Summer 2007
Focus on Capital Markets and Commercial Litigation
Editors for This Issue: Craig A. Jacobson and James J. O’Sullivan
Commercial Litigation Insights
Feature Article:The Draft Expert Report—Caught in the Tug of War Between Full Disclosure and the Work
Product Doctrine
James J. O’Sullivan, Esq., and Richard T. Cordano, Esq.
There is a split in authority in the federal courts regarding the
discoverability of attorney work product provided by counsel to his or her expert and in
particular, the discoverability of draft expert reports. Most jurisdictions have ruled
that the 1993 amendment to the Federal Rules of Civil Procedure makes it clear that any
materials provided by counsel to a testifying expert is discoverable, including
information contained in draft reports. However, a minority of jurisdictions still feel
that draft expert reports should be protected from discovery if they contain ”core” or
“opinion” work product. Recognizing the need for a consistent standard among
jurisdictions and the fact that the discovery of draft expert reports has added
unnecessary cost and complexity to the litigation process, the American Bar Association
is pushing for a change to the federal rules that will protect expert draft reports from
discovery. This article discusses the two schools of thought on the subject and the
recent developments in the area.
Bankruptcy Court Addresses Daubert Challenges to Disqualify Valuation Analyst Expert
and Valuation Opinion Expert Reports
Curtis R. Kimball
In the post-Daubert era, even experienced valuation experts may fail
to qualify as an expert witness if a trier of fact finds a sufficient level of problems
with the valuation analysis and/or valuation report. This discussion summarizes a
bankruptcy case where the judicial criticisms of the valuation analyst’s expert report
appear quite justified. However, in other cases, the judicial criticisms often seem
unjustified. Those judicial criticisms are sometimes directed to valuation reports that
are prepared in accordance with generally accepted valuation standards and valuation
practices. Valuation analysts who offer litigation support services should be aware of
such cases, in order to better prepare for judicial challenges to their own valuation
reports.
The New Discovery Rules Pertaining to Electronically Stored Information: The Early
Bird Catches the Worm
Marla S.K. Bergman, Esq.
In these times of increased litigation and the increased storage of
data, it is important for anyone who may be a party to commercial litigation to be aware
of the current rules related to electronically stored information. This topic is
important to both business owners and their professional advisers. The knowledge of these
new rules will enable companies to better face the challenges of commercial
litigation.
Intellectual Property Litigation Insights
The Concept of Irreparable Harm in Patent Infringement Litigation
David L. Nocilly, Esq. and Suzanne M. Messina, Esq.
It is important for both the owners of intellectual property
(including patents) and their professional advisers to understand the factors related to
injunctive relief. The concept of irreparable harm is an important component of seeking
injunctive relief in intellectual property litigation matters.
Financial Advisory Services Insights
Current ESOP and ESOP Trustee
Corporate Governance Issues
David Burdette
Recent corporate scandals and conflict of interest issues related to
merger and acquisition transactions have focused investors’ attention on the topic of
corporate governance “best practices.” A review of corporate governance “best practices”
related to employee stock ownership plan (ESOP) acquisition transactions can shed light
on the broader topic of general corporate governance practices and procedures.
Fairness Opinions for Private Equity Fund M&A Transactions
S. Scott Cobb
Transactional fairness opinions have drawn their share of controversy
in recent years. As private equity transactions represent an increasingly big slice of
the mergers and acquisitions pie, it is important for investors to understand the
uses—and limitations—of fairness opinions related to private equity merger and
acquisition transactions.
Due Diligence and Procedural
Checklist for the Independent Financial Adviser Solvency Opinion
Robert F. Reilly and Jacquelyn DeRosa
Transactional fairness opinions have drawn their share of controversy
in recent years. As private equity transactions represent an increasingly big slice of
the mergers and acquisitions pie, it is important for investors to understand the
uses—and limitations—of fairness opinions related to private equity merger and
acquisition transactions.
Estimating the Cost of Capital: An Update from the Private Equity Perspective
Craig A. Jacobson
Empirical data on real world rates of return are an important input
to any valuation analysis. Today’s capital market environment may be characterized by (1)
an increased level of merger and acquisition activity and (2) an increased participation
by private equity firms. An understanding of these transactional rates of return and of
the dynamics of the mergers and acquisition market will allow the valuation analyst to
better apply empirical cost of capital data.
The American Institute of
Certified Public Accountants Issues a New Business Valuation Standard, SSVS No. 1
Robert F. Reilly
After years of deliberation involving numerous groups within its
organization, the AICPA recently issued SSVS No. 1: “Valuation of a Business, Business
Ownership Interest, Security, and Intangible Asset.” SSVS No. 1 applies to all AICPA
members (regardless of their technical discipline) when they perform an engagement to
estimate value when the member (1) applies valuation approaches and methods and (2) uses
professional judgment. This AICPA standard is effective for valuation engagements
accepted after January 1, 2008. This discussion will summarize (1) the engagement
acceptance considerations, (2) the valuation analysis requirements, and (3) the valuation
reporting requirements of the new AICPA standard. While this business valuation (BV)
standard only applies to AICPA members, it may ultimately benefit all BV analysts and all
BV clients. This is because both BV clients and parties that rely on BV reports (i.e.,
bankers, regulators, government agencies, courts, etc.) may come to expect all valuation
practitioners to prepare analyses and reports to incorporate the professional “best
practices” that are required by the AICPA standard.
The Employee Stock Option Backdating Kerfuffle: A Valuation Perspective
Craig A. Jacobson and James J. O’Sullivan, Esq.
The valuation and accounting implications of the “options backdating
scandal” often get lost in the hysteria surrounding this issue. This discussion attempts
to shed light on the real-world implications of this topic.
Hedge Fund Regulation and More: The SEC Tries Again
Patrick D. Sweeney, Esq.
Hedge funds have exploded both as a popular investment vehicle and as
a focus of attention in the world of finance. One entity paying very close attention to
hedge funds is the Securities and Exchange Commission (SEC). Investors and professional
advisers would benefit from understanding the current discussion surrounding the
regulation of hedge funds.