valuation in the development and acceptance of claims october 2014 timmothy librande, barrister...

Valuation in the Development and

Acceptance of Claims

October 2014

Timmothy Librande, Barrister & SolicitorLibrande Law Office

Current Environment - Proactive Approach

• Canada has taken a much more adversarial approach to claims pre-negotiation – Funding cuts – partial and narrow acceptances - small value claims

• Goal is to restore a balance to the system – First Nations still have claims that they want pursued

• We are attempting to be proactive and develop new approaches to the current environment

Librande Law Office October 9, 2014 2

Development and Submission of Claims

• Historical research conducted Potential lawful obligations identified Claim submission being prepared

• Traditionally very little valuation analysis has been undertaken at this stage

• There is a role for a better understanding of claim value at these early stages• Multiple allegations – Canada’s approach to multiple

allegations & risk of less valuable undermining more valuable• Low value claims – Is there sufficient value to pursue a claim?• Offers of Settlement – is the offer enough? How far off are

they?


Early Claim Valuation– Creating an Equal Playing Field-

• Clear that Canada uses potential value to limit its financial liability

• Canada has a valuation and mandating unit within SCB – This unit has access to data Canada has collected from claims it has been involved in

• Canada uses this early valuation analysis in how it accepts claims in order to limit its financial liability:• Partial acceptances • Accepted allegations framed narrowly

• We have been using early valuations to attempt to limit this information imbalance

October 9, 2014 Librande Law Office 4

Early Claim Valuation– Other Insights

• Valuation Analysis not full valuation study – based on best evidence available

• Not always possible:• With multiple allegations, the allegations may be too

interconnected• Facts necessary to estimate a value are not always present

• May be the same sort of analysis Canada employs when it looks at claim and classifies them by value

• Helps level the information playing field – Both parties have information on potential values as well strength of legal positions


Early Claim Valuation – Deciding to Develop a Claim

• The potential value of a claim is playing a bigger role in deciding whether or not to pursue it

• increased risk that First Nations will expend its own money to settle a claim, and benefit of settlement will not outweigh costs

• Low value claims may be set aside until environment changes OR potential alternative to how low value claims are submitted


Early Claim Valuation – Deciding to Develop a Claim

• Benefits of early claim valuation:• Allows the First Nation to make informed

decision on whether Claim is financially worthwhile to pursue

• Places First Nations on a more equal footing with Canada

• Provides basis for First Nation to better understand effect of terms of Canada’s acceptance, and also effect of partial acceptance offered by Canada


Canada’s New Approach – Partial Acceptance

• Not a lot of claims are accepted and those that are are accepted in part

• Throwing the baby out with the bathwater - Risk of partial acceptances are that it is not always clear the effect of agreeing to negotiate on the basis proposed by Canada


Partial Acceptance – An Example

• First Nation had submitted a Hydro Line Claim to Canada

• Claim submission advanced 5 allegations of wrongdoing- Canada accepted one allegation

• Canada required that if the First Nation agreed to negotiate, a full release and indemnity would have to be provided for the entire claim as submitted

• Allegations were sufficiently interconnected that it was very difficult to withdraw rejected allegations and negotiate only the accepted allegation


Partial Acceptance – An Example

• Community did not want to proceed to SCT & did not want to withdraw the claim for further work

• Initial reaction was to pursue the claim and see what could be made of it

• Difficulty was in assisting the First Nation in making an informed decision on whether it was advisable to negotiate on the terms proposed by Canada


Partial Acceptance – How We Handled It

• In addition to a legal analysis on Canada’s basis of rejection, A valuation analysis was carried out• based on information from the historical document

collection and other sources readily available

• Legal correctness of an allegation is only one issue, there is also question of value of what was accepted versus what was rejected

• Low potential value of what was rejected may justify agreeing to negotiate what was accepted


Partial Acceptance – How We Handled It

• Analysis indicated that the present day value of what was accepted was a few thousand dollars

• Valuation Analysis indicated that the present day value of what was rejected was substantially greater than what was accepted

• Addressed question from community about whether claim should be pursued on basis proposed by Canada

• First Nation rejected Canada’s partial acceptance outright - Claim in its entirety was protected for further steps

• No risk of settlement of accepted allegation tainting future ability of First Nation to pursue more valuable aspects of claim


Partial Acceptance – Benefits of the Legal and Valuation Analysis

• Better understanding of what Canada was accepting versus what it was rejecting – Prevents being taken advantage of

• Provided a basis on which to reject the partial acceptance, other than just strength of legal position

• Also provided an idea of potential value of entire claim, which may inform next steps


Small Value Claims – Canada’s Current Approach

• First Nation had a claim accepted. Claim clearly fell into category of a small value claim

• First Nation hired a lawyer and a negotiator and then contacted Canada to start negotiations

• Canada suggested an initial meeting at community, and suggested First Nation bring its team


Small Value Claims – Canada’s Current Approach

• Canada informed the First Nation:• Value of claim did not justify any funding• There would be no further negotiation meetings• Canada would begin preparing an offer of

settlement based on its own internal information sources

• If the First Nation had any information it wanted to share, now was its chance

• As a result the First Nation was left with no voice in the process and no opportunity to influence the value of its claim


Small Value Claim – An Alternative Approach

• Claim related to 6 acres of land surrendered in the 1920s

• A sale to the Indian Agent was authorized by OIC, however inadequate compensation was paid

• Claim was for the difference between what was paid and what should have been paid

• Historical document contained various early land sales in the same area, and subsequent sales of the 6 acres



• Clear from the outset that claim was not high value

• If the Claim was filed in the traditional way: No adequate funding, no negotiation, and no real opportunity to influence the outcome

• Could we submit the claim in such a way to give the First Nation an opportunity to influence the offer Canada would ultimately make, while at same time minimizing costs for the First Nation?

• It was decided to carry out a valuation analysis and then submit part of that valuation analysis with an offer of settlement along with the Claim Submission



• Offer of Settlement included :• A justification that the offer is consistent with the goal of

resolving claims in an expeditious fashion• A statement that the First Nation had no interest in a

“negotiation” that does not allow it to participate on an equal footing

• Present day compensation for the historic payment shortfall• An amount for costs of the First Nation in preparing the offer• A three month time frame by which Canada had to accept the

offer• Recognition that appropriate releases and indemnities would be

needed• A statement that the offer was made on a without prejudice

basis and the First Nation reserved the right to amend its positions


Small Value Claims – Canada’s Response

• Canada has replied that:• Minimum standards have been met and the claim is proceeding

to further analysis• Canada has three years to consider the claim• Additional information submitted will be considered during that

further analysis

• What does this mean:• Canada is sticking to the process it has implemented• If nothing else, the offer hopefully influences how Canada values the claim• Should the offer eventually be accepted, the offer and supporting rationale

should streamline the settlement process and minimize costs to the First Nation

• Unclear at present whether this is a viable alternative for low value claims


Early Claim Valuation Advice – Helping Create an Equal Playing Field-

• Canada appears to be using potential values to attempt to limit its financial liability – partial acceptances, etc

• SCB has a valuation and mandating unit that has developed a collection of valuation data that it relies on to prepare unilateral offers of settlement

• Once a claim is filed, Canada begins valuing claim -This is information they use to First Nations disadvantage – There is no reason we cannot attempt to do the same

• First Nation and First Nation organizations that develop claims should consider developing similar collections• Valuation information collected by researchers while developing

claims• Public data collected by First Nations during the negotiation of their

claims


Risks of Early Valuation Analysis

• A valuation analysis, either during the development of claim or upon a partial acceptance, is not always possible

• With multiple allegations and partial acceptances, the allegations may be too interconnected to value them separately.

• Facts necessary to estimate a value are not always present

• Risk that valuation analysis is not as accurate as it is not the product of a full valuation study


Valuation– What Role Can the Researchers Play

• Valuation analysis requires data/information – The more information the stronger the valuation analysis

• When researching the historical facts of a claim, keep an eye out for:• Information on land values, either on the reserve or in the

area• Information on land uses, either on the reserve or in the area• Opportunities the First Nation took advantage of or expressed

an interest in

• Information that may assist in valuing a claim can be part of the historical report or kept as a separate document


Valuation in the Negotiation of Claims

October 2014

Ian Johnson, Negotiator and Mediatorwww.kykaik.com

http://www.kykaik.com/

Preparation

• Creating a sense of value in advance of negotiations or litigation is simply good practice• If you have no idea of the range of

possible outcomes you won’t know a good offer from a bad one.• You require good historical information in

order to calculate a range of value

October 9, 2014 Kykaik Inc.1

Approaches to Valuation

• Discussion of approaches to valuation during negotiations• Owner/operator model• Down stream benefits approach• Rental/lease model• Proxy for a rental model


Selecting an Approach

• Which approach to use depends on the circumstances and data available and researchers can be a huge help if much of this data is provided in the research report;• Single economic use, reasonable time,

good data• Multiple uses, changing over long time

period, poor data• Downstream benefits approach• Something in between


Examples I

• Multiple economic uses, changing over long time period, poor data• We used a proxy for a rental model after

exploring owner/operator and leasing models.• We used our data on the other two

approaches as comparators to measure the success of the proxy for a rental model


Examples II

• Multiple economic uses, consistent over reasonable time frame, reasonable data• We valued multiple heads of damage

each over a different rime frame• We used a proxy for rental model and a

downstream benefits analysis to perform due diligence

Kykaik Inc.October 9, 2014 5

Examples III

• Downstream benefits is an approach to consider when the damage to the Aboriginal interest does not reflect the long term benefit of the intervention.

• For example, Reserve lands are flooded causing damage in order to create a reservoir for hydro development literally downstream;

• Or, a road is punched through Reserve lands to extract valuable minerals located on the other side of the Reserve;


Examples IV

• Single economic use, reasonable time frame, reasonable data• One study by a qualified expert will

produce the results• Still necessary to negotiate all the inputs

and assumptions – costs of production, value of sales, etc.• Need good data


Issues I

• SCB has instituted and published their process for pre-valuing claims in “Specific Claim Negotiation Cost Guidelines”;

• If they decide unilaterally that the claim is worth less than $3M they will provide no funding at all to assist the First Nation and will only conduct their own internal research to determine settlement offer.

• SCB will entertain submissions by First Nation but First Nation often can’t afford to hire professional help.

• This serves to create a very unbalanced negotiation and uneven bargaining power

Kykaik Inc.October 9, 2014 8

Issues II

• Even if Canada will provide funding they have been reluctant to pay for studies, especially for what they see as more speculative losses like loss of fur bearers; traditional medicines; environmental damage; etc.• Funding made available to First Nations is

decreasing dramatically and is not sufficient for even rudimentary professional help.• This serves to create a very unbalanced

negotiation and uneven bargaining powerOctober 9, 2014 Kykaik Inc.9

Issues III

• Perhaps even more disturbing is that Canada no longer truly negotiates Specific Claims

• Their approach now is to sit in judgment willing to accept submissions by the First Nation and evaluating those submissions internally where they either accept or more often reject the First Nation’s evidence and arguments without providing reasons;

• There is usually no discussion or recourse within SCB;• I have experienced situations where SCB senior

management blames DOJ policy for the lack of engagement on an issue and DOJ claims they are only taking advice from their client (SCB) in the matter;


Issues IIIcontinued

• The Minister’s Office will not usually meet on claims matters suggesting that there is a conflict of interest.

• Their reframing of the three year time period in the Tribunal Act to now apply to the length of time for negotiations is another artificial constraint;

• The three year time frame is made more restrictive because the clock is ticking while a First Nation decides whether to accept negotiations on what is often a very controversial acceptance letter and SCB requires the better part of a year at the end to go through its interminable analysis and decision making on an already negotiated settlement.


Issues IV

• When SCB values a claim they do it based on hard line positions on heads of damage where they have determined a First Nation would likely win in Court;• Offers seem to be at the low end of the

likely range of possible outcomes and are based on a risk analysis by DOJ;• Offers are based on their TVOM program

rather than on genuine resolution of the issues based on a negotiated outcome;


Strategies

• Cooperative approach can work well• details in TOR for studies are critical• comparative valuation analysis is important

• Driven by the facts• the better the data the better the result• assumptions where data is weak are critical

• Mediation• Unfortunately SCB will only agree to mediation in

extraordinary circumstances


Questions and Discussion

valuation in the development and acceptance of claims october 2014 timmothy librande, barrister...

Documents

claim submission

early valuation analysis

canada librande law

acceptance of claims

valuable low value claims

costs low value claims

valuation study

lot of claims