Today the Massachusetts Appeals Court (the second highest court in the state) overturned a divorce judgment in the Caveney case dealing with valuation of interests in closely held businesses. In the process they clarified the standard to be used for divorce purposes in valuations.
Before the Bernier case in 2007, valuations of closely held businesses applied "Fair Market Value," which is what a willing buyer would pay a willing seller. The experts would then apply discounts which reduced the value, first for lack of marketability. If the business interest was a minority interest, they would apply a discount for lack of control. These two discounts can and did make an enormous difference in the values applied. Post Bernier, most experts use (or at least discuss) using "Fair Value," which generally means no discounts for marketability or lack of control.
In Bernier, the divorcing couple owned supermarkets on Martha’s Vineyard. These markets were not for sale. The judge — a very capable judge (disclaimer here, she once was a partner of mine) — not unreasonably applied discounts. The wife appealed and the Appeals Court held that the discounts should not be applied. The Bernier decision had been read more narrowly; this decision eliminates that argument. This case, and in circumstances where a sale of the asset is not contemplated, makes it clear that Fair Value is the standard to be applied.