Observations and Delaware Fair Value (Part II of II) This is the second of a two-part article, read Part I here, that focuses on empirical evidence supporting the size premium adjustment, observations regarding the CRSP size premium 10th decile category, liquidity issues that may account for the size premium, and certain Delaware Chancery Court decisions involving a size premium discussion. In this second part, the author focuses on the latter two points. These are discussed since in the past few years there have been numerous fair value business valuation related disputes decided by the Delaware Court of Chancery that involved…
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Lessons on Ill-Conceived Strategies that Companies Should Avoid Doing in Business and in Litigation Being aggressive in business and in litigation is considered an advantage. But, as illustrated in a recent 7th Circuit case, it is possible to be overly aggressive. When this is coupled with some serious mistakes in business and in litigation, it can be disastrous. The cases, 4SEMO.COM Incorporated v. Southern Illinois Storm Shelters, Inc., Ingoldsby Excavating, Inc. and Bob Ingoldsby, 7th Circuit Court of Appeals, Nos. 18-1998 and 18-2095, October 7, 2019) offer experts, lawyers, and business owners lessons on how an unchecked ego and an…
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In Dissenting Shareholder Appraisal Rights Matters (Part II of II) The Delaware Court of Chancery decisions on the treatment of synergistic value in dissenting shareholder appraisal rights cases provide meaningful guidance to valuation analysts, legal counsel, and other courts. This final part of the article continues the discussion on recent judicial decisions issued by the Delaware Court of Chancery where synergistic value was a consideration in a dissenting shareholder appraisal rights matter. This discussion provides insights related to the treatment of synergistic value within the context of a statutory appraisal rights fair value controversy. [su_pullquote align=”right”]Resources: Foundations of Financial Forensics…
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In Dissenting Shareholder Appraisal Rights Matters (Part I of II) The Delaware Court of Chancery decisions on the treatment of synergistic value in dissenting shareholder appraisal rights cases provide meaningful guidance to valuation analysts, legal counsel, and other courts. In this two-part article, the author discusses recent judicial decisions issued by the Delaware Court of Chancery where synergistic value was a consideration in a dissenting shareholder appraisal rights matter. This discussion provides insights related to the treatment of synergistic value within the context of a statutory appraisal rights fair value controversy. [su_pullquote align=”right”]Resources: Foundations Of Financial Forensics Workshop Financial Litigation…
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April 2019 In the first quarter of 2019, there were no reported U.S. Tax Court cases involving either business, estate, or FLP valuation issues. Notwithstanding the above, there were several cases that valuation and litigation support professionals will want to consider. In this article, five recent cases are discussed. One of the leading cases circulating amongst the business valuation community is Kress v. U.S., Case No. 16-C-795 (U.S.D.C. Eastern District of Wisconsin), it has received considerable attention, especially by business valuation professionals. The Veriton Partners Master Fund Ltd. v. Aruba Networks, Inc. (April 16, 2019), a Delaware Supreme Court case…
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for State Income Tax Purposes How will the SALT limits impact growth? Demographic trends? In this article, the author looks at current data, considers these issues and other tax matters that complicate residency choices and options. A few years ago Fox News Channel’s commentator and nationally syndicated radio talk show host (both based in New York), Sean Hannity, threatened that he was going to leave New York, a high personal income tax state, for Florida and Texas, no personal income tax states…and that was when there was a full federal itemized deduction for state and local income taxes, state and…
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To Measure Trustee Breach of Fiduciary Duty Damages The but for investment portfolio is a tool that damages analysts utilize to estimate economic damages when there is an allegation of a breach of fiduciary duty with regard to the management of an investment. In its simplest form, the but for investment portfolio estimates the value of a portfolio but for the alleged breach of fiduciary duty. Case law precedents established the but for investment portfolio analysis as a method to estimate economic damages on a market adjusted basis. While the concept of a but for investment portfolio analysis is simple,…
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Marketplace Platform for Aspiring and Experienced Litigation Support Professionals There is no disputing the influence that expert witnesses have on litigation outcomes—this much we know for sure. Their expertise is often relied upon by the court in rendering decisions, weighing the opinions, methodology, and, indeed, the credibility of the competing expert witnesses involved for each party to the legal dispute. Considering what is at stake, it therefore behooves litigators to be exquisitely careful and circumspect in their expert witness retentions and due diligence practices. In this article, the authors discuss surprises that may arise and how those may affect the…
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Marketplace Platform for Aspiring and Experienced Litigation Support Professionals Until now, a lawyer could not put out a call for help with a single case description and submit that to one, a dozen, or an entire community of relevant subject matter experts simultaneously with the single push of a button. Until now, an expert might have to choose between paying for advertising to be listed in a directory and/or set up their own website in the hope that additional expert witness consulting work would flow to them. The Exchange’s marketplace offers a different paradigm and value proposition. This has been…
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Reliability of Client’s Data This article discusses how experts can handle the unique situation of receiving unreliable data. Litigation and appraisal literature will be reviewed as will the author’s handling of unreliable data in a recent lost profits case. In the end, warning signs will be reviewed to alert the expert to potential problems with the projected data.
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On Patent Damages and Apportionment In two recent cases, the U.S. Court of Appeals for the Federal Circuit provided important guidance when applying apportionment principles to calculate reasonable royalty damages. See Finjan, Inc. v. Blue Coat Systems, Inc., 879 F.3d 1299 (Fed. Cir. 2018); Exmark Mfg. Co. v. Briggs & Stratton Power Products Group, LLC, 879 F.3d 1332 (Fed. Cir. 2018). The Federal Circuit signaled greater flexibility when apportioning damages, which may permit using the royalty rate and not just the royalty base, to value a patented invention’s contribution to a larger, multicomponent product. The Circuit also reaffirmed, however, that…
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Case Law Four cases are presented in this article that provide valuation, litigation support professionals, and M&A advisors insight regarding how courts are addressing damages claims, challenges to experts, appraisal action challenges, and claims of fraud and breach of contract in connection with M&A transactions. Although the cases are from Delaware and California, they provide insight for readers to use in their practices.
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A Unique Assessment of Commercial Damages Business interruption is a form of commercial damages that may include both breach of contract and torts. While it is not common for financial experts to be hired in business interruption situations, some claims require their expertise. Unlike a traditional lost profit analysis, business interruption calculations are unique. Any expert asked to make such an analysis should consider lost profits (projected revenue for the loss period less saved expenses), non-saved expenses that are ongoing during the interruption, and extra or expedited expenses the business has to incur to reopen. This article addresses the work…
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in Light of LIBOR’s End Appraisal and litigation support professionals consider various rates to use as part of a financial model, including LIBOR. Near the end of July 2017, British banking regulators made waves in the business world by announcing the end of the London Interbank Offered Rate, or LIBOR, by the end of 2021. LIBOR’s end will mean the loss of a financial benchmark that is not only ubiquitous in commerce, but a valuable tool in creating discount rates in financial litigation. Fortunately, the Alternative Reference Rates Committee (ARRC), organized by the Federal Reserve, has already identified alternative benchmarks,…
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Part II of II This is a two-part article. In this second part, the authors discuss valuation and the approaches used to value contingent assets and liabilities. Read Part I here.
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Part I of II This is a two-part article. A variety of methods may be appropriate, depending on the context, to value contingent or disputed assets or claims in solvency opinions. These include probability discount, hindsight, and traditional valuation of future earnings. Other possibilities are the cost of insurance or Monte Carlo simulation. The authors discuss the cases and the uses and limitations of the various methods.
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Funeral Service Retirement Challenges The funeral industry is dynamic and one where often the directors “build to serve” and overlook the importance of “build to sell”. The authors here provide an overview of the valuation and consulting opportunities.
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The Case for Use of a Risk-Adjusted Rate in Damages Cases Robert Dunn and Everett Harry laid out a process for modeling and discounting future lost profits to present value in their article, Modeling and Discounting Future Damages. Not all experts agreed with the position presented by Dunn and Harry. In March, we revisited modeling and its level of acceptance. This article revisits the more controversial portion of the Dunn and Harry article, determining the discount rate. Dunn and Harry believed modeling the projected income stream reduced uncertainty and risk in an expert’s estimates. Therefore, they stated a lesser discount…
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Copyright Protection and the “First-Sale” Exception In 1997 Supap Kirtsaeng, a citizen of Thailand, moved to the United States to study mathematics at Cornell University. He paid for his education with the help of a Thai Government scholarship which required him to teach in Thailand for ten years on his return. Kirtsaeng successfully completed his undergraduate courses at Cornell, successfully completed a PhD program in mathematics at the University of Southern California, and then, as promised, returned to Thailand to teach. While he was studying at Cornell, Kirtsaeng asked his friends and family in Thailand to buy copies of foreign…
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Will Your Methodology be up to Snuff? Beyond Frye and Daubert (Part IV of VII) The methodology employed by the expert is a critical factor determining the admissibility of the testimony. Frye, Daubert, and Kumho provide guidance regarding the admissibility of the testimony. In this article, the author discusses these and recent cases, including: Manpower, Inc. v. Insurance Company of the State of Pennsylvania; United States v. Alabama Power Company; United States v. Cinergy Corp., to illustrate the how courts have decided motions to exclude.