Certified Valuation Analyst CVA Litigation Support and Expert Testimony 1 — Questions and Answers
Question 1: In U.S. federal courts, the admissibility of expert testimony is governed primarily by:
- Federal Rule of Evidence 702 and the Daubert standard (Correct answer)
- The Uniform Standards of Professional Appraisal Practice
- NACVA's Professional Standards, Section IV
- The Securities Exchange Act of 1934
Correct answer: Federal Rule of Evidence 702 and the Daubert standard
FRE 702 and the Daubert trilogy require that expert testimony be based on sufficient facts, reliable methodology, and proper application to the case facts.
Question 2: Under the Daubert standard, a judge evaluating a valuation expert's methodology may consider:
- Whether the methodology has been tested, peer-reviewed, and has a known error rate (Correct answer)
- Only the expert's academic credentials and years of experience
- Whether the client approves of the methodology used
- Only whether the methodology has been published in a textbook
Correct answer: Whether the methodology has been tested, peer-reviewed, and has a known error rate
Daubert factors include testability, peer review, known error rate, and general acceptance in the relevant professional community.
Question 3: A CVA retained as a 'consulting expert' (non-testifying) in litigation:
- Is typically protected from discovery and helps counsel understand valuation issues (Correct answer)
- Must produce a full written report compliant with NACVA standards
- Can be deposed by opposing counsel on all opinions formed
- Is held to the same disclosure standards as a testifying expert
Correct answer: Is typically protected from discovery and helps counsel understand valuation issues
Consulting experts are generally shielded from discovery under FRCP 26(b)(4)(D) and serve to advise counsel rather than present opinions to the court.
Question 4: The 'reasonable certainty' standard applied to damages in business litigation generally requires that:
- The fact of damages must be proven with certainty, but the amount may be estimated with reasonable probability (Correct answer)
- Every dollar of claimed damage must be documented with receipts
- Expert testimony is not required if damages are below $1 million
- Damages must be based only on pre-dispute historical financial statements
Correct answer: The fact of damages must be proven with certainty, but the amount may be estimated with reasonable probability
Courts distinguish between certainty of the existence of harm (required) and precision of the amount (reasonable probability suffices), giving experts flexibility in methodology.
Question 5: Lost profits damages in a breach of contract case are typically calculated using which framework?
- But-for revenues minus actual revenues, less saved costs, discounted to present value if future losses are included (Correct answer)
- Total revenues of the plaintiff before the breach, capitalized at a market multiple
- The defendant's profits earned due to the breach
- A percentage of the contract value fixed by statute
Correct answer: But-for revenues minus actual revenues, less saved costs, discounted to present value if future losses are included
Lost profits are measured as the difference between what the plaintiff would have earned 'but for' the breach and what it actually earned, net of mitigated or avoided costs.
Question 6: Which of the following is a key distinction between 'lost profits' and 'lost business value' as damages theories?
- Lost profits compensate for a finite stream of lost earnings; lost business value compensates for permanent destruction of the going concern (Correct answer)
- Lost profits can only be claimed in tort; lost business value is limited to contract disputes
- Lost business value requires a higher standard of proof than lost profits
- Lost profits and lost business value are legally interchangeable theories
Correct answer: Lost profits compensate for a finite stream of lost earnings; lost business value compensates for permanent destruction of the going concern
Courts generally do not allow double recovery; lost profits apply when the business survives but profits are temporarily impaired, while lost business value applies when the enterprise is destroyed.
Certified Valuation Analyst CVA Litigation Support and Expert Testimony 1
In U.S. federal courts, the admissibility of expert testimony is governed primarily by: