February, 2011

Contents

• Daubert and the Lost Profits Expert: Recent Cases
• Defendant's Damages Theory Does Not Provide Separate Basis for Award
• DCF, Including Discounts & Tax-Affecting, May Not Apply to Insolvency Opinions
• New Guidance from DE Chancery Court on DCF Inputs, Assumptions

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Michael J. Young,
CPA/ABV, CVA
Director
(410) 403-1513
Over 27 years of experience; serves as expert witness in litigation issues including economic damages, patent infringement, valuation, and fraud matters in Federal and state courts.

Nathan E. DiNatale,
CPA/ABV, CVA, CFE
Senior Manager
(410) 403-1521
Over 16 years of experience; focuses on business valuations, valuations for financial reporting, litigation support and economic damage calculations. Serves as expert witness in valuation and litigation cases.

Daubert and the Lost Profits Expert: Recent Cases

Can a lost profits analysis ever be too "simple" under the Daubert standard? The answer might be "it depends," as the following three recent court decisions demonstrate.

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Defendant's Damages Theory Does Not Provide Separate Basis for Award

Glattly v. Air Starter Components, Inc., 2010 WL 3928480 (Tex. App.-Hous. (1 Dist))
October 7, 2010

The plaintiff sued the defendant for misappropriation of trade secrets, including stolen drawings and customer lists, and tortious interference with contract. A jury awarded damages on both counts, for $168,000 and $600,000, respectively. The defendant appealed, claiming failure to prove lost profits to a reasonable degree of certainty.

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DCF, Including Discounts & Tax-Affecting, May Not Apply to Insolvency Opinions

Paloian v. LaSalle Bank, 2010 WL 3363596 (C.A.7 (Ill.))
August 27, 2010

In this important bankruptcy case, the U.S. Court of Appeals for the Seventh Circuit considered two issues of first impression for the federal circuits. The first was whether a discounted cash flow (DCF) analysis properly applies to determining insolvency; the second was whether fraudulent conveyance claims may be asserted against banks and other "mere holders" of securitized assets.

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New Guidance from DE Chancery Court on DCF Inputs, Assumptions

Three recent decisions by the Delaware Chancery Court—in opinions authored by Vice Chancellor Leo E. Strine, Jr.—provide important insights into the application of the discounted cash flow (DCF) analysis in statutory fair value appraisal and related merger proceedings.

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