Document Type
Article
Publication Title
Minnesota Law Review
Publication Date
2003
Volume
88
First Page
357
Abstract
(Excerpt)
This Article follows in the spirit of Karl Llewellyn and his fellow drafters of the Uniform Commercial Code who sought to transform merchant norms into law. The merchant norms discussed here are the procedures that sophisticated firms contract for to resolve anticipated valuation disputes. The law proposed is a new procedure for resolving valuation disputes based on commercial valuation norms. More specifically, this Article proposes a new default valuation procedure, modeled on the algorithmic valuation clauses commonly used in the contracts of sophisticated firms, that would encourage parties to valuation disputes to introduce more plausible valuations into evidence and limit adjudicative discretion over how to resolve any remaining differences.
Part I discusses the problem of "discretionary valuation"—that courts are ill-equipped to assess expert valuation evidence and end up adopting arbitrary, unpredictable valuations that fall somewhere between the widely divergent values offered by the parties—and some of the reforms to address this problem that others have proposed. Part II, after first describing some private contractual solutions to the discretionary valuation problem, introduces "valuation averaging": a discretion-limiting, public valuation process modeled on the private examples. Part III explains how the proposed valuation averaging procedure would work in a variety of contexts and offers reasons for why it would be superior to current law and other proposed alternatives. Part IV anticipates and responds to two potential constitutional objections to valuation averaging, arguing that implementation of the proposal would offend neither due process nor the Seventh Amendment right to trial by jury.
Comments
Available at: https://scholarship.law.umn.edu/mlr/710/