Randall v. Widen is a federal court case filed in the Western District of Wisconsin, that involves a redemption. The article focuses on the pre-trial motions involving the admissibility of the experts. In the case, Plaintiff alleged that Defendants failed to disclose material information in connection with the redemption of closely held shares.
Arthur C. Clarke once said, “For every expert, there is an equal and opposite expert.” Randall v. Widen, 2025 U.S. Dist. LEXIS 142800, 2025 WL 2081193 (W.D. Wis. July 24, 2025) demonstrates that Mr. Clarke knew what he was talking about. As often happens in litigation
Background[1]
Stacy Randall (“Plaintiff”) owned 20% of her family’s business, Widen Enterprises, LLC (“Widen”). Plaintiff’s grandparents founded Widen in 1948 as an engraver of printing plates. Over time with changes in technology, Widen moved into digital graphics and other technology. While the founders gifted small amounts of Widen stock to Plaintiff and her four brothers, their father inherited control of the business following his parents’ deaths. In 1997, Mr. Widen created Windy Waters, LLC (“Windy Waters”) as a holding company for Widen, and the siblings’ shares were converted to member interests in Windy Waters. In 2002, following Mr. Widen’s death, Plaintiff and her four brothers received equal ownership interests in Windy Waters.
Plaintiff’s brother, Reed Widen (“Reed”), had been actively involved in business operations and, following his father’s death, assumed control of the business. Through a series of transactions withheld from Plaintiff, Reed acquired his brothers’ interests, resulting in Reed owning 80% of Windy Waters and Plaintiff owning 20%. According to Plaintiff, as Reed gained control over the business, including appointing himself president and chairman of the board of Widen and as managing member of Windy Waters, he excluded her from the business. She did not receive financial information, and when she asked her brother questions about the business, he brushed her off.
In May 2020, Plaintiff was in the middle of divorcing her husband and desperately needed cash to support herself and pay her legal fees. She approached Reed about selling a portion of her stake in the family business. Reed advised her that the timing was problematic because the company “had a COVID problem,” but he would see what he could do. Reed did not reveal that, at the time he was telling her about a “COVID problem,” Widen was projecting $30 million in revenue and Windy Waters was holding $5 million in cash and short-term securities.
On May 6, 2020, Plaintiff received a call from Michael Kiesler, the chief financial officer of Widen, treasurer of Windy Waters and an 8% owner of the companies, who told her that the company would purchase her entire interest for $1.1 million, but she had to decide within three hours. Minutes before that deadline, Kiesler called her again to tell her that he was able to get a three-day extension for the offer. Plaintiff, unable to obtain legal or financial advice in the limited time frame, let the offer lapse.
On May 13, 2020, Kiesler called Plaintiff to inform her that he and Reed had managed to find an additional $250,000, but only if she accepted by the end of the day. Plaintiff specifically asked Kiesler if management was looking to sell Widen, and he responded that “there had been no talk of that.” Without any other information or options, Plaintiff sold her shares for approximately $1.3 million.
On August 17, 2021, approximately 15 months after the transaction with Plaintiff, a third-party company purchased Widen for approximately $162,000,000, nearly five times the value implied in the purchase of Plaintiff’s interest.
In 2022, Plaintiff sued Reed, Kiesler, Widen and Windy Waters (collectively “Defendants”) for a variety of federal and state law claims, including among others, securities fraud, common law fraud, shareholder oppression and civil conspiracy.
The parties proffered expert witnesses to opine on the value of the family business in May of 2020 when Plaintiff sold her shares and several other issues in the litigation. The parties filed cross motions to exclude their opponent’s experts among the number of other motions in limine. Approximately two weeks before the scheduled trial, the court ruled on all the outstanding motions.
Court Findings
Plaintiff’s Valuation Expert
Plaintiff’s expert produced reports of anticipated testimony on two issues: the fair market value of Widen in May 2020 and the information that would have been material to a reasonable investor in Plaintiff’s position in deciding whether to sell her shares. The Defendants challenged his testimony claiming that his opinions on materiality were both irrelevant and unreliable.
Defendants argued that the expert’s assessment of materiality was irrelevant because Plaintiff, “desperate for cash” was not a reasonable investor. The court disagreed, noting that Defendants conflated two distinct elements of Plaintiff’s securities fraud claim. “To establish liability under § 10(b) and Rule 10b-5 of the Securities Exchange Act, [Plaintiff] must prove both that defendants made a misstatement ‘of material fact’ and that she relied on the misstatement to her detriment. Defendants’ assertion that [Plaintiff] was desperate for cash and uninterested in the company’s finances is relevant to the reliance element, but it has no bearing on the materiality element, which is a purely objective inquiry.”[2] While the reliance element is an individual’s claim would be based on the testimony of the individual, the issue of what would be material to a reasonable investor is an appropriate area for expert testimony.
Defendants’ argument that Plaintiff’s expert’s materiality testimony lacked an established methodology also failed because the expert had identified types of information based on his extensive experience in valuing businesses and “published valuation treatises, which describe the financial information that should be gathered when performing a business valuation.”[3] Defendants did not challenge the reliability of the treatises or the basic valuation models contained in them. While the expert used his own judgment in selecting which models to use, that, alone, does not implicate Federal Rule of Evidence 702’s reliability test.
Defendants’ Valuation Expert
Defendants offered an expert to rebut Plaintiff’s valuation expert. Since this expert was offered solely to “’contradict, impeach or defuse the impact of the evidence offered’ by [Plaintiff’s expert], … the court analyzes [Defendant’s expert’s] reliability differently than it would analyze the reliability of an expert offering an independent opinion. As long as [Defendant’s expert] provides sufficient reasons grounded in his experience and generally accepted valuation methods for his critiques of [Plaintiff’s expert’s] valuation, the court will not exclude his opinions as insufficiently reliable.”[4]
Plaintiff challenged the Defendants’ valuation expert on two issues: his guideline public companies (GPC) critique and his discounted cash flow (DCF) critique.
Plaintiff’s expert performed a GPC analysis using six publicly traded software-as-a-service companies with products similar to Widen and negative EBITDA, like Widen. Applying a price to revenue multiple, Plaintiff’s expert determined a value for Widen of approximately $113 million.
Defendant’s valuation expert noted that all of Plaintiff’s expert’s comparators had substantially higher revenues than Widen. He performed a regression analysis to derive a size adjusted multiple and, using that adjusted multiple, repeated Plaintiff’s expert’s calculation resulting in an estimated value approximately $10 million lower than Plaintiff’s expert’s calculation. Plaintiff argued that her expert had addressed the revenue size issue by using a multiple based on the bottom quartile of the six comparators rather than a mean or median multiple. Therefore, according to Plaintiff, Defendants’ expert was double dipping on a size adjustment. The court dismissed that argument, noting that Plaintiff’s expert’s report did not say that he used that multiple to address the revenue size issue nor did he use a multiple based on the lowest revenue companies among the comparables, instead using the lowest multiples. While Plaintiff was free to cross-exam Defendants’ expert on whether his regression analysis over-compensated for revenue size, the court would not exclude his testimony on the issue.
Plaintiff’s expert performed a DCF analysis using projections prepared by Widen’s public accounting firm. The DCF analysis resulted in a substantially lower valuation ($8 million) than his two market approach methods: GPC ($113 million) and mergers-and-acquisitions analysis ($79 million). Plaintiff’s expert chose to disregard the DCF calculation as an outlier.
Defendant’s valuation expert rebutted that decision, relying on Shannon Pratt’s Valuing a Business, saying that the DCF approach can be valuable even when the industry commonly uses other methods, because DCF is the method that most directly incorporates the general premise that the value of a business is the present value of the expected future benefits of owning the interest. Instead of disregarding the DCF, Defendant’s valuation expert asserted, Plaintiff’s expert should have re-evaluated the projections on which it was based. Those projections appeared to use more conservative growth factors. Using growth data from similar publicly traded companies, Defendant’s valuation expert recalculated the DCF to illustrate how underlying growth assumptions can affect a DCF analysis. Plaintiff sought to exclude this testimony as confusing to the jury. The court determined that the alternate calculation, could be used not to provide a value, but to illustrate how changes to underlying assumption can affect the outcome, would be useful to a jury in assessing the credibility of Plaintiff’s expert’s assertions.
Dividend Policy Expert
Plaintiff alleged that Defendants paid Reed excess compensation in lieu of issuing pro rata dividends/distributions to members. Defendants proffered an expert witness on executive compensation and dividends. His report concluded that Reed’s compensation was not out of line with comparable, non-CEO executives and that in his “extensive experience dealing with private companies, issuing dividends is not the norm.” The court concluded that the expert’s assessment of what other privately held companies did is not relevant to Plaintiff’s claim that Widen was paying its profits to Reed in the form of compensation rather than distributing them to Windy Waters and, in turn, to the members of Windy Waters. The “key question is not whether a typical company would have paid dividends, but whether Windy Waters chose to pay them only to Reed.”[5]
Defendants’ M&A Expert
Defendants proffered a M&A attorney as an expert witness to testify about what he would have told Plaintiff if she had requested guidance on whether to accept the May 2020 offer from Windy Waters. In essence, the expert intended to testify that Windy Waters was under no obligation to offer Plaintiff a fair price for her interest, as there was no market for her Windy Waters membership units, she really had no choice but to accept the offer, and hiring a valuation expert would have cost her thousands of dollars she did not have and would have added months to the timeline for getting the money she needed. Defendants intended to use his testimony to show that regardless of the information available to her, Plaintiff’s desperate need for cash would have driven her to accept the offer anyway.
The court excluded the M&A expert’s testimony as irrelevant, unreliable, and impinged on the court’s province to explain the legal standards to the jury. “Much of [the expert’s] report is devoted to spelling out the legal rights of the parties, which impinges on the role of the court. The court will instruct the jury on any necessary points of law.”[6] Further, the expert would be testifying only to what he would have advised her if she had reached out to him. That does not encompass the advice she might have received from any attorney or financial advisor. Finally, the expert considered only the “sell/not sell” prospects. He did not consider whether Plaintiff could have alleviated her short-term cash flow issues in other ways, particularly with better knowledge of the value of her interest in the business.
Conclusion
Courts have significant latitude in deciding whether to permit expert testimony. Judges may hold strictly rebuttal witnesses to a lower standard than those providing their own opinions, and they will jealously guard their province to inform juries about the law to be applied in a particular case.
[1] The court’s opinion focused almost exclusively on the parties’ cross motions to exclude expert testimony and omitted the background facts of the dispute. This recitation of the facts is drawn from a previous ruling of the court on the defendants’ motion to dismiss. 2023 U.S. Dist. LEXIS 128011 (July 24, 2023).
[2] 2025 U.S. Dist. LEXIS 142800 at *5, citations omitted.
[3] Ibid. at *7.
[4] Ibid. at *8, citations omitted.
[5] Ibid. at *20.
[6] Ibid. at *22.
Michael J. Molder, JD, CPA, CFE, CVA, MAFF, applies 30 years of experience as a Certified Public Accountant and litigator to help investigate and analyze cases with complex financial and economic implications. He has acted as both counsel and accounting expert in pending and threatened litigation as well as participating in internal investigations of financial misconduct. As a litigator, Mr. Molder helped co-counsel understand complex financial and accounting issues in dozens of cases. In 2006, Mr. Molder returned to public accounting applying his unique skills to forensic engagements. He has also performed valuations of business interests in a wide variety of industries.
Mr. Molder has served as a valuation expert for both plaintiffs and defendants in commercial litigation matters and owner and non-owner spouses in matrimonial dissolutions. He has participated in the valuations of businesses in a wide variety of industries, including: food service, wholesale and retail distribution, literary development and production, healthcare, manufacturing, and real estate development.
Mr. Molder has also investigated and valued damages in a wide variety of litigation contexts ranging from breach of contract claims to personal injury cases, and from employment disputes to civil fraud. He has consulted on many matters which have not involved the issuance of a report for litigation or resulted in deposition or trial testimony. Accordingly, the identity of these matters is protected by attorney client privilege.
Mr. Molder has also lectured widely on a variety of accounting and litigation related topics including business valuation, financial investigations in divorce proceedings, accountant ethics, financial statement manipulation and “earnings management.”
Mr. Molder can be contacted at (610) 208-3169 or by e-mail to Molder@lawandaccounting.com.
