Expert’s Exclusion Dooms ‘Frozen Market’ Theory and Loss of Value Claims
Court excludes expert damages calculation where expert relied solely on “temporal relationship” to show causation between loss of value in plaintiff’s business and defendants’ actions and did not account for alternative explanation for plaintiff’s loss.
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.
‘Fanciful’ Projections Make DCF an Unreliable Tool in Appraisal Proceeding
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.
Defective Lost Profits Analysis Triggers Take-Nothing Ruling
High court discusses level of evidence required to establish future lost profits with “reasonable certainty”; plaintiff did not show it lost any contracts owing to defendants’ wrongdoing and failed to show profitability specific to claimed lost contracts.
Horizon Health Corp. v. Acadia Healthcare Co.
High court discusses level of evidence required to establish future lost profits with “reasonable certainty”; plaintiff did not show it lost any contracts owing to defendants’ wrongdoing and failed to show profitability specific to claimed lost contracts.
Solvency Determination Turns on Income Recognition Analysis
Court credits trustee expert’s analysis of debtor’s balance sheet, finding the expert showed debtor’s practice of immediate recognition of initial franchise fees as revenue violated GAAP and debtor was continuously insolvent; transfers are avoidable.
Redmond v. NCMIC Fin. Corp. (In re Brooke Corp.)
Court credits trustee expert’s analysis of debtor’s balance sheet, finding the expert showed debtor’s practice of immediate recognition of initial franchise fees as revenue violated GAAP and debtor was continuously insolvent; transfers are avoidable.
SEC’s Daubert Challenge to Securities Valuation Testimony Fizzles
In an SEC case requiring valuation of restricted securities, court admits most of the testimony of parties’ experts; experts need not be specialists in given field and need not demonstrate familiarity with USPAP or SSVS to qualify under Daubert, court fin ...
Chancery Says Solid Sales Process Lends Credibility to Deal Price
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.
Judicial Appraisal Lacks Valuation Evidence and Gets Dinged on Appeal
Appeals court scraps judicial appraisal, finding it was not based on competent evidence; in valuing dissenting shareholder’s interest in auto dealership, trial court ignored expert opinions but failed to detail methodology supporting its valuation.
Court Dismisses S Corp Tax Argument in Fair Value Buyout
In statutory fair value proceeding, court adopts income-based approach reconciling key differences in expert analyses regarding historical earnings period, tax rates, and normalization for intercompany transactions; court rejects market analysis.
SEC v. Nutmeg Group, LLC
In an SEC case requiring valuation of restricted securities, court admits most of the testimony of parties’ experts; experts need not be specialists in given field and need not demonstrate familiarity with USPAP or SSVS to qualify under Daubert, court fin ...
Eleventh Circuit Affirms Tax Court’s Valuation of Trust’s Interest in LLC
Affirming FMV conclusion, appeals court says Tax Court did not err in focusing less on details of methodology parties’ appraisers used than on larger issue of whether hypothetical seller would be able to force distribution of majority of LLC’s assets.
Estate of Koons v. Commissioner (Koons II)
Affirming FMV conclusion, appeals court says Tax Court did not err in focusing less on details of methodology parties’ appraisers used than on larger issue of whether hypothetical seller would be able to force distribution of majority of LLC’s assets.
Questions a judge will ask of a valuation expert witness
A new book not only gives judges and attorneys a reference guide of fundamental business valuation concepts, but it's also a refresher course for valuation experts, and it will help them prepare for court.
Schewe v. Schewe Farms
Appellate court affirms fair value determination of distributional interest in family farm based on multiprong valuation; company is not a holding company, and net asset valuation alone fails to capture fair value of dissociating members’ interest.
NAV Alone Fails to Capture Distributional Interest’s Fair Value
Appellate court affirms fair value determination of distributional interest in family farm based on multiprong valuation; company is not a holding company, and net asset valuation alone fails to capture fair value of dissociating members’ interest.
Missouri says yes to Daubert
Missouri's governor recently signed into law a bill in favor of adopting the Daubert standard applicable to the admissibility of expert testimony. The move by the governor apparently is the first in several major tort reform measures he hopes to accomplish during his term.
ESOP Trustee Evaded Fiduciary Duties by Delegating Valuation
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.
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.
Comments wanted on simplified MUM for personal goodwill
What do you think of this method a valuation expert and forensic accountant uses for allocating goodwill between its enterprise and personal components?
Market Data Approach ‘Particularly Unsuitable’ to Valuing Feature Film
Court rejects expert’s movie valuation based on percentage of cost of making it; market data approach is “particularly unsuitable” because simply averaging price of films and cost to create them does not yield information about value of particular film.
Court of Appeals Sides With Taxpayers on Right to Vet IRS Expert Valuation
Court of Appeals finds Tax Court held mistaken view of burden of proof and erred in declining to evaluate taxpayers’ multiple challenges to IRS’s expert valuation; on remand, Tax Court may consider new valuation evidence, appeals court says.
Reasonable Compensation Analysis Ignores Objective Evidence, Tax Court Says
Tax Court dismisses taxpayer expert’s reasonable compensation analysis as not helpful to trier of fact; court points to failure to consider objective evidence and detects willingness to “validate and confirm” the amounts reported on taxpayer’s returns.
Damages Calculation Admissible Under Facts Available to PI Expert
Court says P.I. expert properly based economic loss determination on plaintiff’s actual work situation at time of expert report instead of speculating about future earnings; testimony is helpful to jury because it explains issues not usually encountered.