Department Store Expels Celebrity Designer From Partnership Agreement

This case involves a business dispute between a celebrity clothing designer and a department store she previously entered into a partnership agreement with. The designer entered into a business partnership with the department store to launch a new line of teen-casual garments. The designer owned 60% of the line and the restaurant group owned 40%. The business relationship ultimately soured and the department store and the designer entered an arbitration proceeding. One day after the arbitration concluded, the department store purported to exercise a clause in their partnership agreement which led to the expulsion of the designer from the agreement with the store retaining the designer’s ownership of the clothing line. An expert in capital account valuations was sought to opine on the valuation of the clothing line.

Question(s) For Expert Witness

1. How often do you perform valuations of partnerships?

2. How would you determine the actual valuation of the plaintiff's ownership?

Expert Witness Response E-008354

I am a professor of law and a licensed CPA. I have written articles and books and about partnerships, which cover legal, financial, and tax aspects of partnerships, all of which relate to valuing capital accounts. Partnership and capital account valuation issues arise frequently in the consulting and client work that I do. I perform capital account valuations often in practice as partnership interests change hands. In most situations, the partiers negotiate the value of the partnership, and I use those negotiations as a basis for valuation. In this situation, the value of plaintiff's ownership would depend upon various factors, including the value of the partnership's assets, which may require an appraisal for some assets, and the partnership's income, both past and future.