
  The issue in this appraisal action was the value of the shares of two cellular companies (Janesville and Sheboygan).
• In re Winstar Communication, Inc.
  Analyst argues that Bankruptcy Court should disregard publicly-traded stock value to assess whether telecom company was insolvent eighteen months before bankruptcy filing.
• In re Yellowstone Mountain Club, LLC
  Bankruptcy court avoids $209 million loan distribution to a resort owner, finding he (and counsel) manipulated the valuation experts, inflated projections, and used flawed appraisals for the underlying assets.
• In re: Appraisal of The Orchard Enterprises, Inc.
  Delaware Chancery Court confirms its preference for the DCF approach in a statutory appraisal action as well as the CAPM for calculating the discount rate and the supply-side ERP, but rejects an adjustment to the size premium to account for the latter.
• Insignia Systems, Inc. v. News America Marketing In-Store, Inc.
  Federal district court denies Daubert challenge to plaintiff’s lost profits expert, finding his reliance on optimistic management projections and comparable companies were better suited for cross-examination rather than exclusion.
• Kendall Hoyd & Silver v. Trussway Holdings
  Delaware Court of Chancery finds DCF analysis is the best way to achieve fair value in a statutory appraisal case arising out of a contested merger; court’s analysis leans heavily on company expert’s analysis regarding contested inputs, including projections, beta, and terminal value.
• Kohler et al. v. Commissioner of Internal Revenue
  A “textbook case” on how to value a large, closely-held corporation, complete with discussion of dividend method and appropriate discounts. A total victory for the taxpayer.
• Kruse v. Synapse Wireless, Inc.
  In appraisal action arising out of controller’s buyout of minority stockholders, court finds there is no reliable market evidence as to target’s fair value on merger date; none of expert valuations are “wholly reliable,” but one expert’s DCF analysis offers a “proportionately reliable conclusion.”
• Lightbox Ventures, LLC v. 3 RD Home Ltd.
  Court excludes lost profits calculation and valuations of new venture; experts’ unquestioning adoption of plaintiff’s data and assumptions, the large range of valuations proffered, and disclaimers accompanying valuations undermine opinions’ meaningfulness.
• MacDermid Printing Solutions, Inc. v Cortron Corp.
  Court finds damages expert’s use of destruction of business method is not improper despite a four-year gap between the alleged offending conduct and the company’s demise, and it does not render his calculation inadmissible under Daubert.
• Maric Capital Master Fund, Ltd. v. Plato Learning, Inc.
  Delaware Chancery enjoins merger based on flawed proxy statement, including overstated discount rate in valuation and selectively chosen cash flow projections.
• Merion Capital L.P. v. Lender Processing Servs.
  In appraisal action, Chancery says final merger consideration best represents fair value, noting sales process led to “meaningful price discovery”; court says with DCF too much depends on assumptions; small changes may have outsize impact on value range.
• Merion Capital LP & Merion Capital II LP v. BMC Software
  Chancery favors merger price, without synergy adjustment, over DCF-generated value, noting uncertainties over key inputs such as projections, equity risk premium, terminal growth rate as well as the “wildly divergent” DCF results of the parties’ experts.
• Merion Capital, L.P. v. 3M Cogent, Inc.
  In statutory appraisal action, Court of Chancery discredits respondent’s comparable company analyses because the comparables were significantly smaller than the target and not in the same industry or had different multiples; as to the DCF analysis, the ta ...
• Michael F. Taylor v. American Speciality Retailing Group, Inc.
  The Delaware Court of Chancery considered the fair value of a minority interest in a retail sporting goods chain. The court considered the experts’ discounted cash flow, comparable company, and transaction valuations. It gave great weight to the managemen ...
• MY Imagination v. M.Z. Berger & Co. (I)
  Court says plaintiff fails New York test for lost profits; plaintiff lacks coherent damages theory and, by its own admission, is unable to do more than speculate about future profitability; expert calculation represents “the sort of conjecture the reasonable certainty standard prohibits.”
• Natural Balance Pet Foods, Inc. v. Chenango Pet Foods, Inc.
  The California Court of Appeal, 2nd District, concluded that testimony from a forensic accountant as to the lost profits arising from a breach of contract were not speculative because the computation was based in part on management’s projections.
• Official Committee of Unsecured Creditors v. Calpers Corp. Partners, LLC
  In bankruptcy dispute, court rejects parties’ Daubert challenge to opposing expert testimony; defense expert did not blindly rely on management projections for capital adequacy and balance sheet tests, and plaintiff’s expert did not use hindsight to find debtor was insolvent on fund transfer dates.
• Parlour Enterprises Inc. v. The Kirin Group, Inc.
  Court denies lost profits claim for unestablished business based on speculative management forecasts and lack of credible market data.
• Perez v. Bruister (I)
  In ESOP case, court finds trustees unreasonably relied on appraiser’s valuations and overpaid for company stock; court credits parties’ three experts equally and arrives at fair market value by averaging results from experts’ multiple calculations.
• Perez v. Bruister (II)
  5th Circuit upholds district court’s liability and remedy findings in ESOP case; lower court’s weighting and averaging of valuation results offered by parties’ experts to compute amount of overpayment “was founded in established valuation methodology.”
• Perez v. First Bankers Trust Services, Inc.
  Court finds ESOP trustee liable for causing plan to overpay; trustee “delegated” valuation to ESOP valuator without inquiring into valuation components, including projections, and without exploring “glaring” gaps (industry analysis) in valuation report.
• Pike v. Tex. EMC Mgmt., LLC
  In business tort case involving unprofitable entity trying to market a trade secret, court upholds damages award; experts’ EBITDA valuations were based on commonly used method and numerous data sources, and experts linked data to conclusions, court says.
• Reynolds American Inc. v. Third Motion Equities Master Fund Ltd.
  In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.
• S. Muoio & Co., LLC v. Hallmark Entertainment Investments
  Delaware Chancery urges experts to use “robust” “triangular” valuation approach, including DCF, comparable companies, and comparable transactions.
• Scalia v. Reliance Trust Co.
  In an evolving ESOP case, court says DOL’s allegations that ESOP trustee and various directors engaged in breaches of fiduciary duties and caused the ESOP to enter a prohibited transaction (i.e., overpaid for company stock) require “fact-intensive inquiry” and cannot be resolved on summary judgment.
• Smith v. Promontory Financial Group, LLC
  In buyout dispute, court says parties’ letter of intent states buyout conditions; court relies on amount stated in plaintiff’s debt/equity deal proposal to value subject company, finding parties’ trial experts used methods (DCF and asset accumulation) not suited to valuing subject company.
• Structural Polymer Group, Ltd. v. Zoltek Corporation
  Expert bases solid lost profits calculations for breach of sales on management-provided projections as well as actual performance data and other corroborating sources.
• Towerview LLC v. Cox Radio, Inc.
  In statutory appraisal action related to radio broadcasting business, Court of Chancery affirms that pre-merger management projections generally are an “appropriate starting point” for the requisite DCF analysis; however, given signs of secular change in ...
• U.S. Salt, Inc. v. Broken Arrow, Inc.
  Lost profits calculations, based exclusively on management projections, called into question by U.S. District Court.
• Union Illinois 1995 Investment Limited Partnership v. Union Financial Group, Ltd.
  This is an appraisal action in which shareholders who are all affiliated with the O’Brien family seek a determination of the fair value of their shares in Union Financial Group, Ltd. (“UFG”). The O’Brien family controlled approximately 38% of UFG’s stoc ...
• Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba I)
  In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal-price-minus-synergies is a less reliable “indirect measure.”
• Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)
  Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.
• Wright v. Irish (Hudson Valley Clean Energy, Inc.)
  Court discredits respondent expert’s capitalization of earnings calculation and market-based analysis, noting “severe deficiencies” and instead adopts petitioner expert’s valuation but applies DLOM to entire equity value, not just goodwill.