Opinion ID: 2785663
Heading Depth: 2
Heading Rank: 1

Heading: Valuation of Seaside

Text: Vision argues that the bankruptcy court improperly valued Seaside under a forced-sale analysis as opposed to a going-concern analysis. Vision continues that even under a forced-sale analysis, the bankruptcy court selected an inadequate discount rate by considering impermissible factors—particularly the risk of critical employees leaving the firm—and inadmissible expert testimony. The valuation of Seaside is a mixed question of law and fact. In re Ebbler Furniture & Appliances, Inc., 804 F.2d 87, 89 (7th Cir. 1986). Selection of a valuation method is a legal matter subject to de novo review, and findings made under that standard are facts subject to clear error review. Id. We disagree with Vision that the bankruptcy court valued Seaside using a forced-sale method. To begin, the bankruptcy court explicitly stated that “the correct method of valuation of the [D]ebtor is that as a going concern.” The bankruptcy court also considered future losses, which are necessary to a discounted cash flow analysis, the core of a going-concern valuation. Most telling, the 4 Case: 14-11590 Date Filed: 03/12/2015 Page: 5 of 23 bankruptcy court discussed and selected a discount rate, the critical input to calculate the present value of a business based on a cash flow. Having established use of the proper valuation method, the bankruptcy court committed no error in considering the risk of losing key employees in selecting a discount rate. “[A]ll relevant factors to property value must be considered to arrive at a just valuation of a property.” In re Webb MTN, LLC, 420 B.R. 418, 435 (Bankr. E.D. Tenn. 2009). Seaside’s civil engineering and mapping operations rely upon human expertise, and its client base relies upon established relationships. The loss of key employees could equate to a complete deterioration of Seaside’s value. Employee retention is certainly a relevant risk if not the key risk in calculating the discount rate in a case like this. The bankruptcy court also has discretion to weigh expert testimony and select portions to accept or reject. Id. Vision’s argument is that the bankruptcy court did just this, and therefore the argument is unavailing. To reiterate, the bankruptcy court committed no error in valuing Seaside.