Valuing Community Property Businesses: The Good, the Bad, and the Ugly of Louisiana Law

AuthorSally Brown Richardson
PositionA.D. Freeman Associate Professor of Civil Law, Tulane University Law School
Pages810-847
Louisiana Law Review Louisiana Law Review
Volume 80
Number 3
Spring 2020
Article 9
9-15-2020
Valuing Community Property Businesses: The Good, the Bad, and Valuing Community Property Businesses: The Good, the Bad, and
the Ugly of Louisiana Law the Ugly of Louisiana Law
Sally Brown Richardson
Follow this and additional works at: https://digitalcommons.law.lsu.edu/lalrev
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Repository Citation Repository Citation
Sally Brown Richardson,
Valuing Community Property Businesses: The Good, the Bad, and the Ugly of
Louisiana Law
, 80 La. L. Rev. (2020)
Available at: https://digitalcommons.law.lsu.edu/lalrev/vol80/iss3/9
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Valuing Community Property Businesses: The Good,
the Bad, and the Ugly of Louisiana Law
Sally Brown Richardson*
TABLE OF CONTENTS
Introduction .................................................................................. 809
I. The Good: A Battle Based on Facts ............................................. 811
II. The Beginning of the Bad: Ellington, Goodwill,
and “Personal Qualities” .............................................................. 818
III. The Ugly: Taking Stated Value at Face Value............................. 825
IV. Unraveling the Wrongness of Rao ............................................... 831
V. Getting Back to the Good: How Courts Should
Value the Community’s Interest in a Business ............................ 838
Conclusion.................................................................................... 845
INTRODUCTION
Valuing community assets must occur during any partition of the
community, yet few legislative or scholarly sources provide guidance for
how that valuation should be done in Louisiana.1 The pertinent statute on
Copyright 2020, by SALLY BROWN RICHARDSON.
* A.D. Freeman Associate Professor of Civil Law, Tulane University Law
School. Earlier drafts of this Article have been presented at the Family Law
Seminar at the Louisiana State University, Paul M. Hebert Law Center, and during
a Faculty Workshop at Tulane University Law School. The author thanks all
participants for their helpful input. The author also thanks Lila Tritico Hogan,
Ann Lipton, and Ronald J. Scalise, Jr., for their helpful discussions on prior drafts.
All views and any errors herein are solely attributable to the author.
1. For discussions on valuing community property in Louisiana, see
ANDREA CARROLL & RICHARD D. MORENO, MATRIMONIAL REGIMES § 7:27, in
16 LOUISIANA CIVIL LAW TREATISE 76176 (4th ed. 2013) [hereinafter
MATRIMONIAL REGIMES]; ROBERT C. LOWE, LOUISIANA DIVORCE § 9:123, in 2
LOUISIANA PRACTICE SERIES 19902 (2019) [hereinafter LOUISIANA DIVORCE];
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810 LOUISIANA LAW REVIEW [Vol. 80
the topic of partition simply states that parties to a divorce must provide a
detailed descriptive list that includes, among other things, all of the
community property and the “fair market value” of that community
property.2 The other party to the divorce then has a chance to “traverse or
concur” in those valuations,3 but ultimately the court must “value the
[community property] assets”4 and determine the “fair market value” of
each asset.5 As the Louisiana Second Circuit Court of Appeal aptly
observed in the infamous 2003 case Ellington v. Ellington, the law
provides no mathematical formula for determining the value of
community assets.”6
Although legislation gives no exact roadmap for how to value
community property, Louisiana courts over the past two decades have
provided an increasing number of examples of what not to do in the
context of valuing the community’s interest in a business.7 Following the
Ellington decision and the legislation that spawned from that decision,8
courts have increasingly taken the position that the community’s interest
in a business is automatically valued at the buy-sell amount stated in the
agreement that initially established the community’s interest in that
business.9 Such results, as asserted herein, are a misreading of the
statutorily provided valuation requirement in a community property
partition and have the potential effect of mis-valuing the community’s
interest in a business to the detriment or benefit of the spouse who is not
ultimately assigned the asset.
This Article proceeds in five parts. First, the Article explores how
courts determined community property business valuations prior to
Ellington v. Ellington. Second, the Article explains how the Ellington
casea case concerning the valuation of goodwill in a community
Kenneth Rigby, Matrimonial Regimes: Recent Developments, 67 LA. L. REV. 73,
98108 (2006).
2. LA. REV. STAT. § 9:2801(A)(1)(a) (2018).
3. Id. § 9:2801(A)(2).
4. Id. § 9:2801(A)(4)(a).
5. Id. § 9:2801(A)(1)(a).
6. Ellington v. Ellington, 842 So. 2d 1160, 1166 (La. Ct. App. 2d Cir. 2003);
see also Head v. Head, 714 So. 2d 231, 234 (La. Ct. App. 2d Cir. 1998) (“Business
valuations methods are not an exact science . . . .”).
7. Infra Part III.
8. Infra Part II.
9. Bulloch v. Bulloch, 214 So. 3d 930, 94041 (La. Ct. App. 2d Cir. 2017);
Rao v. Rao, 927 So. 2d 356, 366 (La. Ct. App. 1st Cir. 2005); Baumbouree v.
Baumbouree, 202 So. 3d 1077, 1084 (La. Ct. App. 3d Cir. 2016); see also infra
Part III (discussing the decisions in Rao, Baumbouree, and Bulloch).

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