Divorce Mediation Blog

Not So Fast, Sotheby’s! Expert Bias Rejected by Tax Court: A Mediators’ Take

Wednesday, August 30, 2017

Levine Dispute Resolution - Divorce Mediation

Business Valuation Resources reported recently on Estate of Kollsman v. Commissioner, TC Memo 2017-40, in which the government rejected Sotheby’s appraisals of two significant artworks, citing inherent conflict and resulting bias, and the U.S. Tax Court agreed. After all, Sotheby’s valued one painting at $500,000.00, then sold it at auction for $2,400,000.00 (“buyer’s premium” included), just four years later. The court rejected Sotheby’s claim that the near five-fold appreciation was due to a good cleaning, and an uptick in Russian buyers.

Finding the valuations “unreliable and unpersuasive”, the court noted Sotheby’s inherent conflict of interest: lure in the customer with a favorable “lowball” estate valuation, while soliciting the auction business.

It reminds us of two things from our divorce mediation practice as well as our other professional iterations as litigators, judge and arbitrator.

First, expert witnesses, however good and straight-laced, somehow deliver results that favor the hiring client 99.99 per cent of the time; and-

Second, “informal” experts such as real estate brokers, whose ulterior and ultimate interest is in obtaining sales inventory have, by definition, Sotheby’s-like conflicts.

That is why in all of our private dispute resolution processes, we encourage clients to use single, neutral experts who are hired by and paid equally by the clients, or on occasion, by us. And, where intimate market information may be gleaned from informal experts, their data should never be viewed in isolations, but with other vetted information to provide comparison and context.


Civility Guidelines for Family Lawyers

Wednesday, August 16, 2017

The Massachusetts Bar Association recently endorsed a set of “Civility Guidelines for Family Law Attorneys”. It is amazing to us that in 2017 this project should have been necessary, but we have no doubt of it; and the ten points are both simple and profound.

Moreover, these tenets don’t just apply to the courtroom. They are equally applicable to the arbitration or mediation room, the four-way meeting, attorney correspondence, and the ongoing processing of every case, including negotiation. In truncated form the ten commandments of civility are:

  • Dress appropriately.
  • Be on time and prepared.
  • Treat people with courtesy and respect.
  • Wait your turn – don’t interrupt or shout.
  • Be honest – in verbal and written word.
  • Follow the rules (about notice and service)
  • Respond timely.
  • Focus on the facts in issue.
  • Negotiate in good faith after full disclosure.
  • Do not use court in a revengeful manner.

Sometimes the truest things shouldn’t have to be said – be bear reminder nonetheless.


“Corporate Mortality” and Valuation

Wednesday, August 02, 2017

We have often puzzled over business valuation methodologies that assume a company’s perpetual life. We recently read for the first time about the expert questioning of this assumption within the context of a discounted cash flow analysis. Business immortality is unrealistic and maturing companies also tend to experience slowing growth.

It appears that the data is not yet clear on these phenomena, which may explain why the valuation community has not yet embraced this consciousness. But, pursuit and application of this knowledge seems material to not overstating business values, while reflecting reality more closely.

We look forward to reading further about positive developments on the important issue.


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