In ESOP Discovery Dispute, Court Affirms Protection of Expert Drafts Under Rule 26
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.
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.
Lucchesi v. Lucchesi
Appeals court upholds ruling that appreciation in value of husband’s interest in family liquor business is marital asset; trial court carefully analyzed husband’s role in company to find he “substantially contributed” to the increase and husband stipulated to wife’s substantial contribution.
In Gatekeeper Role, Court Trains Attention on Expert Methodology, Not Conclusions
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. (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.
Appeals Court Upholds Grocery Store Buyout Ruling and Fair Value Determination
Appeals court upholds district court’s buyout order of minority shareholder’s interests in related family businesses (grocery store chain) as well as district court’s fair value determination; district court’s valuation “falls squarely” between trial experts’ valuations, appeals court says.
Lund v. Lund (II)
Appeals court upholds district court’s buyout order of minority shareholder’s interests in related family businesses (grocery store chain) as well as district court’s fair value determination; district court’s valuation “falls squarely” between trial experts’ valuations, appeals court says.
2018 Key Business Valuation and Damages Cases
Choices for the most interesting and pivotal court cases of 2018 involving business valuation issues.
Stephanos v. Stephanos (In re Marriage of Stephanos)
Trial court adopts goodwill value determination of wife’s expert (residual method) as well as expert’s finding that none of goodwill in family business is personal to owner spouse; business’s success was not dependent on owner’s continued presence or his execution of a noncompete, court says.
Divorce Court Finds No Personal Goodwill Value in Single-Owner Business
Trial court adopts goodwill value determination of wife’s expert (residual method) as well as expert’s finding that none of goodwill in family business is personal to owner spouse; business’s success was not dependent on owner’s continued presence or his execution of a noncompete, court says.
Tax Court’s Exelon ruling, turning on compromised appraisals, withstands appeal
In 2016, Tax Court Judge Laro ruled on the legitimacy of a series of Section 1031 transactions involving Exelon, an Illinois-based energy giant.
Expert’s inability to defend income analysis ‘is decidedly troubling,’ court says
Judges are alert to incongruities in valuations, as is clear from a recent condemnation case in which landowners hired three experts to calculate the compensation owed to them.
BVU News and Trends November 2018
A monthly roundup of key developments of interest to business valuation experts.
5th Circuit Upholds Tax Court’s Characterization of Interest and Discount Rulings
In estate tax dispute, Tax Court agrees with IRS that decedent transferred limited partner interest, not assignee interest, to revocable trust; under partnership agreement, limited partner had rights not available to assignee; court rejects discount for lack of control and adopts IRS’ DLOM rate.
Estate of Streightoff v. Commissioner (I)
In estate tax dispute, Tax Court agrees with IRS that decedent transferred limited partner interest, not assignee interest, to revocable trust; under partnership agreement, limited partner had rights not available to assignee; court rejects discount for lack of control and adopts IRS’ DLOM rate.
Congressional members accuse DOL of undermining ESOPs
As reported by the ESOP Association, in a letter to the White House dated October 1, 27 members of Congress (including one who identified as a CPA) have voiced serious concerns about the DOL’s “investigatory and enforcement policies toward Employee Stock Ownership Plans (ESOPs).”
New York Times serves up scathing look at appraisers in Trump exposé
“Friendly” valuations are the main characters in a brilliantly written and fascinating article in the New York Times about President Trump’s involvement in “dubious tax schemes” and “outright fraud” to increase the fortune he received from his father.
Appeals Court Upholds Tax Court’s Section 1031 Decision Pivoting on ‘Tainted Appraisals’
Appeals court upholds Tax Court’s ruling that taxpayer’s transactions do not represent section 1031 like-kind exchanges because taxpayer never assumed ownership of replacement plants; improper input from taxpayer’s law firm tainted appraisals used to show otherwise; accuracy penalty is justified.
Exelon Corp. v. Commissioner
Appeals court upholds Tax Court’s ruling that taxpayer’s transactions do not represent section 1031 like-kind exchanges because taxpayer never assumed ownership of replacement plants; improper input from taxpayer’s law firm tainted appraisals used to show otherwise; accuracy penalty is justified.
Can ESOP Appraisal Satisfy Charitable Contribution Reporting Requirement?
Court finds using ESOP appraisal to show “qualified appraisal” is a long shot to meet charitable contribution verification requirements because appraisal did not consider tax consequences or value shares individual petitioners donated, but petitioners may have reasonable cause defense.
Chrem v. Commissioner
Court finds using ESOP appraisal to show “qualified appraisal” is a long shot to meet charitable contribution verification requirements because appraisal did not consider tax consequences or value shares individual petitioners donated, but petitioners may have reasonable cause defense.
Expert’s Failure to Explain Basis for Compensation Analysis Renders Testimony Inadmissible
In condemnation case requiring fair market value analysis to determine compensation due to landowners, court excludes defense expert testimony, citing failure to follow mandated methodology and standard of value; court calls aspects of loss calculation based on income approach “disturbing.”
Rover Pipeline LLC v. 10.55 Acres
In condemnation case requiring fair market value analysis to determine compensation due to landowners, court excludes defense expert testimony, citing failure to follow mandated methodology and standard of value; court calls aspects of loss calculation based on income approach “disturbing.”
DOL urges court to uphold judgment against trustee in Brundle ESOP litigation
In the ongoing Brundle v. Wilmington Trust ESOP saga, which is now in the appeals stage, the Department of Labor recently filed an amicus brief in support of the district court’s $29.8 million judgment against the ESOP trustee. The case arose out of a plan participant’s claim that the ESOP trustee breached its fiduciary duties to the plan by causing the ESOP to pay more than fair market value for the employer’s stock.
Expert’s Detailed Risk Analysis Bolsters Use of Deep Discount in Law Firm Valuation
In buyout dispute over law firm interest, court credits firm’s expert, noting his extensive relevant experience, his taking care to value interest under fair market value standard, as required by the partnership agreement, and his detailed risk analysis to support a deep discount.