When a CEO Steals the Deal: Business Valuation, Lost Profits & a $3.7 Million Court Battle
The Business Opportunity That Turned Into a Six-Year Legal Fight
Business litigation can become extraordinarily expensive when a corporate leader attempts to pursue a business opportunity that originally belonged to the company employing them.
A recent federal case involving the parking technology industry illustrates how quickly a business dispute can transform into a multimillion-dollar battle over fiduciary duties, lost profits, business valuation, expert testimony, litigation strategy, and attorney fees.
The case, ZipBy v. Parzich, involved a company president who became involved in an acquisition opportunity involving a business he had previously founded. Rather than pursuing the acquisition through his employer, he ultimately attempted to acquire the opportunity through his own holding company.
The dispute eventually resulted in a jury award of $1.5 million in compensatory damages, along with significant attorney and expert fees. The case also demonstrates why financial professionals and attorneys must evaluate the economics of litigation long before a case reaches a courtroom.
The central lesson is straightforward: winning the legal argument does not necessarily mean winning financially.
From Acquisition Opportunity to Alleged Misappropriation
The underlying facts were particularly damaging for the defendant.
The company president had previously spent approximately a decade developing parking technology and had successfully exited his startup. Years later, after joining another parking technology company as president, his former business became an acquisition target.
Initially, he reviewed the opportunity and recommended that his employer consider purchasing the company.
That recommendation changed.
The president eventually advised his employer not to proceed with the acquisition. At the same time, he continued pursuing the acquisition independently through a separate holding company.
The circumstances became even more problematic because company resources were allegedly used during the process, including a company laptop, phone, and email account. One email stating that he was buying back the startup became a particularly damaging piece of evidence.
The legal issue was not simply whether someone had "stolen" a company. The underlying dispute centered on the misappropriation of a business opportunity, along with alleged breaches of fiduciary duty and contractual obligations.
For business owners and executives, this distinction matters. A business opportunity can have substantial economic value even when the underlying transaction never closes.
The Real Battle: How Much Was the Lost Opportunity Worth?
Once liability became difficult to dispute, the litigation shifted toward damages.
The plaintiff elected to pursue lost profits rather than relying solely on restitution. That distinction was critical.
If the defendant had never actually purchased the acquisition target, a restitution-based calculation could potentially have resulted in a relatively small recovery. Lost profits created an entirely different valuation question:
What economic benefit did the company lose when the opportunity was diverted?
The plaintiff's expert relied on financial projections associated with the acquisition target. Those projections indicated approximately $2.4 million in potential damages before the jury ultimately reduced the award to $1.5 million.
The case therefore became a lesson in the difference between:
The value of an asset that was actually acquired
The value of an opportunity that was lost
The profits that might have been generated
The economic value of synergies between businesses
The reliability of financial projections used to calculate damages
These distinctions can materially affect the outcome of commercial litigation.
Why Financial Projections Need a Reality Check
One of the most important valuation lessons from the case involves financial projections.
Projections can be essential in lost-profit calculations, but projections are not automatically reliable simply because they appear in a financial document.
A valuation professional must ask:
Who created the projections?
What assumptions support the forecast?
Do the projections reflect historical performance?
Are the projected margins reasonable for the industry?
What operational changes are necessary to achieve the forecast?
Were the assumptions known or knowable as of the relevant valuation date?
Are there external circumstances that materially affect the projections?
These questions become particularly important when a forecast is dramatically different from actual results.
In this case, later tax returns reportedly showed that the acquisition target's actual performance was substantially below the original projections. The actual results represented only about 26% of the projected performance—a roughly 74% shortfall.
That does not automatically make the original projections inadmissible. But it demonstrates why financial projections should be sanity-tested rather than accepted at face value.
A strong damages analysis must explain not only what the projected number is, but why the number makes economic sense.
The Valuation Date Can Change Everything
Another significant valuation principle involves the valuation date.
The case unfolded around the beginning of the COVID-19 pandemic, making timing particularly important.
A valuation performed in January or early March 2020 could look dramatically different from one performed in April 2020 because the amount of information known or knowable about the pandemic changed rapidly.
Valuation professionals generally cannot simply use hindsight to rewrite what a business was worth at an earlier date.
That creates a critical distinction between:
What actually happened and What could reasonably have been anticipated at the valuation date.
For damages and lost-profit matters, determining the appropriate valuation date can therefore have a substantial impact on the financial analysis.
The parking industry also presented a particularly challenging environment because public parking was directly affected by shutdowns, travel restrictions, reduced office occupancy, and changes in consumer behavior.
A projection must therefore be examined within the economic environment that existed—or was reasonably knowable—at the relevant date.
The Missing Defense Expert May Have Changed the Case
Perhaps the most important litigation strategy lesson from the case was the defense's decision not to retain its own damages expert.
The plaintiff presented an expert who calculated the lost-profit damages.
The defense challenged that expert's methodology and reliability, but did not present an independent expert valuation to establish a competing damages figure.
That created a significant strategic problem.
If one side presents $2.4 million and the other side effectively argues that the damages should be zero, the judge or jury may still be left with only one professionally developed financial analysis.
A defense expert does not necessarily need to prove that damages are exactly zero.
An expert can instead establish a reasonable lower-end position, identify unsupported assumptions, challenge projections, test margins, evaluate synergies, and provide an alternative damages calculation.
That creates a financial "floor" from which the trier of fact can work.
Why a "Shaky" Expert Can Still Win
The case also highlights an important distinction between admissibility and credibility.
A damages expert does not necessarily have to present the perfect analysis to survive an evidentiary challenge. Under the applicable federal evidentiary framework, the question can center on whether the methodology is relevant and sufficiently reliable and whether it is supported by adequate facts or data.
That means a court may allow evidence to reach the jury even when there are substantial arguments about its weaknesses.
Once the expert's testimony reaches the jury, however, the battle becomes one of weight and credibility.
This is where failing to present a competing expert can become dangerous.
A jury may not see the case through the same technical lens as attorneys or valuation professionals. Without a competing financial expert, the plaintiff's expert may effectively become the only professional voice explaining the damages.
The jury can reduce the number, challenge assumptions, or reject portions of the analysis—but there is no competing expert framework providing an alternative destination.
The $3.7 Million Lesson: Litigation Costs Matter
The financial outcome is perhaps the most revealing part of the case.
The plaintiff received approximately:
$1.5 million in compensatory damages
$2 million in attorney fees
$200,000 in business valuation expert fees
The plaintiff reportedly spent approximately $3 million in legal fees, meaning the fee award did not fully reimburse its litigation costs.
The defendant also faced his own legal expenses, in addition to the fee-shifting consequences of the intellectual property agreement.
This illustrates an issue that is often overlooked when evaluating litigation:
The value of the judgment is not the same as the economic value of winning.
A party can prevail and still spend years and millions of dollars reaching the result.
That is why litigation strategy should include an economic analysis of:
Best-case damages
Worst-case exposure
Probability of success
Attorney fees
Expert fees
Fee-shifting provisions
Collection risk
Appeal costs
Settlement alternatives
The time value of money
A $3 million judgment does not necessarily make sense if achieving it requires $3 million—or more—in legal and professional fees.
Contracts Can Change the Litigation Math
Fee-shifting provisions played a major role in this dispute.
A contract that requires the losing party to pay certain legal or expert fees can dramatically change the economics of litigation.
Without fee shifting, a plaintiff facing millions of dollars in legal expenses may have a much stronger incentive to settle early.
With fee shifting, however, the plaintiff may have greater financial motivation to continue pursuing a claim if the contract provides a meaningful path toward recovering litigation costs.
This is why executives, business owners, and entrepreneurs should understand their contracts before a dispute arises.
Employment agreements, intellectual property agreements, operating agreements, shareholder agreements, and other business contracts can contain provisions that materially change the financial consequences of litigation.
The Bigger Lesson: Litigation Strategy Needs Financial Strategy
The case demonstrates why legal strategy and financial strategy cannot be separated.
Attorneys evaluate liability, contracts, procedural rules, and legal precedent. Valuation professionals evaluate financial data, projections, damages, lost profits, and economic assumptions.
The strongest litigation strategy incorporates both.
A business owner considering litigation should understand not only whether a claim is legally viable, but also whether the potential financial recovery justifies the cost and risk of pursuing it.
Likewise, a defendant should not assume that attacking the opposing expert is enough. Establishing an alternative financial position can be just as important as identifying weaknesses in the other side's analysis.
The goal is not merely to say, "Their number is wrong."
The stronger position is:
"Their number is wrong, here is why, and here is the financially supportable number."
What Business Owners Can Learn From the Case
The case provides several practical lessons for executives, entrepreneurs, attorneys, and financial professionals:
1. Read the Contract Before Making the Decision
Fee-shifting provisions, intellectual property clauses, fiduciary obligations, and contractual restrictions can dramatically alter the consequences of a business decision.
2. Do Not Assume the Damages Will Be Zero
Even if a transaction never closes, a lost business opportunity may create a damages claim based on lost profits or another legally available measure.
3. Test Every Projection
A forecast should be evaluated against historical performance, industry economics, margins, operational capacity, and other objective evidence.
4. Consider the Valuation Date Carefully
The information available at the relevant date matters. Hindsight can distort the analysis.
5. Establish a Financial Position
A defense does not always benefit from simply attacking the opposing expert. An independent expert can provide a reasonable alternative and establish a lower-end damages position.
6. Calculate the Cost of Winning
The financial impact of litigation includes much more than the final judgment. Legal fees, expert fees, delays, appeals, and collection issues can determine whether the ultimate outcome is economically worthwhile.
7. Seek Professional Advice Before the Dispute Escalates
Early legal and financial analysis can sometimes prevent years of litigation. A contract review and preliminary damages analysis may reveal risks that are difficult or expensive to address after a dispute begins.
Build a Better Financial Strategy Before Litigation
The ZipBy v. Parzich dispute demonstrates that business litigation is not simply a contest over who is right or wrong. It is also a financial exercise involving valuation, damages, evidence, expert testimony, risk, and cost.
For business owners and professionals dealing with valuation disputes, lost profits, shareholder conflicts, or commercial litigation, understanding the numbers early can create better strategic options.
Visit ValuationPodcast.com for additional insights into business valuation, financial disputes, damages, and the strategies professionals can use to better understand the financial side of complex cases.
The most valuable litigation strategy may not be winning after six years. It may be understanding the economics well enough to avoid six years of litigation in the first place.
FAQs
1. What is a lost-profit damages claim?
A lost-profit damages claim seeks compensation for profits a party alleges it would have earned if a wrongful act had not occurred. The calculation typically requires analysis of revenues, expenses, margins, market conditions, projections, causation, and other financial factors.
2. Why are financial projections important in business litigation?
Financial projections can form the foundation of a lost-profit or damages calculation. However, projections should be tested for reliability by comparing their assumptions against historical performance, industry conditions, operational realities, and other available evidence.
3. Why should a defense hire its own business valuation expert?
A defense expert can challenge the opposing expert's methodology while also providing an independent damages analysis. Establishing a reasonable alternative number can give the judge or jury a more complete financial framework and potentially create a lower range of damages.
4. What is the importance of the valuation date?
The valuation date determines the point in time from which relevant information and assumptions are evaluated. Major economic changes occurring after that date may not be appropriate to incorporate into the analysis if they were not known or reasonably knowable at the time.
5. Can winning a business lawsuit still result in a financial loss?
Yes. A party can win a judgment but still spend substantial amounts on attorneys, experts, appeals, and other litigation expenses. Fee-shifting provisions may offset some costs, but the overall economic result should be evaluated by comparing the expected recovery with the total cost and risk of litigation.
