Case Comment: Expert Opinions Must Be Adequately Explained

In Hardenbrook v. United Parcel Service, Inc., 2014 U.S. Dist. LEXIS 15830 (Feb. 7, 2014), a district court accepted a discount rate of 0% used to value UPS stock. On appeal, the 9th Circuit remanded the case to the district court, which ratified its original finding. This case should be viewed less as an acceptance of a questionable valuation result than a cautionary tale for valuation experts about the importance of presenting adequately supported evidence. The UPS expert called the use of a 0% discount rate “unsound,” but failed to adequately explain and support his chosen discount rate of 10.5% in the eyes of the court. Faced with two competing discount rates, the district court chose to rely on the one that appeared to have the most supporting evidence.