Griggs v. Griggs
The husband appealed this Vermont divorce case to the State Supreme Court inter alia to challenge the inclusion of PPP loan proceeds by the wife’s expert in determining the cash flows of the husband’s electrician services business for purposes of determining a value of the business using the capitalization of earnings method. The Supreme Court affirmed the lower trial court on this issue and allowed the PPP proceeds to be included in the cash flows.
Vermont Supreme Court Allows Inclusion of PPP Proceeds in Cap Earnings Cash Flow for Determination of Value
The husband appealed this Vermont divorce case to the State Supreme Court inter alia to challenge the inclusion of PPP loan proceeds by the wife’s expert in determining the cash flows of the husband’s electrician services business for purposes of determining a value of the business using the capitalization of earnings method. The Supreme Court affirmed the lower trial court on this issue and allowed the PPP proceeds to be included in the cash flows.
Lamm v. Preston
This was a divorce case with a complex set of issues regarding the marital estate and the businesses of the parties. This Supreme Court of Idaho case and opinion related to one of the businesses, Black Sage Acquisition LLC, in which the couple owned 25%. The magistrate court determined the value of Black Sage Acquisition as $163,373 based on fair market value. The remaining value was determined to be personal goodwill. The Supreme Court (Idaho) affirmed the decision of the district court, which upheld the magistrate court.
Idaho Supreme Court Affirms Magistrate Judge’s Opinion Regarding Personal Goodwill
This was a divorce case with a complex set of issues regarding the marital estate and the businesses of the parties. This Supreme Court of Idaho case and opinion related to one of the businesses, Black Sage Acquisition LLC, in which the couple owned 25%. The magistrate court determined the value of Black Sage Acquisition as $163,373 based on fair market value. The remaining value was determined to be personal goodwill. The Supreme Court (Idaho) affirmed the decision of the district court, which upheld the magistrate court.
Recap of the AAML/BVR National Divorce Conference
It was a happy marriage of divorce attorneys and financial experts who gathered together for the AAML/BVR National Divorce Conference in Las Vegas. The AAML is the American Academy of Matrimonial Lawyers.
The Two Most Prevalent Methods for Solving the Goodwill Conundrum
Remarks from a session at the AAML/BVR National Divorce Conference conducted by veteran valuers Jay Fishman (Financial Research Associates) and Ken Pia (Marcum) who were joined by attorney Thomas J. Sasser (Sasser, Cestero & Roy).
Brown v. Brown
In this Mississippi divorce case, the appellate court en banc reversed in part and remanded in part, asking the trial court to determine whether certain items were marital property and determine the values for certain marital properties so a proper distribution of marital property can be made. Included was a used-car business that was remanded for a value to be determined. Several judges dissented primarily because the marital estate in total was not very material and they believed the appellate court could have made adjustments without remanding.
Mississippi Appeals Court En Banc Remands for Valuation of a Small Used-Car Business With Dissents From Several Judges
In this Mississippi divorce case, the appellate court en banc reversed in part and remanded in part, asking the trial court to determine whether certain items were marital property and determine the values for certain marital properties so a proper distribution of marital property can be made. Included was a used-car business that was remanded for a value to be determined. Several judges dissented primarily because the marital estate in total was not very material and they believed the appellate court could have made adjustments without remanding.
BV News and Trends October 2022
A monthly roundup of key developments of interest to business valuation experts.
Thomasee v. Thomasee
The Louisiana appellate court affirmed the decision of the trial court in a divorce case that included the value of the husband’s business in the marital estate as community property. The husband argued that the FEMA adjuster business was a professional business and that the profits were all goodwill and, therefore, not included in the estate. The wife argued that the business was not a professional business and had value other than just the personal goodwill of the husband. The value was includable as community property, and any subsequent income was half hers. The trial court sided with the wife, and the appeals court affirmed.
Louisiana Appeals Court Affirms Husband’s Business Is Not a Professional Business and Has Value Other Than Personal Goodwill
The Louisiana appellate court affirmed the decision of the trial court in a divorce case that included the value of the husband’s business in the marital estate as community property. The husband argued that the FEMA adjuster business was a professional business and that the profits were all goodwill and, therefore, not included in the estate. The wife argued that the business was not a professional business and had value other than just the personal goodwill of the husband. The value was includable as community property, and any subsequent income was half hers. The trial court sided with the wife, and the appeals court affirmed.
Divorce courts getting flexible on valuation dates
One of the interesting points made at the recent AAML/BVR National Divorce Conference was that judges in marital dissolution cases now tend to want more current valuations, particularly when subsequent events may have impacted value.
Great turnout for the AAML/BVR National Divorce Conference
The AAML/BVR National Divorce Conference harkened back to prepandemic times as family law attorneys and valuation experts met in person in Las Vegas September 18-20.
Divorce Highlight: Last chance—AAML/BVR Divorce Conference starts Sunday September 18
Connect with divorce attorneys from across the US at the AAML/BVR National Divorce Conference in Las Vegas September 18-20.
Divorce Highlight: PPP loans, goodwill, BIG tax in recent divorce cases
How do you treat a PPP loan in a marital dissolution case?
Divorce Highlight: Hitchner’s wrath continues regarding Damodaran’s attacks
Speaking at the NACVA’s Business Valuation & Financial Litigation Super Conference last week, Jim Hitchner (Valuation Products and Services) continued his strong rebuttal of some severe criticisms Aswath Damodaran (New York University Stern School of Business) made during a recent BVR webinar about certain inputs to the cost of capital (see prior coverage here).
Divorce Highlight: What’s in a judge’s mind?
In divorce matters, the most important audience is often the trier of fact, so anytime you can glean insights from them is time well spent.
Divorce Highlight: Forging the attorney-expert relationship
“One of the things I suggest to younger family lawyers is to make relationships with experts,” says Jay Fishman (Financial Research Associates) in a recent interview with Family Lawyer Magazine.
Simons v. Simons
The Nebraska Supreme Court allowed a fair value determination by the wife’s expert as the appropriate value for a divorce case and did not include any discounts that might apply in a fair market value determination. Much of the opinion dealt with the issue of a constructive trust, which the trial court determined results in a 50% ownership by the wife in the family business.
Nebraska Supreme Court Allows Fair Value Determination for Family-Owned Business and Does Not Allow Discounts
The Nebraska Supreme Court allowed a fair value determination by the wife’s expert as the appropriate value for a divorce case and did not include any discounts that might apply in a fair market value determination. Much of the opinion dealt with the issue of a constructive trust, which the trial court determined results in a 50% ownership by the wife in the family business.
Divorce Highlight: Something for everyone at the AAML/BVR Divorce Conference
The breadth of topics run from basic to complex at the 2022 AAML/BVR National Conference, which will be held on September 18-20 in Las Vegas.
Divorce spotlight: valuing a family business with complex ownership
When a family business caught up in divorce is not a simple 100% ownership, things can get complicated—from both a valuation and legal perspective.
Weinstein v. Weinstein
In this Vermont divorce case, the Supreme Court affirmed the value of the husband’s law practice even though there was evidence of some potential personal goodwill left in the value determined by the lower court. The Supreme Court also affirmed the wife’s expert’s determination of the husband’s income for maintenance purposes. Note that, per the court, “decisions of a three-justice panel are not to be considered as precedent before any tribunal.”
Vermont Supreme Court Affirms Value of Husband’s Law Practice, Declines to Eliminate Personal Goodwill, Affirms Determination of Husband’s Income
In this Vermont divorce case, the Supreme Court affirmed the value of the husband’s law practice even though there was evidence of some potential personal goodwill left in the value determined by the lower court. The Supreme Court also affirmed the wife’s expert’s determination of the husband’s income for maintenance purposes. Note that, per the court, “decisions of a three-justice panel are not to be considered as precedent before any tribunal.”
New Toolkit for Passive Appreciation Takes Shape
BVR and Dr. Ashok Abbott (West Virginia University) are developing an automated tool and supporting documentation that embodies his peer-reviewed methodology for separating active from passive appreciation of business assets in a divorce context.