Omnicom Group, Inc. (“Omnicom”) was sued on behalf of investors in a shareholder class action. A primary allegation was that Omnicom had overvalued its ownership interest in many publicly traded and privately held e-service assets. Plaintiffs further alleged that the decline in the assets’ values was “other than temporary,” an accounting term of art that would have required that an impairment charge be taken. Plaintiffs challenged the valuation of those assets, prepared by the Murray Devine valuation firm, upon which Omnicom relied.
NERA Senior Vice President Dr. David Tabak served as the valuation expert for Omnicom in this matter. He reviewed the Murray Devine analysis and found it to be reasonable, both in terms of its methodologies and conclusions. In addition, Dr. Tabak performed his own analyses in which he found that the publicly traded companies in which Omnicom held a stake did not trade in efficient markets, providing a basis for the company to value them at something other than their market prices. After a simultaneous exchange of opening expert reports, Dr. Tabak critiqued the report of plaintiff’s valuation expert on its conclusions with regard to market efficiency and valuation.
In a ruling dated 10 August 2007, the Honorable Magistrate Judge Michael H. Dolinger found that Dr. Tabak “notes that the Murray Devine approach is consistent with professional standards, and points out (without contradiction in the current record) that plaintiffs’ expert misstates certain key facts and fails to follow all steps of the approach that he purports to apply and that courts have approved as appropriate for these purposes. In sum, this record supports the reasonableness of defendants’ position that the impairment of the e-service assets was not ‘other than temporary’ under governing professional standards.” (Internal citations to Dr. Tabak’s rebuttal report omitted.) He further noted that “[d]efendants' economic and valuation experts offer not only specific and seemingly cogent justifications for their respective findings, but also specific and persuasive rebuttals of most of plaintiffs’ experts’ contentions.” In a ruling on summary judgment dated 29 January 2008, the Court dismissed the case. On 9 March 2010, the Second Circuit rejected plaintiffs’ appeal of the district court’s grant of summary judgment.