Simone vs Thompson; No. 1 CA-CV 19-0384 FC
Aug 04, 2020OUTCOME: McWhorter Law Firm's client won on appeal.
The parties married in2012. In 2013, Husband formed Thompson Consumer Law Group (“TCLG”), a law firm that accepted referrals from a marketing company named AFC Legal Marketing LLC(“ ... AFC”). In May 2017, TCLGpurchased AFC from MarshallMeyers for $2.28 million.Under the purchase agreement, the purchase price included“any amounts owed under the [previous] agreement between Seller, Buyer and [Thompson] dated January 22, 2016.”The agreement also includedan attached“Schedule [1.5] of included fees [totaling $477,843.92],” which reflected the amount owed to AFC by TCLG. In June of 2017, Wife filed a petition for legal separation that was later converted into a petition for dissolution of marriage.In the dissolution proceeding the parties retainedDavid Cantor, a forensic accountant, to determine the value of TCLG and Law Cent (the marketing arm of TCLG) as of June 30, 2017.Cantor assigned an overall value of $195,000 to TCLG,with one of its assets being AFC, which was valuedat$2.28 million.Cantor used the $2.28 million purchase price as AFC’s asset value because thepurchase transaction occurred within a fewmonths ofthe valuation date. Husbandchallenged Cantor’s valuation, contending Cantor should have reducedthe value of AFC on TCLG’s balance sheet to reflect the Schedule 1.5 fees and a$25,000 loan previously owed to Meyers, but not mentioned in the purchase agreement documentation.Husband claimed that the Schedule 1.5 fees were still owed and should be counted as a liability on TCLG’s balance sheet.Cantor offered to conduct further analysis to determine whether TCLG had received revenue for the referralsbefore or after the valuation date. Husband declined to provide additional documentation to Cantor and instead retained another forensic accountant,Glenn Karlberg,to conduct a separate business valuation.Karlberg valuedAFC as an asset worth $1,777,156after deducting from the $2.28 million purchase price the $25,000 loan owed to Meyersand theSchedule 1.5fees.Based on thoseassumptions, Karlberg testifiedat trial thatthe business value of TCLG on June 30, 2017,was negative $391,765. Cantor testified there was no reference to a loan by Meyer for $25,000, and that in any event, such aloan, along with the $477,843.92Schedule 1.5 fees, wasrolled into the $2.28 million purchase price, which included a block of assets including referrals, good will, and account receivables. Cantor noted thatthe promissory note made no reference to a $25,000 loan or a $477,843.92liability. Cantor also pointed out that if in fact these were liabilities at the time of purchase, Husband would have paidto purchasea company with a negative value. Ultimately, the superior court relied onCantor’s valuation and found that “the purchase price of $2.28 million reflected the value of [AFC], including any and all liabilities.”In support of its finding, the court noted that the purchase agreement provided the purchase price for AFC and explicitly stated it incorporated previous amounts owed and the Schedule 1.5 fees.Accordingly, the court determined the value of TCLG to be $195,000 and awarded Wife an offset of $97,500.
