In Re Marriage of Nichols

Summary

Husband held about 2.677 percent of his law firm. Wife's expert valued the interest at $142,000 using book value that included receivables and work in progress, while husband's expert applied the stock purchase agreement, which excludes those items, and reached $11,347. The trial court adopted the agreement value, except that it found goodwill separately (stipulated at $35,000). The Court of Appeal affirmed, finding substantial evidence supported the valuation and finding husband's protective cross-appeal on spousal support and fees moot.

What it means for the financial analysis

When valuing a minority interest in a professional firm, the analysis should address whether the interest carries any real claim to receivables and work in progress, and should examine the buy-sell agreement using the court's factors: timing, independent motive, and how closely the formula result matches other approaches. The court affirmed under a deferential standard and did not hold that a buy-sell formula must control or that discounts are required, and it expressly declined to decide whether minority and marketability discounts apply to professional corporations.

Also available on CourtListener.