ESOP litigation watchers can add one more case to the number of actions that recently have been resolved. This case, Casey v. Reliance Trust Company, involves a proposed class action in which the plaintiffs sued the trustee, Reliance, alleging ERISA violations related to a 2012 transaction, including breach of fiduciary duty by causing the plan to overpay for company stock. The plaintiffs recently asked the court for final approval of settlement.

Disagreement on damages: The case involved RVNB Holdings Inc., a company providing moving and storage services throughout the U.S. In October 2012, RVNB formed an ESOP to acquire the common stock of RVNB. RVNB retained Reliance as ESOP trustee. An independent appraiser performed the underlying valuations. The purchase price was $85 million. In June 2017, RVNB’s board of directors approved the termination of the ESOP and all participants’ interests became immediately fully vested. In fall 2017, RVNB was sold to a private equity firm.

In June 2018, the plaintiffs filed a class action in which they alleged the plan overpaid for RVNB stock by approximately $42.5 million. Reliance engaged in a prohibited transaction, as defined under ERISA, causing the plan to buy the RVNB shares and to borrow money from RVNB for the purchase. Further, Reliance acted for the benefit of RVNB and the selling shareholders by approving a purchase price that was more than fair market value.

In their recent motion for final approval of the settlement, the plaintiffs state that, as part of the litigation, both sides engaged in extensive “fact discovery and expert discovery.” Further, both parties retained high-caliber valuation and damages experts. The parties also “vigorously engaged in the mediation process.”

The motion notes that Reliance denied the allegations and the facts on which the plaintiffs’ liability allegations rested. The contested facts include “the accuracy of RVNB’s projections, whether the valuation methods employed by Reliance Trust and its advisors were proper, and whether there were negative facts that were ignored by or not sufficiently investigated by Reliance Trust during the due diligence and negotiation process.”

The motion notes that Reliance has maintained the plan and its participants suffered no harm at all from the 2012 transaction. In negotiating a resolution, the parties exchanged “position papers supporting their differing views of what a proper measure of damages should be and presented their theories extensively in the mediation.” However, they were unable to resolve this “core dispute” by the time they reached a settlement in January 2020.

In asking for approval of the final settlement, the plaintiffs’ motion notes the settlement “provides significant relief and constitutes an excellent result for the Class.” Under the agreement, Reliance will pay $6.25 million. Each class member will obtain about $5,300 (before court-approved deductions), which is “well above the range for similar cases.” The named plaintiffs each will receive a $25,000 “case contribution award.” In exchange, the court will dismiss the case against Reliance on the merits. The plaintiffs’ motion says the settlement agreement is “fair, reasonable, and adequate,” as required under the applicable law.

The case, which is litigated in federal court, eastern district of Texas, is Casey v. Reliance Trust Company, Case No.: 4:18-cv-000424-ALM.

FASB seeks to simplify fair value for
private-company shares

The Financial Accounting Standards Board (FASB) has issued a proposal drafted by the Private Company Council (PPP) that would simplify how private companies determine the fair value of the shares underlying a share-option award on its grant date or modification date. The FASB noted that stakeholders had wanted a simplified approach for private companies because these firms typically do not have actively traded equity shares and so observable market prices for those shares do not exist. The FASB is proposing, as a practical expedient, to allow nonpublic entities to determine the current price of equity-classified share-option awards issued to both employees and nonemployees using the same valuation method prescribed by Section 409A of the Internal Revenue Code. The FASB said that it is expected that an independent appraisal will often be the method used by nonpublic entities electing the practical expedient in the proposal. The proposal is available if you click here, and comments are due by October 1.

New guide to pathology compensation arrangements

HealthCare Appraisers has released its Comprehensive Guide to Pathology Arrangements, which provides an overview of key concepts and terminology used in pathology as well as a more in-depth description of the most common pathology service arrangements. This guide details the various services that may be provided under the five most common pathology compensation arrangements including medical director services, “Part A”-type services (also known as professional oversight of the clinical laboratory), coverage services, anatomic pathology services, and autopsy services.

Deadline looms for applications for TAF BV panel

Completed applications are due by September 11 from volunteers to serve on the Business Valuation Resource Panel (BVRP) of The Appraisal Foundation (TAF). The purpose of the BVRP is to oversee the development of business valuation advisories, provide input on exposure drafts, and offer insight into emerging issues or other matters of like significance. The panelists will serve staggered terms commencing Jan. 1, 2021, for up to three years. For an application, click here.

AAML/BVR Virtual Divorce Conference
starts September 9

It’s a whole new world for valuations in the context of marital dissolution, so don’t miss the Virtual Divorce Conference, presented by the American Academy of Matrimonial Lawyers (AAML) and Business Valuation Resources (BVR). The conference starts September 9 with a multiday schedule designed to fully respect your workday obligations. In addition to sessions conducted by attorneys, valuation professionals, and industry experts, there will also be special sessions devoted to online speed networking. You’ll be matched up for a series of short video conversations so you can share ideas, give and get feedback, and build some new relationships. To register, click here.

Free preview: Click here to watch a free webinar in which several conference speakers give insights about divorce valuations in today’s challenging environment.

VSCPA BVFLS conference September 16-17

Valuing a business in the post-COVID-19 pandemic economy, how to review a valuation report, the misunderstood calculation report, and practice-building strategies are just some of the topics at the Business Valuation, Fraud and Litigation Services Conference sponsored by the Virginia Society of CPAs. This year’s event will be held solely online September 16-17, and BVWire will be there!

Damodaran to conduct masterclass on valuation

Professor Aswath Damodaran (New York University Stern School of Business) will conduct a masterclass in valuation as part of the IVAS-IVSC Business Valuation Conference 2020 October 6-7. Damodaran’s class will be on Day 2 (October 7) of the conference, now in its fourth edition this year. Organized by the Institute of Valuers and Appraisers, Singapore (IVAS) in partnership with the International Valuation Standards Council (IVSC), the two-day virtual conference has the theme “Crisis and Sustainability: The Search for Enduring Value” and will focus on strategies to sustain a competitive edge during this period of global crisis. For more information and to register, click here.

CBV Institute leadership address video
now available

Mary Jane Andrews, president and CEO, along with Anish Chopra, board chair of the CBV Institute, have delivered an address via video that is now available if you click here. They discussed the organization’s accomplishments and plans and how it is responding to the current challenging environment. The CBV Institute is Canada’s valuation professional organization (VPO). Its members have the Chartered Business Valuator designation. The CBV Institute’s 2020 Business Valuation Congress was canceled, but the organization offers the sessions as a series of webinars. Click here for more information.

BV movers . . .

People: Jouky Chang and Raymond Moran, ASA, MRICS, have joined FON Advisors LLC to develop and grow the firm’s new valuation practice, FON Valuation Services LLC; Chang, formerly with Duff & Phelps, will serve as a managing director and practice leader, and Moran, formerly CEO of MG Valuation, will serve as a managing director … Memphis-based Mercer Capital has expanded and enhanced its team: Justin J. F. Ramirez, AM, has joined as a senior financial analyst, and Harrison Holt and Ash Midyett have joined as financial analysts; also, Zachary M. Barber, CPA, John T. (Tripp) Crews III, and David W. R. Harkins have been promoted to senior financial analysts … Kevin Voigt, CPA/ABV, was named managing partner for the Detroit and Grand Rapids, Mich., offices of KPMG effective October 1; he is also the national service line leader for the tax, economic, and valuation services practice … Jeffrey Baresciano, CPA, CFF, ABV, CVA, has joined Mercadien as a director in the firm’s forensic accounting and litigation support team; the firm has offices in Princeton, N.J., and Philadelphia … Corey Palasota, CFA, has joined the national healthcare valuation practice at Houston-based Weaver as a managing director.

Firms: FTI Consulting has signed a long-term lease for 120,720 square feet across three entire floors on Sixth Avenue at 45th Street in New York City; this will serve as the firm’s New York City headquarters, consolidating multiple office locations … Mowery & Schoenfeld LLC (Lincolnshire, Ill.) has added Xamin Inc., a national provider of information technology services … Minnesota firm Westberg Eischens PLLP has acquired Robert F. Danielowski, PA, accounting firm in nearby Granite Falls; the combined firm has 31 employees … Dean Dorton will move its Louisville, Ky., office to larger quarters in the city; the firm’s continued growth in the Louisville market requires more square footage, and the new space will nearly double the firm’s current office square footage.

Please send your professional and firm news to us at editor@bvresources.com.

CPE events

• Case Studies in Contingent Consideration. September 16, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Antonella Puca (Alvarez & Marsal), Brett Hickey (Star Mountain Capital), and Shaun Maloney (Eisner Amper). Part of BVR's Special Series on Fair Value.

An overview of the valuation of contingent consideration, based on the guidance of The Appraisal Foundation in VFR No. 4 Valuation of Contingent Consideration, the AICPA Guide on the Valuation of Portfolio Investments of Venture Capital and Private Equity Funds and Other Investment Companies, and other best practices.

• Valuation Challenges and Best Practices in Joint Ventures and Strategic Affiliations. September 23, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Jerry M. Chang (Ankura), Molly Farber (Ankura), and Tim Lubbe (Ankura).

A discussion of the increasing prevalence of joint ventures and other strategic affiliations in the current environment and the unique valuation considerations related to these arrangements.

Holiday Break
BVWire will take a break for the Labor Day holiday next week. We will resume publication on September 9. Have a happy and safe holiday!