Campbell, Iridium, and the Future of Valuation Litigation

Five years ago, two landmark federal court valuation decisions, Campbell and Iridium, held that market evidence—rather than the testimony of paid litigation experts—should be relied on to value corporations for purposes of litigation. While a number of decisions have followed Campbell and Iridium, their full potential to make business valuation litigation less costly and less susceptible to hindsight bias has yet to be realized. Courts can and should take greater advantage of the full panoply of types of market evidence relied upon by the United States District Court in Campbell, and ordinarily equally available to the finder of fact in other business valuation disputes—even in cases where, unlike Campbell and Iridium, the company to be valued has no publicly traded securities. Such market evidence includes the contemporaneous actions of company executives and directors, who make career and investment decisions based on their views of value; the contemporaneous actions and views of lenders, creditors, investors, and other market participants; and the contemporaneous views of expert advisors expressed at or near the valuation date. Moreover, courts should not routinely permit litigants to retain and present paid valuation experts in valuation disputes; this practice subjects courts and litigants to massive expense and delay that in most cases is wholly unnecessary given the availability of contemporaneous market evidence. Hence, a litigant wishing to present expert testimony in a valuation dispute should be required to establish by motion that the non-expert contemporaneous market evidence is insufficient to permit the finder of fact to make a reasoned determination of value.