When are the divorce proceedings going to start?!!

July 15, 2019 News

by Bruce Bryen, CPA, CVA

Why has there been such a delay on proceeding?

A successful dental laboratory owner or possibly two owners of a laboratory who are involved with a time consuming, frustrating and costly matter such as a divorce will most likely want a settlement to the affair as quick and reasonable as possible.  With one of the parties having a majority of the assets, there may likely be delaying tactics to either “hide,” or prevent the presentation of those assets to the other side of the case.  A dental laboratory valuation should reveal the worth of the asset that may be the most valuable property owned by either of the parties.  The final conclusion of the worth of this income producer will be what a court or mediator will want to see in order to assist in providing guidance as to the opinion of the distribution of the laboratory assets to the deserving spouse.  The division of the distribution is what each spouse is anxiously awaiting.  The delay in the process will give the majority owner more time to “arrange,” his or her presentation to the evaluator prior to the actual preparation of the valuation.  This is something the non-delaying spouse should not allow to happen. 

Getting the process started and evaluating the attorney and the laboratory valuation expert

When interviewing for the right attorney and laboratory valuation expert, a critical item is the experience they have had with this type of situation.  A divorce attorney is important but if possible, finding one with the experience in representing the owner of a dental laboratory would be ideal.  The same goes for the laboratory valuation expert. Someone with experience in evaluating dental laboratories should be an important part of the information needed as well.  The legal process begins with the filing of the papers in court requesting the divorce.  The attorney is responsible for this and should be preparing the papers for service as soon as the client is ready.  While this is occurring, the expert laboratory evaluator can begin preparing the valuation report for the laboratory.  This is needed by the court or by an arbitrator or mediator to be able to judge what the appropriate value of the laboratory is as well as attempting to assist in the distribution of that value between the spouses.  There is no reason that the papers should be held back from their filing with the court to begin the divorce process.  In the event that the spouse who may be causing the delay attempts to continue that process, the attorney can file a motion to compel the one who has the documentation to respond.  This approach puts the party on notice that delays will not be accepted.  It also lets the court know that one of the parties to the dispute is not being cooperative. This hurts that spouse in in the long term with the court. If continued delays are part of the plan and the attorney keeps filing motions with the court on behalf of the non delaying spouse, sanctions may also be granted on behalf of the party requesting the court’s assistance with the production of documents.

Can the dental laboratory evaluator present the valuation so that one party has a benefit and the presentation is to the detriment of the other spouse? 

The presentation of the valuation for the purpose of a divorce is different in many ways to the offering of a valuation for the sale of the dental laboratory.  One of the most consequential of the points of difference is the fact that a goodwill allocation between that which is personal and that of the laboratory (enterprise) can mean the transfer of thousands of dollars in value between marital property and non-marital property.  Most of the country is divided into states that use the equitable distribution guideline meaning that marital assets are divided equitably, which is not necessarily the same as equally.  The independent valuation is just what it implies. It is not supposed to be a biased presentation. The evaluator must follow standards based on his or her designation.  A designation may be that of a CVA, or certified valuation analyst.  The independent evaluator must present the valuation on the basis of fairness and independence.  The term “independence,” means that there is no favoritism.  Each party should understand that there is a reality taking place and that a one sided offering to the court will cause the judge to lose any credibility in the evaluator and the spouse who is using that particular valuation.  Once credibility is gone regarding one aspect of a judge’s feeling of any bias, other testimony will probably be looked upon with disfavor as well. 

How does the evaluator respond to the spouse’s coercion based on how to accept input into the report?  This is definitely a touchy subject.  The spouse may feel that since the money is coming from him or her in payment to the evaluator either directly or indirectly, that input is to be accepted and included in the valuation no matter how prejudiced it may be.  Many times an attorney retains the expert and the client pays the attorney who then pays the expert so effectively there is an indirect payment to the expert by the client.  If that spouse insists on “leading,” the evaluator’s judgement and assists in writing the report, the expert should consider withdrawing from the case mainly because the need for independence has been lost.  A court will see through the writings on the report and will understand that one side has an independent report from an independent evaluator.  The other side does not.  This will color a judge or mediator’s feeling about the credentials of each evaluator as well as the credibility of the experts and the clients in the case.  His or her final opinion will no doubt include an award of the distribution of the dental laboratory’s assets in a different manner than thought of as the outcome because the meddling distorts the facts drastically.