When the President Steals the Deal: The $3.7 Million Cost of Lost Profits

Speaker A: Foreign.

Speaker B: Hi, welcome to valuation podcast.com a podcast and video series about all things related to business and valuation. My name is Melissa Greg and I'm a financial mediator and business valuation expert in St. Louis, Missouri. So by now you should know who I'm speaking to. But it's Kelly Lise Murray and she's a lawyer, a professor, a legal scholar, a serial entrepreneur. She has her own podcast. She has a website vetting the house, a podcast, wealth Litigated. Welcome, Kelly, how are you?

Speaker A: I'm doing well, Melissa, how are you?

Speaker B: So we always talk about cases and Kelly is like this brilliant legal scholar, finds these amazing cases. Like, you are going to have so much fun with this case today because, and you know, we kind of named this, uh, when the president steals the deal valuing lost profit. So we bring you cases that are entertaining usually intersect the appeal world, which is, you know, Kelly's love, and the business valuation world, which is my love. And this is a really fun case today. So where are we going, where are we going with this case?

Speaker A: Like, help us understand, we're going to Massachusetts. This was tried before jury, a six day jury trial in federal court. So the district of Massachusetts federal court, it went up on appeal to the U.S. court of Circuit Court of Appeals, the First Circuit. And so we'll be describing it as the trial court and the court of appeals, but it's really a federal case and it's, it shows us how business litigation can be just as dramatic as the divorce cases we talk about. Because when money's at issue, there are emotions and possibly extra zeros when you've got companies in the, in the mix. But this case is zip by, is zip by versus Parzic. And the the appellate opinion is recent March of 2026. Essentially the industry is parking technology and the president, who was the defendant, was employed by the plaintiff employer. And I just want to give some structure to this. The president, before he joined the plaintiff company, he spent 10 years developing parking technology. You know how when you drive into a parking lot and it tells you how many spots are left? That was the technology he helped develop for 10 years. He successfully exited when he sold his startup. A Norwegian owned parking technology company bought his startup. That's not who employed him. Four years after the exit, he was employed by an Australian owned parking technology company. And that's who's the plaintiff in this case. In 2016, he gets employed, he signs an employment agreement, then he spends three years developing an employee handbook which he also signs. He's also asked to sign an Intellectual property agreement. And that's some of the key language that affects the damages in this case. That's 2016 to 2019. And in 2020, besides the pandemic, he makes a very expensive decision. The company he's employed by, he's the president of the Australian owned part parking lot technology company, has an opportunity to acquire a company and it turns out to be the company he exited from, they're looking to acquire it from. So the Australian owned employer is looking to acquire his former startup from the Norwegian owned parking lot technology company. They exchange documents and his first assessment is hey employer, this looks like a great deal. It's the company I founded and it works great and you should consider buying it. And then almost immediately he completely does a 180 and tells his employer, nope, don't buy it, I don't recommend it, forget it. He uh, says that to the board of directors, they vote and agree we're not going to pursue it. Without telling his employer, he continues to pursue acquisition of his former startup from the Norwegian parking technology company. And he's using his company laptop, he's using his company iPhone, he's using his company email. And when the acquisition target sends an NDA, he signs it on behalf of his own holding company, a shell company, and not on um, behalf of his employer, doesn't tell his employer any of this. So from, From January of 2020 to March of 2020 is when this happens. And I just want to read his, his incriminating email. And this was sent on his company email account. FYI, I'm buying back the startup Confidential in all caps. A really good story. It's one of the smoking guns of this trial. So what we have here is someone who has, is the president of a company, he has a fiduciary duty to the company, he's under contract and he signed an intellectual property agreement. And all of those things together support why the plaintiff employer sued him. This litigation took six years, six day jury trial and we're really looking at the damages because each side appealed the damages. And I want to start with the numbers only because they're just so interesting from the perspective of the cost of litigation versus the damages received. Is there a net gain? Is it a break even or is it a net loss? So he was awarded. After a six day trial, the jury found $1.5 million in compensatory damages for the plaintiff, the Australian owned parking technology company whose president tried to buy out from under them an acquisition target. Then there was a $1 million punitive damage award that the trial court struck. It was not. It was judgment as a m. As a matter of law, struck the 1 million. So their compensatory damages are just 1.5 million. And then the intellectual property agreement kicks in. There's fee shifting. The defendant is ordered to pay $2 million in legal fees and $200,000 in the business valuation expert fees. And if you read all the documents, you find out the $2 million in legal fees is only 2/3 of what they spe litigate this. So from the plaintiff and company side, they spent 3 million in legal fees. They get back 2 million in legal fees. They spend 200,000 on an expert, but their compensatory judgment is 1.5 million. So what was their net? We don't know exactly, but it's not nearly the millions they would have been hoping for. On the defense side, he signed an intellectual property agreement with fee shifting provisions. So as you can imagine, all the things he's doing on appeal are trying to say the plaintiff's expert got it wrong. I'm, um, not responsible for these legal fees because of the contract interpretation. Those are, uh, what took so long and why this appeal took over two years. But if we go back to what he actually did, we saw from that email, he really had no opportunity to convince a jury that he did not attempt to steal the acquisition opportunity. The evidence is overwhelming. So the litigation is really about what's the measure of damages? Did the expert correctly measure the damages? And then should there also be fee shifting? Those are some of the things. And what was interesting is he and his lawyers, the president, defendant, was found liable, and civil liability is not criminal. He's not guilty, and he really didn't steal. There's no stealing. The tort is actually misappropriation of business opportunity. And I, I was reading this opinion, and I saw the appellate court write stolen business opportunity. So that just tells you how the appellate court looked at this based on what occurred and the trial level. So the first thing we should really look at is how the compensatory damages were measured, because this transpires through the pandemic. January 2020 is when they're looking at, at the acquisition, when his first recommendation to his employer is, hey, this looks good. It's my former startup, obviously you knew a lot about it. This looks good. By March, he tells them no, and by April, he's fired and being sued. He was sued immediately. We have the evidence given to the plaintiff's expert. And it was first projections. Projections of what this parking lot Technology acquisition, company Target could produce. We have a, uh, deduction for Covid, a 20% deduction. And the weird thing is, this is where the soap opera facts come in. The projections started with the acquisition itself. The Norwegian owned company that owned the acquired startup, a single person, an executive vice president, created those projections. Those numbers are adopted by the plaintiff's experts. Plaintiff takes the same projections, 2.4 million. The jury reduces it to 1.5 million. And the arguments are, it shouldn't even be the number. The defense argument is that's lost profits, and it's not based on fact, not even the law. The plaintiff says we get to choose in Massachusetts. We get to elect our measure of damages, which is either restitution or lost opportunity cost, lost profits. And as a matter of law, the result of this case is the plaintiff gets to elect. And this is so important for everyone thinking about breaching their contracts with their own company. You're not on the hook just for restitution. The defendant never bought the company. So he was thinking, if the measure of damages is restitution, I'm not on the hook for very much. I didn't buy this company. And that's why the plaintiff's ability to elect lost profits was an opportunity for the plaintiff and their business valuation expert there to come up with a bigger number. And the bigger number was 2.4 million, which gets reduced by the jury to 1.5 million. And even that jury reduction reinforced the Daubert arguments on appeal. The appellate court used that as evidence that the jury really did weigh the evidence instead of just accepting it blindly. This number was just put in. So that's what's so interesting about how you value the lost profit damages. There were several components in it, and one was a projection. Well, the projection was wildly inaccurate. It was not how reality happened. The plaintiff's expert did deduct for Covid a, uh, 20% deduction, but the projections themselves were presented to the jury. And the appellate court gives us some really interesting insight into how that was enough for Daubert that satisfied Federal rules of evidence 702 and didn't violate it. Because, uh, whoever is offering the evidence doesn't have to show the trial court that they're correct. It just has to be relevant and reliable based on sufficient facts or data with a reliable principle or method. So, something to ask you about, Melissa, is, are these projections reliable? A reliable principle and method. That was the defense argument. Not reliable principle, not reliable method. But the way this turned out, it was held to be reliable enough.

Speaker B: Well, I Think that there's a couple interesting parts. Not only the timing, you know, this being between January and March of 2020, and then there's things that happen in April of 2020. To me, the purpose of extending it beyond the March 2020 is because April of 2020 as a valuation date, M, you know, is. Is different than March of 2020. March of 2020, if you were at the early parts of March, we didn't know that things were going to get shut down by April. We did. And from a valuation standpoint, the valuation date is very important. We can't consider anything beyond the valuation date. So we couldn't. And like, if you did this transaction in January, like, I had a huge deal that closed In January of 2020 that was a different value based on the knowledge that we had no clue that things were going to shut down. The value of that company could drastically change the moment that we knew that the impact or even started to be in. In the impact. So the data valuation is important because they would have known about the pandemic at that time. Um, but I think what's interesting, if we go back to the cost of this litigation, to me, when you're initially looking at something like this, you should be running some numbers and saying, okay, what's your best case? What's your worst case? Because if their best case was 2.4 million, why would you ever spend 3 million fighting a case that you're never going to put a number above? Like, you, you know, like, to me, there's a bunch of red flags of how they got there or, you know, how they would have incurred that many costs that would be part of it. Um, I think projections have to be sanity tested. And so a lot of times, you know, and it also, projections kind of enter you in a weird space of the income approach and valuation. Is that, are you looking at the past? Are you looking at the future? So the projections then are based on, like, who created them. You know, if they, if. Do they follow the past? Are they saying, well, we only made a dollar in the past, but we're going to make a million in a month? You know, like, is there, is it logical? I mean, at the end of the day, if you're going to present these, um, projections, but I think in lost profits cases, from an expert witness perspective, the projections are everything. You know, the projections are the basis. So you typically interview the person that created the projections or the owners and say, you know, how are you going to get there? Does it make sense? We had this in a case where the guy said he was going to have a profit of 50%. 50% net profit margin. And I was like, well, so there's a great business that make 50% to the bottom line, so tell me how you're going to get it done. And he didn't have a good plausible reason. So foundationally now you're relying upon documents that are not going to withhold logic in the courtroom. To me, that's too wobbly of a foundation to set your entire opinion upon.

Speaker A: Well, and that's where this case gets interesting. The appellate court decision. My first read through, I could tell even without seeing the words that appear later, that the appellate court didn't agree with the plaintiff's expert. But the standard on appeal was abuse of discretion. And they come right out later and say, even though we may not agree with how the trial court allowed this to come in, it was not an abuse of discretion and we won't disturb it. So that's one piece of it. The other thing is the person who created the projections was actually somewhat of a favorable witness for the defendant. Either he knew him personally, we don't know from the appellate decision. And another piece of evidence in this case was omitted, was excluded because of a, um, decision by the defendant's lawyers. And that was the actual performance of the acquisition. And those were three years of tax returns. Discovery had closed two years earlier. And at the time of the close of discovery, this is a six year litigation. So there was a big gap between discovery ending and the trial. The tax returns were not available. Now, the acquisition company is a third party. It's not a defendant, it's not a plaintiff, it's just a third party. But they control the tax returns. When the defense counsel finally submitted to the plaintiff these tax returns, they showed 26 cents on the dollar of the projections. So the projections, which originated in 2020 from the acquiring the acquired company itself, were off by 74%. 74%. Overstatement. The defense used that person, the executive vice president of the Norwegian parking technology company that owned the acquisition target, to testify that he prepared the projections, he was personally aware of the business records in the tax returns and that they fell short. They were only $0.26 on the $74 lower in actual performance. But the defense lawyers made a very ultimately negative decision for their own client. So maybe there's an argument that it was a strategic choice. Normally when evidence is delayed or excluded, or there's a fight over hoping to exclude something, it's because the evidence hurts your side. This was evidence that would massively help the defense. It didn't exist when discovery closed. Everybody agrees with that. But if federal rules of Civil Procedure 26e have an updating obligation, if even after the close of discovery, new or, uh, contradictory evidence, you become aware of it or it's in your possession, it's not simply in your possession, it's are you aware of it? You have an obligation to timely update the other side. This is not trial by surprise. Well, in the actual facts, the defense lawyers submitted the tax returns that would massively help their case a week before trial, one week before trial. And under federal rules of civil procedure 37, they were excluded by the trial court as a sanction for delaying the production of the tax returns, which left the defense with only a person. This third party witness who's the executive vice president of the Norwegian owned parking technology company that owned the acquisition target at the time. And he knew that, he wrote the projections that were wildly overstated. He knew that the actual performance was 74% lower and all the defense had at trial was his testimony. And I was thinking, why would they do that? I mean, in an academic sense, they have a person who can say all the things, but who's better? A person who can be cross examined or a tax return that stands up. Yes, you can investigate a tax return, but let's just assume the tax return, it wasn't audited by the irs. If the tax return wasn't, if the tax return was accurate, what do you think would impact the jury more on the same numbers?

Speaker B: Well, I think that, you know, it's, it's hard to ever tell if a tax return is accurate, you know, and so you're kind of weighing all the evidence. And a lot of times, you know, with anything financially, you need to like, triangulate, you know, so you have a tax return, you have a bank statement, you have deposits and withdrawals, you know, like, you have different things, internal statements, the projections, like you really have to compare it or like sanity test it. Um, but most people just assume that the tax returns are correct and that they are the most reliable source, um, over any sort of produced documentation. So I don't know if that, um, you know, kind of answers the question. But I mean, at the end of the day, I think that tax returns are foundationally more reliable by the court. Like from a financial aspect, I rarely see a tax return that is correct and that it hasn't been manipulated. And I mean, that's the name of the game, is to lower your taxes so you increase certain things, you Know, there's, there's loopholes and, and stuff like that. So I think that, um, you know, the, the thing that I was looking at is like the COVID adjustment that they were taking, which I thought was interesting because again, depending upon when you valued this, if you wouldn't. When they were talking about stealing this opportunity, they didn't know Covid was into what was coming into account. And so they negotiated or lack of negotiated or made a decision to move forward or not move forward based on evidence that didn't include Covid. You know, so the, the loss of whatever that opportunity was was in their minds, what they were fighting about was maybe a different reality than what a Covid impacted projection would have been like the reality of the projection. But we can't always predict the reality. We have to go back to what was known or knowable at the date of that valuation. And we would have, I mean, in April, none of us had any clue the impact of COVID at April. Like, we were all like, next day we're going to be open, backed up, you know, like we're going back to work the next day. And it was months and months and months and months.

Speaker A: And this is parking. And this is parking, public parking. So if among the businesses most immediately hit by the true lockdown, you would think parking would be one of them. So definitely the subject matter, there's one more piece of the plaintiff employer's expert and this was the synergy premium. A defense argument was well, the one point, well, the 2.4 million that the jury reduced to 1.5 million in compensatory damages. The defense also argued, well, that isn't even the number that the acquisition target earned. So that can't be the number of compensatory damages. And the trial court and the appellate court affirmed this synergy premium that the plaintiff's expert used because this, the acquirer was in the industry. The acquirer was this Australian owned parking technology company. The target was currently owned by a Norwegian technology company. And the argument was that the acquired the potential acquire acquisition. The synergistic relationship could actually increase what the Australian company could have produced from buying the. The acquisition target that ultimately never went through. So that's what also ended up increasing the number. And that it's so interesting because the appellate court spells out in the opinion that they see this as possibly very shaky. But there's one more decision we need to talk about with the defense counsel and that's the failure to get their own expert. They did not get their own expert. They Relied on hoping to block the ex. The plaintiff's expert entirely through a 702 challenge. They hope to undercut his opinions. The appellate court makes it clear they view some of this as barely admissible themselves. It doesn't block admissibility. It blocks the. It. It affects the weight. So all of these challenges that the defense raised, that this is not the best evidence. Well, you don't have to have the best evidence that this, that a trial court couldn't believe it. Well, that's not the standard. It has to be relevant and reliable and based on sufficient facts and based on a sufficient method. So it's sort of the, the floor. It made it, it barely made it in. And it prevailed. And it may have prevailed because there was no defense expert. And so I was thinking, why would the defense counsel, I mean he had very accomplished defense counsel. He was not unresourced. The defendant paid a lot to be well represented. Why did they choose not to have an expert? And one suggestion was to not set the, those lost profits at all. That they didn't want that number out there.

Speaker B: Mhm.

Speaker A: But the way it turned out, by not setting the floor themselves, it left. The jury chipped away at the high number. But they, but they chipped away more than half. They left more than half of the high number. Which you, which I would, I would expect to see if there, if the, if the expertise is lopsided. The only witness is, is the executive vice president of the Norwegian parking technology company that owned the acquiring target. The acquisition target. He's the one who did the projections. And then he's the one saying my projections were wrong. And he's not a business expert. His credibility wasn't great. This guy isn't great with numbers. He was bad. He's saying I was wrong then and I may be wrong now. Who knows? I'm not an expert. And there were no tax returns. He was saying he was testified based on his knowledge of the money, of the business records. But without those tax returns, that also could have come into play. So is it, is it a viable strategy? If you don't want, if you're trying to omit that version of damages entirely. Would it be bad to set a floor? Because lawyers, from my perspective as a lawyer, you can, uh. Lawyers argue in the alternative all the time. It's not. They're saying restitution. Well, and their client didn't buy the company, so restitution would have been minimal. Plaintiff is asked, is selecting lost profits. A lawyer can argue in the alternative. We legally lost profits are legally unavailable for this tort. They lost on that, but they can still make that argument while setting a better floor. And this is a case that massively backfired because the defendant, when he exited successfully before being hired by the plaintiff as its president, his exit was $7 million. The, the ultimate award is 3.7 million. That's 2/3 of the plaintiff's legal fees. 2,200,000 for the expert on the plaintiff's side. What did he spend on his own lawyers? If they spent 3 million, what did he spend?

Speaker B: Mhm.

Speaker A: A million. I would say it would have to be at least a million. So 3.7 plus a million is 4.7. Now we're closing in on 5. He exited years earlier, less than a decade, but years earlier for 7 million. So maybe the plaintiff broke even or barely had a net gain at the, in, uh, monetary viewpoint, the defense got hammered completely with his own costs. The fee shifting of their costs, which is really the only reason this was even financially palatable to their board of directors. It's what you said at the top. If, if you run the numbers and your damages because this company didn't perform are lower than your known legal fees are going to be, usually the defense will offer a cost of defense. We're going to spend this much to defend plaintiff. You're looking at this and your own fees are this. That argument didn't work because of the intellectual property agreement he signed as the president. That fee had a fee shifting provision. And yes, the defense litigated, attempted to argue that the intellectual property agreement wasn't the breach of contract, wasn't the breach of fiduciary duty. And the appellate court held, oh yes it was. It has a separate clause. They go in word by word, showing there's no argument here. The plaintiffs clearly win on that issue based on plain meaning of the words used in the intellectual property agreement. But this cost of defense, if there isn't a fee shifting, could have been an effective settlement opportunity because they both were looking at massive legal fees, significant expert fees, and then the dam and the damages were not looking like they were going to overcome that.

Speaker B: Well, but we see this happening in a lot of situations and I would never advise not having an expert, you know, so like.

Speaker A: And that's so helpful to hear that, Melissa. That's so helpful for me to hear because I'm reading this thinking, why didn't they,

Speaker B: I mean, we even, we even can come in and say something is zero, right? And you're still proving it towards a position. Because I Think what you have, like in a rebuttal situation is that, you know, a lot of times the rebuttal is like, well, we don't like how you did your number, but we're not positioning a new number. So I'm still the only expert out there. Like in this situation, you have one expert. And just like you talked about, you know, like, that's our whole concept around anchor. The deal is that we're putting forth a position and that if, if the jury or the judge doesn't have any other person to look at, then they're looking at this person and they're like, okay, well, they said this number is a number. How do we break it? You know, like, how do we nick at it and just take little pieces off of it over time, you know, like with all of these other pieces. But I think that a lot of times this CEO probably thought that they were pretty smart. Probably thought that they could testify to whether what the value of it was to them. Right. And that it wasn't that, as evidenced by the fact that they didn't move forward. It wasn't of value. So, you know, whatever it was, they think that they can prove it or say that there's no just implied. We didn't need an expert because we didn't think that there was any valid. Like, we thought that there was no merit to it. The problem is if you don't prevail in totality from a legal standpoint and you have this jury that's like, okay, well, we're somewhere between zero and this number. You haven't given them any reasons to be at the other number. That they can even split the baby. Right.

Speaker A: And they didn't. They stayed high and. Which helped the plaintiff to hopefully break even. One thing, just from hearing what you're saying, I'm thinking of it from the jury's perspective. The appellate court signals implicitly and explicitly they don't think the expert's opinion was that great. Uh, it's in the opinion. Everyone should read this opinion. It's very clearly written. Not legally. I mean, they use the word stolen instead of misappropriation. But think of it this way. From the jury's perspective, judges view him as shaky. But there was no other expert. Guess what that did or could have done for the jury. Made him look more stronger, uh, made his opinion more credible. Because the impression from a non lawyer on the jury may be you couldn't find anybody to go after this guy. Why don't you have an expert? They don't understand the four Dimensional chess decision that may have gone into the defense reason to not get their own expert. And it wasn't that he couldn't afford an expert. So resources was not an issue here. And we're.

Speaker B: No, it was a strategy. I mean, yes, that is a very specific strategy that we, I mean, and you're, you're going logically, like, we didn't need an expert because we don't think that there is any damages. And again, I have seen, you know, like, I've seen it in a business valuation sense. We went and had this case and we submitted a report and they had no witness, no rebuttal. They just said, we don't believe the business has value and she does. Right. And so when the attorneys tried to decide whether they would just submit the, the um, report for the court, because I would have had to travel to testify, I said, listen, if there's no expert, then you lock this in all the way and you. We testify, we present the report, we make sure that the judge understands that we have a value and they don't have anything to negate it. Now, some states will have to go with one value, the other, or people perceive that they have to go to one value with the other. I don't know about that because I see a lot of states with where the judge or the jury kind of figures out whatever they like the number to be and if it's plausible, backed on. We had an expert that told us this was the number. We moderately changed it based on these other facts. You know, like, that's probably not an appealable issue. And the case where we went and testified, the, the judge went with our number. And again, they, they brought, they brought up some good points on cross examination. I mean, they did their dangest to, to use cross examination to prove their points. Right? And I thought a couple of them were valid. But the judge went with our number, exactly the number. Because you, you can't appeal that like

Speaker A: you had an standard would be abusive discretion. That's why you. And these are experienced litigators who knew that. So yes, it was a strategy choice, but everyone should read this opinion because the negatives outweigh what their strategy may have been focusing on in the first place. They set no floor to these damages. They had no expert. The other side's expert was shaky. They should have been able to crush him with an expert. They ended up with a person and they thought they were going to rely on the person and the tax returns. And that's why, uh, it's so interesting to speak with you about this, Melissa, because the court, the trial court, and the appellate court point out that the tax returns may have been better, but the defense wasn't harmed because they have a witness. And you're saying, well, that alone isn't enough. And I agree with you. So it from the lawyer side, as a lawyer reading this, at first read, it looks like, oh, those tax returns that turned everything. No, it's tax returns and no expert. What you're helping read between the lines. You're helping show all of us from the business expert perspective, that it's not just the tax returns. Now, I'm thinking of the trial exhibits. And yes, the tax return as an exhibit would have been better than just the words out of one third party's mouth who could. You know, uh, he's the one who got the projections wrong in the first place. But this shaky opinion from the plaintiff side, the appellate court doesn't think it's great, but it was barely good enough, and good enough looked great without an opposing expert. That's my read now, after talking to you.

Speaker B: And the problem is that we get so far into these cases over time that we think that it's very clear to read between the lines. And so we're producing the evidence, and everybody can clearly see that it went from here to here to here. It really does take an expert to make it seem simple. Right. You know, and. And pull it all together. And again, you're telling this story to a jury, to a group of fifth graders, and how are you showing them? Like, this is where it was. This is where it went.

Speaker A: The difference is the objection was here, 74 lower. Like any, an expert saying that would have carried so much weight than just the tax returns. And it's just so interesting because there's a huge fight about the. The exclusion of the tax returns. And because that's discretionary, that was a lose from the beginning. And it was the evidence that the defense would have benefited from, which just makes the whole thing weird. This is weird that that really wasn't a strategic choice. They. And, um. Oh, they did argue. Well, we weren't in control of them. And for everybody, 26e is not about control. It's. You have the ability to go get it, and you have an obligation to go get something that updates what you were asked for during the period of discovery. Even though discovery closed or ended, you still have an obligation to update your submissions. And this was well within your obligation. And the week before trial is not going to cut it. That's a major takeaway from this case.

Speaker B: And I see a lot of people do this if they think that they have a good case, right. They think that, that, that everybody should just be able to look at the facts and circumstances and it just logically is the best case. The problem is if you don't take it all the way through, right. And you protect that position. Because they probably wouldn't have had to have an expert do a tremendous amount of work, but the expert would have bolstered the position of it being zero. And so what you have is like the expert testimony with the CEO testimony would have, like the CEO would have said my experience in selling this company, buying this company, like they could have doubled down on the M and a aspect of it of strategic value versus fair market value, like all of those constructs. But then the expert comes in to put numbers around it. And a lot of times even I think a strategy is not to say zero is to say some number that has some backing to it. Because in this spectrum of reasonable range of value, there's something on the lower end that would have been reasonable if you would have accepted one of their positions. Right. You take one position off the table. What's the lowest lying assumption that you can make that is consistent, you know, potentially with the other side? Or you're sort of like being conservative in that assumption and saying, you know, we accept this one attribute. Like what can you not deny that is being told to you in the financial statements? To me, the more the financial statements can speak for themselves. But also you're just summarizing the story with an expert. You know, you now have approached it from a lot of different positions and realistically you're just giving more impetus. You're sort of selling it to the judge to make a bigger haircut on the other expert. And it is a, a waring of the experts. I mean, we've even had situations where if a jury liked the expert more than the other one, they would have sided with one or the other. Like their personality, how they approached it, how they talked about it, how they made it simple, how they made eye contact with the jurors. Right.

Speaker A: And so what you're just, what you're saying right now is the expert, they should have, the defense should have hired MHM just for that. The not attacking everything coming, it just, it, it's not just hindsight. This was a forward looking strategy that others need to think about before making this same choice that may make the judgment if you lose even worse because the jury had nothing other than this big number and they dropped it a little bit. But an expert who could have expertly shown how shaky the plaintiff's expert was, he was shaky. The appellate court saying, we think it's shaky, but it was. We are not speaking for the Trump.

Speaker B: Thing is you could do that. Like you can have that strategy with a judge perfectly fine. A judge is going to be a logical human that has an, a greater understanding of some of these things, especially if they're doing federal cases that are business related. Right. These are not dummies in, in the judge world. Okay? So. But this was a jury. You knew all along that this was a jury. And juries can be swayed by a whole bunch of psychology that has nothing to do with the numbers. And so when you're looking at a jury, like, again, I'm coming like a woman as an expert going against a man with a jury, I win. And I know I'm going to create some, you know, people are going to come for me in that comment, but I win because I'm going to get them to like me a little bit more. Right. I'm going to engage with them. I'm going to use other tactics that now give me more credence. I'm hoping that the person I'm going up against is really, really like harsh and talking too many theoretical conversations and everybody gets lost. And then they're looking at that like they're not even looking at the jury because they're talking up here to the lawyer and like, I'm gonna go and use all of these tactics to try to get the jury to side on me and reject the numbers because they don't like the person. And if people don't think, think that that is an important part of the strategy with a jury case. Yes, that's crazy.

Speaker A: Like, uh, a defendant and the defendant with that smoking gun email I read, he had no defense. He did breach fiduciary. I mean, well, now it is fact a jury peers found he did all of those things, breached his fiduciary duty, breached multiple breaches of contract, uh, in multiple of contracts and the employee handbook that he helped create. So he couldn't even one of. In the, in the, uh, answer to the amended complaint, it's he, he had no choice but to sign. All right, As a matter of law, you do have a choice. You can choose to stay employed or you can choose and sign it, or you can choose not to sign it. But he helped create the employee handbook. It's the rare circumstance in an employee handbook as a contractual obligation. He, he Helped create it for years. That was part of his job. So he can't even say I didn't understand it. He helped create it.

Speaker B: And then that these are the gray areas in the majority of partnerships and business arrangements that you see. Like this is the repetitive issues that we see in these types of cases. And again, you are selling your position if you already know you did what

Speaker A: you did, he did what he did.

Speaker B: A, uh, matter of um, between zero and millions, right? Then you're selling your position to the jury. And a jury can be sold a lot easier than a judge based on other things because they still don't totally understand the numbers. Like they're paying attention to a whole bunch of other things. Like, does it make sense, you know, should we, ah, harm this other person? But one thing that I have a question about which I always think about is they did all of this six years, millions of dollars in fees, you know, barely break even. And uh, you know, why, like in some capacity, you know, how did we get here and how can we avoid something like this? Because it really, it doesn't seem like it was beneficial for any of the parties, you know. And

Speaker A: uh, I m. Have, I have two answers to that. First, I learned early on as a young commercial litigator, commercial litigation is just as personal as non commercial litigation, meaning it's people behind the companies. These facts mattered personally. And the employer was owned by a person, an Australian citizen, and the president helped the Australian owner get his L1 visa and helped arrange for his leased housing and leased luxury vehicles. I mean this is in the, in the complaint and the briefs and all this I've learned all these extra facts. So it's personal and when it's personal plus, it's not just personal though, personal plus that V. Shifting in the IP agreement, that's why the plaintiff moved forward. They knew they had him dead to rights and they knew they had a fee shifting provision. And it's plain meaning according to the federal appellate court gave them that fee shifting that the other side argued it didn't. But it, it's, it was. They lost so easily on appeal that that should not have emboldened the defense at all. But that's why the plaintiff did it.

Speaker B: Here's where I have a frustration in, you know, the litigation realm is that, is this enforceable? You know, so at the end of the day, uh, I'm, um, a big company. I sued this person, I prevailed because they failed to do A, B and C that they could have done better. But like, am I going to get My money. Am, um, I just going to be out of. You know, because in my mind these are things that we don't talk about. We talk about how the case prevails, we talk about what you should have done. But at the end of the day. And we have this a lot in divorce, right?

Speaker A: Yes.

Speaker B: Or you see this in family disputes. Where's the enforceability of the judgment that you know, what if the defendant just goes and files bankruptcy like uh, this

Speaker A: extra fact is he. Oh, there's another mini soap opera in here. The building where the. The plaintiff company that employed the defendant, where they had their offices two weeks after he's fired, he buys that building and while he's still employed with them, he's trying to buy the building and he increases the rent on his former employer by 10%. That's in the complaint and it's in the briefs. So he's. They. They have a whole massive section on all of the breach of fiduciary duty and misappropriation of corporate assets and all of this. He, he is not unmoneyed. The they are confident that they can get to it. But you're right, people do try to make themselves judgment proof and that absolutely is part of the calculus. But the building, what you can do in litigation, it's called a list pendants. And it isn't a lien that you can enforce. It is recorded against real, real property, real estate during the pendency of litigation. So that anyone trying to buy it or any lien that comes after it, you have priority. So you're saying my litigation. These are the assets I may be collecting from. And with the plaintiff sophisticated counsel there had to have been that in mind. Including the building, the commercial building where the plaintiff has their offices. And he of course the defendant, of course, uh, there's an injunction. He can't go into their offices even though he owns the building now and he can't afford. Uh, he was in. He was enjoined from acquiring the acquisition target, which was his former startup. You know who bought it? The witness, the third party witness who was the executive vice president of the Norwegian parking technology company who created the projections, who then testified that he was way off 74% less actually happened. He buys the acquisition target himself. You didn't see that coming? I didn't. Or uh, maybe someone else that coming. But I certainly did not see that coming. So yes,

Speaker B: that's hilarious. And, and that I think globally is why I would weigh. You know like anytime you get into some sort of litigation in any capacity you gotta strategically figure out, like, is it worth it? What could be the potential costs? What could be the potential impact? You know, and are you along for the ride? Because if not, there's, there's reasons to try to settle it. There's reasons to try to show them the leverage that you have, show them the things that are not going to be, you know, I think if the plaintiff had adequately shown the defendant, like, you're not going to win in this. Like, let's save time, effort and money. Let's come to an agreement, let's settle this. But everybody wants to roll their chances. And I see lucrative entrepreneurs like this defendant, um, that are business owners. They usually are willing to roll the dice because they're like, uh, come get me. Like, you know, let's first see if a jury's gonna go against me. Let's see if I really have to pay this. And they roll the dice. And it doesn't always, you know, work out in that way.

Speaker A: The defendant was definitely fighting his own bad facts. His lawyers had to have told him, your facts are bad. These emails, using the company email to steal an acquisition. And you know who ratted him out? The Norwegian parking technology company's Australian subsidiary ratted him out. That's how, that's how his employer found out about it, because it was, um, The Norwegian owned company knew what was going on because he, as soon as he signed the NDA, not with his employer, but with his own holding company, they knew in his email, keep. It's confidential. No, it's not. So he had very, very bad facts. The plaintiff had a very strong fee shifting provision. So the calculus here is who has the fee shifting provision. Without that, the plaintiffs definitely would have had more reason to consider settlement. And maybe they really tried. We don't know. Maybe they tried, but in their back pocket they had that fee shifting where they could at least break even. And that's what it looks like, that they at least broke even and they stuck it to him. I mean, and that's the emotional side. If you can break even and you're, and you're not doing the work, you know that all your lawyers are doing it and it's funded by him to teach him this lesson. That's why this case really should be a deterrence. This case can and should be used to show anyone that you're advising to sign these C suite level documents. This is how they, this is how they work, and this is how it can be used against you. And he should have consulted a lawyer because this was not A crime. What he was trying to do was breach of contract. Breach of contract is not a crime. It's civil. So he wasn't guilty. He was liable and liable for a lot of money. But if, before he diverted the business opportunity, he went to a lawyer and showed the lawyer his employment agreement, the employee handbook that he helped create and signed, and the IP agreement with the fee shifting, what opportunity would that lawyer have had to show him this is bad and it's going to get worse and that you have no upside to do this, could have prevented all of this?

Speaker B: Yeah, absolutely.

Speaker A: He would have 3.7 million plus his own mil, at least a million in his own legal fees back.

Speaker B: Well, and you. You reach a point of no return when you do this. I mean, you really have to be prepared, because even the best settlement structures, you know, and I personally was involved in a litigation, and, you know, the. We tried to settle it, we tried to settle it. We had to go to court. We prevailed in court. And the, um, you know, unfortunately, we're being. We were in litigation with a lawyer, and the lawyer was like, well, I'll just file an appeal, and you'll pay the fees for the appeal unless you split what, you know, you were awarded. And I was like, how is this possible? Like, this seems like a little bit of, um, you know, a shakedown. And it was like, no, because we had signed a contract that the prevailing party fees and all of this. And so I was like, okay, and

Speaker A: that's where you start. All right, where's the contract? And is there fee shifting? And that definitely changes the math, the math of your litigation strategy. It absolutely has a major impact.

Speaker B: Yeah, it's crazy. Well, you always seem to find these amazing, um, cases that, you know, this was the zip by. So if people want to find this, I think they should go read it, because there's a lot more that, um, it had to do so many nuances. But again, I think we can learn a lot of lessons from it. And, and also, you know what? How would we have these discussions? Because I think you are setting the tone with a client. Like, as an expert witness, I don't like to be controlled by the attorney. I like to, you know, have clear communication with the client and be like, hey, we're running these numbers, and this is not going your way. You know, like, you got to figure out how to go around it, or we don't have the documents. Like, we can't do this to the best of our ability. Like how. You know, and sometimes you just have to do it good enough. Um, but I think you're setting the expectations with the clients. And a good expert should kind of set the expectation of, you know, if I was on the defense side, I would have set the expectation of like, hey, if. If you really lose, this is what it's going to look like. If you win, this is what it's going to look like. Like, you got to be thinking of both sides.

Speaker A: But.

Speaker B: But you talk about a ton of cases, and maybe you want to kind of wrap this one up and then tell us about your podcast or how people can reach out to you as well. Because you do a lot of speaking engagements. You present cases immaculately. You're a researcher, you know, like you. I don't know how you find these cases, but they are so fascinating. So what should we take away from this?

Speaker A: This case Zip by Everyone should read. And what I'm finding when I'm recording my own podcast, which is Wealth Litigated, I do a deep dive on a case. And, uh, even my recent episodes while recording, I said out loud, we are all flying blind if we don't know how these words actually litigate in the state where your clients are. That's why reading the cases and, uh, starting from these introductions to the cases is so valuable to a professional practice, to lawyers and business evaluators and financial professionals. All of us need to. To be better informed. Because this is a great example to use with a client who otherwise may go astray thinking, like you said, Melissa, entrepreneurs taking risks. Not when these. Not when these contracts have this level of fee shifting with a very clear provision that should have that legal advice, which probably wasn't even sought and didn't happen, could have helped this defendant avoid all of this and preserve his professional reputation. Because everybody knows he did this. Everyone. So, m. My podcast is Wealth Litigated, and we want to make sure that you have the information to use with your clients so everyone has a more positive path forward with their wealth protection.

Speaker B: Yeah. And I mean, I think some of the things that you. You say at the end of this, you know, as professionals in this space, I think that we have a duty to start to, you know, take it one step further as a consultant and educate people about what we're doing and how things can get settled, you know, outside of the courtroom. To, you know, this. This case was a lose for everyone. Right. It was, uh, just a waste of time. And, you know, some people would say, well, the lawyers benefited. But again, the lawyers probably, at a lot of times are, you know, recommend you do certain things to settle the case. But you, you get so far in. Well, I've already spent a half a million dollars, so I'm just going to keep on going. Let's see what the judge says. But most of the time, these cases are complex. And what the judge will do may not be the best. Where you guys could have figured out, like, maybe you didn't agree to the number, but there could have been a different, Ah. Payment terms or they could have agreed to something.

Speaker A: This was a cost of defense case. It should have been.

Speaker B: Yeah. Yeah. So amazing. So. Well, we'll look forward to the next case that we talk about. And we appreciate you and we'll talk to you soon.

Speaker A: Thank you, Melissa.