Court Says ‘Fair Value’ Under State Shareholder Oppression Law Precludes Discounts
In shareholder oppression suit, court clarifies meaning of “fair value” under applicable statutory framework; court cautions not to conflate “fair value” with “fair market value”; in drafting statute, state legislature explicitly and implicitly conveys its rejection of discounting, court says.
Kolwe v. Civil and Structural Engineers, Inc.
In shareholder oppression suit, court clarifies meaning of “fair value” under applicable statutory framework; court cautions not to conflate “fair value” with “fair market value”; in drafting statute, state legislature explicitly and implicitly conveys its rejection of discounting, court says.
Hultz v. Kuhn
Appellate court finds no error in trial court’s adoption of market-based value determination by husband’s expert; expert acknowledged this was not the preferred method to value the small company, but company’s problematic financials and uncooperative attitude “compelled” use of this approach.
Post-trial briefs in Vinoskey ESOP trial point to fierce valuation fight
The DOL’s aggressive oversight strategy concerning ESOPs has led to a number of controversial lawsuits, including, most recently, the Acosta v. Vinoskey case, which, in the past few months, went to trial over the DOL's overpayment claim.
Supreme Court asked to review entire market value rule (EMVR) standard
A patent holder recently petitioned the U.S. Supreme Court to review the Federal Circuit’s 2018 decision on what a patentee must do to base damages on the entire market value rule (EMVR).
Starkly different valuation narratives in Vinoskey ESOP trial
Post-trial briefs in last year’s Acosta v. Vinoskey ESOP case reveal insights into how each side shaped the valuation narrative.
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.
Multiples Used to Estimate Automotive Dealerships Market Value
Practitioners use goodwill multiples for valuing automobile dealerships. In this paper, the valuation accuracy of five goodwill multiples and seven more traditional multiples that can be used for estimating the market value of the equity of car dealerships is assessed during the 2010–2016 period. Our results support that the goodwill multiples provide the smallest estimation errors in valuing the market value of automobile dealerships.
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.