Judicial Valuation Behavior: Some Evidence from Bankruptcy
February 1, 2008Keith Sharfman
Valuation litigation is notoriously unpredictable. When the value of a legal entitlement is in dispute,one party typically will ask for a high valuation, the other for a low one, and each will offer evidence in support of its position. The trier of fact may in the end agree with one side or the other, but could just as easily settle upon a third value of its own choosing. The valuation inquiry is thus inherently imprecise, a discretionary exercise that depends largely on the whims and predispositions of the factfinder. Given this imprecision, conventional legal scholarship has been unable to articulate a convincing theory of legal valuation. Rather than theorize about which valuation methodologies courts can, should, and do employ, the favored approach has been to shift away from valuation method and to focus instead on process reforms that would lead to more predictable outcomes in valuation litigation.