How Can Nursing Home Abuse Attorneys Value the Defendants’ Enterprise?

February 9, 2024

In an earlier blog, we discussed the importance of determining defendants’ overall enterprise value in assessing the maximum potential recovery in an elder abuse case. Briefly stated, assuming other standards are met, a plaintiff can typically recover up to 10% of the value of the defendants’ overall enterprise. How are practitioners to value a defendants’ enterprise?

Many believe that valuation can only be established by having a defendants’ consolidated financial statements, which can only be obtained either via a Civil Code section 3295 motion or after a jury has made the punitive damages “special finding.”

However, enterprise valuation need not await consolidated financials and a case can be made that consolidated financials are not even the most important documents when determining enterprise valuation. Specifically, balance sheets, which contain a summary of a company’s assets and liabilities, are not an accurate indicator of enterprise value. Instead, enterprise valuation can best be achieved by either (1) determining the number and type of long-term beds a defendant enterprise owns and multiplying that by the “value” of each bed as set forth by third party sources such as Levin & Associates or (2) determining the revenues and profits of the facility by reference to the numbers provided in the publicly available OSHPD records and using industry multipliers. These methods of valuation are generally accepted.

To emphasize the point, practitioners should question high level employees of defendants’ enterprise what valuation methods they have used in valuing their enterprise in connection with sales or raising capital or for lines of credit. The benefit of valuing defendants’ enterprise through these publicly available source is that elder abuse attorneys can determine enterprise value early in the case (even before determining whether to take the case) and an economic expert can testify to enterprise value in his or her expert deposition rather than after a jury makes the special punitive damages finding. The tactical advantage of your expert testify to valuation during his pre-trial expert deposition is that nursing home abuse attorneys can avoid delays between the liability and punitive damages phases should the jury find for plaintiffs on the punitive damages special finding.

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