B&C Victorious in Appeal of Business Valuation of Attorney’s Practice

Published on in Firm Highlights

Daryl Manhart Dan CracchioloOn October 2, 2012, the Arizona Court of Appeals issued an opinion reversing and remanding the lower court ruling regarding the business valuation of a professional practice in case of a divorce.  In its Opinion, the appeals panel reviewed the lower court’s determination of the value of the professional reputation of a highly-compensated shareholder in a  national law firm.  The appellate court found that the lower court erred in restricting the value of the practice to the amount the lawyer would receive if he left the firm as set forth in the law firm shareholder agreement; in this case $140,000, the amount of his capital contribution upon becoming a shareholder.

"The value of 'goodwill' is well established in the case law, and it cannot be eliminated by a recital in the corporate documents," Judge Donn Kessler wrote for the appeals panel. "The family court should have considered Husband's personal goodwill in valuing Husband's law practice beyond his stock redemption interest in the firm."

The Court of Appeals concluded that “the family court conflated the firm’s net assets which were subject to the Agreement with Husband’s own goodwill, and that the evidence demonstrates that Husband possessed goodwill beyond the amount designated by the family court.”

The appeals panel also found that, in light of the father’s extraordinary income, the lower court erred when it failed to consider deviating from the Child Support Guidelines in determining the child support award.    

B&C Shareholder, Daryl Manhart argued the appeal and was assisted by Jessica Conaway.  The Court also approved an award of attorneys’ fees to B&C’s client. 

Congratulations, Dan, Daryl and Jessica!

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