The Impact of The Pandemic on Court Settlements and Business Valuations
Host of the Schein On Podcast, Attorney Evan Schein, welcomed forensic accountant Glenn Liebman and family law attorney Peter Bryniczka to the Schein On Podcast for their insights on the post-COVID courtroom new normal.
In this episode, they discuss the impact of the pandemic on court settlements and business valuations, and the emergence of virtual court
Did you miss Episode 9 of the Schein On Podcast? Listen here!
Pandemic or not, the case must go on
As the COVID-19 pandemic took hold back in March 2020, many in-progress divorce and family law cases which were in litigation took a spot on the back burner. As courts across the country shut down, everything changed, including the ability to move forward with matters currently being litigated. Liebman points out that this was no temporary break, unlike the events of 9/11 or the mortgage and real estate collapses.
He tells Schein, “[The pandemic] was completely different because it was just so sudden and so severe that it effectively shut down the economy. It shut down the economy and it shut down people’s lives and the way that they were doing things. People were just so scared and paralyzed that they forgot about divorces [and were] just trying to figure it out.”
In addition to many new filings being put on hold and lives left in limbo, many of the divorce cases on the verge of settling back in March or April 2020 suddenly found themselves in flux, unable to set a court date or continue negotiations. Bryniczka noted that some couples were still able to move forward cooperatively with their respective lawyers. However, for those couples with complicated property division issues – like a business – this delay simply added an extra layer of difficulty.
Business valuation during uncertain times
As a respected forensic accountant and CPA, Glenn Liebman often finds himself called as an expert witness for business valuations in divorce matters. Schein asked him what one of the biggest challenges of the past year has been, and Liebman noted the stark difference between pre-pandemic and post-pandemic valuations:
[With] the value of a business, we deal with a term called “fair market value.” And a business is valued as what would somebody pay for it if they were going to buy it.
Now, usually businesses are valued based on what I could expect to earn in the future from that business. That’s what I’m going to look at. What income, what earnings am I going to get out of this business after I buy it? [But] when COVID hit, who knew? So I had a lot of attorneys and clients who own businesses and the attorneys who represented them, wanting to update the valuation.
He also points out, when a business is worth less than half of what it was only a year or so ago, what impetus would a spouse have to settle their divorce case? Unless one’s business is benefiting from the pandemic, there may be little to no incentive to settle.
Virtual court – the pros and cons
As courthouses across the tri-state area shut down and then most legal proceedings moved to the virtual arena. Bryniczka says these virtual innovations offered both benefits and disadvantages to lawyers and their clients. He explains:
It’s been a learning experience for all of us, whether it’s the attorneys, the clients, our staff, the hardworking judges, clerks, and superior court staff to figure out how to make this whole system work. And now we are having everything from depositions to status conferences, to trials, hearings, and court appearances virtually, and I think it is effective. The system does work. [But] I do certainly miss being in a courtroom.
He also points out that, from his experience, the physical act of going to court – taking time off work, arranging childcare, dressing up, preparing your case – is often an impetus to resolve a case in a timelier manner. The old adage of “settling on the courthouse steps” is true for a reason, after all.
Bryniczka adds, “Seeing how justice is administered to the other people in that public forum sometimes has a significant effect on all the people who are sitting there waiting their turn.”
But what about the benefits of virtual court?
Liebman has a different perspective on virtual trials. As a seasoned expert witness, he has testified in over 50 trials, explaining business valuations and complicated financial situations. He notes that, for much of his courtroom audience, it is their first time in court and they tend to get distracted. However, when he is on-screen during virtual proceedings, his report is the main focus of attention.
He notes that not only is the court more focused on his expertise, but virtual proceedings also save the client money, saying, “[It’s] a much more targeted experience…in the virtual setting. So it’s working quite well, not to mention the travel time that I don’t have to bear. And clients [don’t] have to pay me to go back and forth.”
What’s the takeaway?
Neither courtroom trials nor virtual proceedings are going away anytime soon. We predict a blend of both going forward, and the next few years are set to be a very exciting time in matrimonial and family law.
The attorneys at Berkman Bottger Newman & Schein LLP are here to help when you have questions about divorce or family law matters. Schedule a consultation today by calling (212) 466-6015 or filling out our contact form. Proudly serving New York, Westchester, and Bergen County, NJ.