Can a Business Valuation Dispute Be Mediated?
Yes, and in St. Louis County you will very likely be required to try.
Missouri’s mediation rule is not limited to custody, and the 21st Circuit’s local rule expressly reaches property division and maintenance. So business valuation mediation is not an idea somebody sells you. In Clayton it is the default.
Rule 88.02 provides that a circuit may establish a mediation program “for contested issues, including, but not limited to, child custody, parenting time, parenting plans, child support, maintenance, and property division, in domestic relations and paternity cases.”
Note the words including, but not limited to. A dispute about what a company is worth is a property division dispute, and the list is a floor rather than a ceiling.
Where Is It Actually Required?
St. Louis County, and only St. Louis County among the four circuits here.
This is the difference that decides whether business valuation mediation is coming and how an owner should plan for it.
Local Rule 68.14 requires mediation “in every domestic relations and paternity case involving contested issues, including, but not limited to, child custody, parenting time, parenting plans, child support, maintenance, or property division.”
The other three are narrower, and the difference is worth knowing before you assume business valuation mediation is coming.
- St. Louis City mandates mediation only where custody or visitation is a genuine and substantial issue, though the parties may request mediation of the financial issues
- St. Charles County mandates three hours on custody and visitation under Local Rule 68.17(A), and merely encourages the parties to mediate child support, property division and maintenance
- Jefferson County mandates two hours on custody and visitation under Local Rule 68.11 and is silent on the financial issues
So if your case is in Clayton and the value of your company is contested, mediating it is not a strategic choice you get to weigh. It is a requirement, and the only real question is how prepared you are. Our page on the St. Louis County family court covers how that circuit runs.
Is a Family Law Mediator Qualified to Value a Company?
Nothing in Missouri’s qualification rule suggests that is the skill being tested.
This is the most useful thing an owner can understand before walking in.
Rule 88.05(a) requires a family law mediator to state by affidavit that they are “an attorney or a person who possesses a graduate degree in a field that includes the study of psychiatry, psychology, social work, counseling, or other behavioral science substantially related to marriage and family interpersonal relationships,” and that they have “a minimum of 20 hours of child custody mediation training in a program approved by the court that shall include a component of training covering violence and power imbalance issues.”
Rule 88.05(c) then lists what a court considers in appointing one, which runs through knowledge of the Missouri judicial system, community resources, child development, clinical issues relating to children, the effects of dissolution on children, family systems theory, and mediation and conflict resolution.
Read both lists end to end. Neither mentions business valuation, financial analysis, closely held entity discounts, normalizing owner compensation or add backs.
Some circuits set a higher bar than the statewide floor. St. Charles County requires its listed mediators to complete at least forty hours of approved curriculum under its Local Rule 68.18(A), and to file an affidavit stating their training and current profession. Even there, none of it is about valuing a company.
That is not a criticism of mediators. It is a description of the role. The neutral runs the negotiation. The valuation work has to come from somewhere else, which means from the experts and from your own counsel.
What Has to Happen Before the Session?
The valuation work, or at least enough of it that both sides know what they are arguing about.
A business valuation mediation held before anyone has a defensible number is a conversation about feelings with a company in the middle of it.
- Assemble the financial record. Three to five years of business and personal returns, K-1s, profit and loss statements, balance sheets, bank statements, payroll records, loan documents and ownership documents
- Find the governing documents. The operating agreement, any buy sell, every amendment, and any prior valuation, offer to purchase or letter of intent
- Settle classification separately. Whether the interest is marital, separate or mixed is a different question from what it is worth, and mediating them as one produces a muddle
- Know which valuation approach each side will argue, and why. A neutral cannot resolve a methodology dispute for you
- Decide what you actually need. For most owners that is the company intact and operating rather than a particular percentage, and knowing that changes what you can trade
Our FAQ on whether a business is marital property covers the classification half, and our FAQ on a family business in a divorce covers what changes when relatives are shareholders.
Should We Use One Expert or Two?
A single agreed valuator works when the disagreement is arithmetic. Two work when the disagreement is judgment.
A neutral valuator is cheaper and faster and it removes the battle of experts that judges tend to find unhelpful, which fits a mediated case well. It works where both spouses accept the financial records and simply need a defensible number.
Bring your own expert where the disagreement is about goodwill, owner compensation, add backs, discounts, the classification of premarital growth or which method fits the business. Those are judgment calls, and a neutral makes them once with nobody arguing the other side.
Either way the expert is only as good as the records, which is why the list above matters more than the choice of expert. Our page on divorce for business owners covers the valuation questions in depth.
What Can Mediation Actually Settle Here?
The structure, which is usually where the real value is for an owner.
A court deciding a contested case picks among a limited set of outcomes. A negotiated agreement can build something, and that is the real argument for business valuation mediation rather than a trial.
- An offset, where one spouse keeps the company and the other takes more of the house, the retirement accounts and the cash
- A structured buyout, where the interest rate, the amortization, the acceleration terms, the security and any life insurance on the payor are all negotiable
- A phased arrangement tied to events a court would never design
- Confidentiality about the company’s financials, which a trial does not offer
- Timing, which matters enormously when a business has a season, a pending contract or a financing event
And the standard on the other side is favorable to a negotiated deal. Section 452.325.2 RSMo makes the terms of a separation agreement “binding upon the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties, on their own motion or on request of the court, that the separation agreement is unconscionable,” which is a much lower bar than the just division standard a judge applies at trial under Section 452.330.1 RSMo. Our FAQ on dividing marital property covers that trial standard.
Is What I Disclose in Mediation Protected?
The communication is protected. The underlying financial documents generally are not.
This is the distinction an owner has to get right about business valuation mediation.
Rule 88.08(a) makes mediation communications confidential and provides that they are not “admissible as evidence or subject to discovery.” It also carves out, in the same sentence, that “no fact independently discoverable shall be immune from discovery by virtue of having been disclosed in such confidential communication.”
So handing a balance sheet across a mediation table does not shelter it. If it was discoverable before, it stays discoverable. What the rule protects is what was said, not what exists.
There is a second point specific to St. Louis County. Local Rule 68.14 describes two routes as confidential mediation and a third, working with Domestic Relations Services, which the rule states is not confidential. Which route you are on changes what can come back into the case.
What If It Does Not Work?
You can end court ordered mediation after two hours, and nothing said in it binds you.
Rule 88.07(a) provides that “at any time after two hours of mediation either party may terminate mediation ordered under Rule 88.04.”
And Rule 88.06(c) provides that “any understanding reached by the parties as a result of mediation shall not be binding upon the parties until it is reduced to writing, signed by the parties and their attorneys, if any, and approved by the court.”
Section 452.372.3 RSMo points the same way for a program ordered under that section, providing that it shall “not be binding on the parties.” Note the words pursuant to this section, because that statute’s ordering power is aimed at custody and visitation rather than at property.
Our page on when divorce mediation may not be your best option covers the cases where it is the wrong tool from the start.
One thing is not reversible. Section 452.330.5 RSMo makes the property division “a final order not subject to modification,” so a valuation you accepted because you were tired is not something a court revisits later.
Who Can Help With Business Valuation Mediation in St. Louis?
For an owner in St. Louis County, mediation of the property issues is not optional, which makes the preparation before it the whole game.
Bardol Law Firm practices only family law, works with valuation professionals, tests the other side’s numbers, and handles mediation and litigation in St. Louis County, St. Louis City, St. Charles County and Jefferson County. You can read more about high net worth divorce, about property and asset division, and the rest of our family law questions and answers.
You should not have to chase your attorney for basic updates. Every client here has a named paralegal on the file, and we generally return calls within one business day.
Family Law, Simplified.
If a mediation date is set and the valuation work has not started, that is the call to make this week. Contact Bardol Law Firm or call 314.918.0100.
This page is general information about Missouri law and is not legal advice. Local court rules change without notice, so confirm the current version for your own circuit. Every case turns on its own facts. The choice of a lawyer is an important decision and should not be based solely upon advertisements.