Hennepin County District Court Chief Judge Ivy S. Bernhardson issued an order this week that got broad attention in the media because it dealt with a family fight over tens of millions of dollars and a locally familiar supermarket chain (Lunds & Byerlys).
The media pay attention to such cases because most of us are fascinated by very rich people. Furthermore, many of us find it particularly interesting and gratifying when they get into fights.
Actually, here at Minnesota Litigator, we have our doubts that very rich people warrant much interest generally, and their family fights, maybe even less so. On the other hand, when tens of millions of dollars (or more) are sloshing around between various financial accounts, owned and controlled by different people, the reverberations of these rich family battles do spread far beyond the parties themselves (to many indirect stake-holders – interested financial institutions, businesses, financial advisers, hangers-on, interested charitable institutions, etc., etc.).
But Minnesota Litigator’s interest in the Lunds’ fight is far more narrow. Our interest is in highlighting Judge Bernhardson’s extremely well written, thorough, and thoughtful order.
In her 54-page opinion, the judge analyzes valuations that were the subject of expert testimony of both sides in the lawsuit. She rejects both, finding them to be the products of “obvious zealous advocacy” (p. 19), and determining that the Court’s valuation was “in spite of” the expert opinions rather than “because of” them (p. 20, ftn. 22).
If you are in the business of business valuation (or litigating business value), I strongly recommend you read this opinion.
Incidentally, Judge Bernhardson’s skepticism and criticism of the Lunds’ valuations is stinging. She refers to both side’s expert opinions as “laden with internal inconsistencies” (p. 27). Note: these are some of the most esteemed valuation experts around. This criticism seems in tension with some earlier Minnesota Litigator posts in which we argue that appraisals or valuations by competent experts are not “endlessly manipulable and worthless.” Maybe, when they are products of advocacy rather than nonpartisan analysis, they actually are all but worthless?
Query whether both sides in this protracted litigation might have saved some money by stipulating to a single valuation by a single appraiser, agreeing to split the costs 50/50? Maybe such a valuation would have come out as Judge Bernhardson’s did, in between the two sides’ apparently artificially inflated/deflated values, at a very small fraction of the cost of two skewed valuations? And without the hundreds of lawyers’ hours (and tens of thousands of more dollars) spent highlighting the the weaknesses of the other side’s valuation?
Finally, we note that Judge Bernhardson’s salary ($157,084) might be lower than the salary of a first-year lawyer at Dorsey & Whitney (average: $178,500, according to GlassDoor) (the law firm for the defendants in the Lunds business valuation dispute).
This simple fact is atrocious. Our legal system may collapse over time if our judges’ salaries are so completely out of whack with “the market.” Minnesota is very fortunate to have excellent judges like Judge Bernhardson. They take on extremely difficult jobs, with meager resources at their disposal, at significant personal sacrifice. Building a system based on this degree of sacrifice is unwise and presents great risk.