Nursing Home Elder Abuse Litigation – Enterprise Valuation – Understand Exactly Who You Are Suing And Value Accordingly

May 31, 2024

In other blogs, we discuss the importance of enterprise valuation to valuing the maximum potential of your case. Briefly stated, your punitive damages recovery will generally be capped at 10% of the overall value of the enterprise. Thus, whether the enterprise you are suing is worth $25 million as opposed to $250 million matters . . . it matters a whole lot.

We have also discussed how valuation can and should be done by looking at secondary sources such as Levin and Associates, which assembles per bed value of nursing homes and assisted living facilities after assessing various characteristics based on recent sales. Multipliers based on revenue and profits can similarly be used.

When doing this type of secondary valuation, it is critical to understand precisely what type of ownership your named defendants have in the various entities within the enterprise. Do they own the real estate (“propcos”), operating entities (“opcos”), and management companies (“mancos”) or something less than that? Typical valuation metrics are based on the assumption that the enterprise owns all three of these. If, however, enterprise does not own the real estate on which its facilities operate – e.g., if the real estate is owned by a bona fide third party that has no involvement in the operations of the facility – then the overall value of the enterprise will be substantially lower. In some cases, the named defendants are only “mancos.” If they have only been hired to manage facilities for bona fide third parties who own both the operating companies and the real estate, the value of their overall enterprise will be sliver of what it would have been had they owned everything.

Given the importance of enterprise valuation to evaluating maximum case value, determining what precisely your named defendants own is of critical importance. As we have urged in another blog, practitioners should use PMQs re organizational structure to determine value early in an elder abuse litigation.

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