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UNITED STATES TAX COURT - TRIAL

ESTATE (OF MICHAEL J. JACKSON DECEASED)

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EXECUTORS: JOHN G. BRANCA. AND JOHN MCCLAIN

COMMISSIONER OF INTERNAL REVENUE (IRS)

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February 15th 2017

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Presiding Judge Mark V. Holmes

Jacksons estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, R
obert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Sa

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lkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of
Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump &
Aldisert LLP. ae
The
IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Mus
en and Laura Mullin.
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--------------------------------------------
JAY FISHMAN
Business Appraiser
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Judge Holmes: Okay. Any housekeeping, Mr. Camp?

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Mr. Camp: Not that I know of. We're still working on the third stip. It will probably be next
week, I anticipate.

Judge Holmes: That's fine. Any housekeeping, Mr. Toscher?

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Mr. Toscher: No, Your Honor.

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Judge Holmes: Okay. The floor is yours.

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Mr. Toscher: Your Honor, we would call expert witness Jay Fishman, but I think ... Your Honor,
I would call him now, but we're waiting for Mr. Voth.
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Judge Holmes: Oh, there we go.
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Mr. Toscher: JAY FISHMAN sworn

Court Clerk: And if you'll please state your name and address for the record.
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A. Jay E. Fishman, 10

Mr. Toscher: Your Honor, I would like to ask the Clerk to mark Mr. Fishman's two reports and -
- for the record and then hand them to Mr. Fishman.
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Judge Holmes: Okay. Please do so, Ms. Wood.

Court Clerk: Exhibit 666-P is marked for identification. It is the original report of Jay Fishman.
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Court Clerk: And Exhibit 667-P is marked for identification. It is the rebuttal report of Jay
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Fishman.
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Judge Holmes: Thank you.

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DIRECT EXAMINATION

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Mr. Toscher:

Q. Mr. Fishman, will you take a look at the reports? I'm going to ask you to identify them once

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you have looked at them. 666-P, is that your report on the fair market value of Michael Jackson's
right of publicity and associated trademarks as of June 25th, 2009?

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A. Yes.

Mr. Toscher: Your Honor, I move into admission 666-P.

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Judge Holmes: It's admitted.
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Mr. Toscher:
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Q. Have you looked at 667-P, Mr. Fishman?

A. Yes.
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Q. And is that your rebuttal report filed in this case concerning your response rebuttal to Mr.
Anson's report?
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A. Right. You call it rebuttal. I call it appraisal review. But yes.

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Q. Okay. All right. But that is in rebuttal to Mr. Anson's report, is it not?
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A. It's an appraisal review in rebuttal, yes.

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Q. Okay. Thank you.

Mr. Toscher: Your Honor, I move into evidence 667-P.

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Judge Holmes: That's admitted as well.

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Mr. Toscher:

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Q. Mr. Fishman, what do you do for a living?

A. I'm an appraiser.
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Q. And how long have you been in the appraisal business?
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A. Forty-two years.

Q. Can you ... is your background summarized in your report, Tab 7?

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A. Yes.

Q. Could you briefly summarize the highlights of your CV for the Court?
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A. Okay. Well, I graduated from Temple University with a bachelor's degree in 1971 and a
master's degree in 1974. I went to work in the appraisal business. And then in 1979 I went back
to school, nights, weekends, and got an MB
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A. from LaSalle University. I worked at two appraisal firms in ... from 1974 to 1979 and 1979 to
1981 doing valuations of closely-held businesses, intangible assets, and publicly-traded securities
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... blocks of publicly- traded securities.

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Q. All right. Let me go back for a second. You hold two master's degrees?

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A. I do.

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Q. Tell us about each one, just briefly.

A. Well one's a ... I have a master's degree in Chinese history and language that I got in 1974.

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And then I got a master's ... a business administration in 1981 with a specialty in finance and
accounting.

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Q. Okay. And you mentioned two appraisal firms you worked for. Can you give us the names of
those and the years?
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A. Yes. From 1974 to 1979, I was employed by the Manufacturers Appraisal Company. And
from 1979 to 1981, I was employed by Marshall and Stevens Appraisal Company.
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Q. And could you briefly describe the size of those companies, each one?

A. Right. The first one was a national multi- discipline, meaning they had real estate appraisers,
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they equipment appraisers, and they had me ... and then ... who did intangible assets in closely-
held businesses. They had offices around the United States. The second one, Marshall and
Stevens, was a lot bigger ... same kind of business, but had offices internationally. And so the
work in the first one was nationally, and the work in the second one was international.
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Q. Okay. And when did you leave Marshall and Stevens?

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A. 1981.
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Q. And which ... where is your current employment?

A. I'm with Financial Research Associates.

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Q. And did you go ... start Financial Research Associates right after you left Marshall and
Stevens?

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A. Yes.

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Q. Tell us a little bit about the formation of that.

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A. Well, I was working at Marshall and Stevens. I got my MBA, and I started to have clients
calling me. And so in 1981 ... in March of 1981, I started my own business ... Financial Research
Inc., it was called then.

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Q. And what is it called now?

A. Financial Research Associates.

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Q. Okay. Tell us what Financial Research Associates does ... size, number of employees, et
cetera.

A. Right. Financial Research Associates is a business valuation, forensic accounting, litigation

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support firm with offices in New Jersey, New York, and Pennsylvania. We have approximately
40 employees, and we value closely-held businesses, intangible assets, professional practices,
publicly- traded securities. We do forensic accounting work when we're called to ... upon. And if
we're in court, then we're asked to do litigation support.
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Q. And you have been with Financial Research Associates since 1981?
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A. Yeah. It was at ... we had different iterations, but yes. It's the same firm.
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Q. How many employees?

A. Forty.
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Q. Forty. Okay. What's your current position at Financial Research Associates?

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A. I'm a managing director.

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Q. And what does a managing director do?

A. Managing director is responsible for obtaining and running assignments, doing hands-on

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work, working with other staff and writing appraisals, testifying to those appraisals. In addition, I
do writing, I do speaking, and I do all kinds of other things like that. I do a lot of work with my
professional societies and appraisal firms, appraisal businesses in the United States.

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Q. Okay. Do you hold any professional designations in connection with your business as an
appraiser?
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A. Yes.
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Q. Can you tell us ... the Court what they are?

A. Well, I'm a ... I'm known as a fellow in the American Society of Appraisers, and I'm also a
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fellow in the Royal Institution of Charter Surveyors.

Q. Okay. Tell us what the association ... what is it, AS ...

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A. American Association of Appraisers.

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Q. Okay. American Association of Appraisers. Tell us what that is and what a fellow is in that
organization.
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A. That's a non-for-profit professional society that has multi-disciplines as well. And to get ...
become a fellow, you have to first become an accredited member. To be an accredited member,
you have to pass an exam, you have to submit your work to be reviewed by your peers, and then
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you have to have five years of full-time experience. I got that experience 1979, 1981, and
operated that way. And in 2005, you get elected to the College of Fellows.

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Q. So can you give me an estimate of the number of members of the American Association ...
American Society of Appraisers?

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A. About 5,000 or 6,000.

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Q. And how many of those members have ... approximately have received the designation of
fellow?

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A.

A. few hundred.
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Q.
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A. few hundred. Okay. The ... were you ever on what's referred to as the Internal Revenue
Service Advisory Commission?
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A. Yes.

Q. Could you describe what that is and what your role was and when?
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A. From 2008 to 2010 I was a member of ... it's known by the acronym IRSAC, Internal Revenue
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Service Advisory Council. We would meet quarterly and write reports to give suggestions to the
Service about how to improve things, be more efficient, perhaps from a professional point of
view how to do things. They're suggestions. And so at the end of the year, we would write a
report. I was in what was called SBSE, Small Business Self Employed, and I dealt with valuation
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issues.

Q. So how do you become a member of the advisory commission?

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A. You have to be selected by folks at the Internal Revenue Service.

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Q. And how long were you on that commission for?

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A. For three years.

Q. Okay. You mentioned before that you have done some writing. Could you describe for the

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Court any books that you have published?

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A. I have three principle ... I co-authored three principle books. The first book is called Guide To
Business Valuations, and it's a textbook. I wrote it starting in 1991, and it gets updated
periodically every year. I wrote that with a gentleman named Shannon Pratt and Keith Wilson.
The second book I wrote, which is now in a second edition, is called Standards of Value Theory
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and Application. I also wrote that with Shannon Pratt and a gentleman named William Morrison.
And most recently in the last year, we did a kind of Q&
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A. book on certain topics in business valuation. It was called The Consensus View, and that was
written with Jim Hitchner, Shannon Pratt, and me.
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Q. Okay. Just one question on the standards of value book. In connection with that book, did you
do a chapter on fair market value?

A. I did.
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Q. And do you have to engage ... did you engage in any research and study in order to prepare
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that chapter?

A. Yes.
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Q. Tell us ... the Court what you did.

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A. Well, I just wanted to understand what it means and how it means. It's been interpreted lots of
different ways. The purpose of the book is not to give people legal advice ... I'm not a lawyer ...
but to create a dialogue between appraisers and stakeholders about what some of these topics

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mean. You know, fair market value has a fairly long established case law associated with it. But
other things like investment value or fair value don't. And so the whole purpose of it was to
engage in a dialogue. I took the components of fair market value, and I broke them into pieces.
And I suggested how appraisers might want to look at ... excuse me ... how might want to look at

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things.

Q. So you mentioned, I think, a couple of the books were co-authored with Shannon Pratt. That

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name has come up before. Can you tell the Court a little bit about Shannon Pratt?

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A. Well, Shannon Pratt has a DB

A. from Indiana University. He's probably the most well-known business valuation expert in the
United States at least. He lives in Portland, Oregon. He's a very prolific author. In 1981, he
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wrote, basically, what was considered a seminal book called Valuing a Business that kind of
everyone used to help crystalize the profession. And he's written ... I think he's written 14 books,
two with me.
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Q. In the course of your work as an appraiser, have you had the opportunity to value what I'll
refer to as a celebrity business or celebrity intellectual property?
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A. Yes.

Q. Could you tell us that ... in what types of context have you been called upon to value those
interests?
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A. Wrongful death, damage, divorce ... I do a lot of divorce ... estate and gift tax, and
transactions.
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Q. The ... could you give us any samples of the names of ... if you can disclose it ... of the parties
you worked for and the context or the nature of the proceeding you were doing?
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A. Yeah. For divorce purposes, I had valued Nicole Kidman, Tom Cruise. I worked with Mayor
Giuliani in his divorce, Jimmy Gandolfini, Bryant Gumbel. These are names that are ... have
been public already.

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Q. And those are in the context of divorces.

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A. That's right.

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Q. Okay.

A. In transactions, I have two assignments that are ... that were of interest. The first one is, in

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2006, I was hired by Mohammed and Yolanda (Lonnie) Ali to value his business for a potential
sale ... for a sale to a company called CKX, Inc. And in 2008, I was hired by an investment bank
on behalf of a buyer who wanted to buy the right of publicity and associated trademarks of
Marilyn Monroe.
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Q. Okay. So going back to the divorce cases, the names you mentioned, as part of those
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assignments, did you value rights of publicity?

A. In some, yes.
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Q. And do you value other intellectual property rights in those assignments as well?

A. Yes.
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Q. Let me ask you another question. Going back to ... you said the Ali transaction was in 2006?
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A. Yes.
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Q. Okay. So you were retained by Mr. and Mrs. Ali ...

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A. Lawyers on their behalf, but for them.

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Q. ... lawyers on their behalf. And what was your assignment there?

A. Well, Mohammed and ... I don't know if Lonnie owned it with him, but they owned a
company called GOAT, G-O-A-T, which was known as Greatest Of All Time. And in GOAT was

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housed his intellectual property. He didn't own the rights to the fights. There was no video. It was
basically his name and likeness, his right of publicity. He had ... GOAT had the right of publicity
because it was granted an exclusive license by some foundation that he owned, and he gave them

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the right to use his right of publicity. There were associated trademarks associated with that. And
there was a basement full of memorabilia. I have never seen anything like it in my life, but he
had all this memorabilia ... belts and things that he had done. So that was included in GOAT but

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was carved out are the transaction.

Q. Okay. Did you come up with a value for that transaction?

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A. Yes.
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Q. Could you tell us what that was?

A. It was something less ... it ... he ... it was ... 80 percent was sold to CKX for 50 ... $52 million,
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and my value was lower than that, but, you know, in the relative range. That was the purpose of
my appraisal, actually.

Q. Okay. Since we're there, you do mention the Ali transaction in your report. Tell us how you
relied or didn't rely upon the Ali transaction in connection with the preparation of your report
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here.
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A. Well, you know, when we valued Mohammed's business, there were lots of opportunities that
were expected to be capitalized. I ... you know, you won't see ... I have to say there were things
he wouldn't allow done. So you wouldn't see his name and likeness associated or right of
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publicity associated with tobacco or alcohol or anything like that. So it ... one had to respect his
beliefs as a Muslim. But also, there weren't any ... you know, there weren't any endorsements, but
there were signatures he would sign for memorabilia. And then his name and likeness would
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get ... be used. There was a program that we had that they were going to do, like, a Mohammed
Ali store in these cruise ships, and that was expected to generate a lot of money. And so that was
the expectation when CKX bought it. Bob Sillerman, who ran CKX, had a ... frankly, a personal

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affection for Mohammed, and so that was also part of the deal.

Q. Okay. So tell us how it fits in with your ...

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A. Right.

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Q. ... valuation here.

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A. So unfortunately, it did not turn out as successful as CKX had hoped. And at the valuation
date in this matter, June 25th, 2009, they wrote it down from 52 million to something like 29
million because the performance just wasn't there. They expected that they would do 70 ... 7 to
$8 million, $10 million, and it just didn't work. And then they were in the process, quite frankly,
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of writing it down again, and they wrote it down to some $13 million. And just to end the script,
in 2013 ... CKX ran into trouble. In 2013, Mohammed's business was sold to ... 80 percent was
sold to a company called ABG, Authentic Brands Group, for a grossed-up amount of
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approximately $12 million. I don't know for ... the first reason is that ...

Q. The first reason that ...

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A. ... I did not use it was it was in the process of being written down. And the second reason is
that the multiples ... I didn't think it directly compared to this situation for a few reasons. The
first is there was a history of earnings that Mohammed had. The second is he was relatively
unaffected by any taints. He's viewed by many of us as a kind of hero. And so I ... between the
problem of writing it down and those couple of issues, I didn't think it was really usable as a
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comp, basically.
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Q. Okay. Tell us a little bit about what your involvement was in the Marilyn Monroe transaction
you mentioned.
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A. So I was approached by these people to value her right of publicity. Ironically, Mark Roesler
was her agent at the time, and I was sent information from Mark Roesler by the buyer ...
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potential buyer ... and we had a long discussion about the prospects. What ... I have to tell you.
This is 2008. So in 2008, they were interested in 2011 ... they were interested in ... it was going
to be the 50th anniversary of her death. And there was an issue about photographs. Some of those

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iconic photographs you see are not photographs ... the copyrights on them are not owned by her
or her estate. And so we did a valuation. And this was the time when there was an issue of where
was she domiciled. People had operated under the assumption that it was going to be California,
but that was under challenge.

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Q. Okay. One question. You said you did a valuation. Did you value her rights of publicity?

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A. Yes.

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Q. Okay. Go ahead.

A. I valued her rights of publicity. I was asked explicitly to assume that she was ... that her
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estate ... her name and rights of publicity were going to be governed by the California
jurisdiction. And while I was doing the assignment and talking to the buyer about that, at least at
the trial court level, on the ... you know, it was adjudicated that she was a New York resident, and
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they abandoned the deal.

Q. Okay. In connection with your representation, did you come up with a value of Ms. Monroe's
rights of publicity?
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A. My recollection is I did. Yes.

Q. And that value assumed that she was domiciled in California?

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A. That's correct.

Mr. Voth: Objection. Leading, Your Honor.

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Judge Holmes: Sustained. Actually, asked and answered, but go ahead.

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Mr. Toscher:
Q. And you recall what that value was that you came up with?

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A. It was a while ago, but my recollection was it was in the $20 million range. It also assumed
that they could make a deal with a photographer.

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Q. Okay. The ... all right. And do you know what happened? Did that transaction go forward or
not go forward?

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A. It ... that particular transaction did not go forward.

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Q. And do you know why it didn't go forward? Do you have any knowledge as to why it didn't
go forward?
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A. Well, what I was ... the buyer was not interested once it was adjudicated that she was
domiciled in New York.
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Q. Let me go to page ... well, that's the cover letter of your report dated October 18th addressed
to me. Did you reach an opinion as to the value of Mr. Jackson's ROP rights as of June 25th,
2009?
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A. Yes.

Q. All right. And what was the value you reached, and is that reflected on this page shown here?
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A. Right, but ...

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Q. What is the value?

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A. The fair market value of his ... Michael Jackson's right of publicity and associated trademarks
as of June 25, 2009, was $3,078,000.
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Q. And could you describe for the Court briefly the methodology you employed to reach that
value?

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A. Well, I mean, I did a survey of everything that I could find out about Michael Jackson up to
the day he died. And ultimately, I tried to apply all three approaches to value, which are the cost

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approach, the market approach, and the income approach. And given the circumstances here, I
found myself using the income approach, specifically the discounted cash flow method.

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Q. Okay. Tell us why you used the income approach/discounted cash method in this case.

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A. Right. So the rights of this asset are based on the present worth of future benefits. And those
benefits are what I'm attempting to capture. So it's what kind of income can be generated by
ownership of this asset from June 25th, 2009, forward. The ... for reasons that we ... I guess we'll
talk about, those cash flows were not uniform. They were ... they varied quite a bit. So that's
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when you use the discounted cash flow method when history and when you haven't reached what
I would call a stabilized period. There was an expectation that upon Michael's death there would
have been a post- death bump. We have seen that happen before. I saw it happen with Dale
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Earnhardt, for example, Senior. And so that's why ... that's when you use the discounted cash
flow method. You use it over a discreet period, in this case 10 years, and then there's what we
call terminal value when you think it's stabilized. And so that's why we used it, because the cash
flows were erratic, and that's how - - and that's the method we decided to use.
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Q. How did you go about determining the revenue projections for the 10 years following death?

A. I relied upon a projection done by Mark Roesler of CMG.

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Q. And how did Mr. Roesler get involved, and why?

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A. Well, he got involved, I would like to believe, because I recommended him. And when I was
contacted in this case in 2013, I was sent two appraisals ... an appraisal by Owen Dahl, an
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appraisal by some gentleman named Coleman .. And I looked at both appraisals, and I saw what
Owen Dahl had a deal with as a traditional appraisal following Revenue Ruling 5960. You look
at five years of history. You look at whatever prospects there are. And he did what he ... what
most people would have done. However, you have ... in order to do this assignment, you had to
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think out of the box. We knew there was a bump, and so I ... at $2,105 just ... it didn't seem right
to me. This is the most ... one of the most unusual valuations I have ever had because there is no
history.

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There's a reason why there's no history. Even if you go back to 1993, the history's scant. There's
a taint, which, just to say it once, you know, there are taints, and then there are taints, excuse me.
There's Kobe Bryant kind of taints, or I had Kate Moss, and then there's things involving
children. Rightly or wrongly, although they were alleged, that taint is hard, almost impossible, to

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overcome. I call it ... it's like being in a nuclear winter, okay? And so I felt like I'm not in the
business of placing licensing agreements with dead celebrities. I tried to do a live one once, and I
didn't do it very well. I thought I needed someone - - you know, as an appraiser, we study the

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market. We don't make the market. I'm not in the market. And so it seemed to me, given these
unique circumstances, there's nobody I know better in the United ... in the world, for that matter,
that can have their pulse on what would have happened than Mark Roesler. And so I suggested

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that we hire him, that he look into this issue, that he go and provide projections and expenses.
And that that's ... I needed help. I did not have the kind of experience in the market. I'm a very
experienced appraiser. I know how to do appraisals. But there are times when you need help, and
that's why I suggested you use him.
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Q. So just complete now, if you can run us through briefly just for an overview for the Court
how you calculated the 3,078 starting with the revenue projections, which you just talked about.
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Give us an overview how you come ...

A. Okay.
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Q. ... to 3,078. It's all in your report, so you can just ...

A. I know that, but you could ... you misstated it twice. It's 3,078,000.
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Q. Thank you.
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A. Right? I mean, right? You said 3,000.

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Q. You have witnesses?

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Mr. Toscher:

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Q. So stipulated. Go ahead. Thank you, Mr. Fishman.

A. Okay. So in using the discounted cash flow, you have to get to cash flow.

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Q. And so to get the cash flow, you have to take revenue and then subtract expenses. So I took
the projection that Mark gave me, and we talked ... he and I talked at length about what kind of

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expenses would be expected to incur. And we identified a number of expenses ... a commission; a
legal expense for some unique reasons here; general administrative ... you know, who's going to
make decisions; and then Mark though PR would be important, given the ability to overcome this
problem that was there. And so that gives you cash flow. It ... there's really something else that is

lJa
important that gets kind of lost. The monies that recognize in this business are called advances.
We're looking at cash, so we use advances as a proxy for ... as ... that's what the cash flow is.
That money is not necessarily earned. That's advance against royalties. So on an accrual basis,
you could have tried to pace it over time. That would have been really hard to do. So this is cash
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flow. We did cash basis. But it shouldn't be overlooked because those ... there's no more cash
flows unless you're recouped. It depends on the deal, but in a lot of deals, that's the case. And so
we did cash flow ... when was he going to receive the cash, what are the expenses. And then we
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got to a pre-tax profit. We took out taxes, and then we discounted it back at a weighted average
cost of capital. And then ... so that's the essence of how we got it. That gave us a number, and
then because we took taxes out, there's something called a tax shield, that we added to it. The
combination of those two gets you to 3,078,000.
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Q. Okay. And all that is set out in your report.

A. Yes.
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Q. Okay. So just one question and then I'll - - I'm done. The ... in calculating the value, you need
to use a ... what's sometimes referred as a discount rate or a weighted cost of capital. Is that
correct?
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A. Yes.
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Q. And what weighted cost of capital did you use in this case?

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A. 15.4 percent.

Q. And do you know what weighted cost of capital Mr. Anson used in his valuation?

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A. Yes.

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Q. What was it?

lJa
A. I believe it was around ... it was 11 percent.

Q. Okay. Can you tell us why ... 15 percent weighted cost of capital, why you chose that?
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A. Well, for a couple of reasons. The first reason is my cost of debt was 7.5 percent because the
comparables I found, at least from which I could derive a rate of return, that was their cost of
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debt ... long-term debt. This is an era ... this is an economic era at the valuation date of
quantitating easy because we're just coming out of the great recession, capital markets were tight,
and the federal reserve was basically increasing the money supply. So short-term rates were a lot
lower, 6 month, one year, two years. You don't finance acquisitions that way. So the first reason
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is I used the seven- and-a-half cost of debt, which after tax times the waiting gets you to one
number. And then I looked at the cost of equity three or four different ways. I used what's called
a build-up method, and then I used something that's called the capital asset pricing model. And
so that got me to a weighted average ... to a cost of equity of 18 percent. This is a relatively risky
asset. First of all, it's an intangible asset, and so it's very, very difficult to borrow against it. And
second, there are risks associated with this. So when you take those two weights, the 7.5 percent
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minus the tax, the 18 percent, times the relative weights, you get 15.4.
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Q. Okay. How did ... this is the last question. How did you factor in the riskiness of the
transaction to get to your 15 percent? Or what adjustments did you make that it ... that reflect
what you believe were the risks?
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A. Well, I think that a person who would buy this asset would expect the rate of return ... a
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weighted average cost of capital rate of return of around 15.4 percent. They would use
 om
approximately 20 percent debt, 80 percent equity. And I got that from the way the other ... some
of the other companies worked. I did add, in one of the methodologies, 200 basis points what I
called specific asset risk. But that's kind of ... you know, you would like to have gotten it by

n.c
looking at what other rates of return would generate on sales like that. That's just not something I
could develop. So I went to the secondary market, which is the public markets, and generated my
weighted average cost of capital that way.

so
Q. Okay. Were you familiar ...

ck
Mr. Voth: Your Honor, may I seek clarification? We have gone well over the 20 minutes that are
allocated for this, and ...

lJa
Judge Holmes: Wrap it up, Mr. Toscher.

Mr. Toscher: One last question, Your Honor. Thank you.

ae
Mr. Toscher:
ich

Q. In calculating ... were you ... in part of your report, did you address what you refer to as
"clouds on title"?
mM

A. Yes.

Q. And how does that factor into your valuation or the weighted cost of capital?
a

A. It ... it's two ways. One, it drives up the legal costs. When I'm talking about the cost of capital,
Te

the title that would be transferred here wasn't clean. There were claims against it. I didn't see that
in Ali, and I didn't see that in Monroe. And so there are going to be extra expenses associated
with fighting those claims in addition to infringements. And so there was legal costs involved.
And then the fact that they exist and that I'm in that kind of business where I have to do that
w.

drives up the risk.

Q. Thank you, Mr. Fishman.

ww
 om
Mr. Toscher: Thanks for the Court's indulgence on going over.

n.c
Judge Holmes: Go ahead, Mr. Voth.

so
Mr. Voth: Thank you, Your Honor. Just one moment as I get organized, Your Honor.

Mr. Voth: May I proceed, Your Honor?

ck
Judge Holmes: Of course.

lJa
CROSS-EXAMINATION

Mr. Voth:
ae
ich
Q. Good morning, Mr. Fishman.

A. Mr. Voth, good morning to you.

mM

Q. Nice to see you again. All right. Let's just talk about, just briefly, just a general overview of
your report. The ... your report should be read in conjunction with Mr. Roesler's report, correct?

A. Yes.
a
Te

Q. You relied on Mr. Roesler's revenue projections?

A. Yes.
w.

Q. You didn't independently verify Mr. Roesler's revenue projections, correct?

ww
 om
A. I did not.

n.c
Q. You primarily relied on Mr. Roesler's projected expenses?

A. Primarily.

so
Q. Okay. So correct?

ck
A. Well, right.

lJa
A. couple of them I did on my own ...

Q. Right.
ae
A. ... but a couple of them came from him.
ich

Q. Okay. So primarily you did rely?

A. Yeah.
mM

Q. Okay

A. Yes.
a
Te

Q. You relied on Mr. Roesler's public relations expenses, correct?

A. Yes.
w.

Q. And you didn't independently verify these expenses, correct?

ww
 om
A. I did not.

n.c
Q. The same would be true with Mr. Roesler's legal expenses?

A. Yes.

so
Q. And you didn't independently verify these expenses as well, correct?

ck
A. That's correct.

lJa
Q. Now, with respect to the 35 commission expense, that's where you primarily relied on Mr.
Roesler's expenses, correct?
ae
A. Well, no, not really. I mean, it says in there. There are three ... there were three spokes ...

Q. Right.
ich

A. ... as we discussed. One came from Mark. The second one was the Marleys ... we were being
charged by ABG at the time ... Bob Marley and his family. And the third was I found out,
mM

because I did Monroe, what Mark was charging.

Q. Okay. So in part, you relied on ...

A. Yes.
a
Te

Q. ... Mr. Roesler's ...

A. Yes.
w.

Q. Okay. Thank you. Now, back in 2009, there were certain firms that specialized in the
ww

management or acquisition of name and license, correct?

 om
A. I'm just worried about the plural. It ... are there firms that ...

n.c
Q. All right. So I'll give you some examples.

so
A. Okay.

Q. Corbis?

ck
A. Well, Corbis was primarily a talent agency.

lJa
Q. Focused on the management and ... of name and likeness?
ae
A. Well, I think the management of talent as well as ... name and likeness as well. But I thought
they managed people, too.
ich

Q. Okay. But management of name and likeness as well, correct?

A. In connection with, I think, people they managed.

mM

Q. In connection with people. CKX would be one of the others?

A. What you call CKX is ... CKX was the buyer of Elvis and Ali.
a
Te

Q. Okay.

A. That was one of their business units. Seventy-eight percent was generated by American Idol.
w.

So they were an entertainment company, and they added this branch of their business by buying
the Elvis business in 2005 and the Ali business in 2006. But what drove the stock price ...
ww
 om
Q. No. I'm not referring to the ...

n.c
A. No, I know. But what drove the stock price was American Idol.

Q. So there's a branch of CKX then that's focused ... that did the acquisitions of the name and
likeness rights of Elvis Presley and Mohammed Ali? Is that what you're saying?

so
A. Right ... but ... well, they have four ... in their public filings, they have ... they report four

ck
business units ... Nineteen Entertainment, a talent agency they own, Elvis Presley, and
Mohammed Ali. And Elvis is broken out between Graceland and licenses and royalties.

lJa
Q. Okay. But it all falls under the umbrella of CKX. Is that correct?

A. Yes.
ae
Q. Okay. All right. And so before Michael Jackson's death, CKX had acquired the right to the
ich
name, image, and likeness of Mohammed Ali. Is that correct?

A. Yes.
mM

Q. That took place around 2006, correct?

A. It was April 2006.

a

Q. Okay. Thank you. Now, CKX had also acquired the right to the name, image, and likeness of
Te

Elvis Presley, coupled with the other things that we discussed, around 2005. Is that correct?

A. We haven't discussed what the other things were, but they ...
w.

Q. Well you mentioned ...

ww
 om
A. ... they applied ... they bought the Elvis Presley business, which included Graceland, included
films, included some songs. It included a lot of things.

n.c
Q. Coupled with his name and likeness ...

A. And his right ... in fact, his name is specifically allocated.

so
Q. Okay. Now, so CKX owns Michael Jackson's name and likeness outright ...

ck
Mr. Toscher: Excuse me. Objection. Mischaracterization. Is that a hypothetical. You said if CKX
owns Michael Jackson's? Is that what I heard? If ... am I hearing it wrong? I could have heard it

lJa
wrong or just ...

A. Well, he said if.

ae
Mr. Toscher: Okay. So this is a hypothetical? I just ...
ich

Judge Holmes: Whatever that is, it's overruled. Go ahead, Mr. Voth.
mM

Mr. Toscher: Okay.

Mr. Voth:

A. Right? You said if, if I heard you correctly, sir?

a
Te

Q. We'll start with the hypothetical.

A. Okay.
w.
ww
 om
Q. And then we may proceed to the actual position. Let's go with the hypothetical. Before the
actual purchase took place of ... CKX does not own Michael Jackson's name and likeness,
correct?

n.c
A. Correct.

so
Q. All right. So then therefore ... so if CKX owned Michael Jackson's name and likeness
outright, there would be no 35 commission percent. They would have to pay to an agent. Is that
correct?

ck
A. Correct. I need to amend that for a second. They did pay commissions on the Ali business, but
they wouldn't ... but they did not pay it on the Elvis business.

lJa
Q. But I'm referring to an agent. So if an entity like CKX were to acquire Michael Jackson's
name and likeness outright, they wouldn't have to pay a 35 percent commission to an agent. Is
that correct?
ae
ich
A. I think the answer, really, I should have given you is depends.

Q. Okay. But it wouldn't be ongoing as the assumption you made in your report with respect to a
35 commission in place with respect to agents?
mM

A. I don't know that. I mean, you would think they could handle it in-house. But as I said, when
you read the line item for Ali, the expenses include commissions.
a

Q. Okay. But you don't know ... the answer would be that you don't know if there would be an
ongoing commission expense of 35 percent that would be ... have to be paid to an agent. Is that
Te

fair?

A. I said it depends, so yes. The answer to your question is yes.

w.
ww
 om
Q. Okay. Now, at your deposition we talked about the allocation that Mr. Roesler placed to
different categories with respect to Jackson's yearly ROP rights, revenue, and he had four
different categories. Do you recall that?

n.c
A. I think you're referring to time periods.

so
Q. Time periods that he categorized as Category 1, 2 ...

ck
A. Yes.

Q. ... 3 and 4?

lJa
A. Yes. ae
Q. You recall that? Okay.
ich
A. Yes. I do.

Q. And you did not review Mr. Roesler's allocation to the different four categories. Is that
mM

correct?

A. I saw ... I read it, and I reviewed it. I didn't verify it, if that's what you mean. I didn't ...

Q. Okay. So you ...

a
Te

A. ... challenge it.

Q. Okay. So you ... okay. So you didn't verify it.

w.

A. No.
ww
 om
Q. Is that correct? And the fact that in our deposition you stated you have no opinion about Mr.
Roesler's percentage allocation to these four categories. Is that correct?

n.c
A. That's right.

so
Q. So if it turns out that Mr. Roesler's revenue projections are, for some reason, unreliable, that
would obviously affect the analysis in your report. Is that correct?

ck
A. Yes.

lJa
Q. The same would be true with respect to Mr. Roesler's projected expenses?

A. Let's say expenses I used based on what Mr. Roesler represented to me in those categories,
yes.
ae
ich
Q. Correct. So the answer would be, if they turn out to be unreliable with respect to the expenses,
that would necessarily affect the analysis done in your report. Is that correct?

A. Yes.
mM

Q. And if it's determined that Mr. Roesler failed to include certain categories of certain revenue
opportunities attributable to name and likeness, that would obviously also affect the fair market
value analysis ... value that you reached in your report. Is that correct?
a

A. Can we agree that name and likeness and right of publicity in associated trademarks, we're
Te

talking about the same thing? Because you keep using name and likeness, and Mr. Roesler and I
call it right of publicity in ...
w.

Q. All right. So I'll go with your definition. If it turns out that, with respect to your right of
publicity and associated trademark, which is the definition that you and Mr. Roesler use, certain
categories were not included as revenue opportunities that would necessarily affect the fair
ww

market value in your report. Is that fair?

 om
A. Sure. I mean, to the extent it will change, my value will change.

n.c
Q. Okay. All right. Let's talk about some just general valuation principles. In preparing a
valuation report, you tried not to rely just on your personal experience. Is that correct?

so
A. I thought you ... the question was, in looking at comparables, I wouldn't just rely on my
personal experience. That's correct.

ck
Q. Just then ... I'm going to continue talking just about ... briefly just about general valuation
principles.

lJa
A. Okay.
ae
Q. So in isolation, you have a better chance of making more revenue with better management?
ich
A. All else being equal, I would ... you would ...

Q. All else being equal.

mM

A. Right. You would help ... you would hope so.

Q. You would hope so; and therefore, there's a probability that there would be a likelihood that
more revenue could be generated with more competent management?
a
Te

A. The only reason I'm hesitating is revenue. The issue is who would generate more cash flow,
right? That would be after expenses because you would have more revenue and have more
expenses. So if the question really is can you get more money in your pocket if the things
manage better, then if that's so, the answer is yes.
w.

Q. Thank you for your clarification. Past events may not fully reflect revenue generation
potential. Is that correct?
ww
 om
A. Yes.

n.c
Q. Yes as a value of the present worth of future benefits?

so
A. Yes.

Q. The willing hypothetical buyer will consider the future when deciding whether to buy?

ck
A. Yes.

lJa
Q. All right. Let's delve a little bit more into the scope of your ... we call it appraisal ... is the
rebuttal report solely the appraisal review? Or ... I just want to make sure I use your terminology.
ae
A. Well, that's fine. What are you referring to?
ich

Q. So the ... just your original report.

A. My original report is my ... the fair market value of ...

mM

Q. And that ...

A. ... right of publicity as of that date.

a
Te

Q. Okay. So it's fair for me to call it original report.

A. And it's an appraisal report. Yes.

w.

Q. So ... okay. All right. So looking at Exhibit 666-P, your appraisal report, now you consider
how the scope of legal rights might affect value, right?
ww
 om
A. I did.

n.c
Q. And it's your position that the valuation of Michael Jackson's name and likeness should be
limited to whatever protection is given under the California post-mortem right of publicity
statute coupled with any associated trademarks?

so
A. I think what I said is that's the framework that I worked on.

ck
Q. That's the framework ...

lJa
A. That's correct.

Q. ... correct? Okay. And that's the case even if Michael Jackson's rights are exploited
nationwide. Is that correct?
ae
ich
A. My understanding is domiciled here. The exploitation can occur in another state, but it would
be controlled by what's here in California.

Q. All right. So the answer is yes?

mM

A. I'm sorry. It was ... I just should have said yes.

Q. And the same is with ... true with respect to if Michael Jackson's right of publicity rights are
a

exploited worldwide, you take ... you still hold the same position. Is that correct?
Te

A. That's the assumption I made, yes.

w.

Q. Okay. And the same would be true even if a rational investor can protect this intangible asset
that we're talking about today through other state laws, correct?
ww
 om
A. I think you have to ask me that as a hypothetical.

n.c
Q. It's a hypothetical, yeah.

A. Okay. So could you repeat it again?

so
Q. Okay. So hypothetically, you have rational investor. He owns this intangible asset. Let's
assume he's able to protect this intangible asset through other state laws. Okay?

ck
A. Yes.

lJa
Q. Your analysis ... your ... the framework that you established to value Michael Jackson's name
and likeness would not change, correct? ae
A. That's correct.
ich
Q. And it's your position that the exemptions talked about in the California Post-Mortem Right
of Publicity Statute under 3344.1(a)(2) provide a guarantee against liability?
mM

A. That's, like, a legal thing. I don't know what that means.

Q. Okay.

A. You mean the fact ... you'll have to explain it to me.

a
Te

Q. Sure. Well, you have talked about the exemptions that are listed under 3344.1(a)(2) in your
report, correct?
w.

A. I mention it.
ww
 om
Q. You mention it. Okay. You also mention it in your ... what do you call it? Your rebuttal report?
Your ...

n.c
A. You could ... what ... if it makes you comfortable, call it rebuttal. Technically, it's called an
appraisal review.

so
Q. Okay.

ck
A. But for the purposes of this, we can call it rebuttal if you would like.

Q. Okay. You also mentioned that code section in your rebuttal report, which has been marked ...

lJa
which is Exhibit 667-P. Is that correct?

A. Yes.
ae
Q. And so you take the position that there are certain things that should not be valued because
ich
they are exempt under the California post-mortem right of publicity statute, correct?

A. Right. That ... the ... as ... in taxes, it would depend on whether Mark considered it or not. But
that's my personal opinion with the exception of merchandising deals at some of these venues.
mM

Q. All right. So when we talk about your original report, Exhibit 666-P, it does not include a
discussion of Section 3344.1(a)(3). Is that correct?

A. That's right. Except the whole statute is included in the report.

a
Te

Q. Right. But there's no particular analysis done with respect to (a)(3) in the body of your report,
right?
w.

A. There's no analysis done on either one, but yes. The answer is yes.
ww
 om
Q. It's not mentioned in the body of your report. Is that ...

n.c
A. It is not mentioned in the body ...

Q. Okay.

so
A. ... of the report. Yes.

ck
Q. And with respect to (a)(3), you consider this a narrow exception, right?

lJa
Mr. Toscher: Objection. If we're going to adhere .. to legal conclusions, then that's an
objectionable. That's what I was held to yesterday. Plus vague.

Judge Holmes: Sustained.

ae
Mr. Voth:
ich

Q. Did you consider the impact of the exceptions provided under (a)(3) in reaching a value in
your appraisal report?
mM

A. The appraisal report is based on revenue projections provided to me by Mark Roesler. And so
I can have a personal opinion about what you just asked me about, but it's only to the extent that
he did or didn't consider it that it gets included.
a

Q. Now, you cited Thomas McCarthy in your report, correct?

Te

A. Yes.
w.

Q. Because he's a reliable authority in right of publicity. Is that correct?

ww

A. He's the most well-known person I know, and he's a book that everybody reads.
 om
Q. Okay.

n.c
A. When you use the word authority, I don't know what that means. That's the only reason I was
asking.

so
Q. Okay. So at our deposition, you said he was well respected. Is that fair?

ck
A. Yes.

lJa
Mr. Voth: Your Honor, may I approach the Clerk to have an exhibit marked for identification?

Judge Holmes: Certainly. ae

Court Clerk: Exhibit 668-R is marked for identification.
Mr. Voth:
ich

Q. All right. So I would like to draw your attention to Page 2 of Exhibit marked for identification
663-R, the section entitled Advertising is not Exempt.
mM

A. Okay. Where is that?

Q. And I'm not asking about your legal opinion. I'm only asking as to how this might affect
value, okay?
a
Te

A. Okay. Could you do it again? Because I ... she just handed it to me.

Q. Okay. So ...
w.

A. So where is it?
ww
 om
Q. ... please go to Page 2.

n.c
A. Okay. Oh, I see it.

so
Q. The section titled Advertising is not Exempt. All right. It states, "Traditional advertising
contained in a media publication or broadcast is clearly not immune under the 1999 statutory
scheme. In a hypothetical example, if an unpermitted use of the name and photo of a deceased
athlete, say Joe DiMaggio, was used in an advertising towards sports shoes contained in a

ck
magazine, the use would not be exempt for two reasons. "Firstly, under 3344.1(a)(1), it is a use
for the purpose of advertising and selling shoes, which are not exempt under 3344.1(a)(2).
"Secondly, even if one considers the use exempt under Section 3344.1(a)(2), that exemption is

lJa
lost because the plaintiff could prove that the use was so directly connected with a product that it
was an act of advertising using the attraction of the identity of the deceased personality to help
sell the sports shoes." Do you agree with what Mr. McCarthy has stated in this?
ae
A. I think so. It makes sense to me.
ich
Q. Okay.

Mr. Toscher: Objection. Calls for a legal conclusion, Your Honor. I would move that it be
mM

stricken.

Judge Holmes: That is granted as well. This is from a legal treatise. You can ask him if he took
that into account in his valuation, thought, Mr. Voth. Is that what you were going for?
a

Mr. Voth: Yes, Your Honor. I mean, that's where ... I was trying to make clear that it was not - - I
Te

was not seeking his legal interpretation.

Judge Holmes: Okay. Well, ask him that question in that fashion then.
w.

Mr. Voth: Okay.

ww
 om
Mr. Voth:

n.c
Q. Did you take this analysis done by Mr. McCarthy in reaching ... did it affect how you reached
your value?

A. No.

so
Q. No. Okay. Now, at our deposition, we talked about trademarks, correct?

ck
A. Okay.

lJa
Q. In general?

A. Yes.
ae
Q. Yeah? Okay.
ich

A. I seem to recall that.

mM

Q. And you consider trademarks an integral part of name and ... of right of publicity?

A. As it applies here, yes.

a

Q. Okay. Let's just briefly talk about Michael Jackson's death and the impact thereof. Michael
Jackson's death gave the estate an opportunity to rebrand Michael Jackson?
Te

A. It did.
w.

Q. Now you ... you're familiar with the Cirque de Soleil Beatles Love Show, correct?
ww
 om
A. I am.

n.c
Q. You saw it in person?

A. I did.

so
Mr. Voth: Your Honor, may I approach the Clerk to have a document marked for identification

ck
Judge Holmes: You may.

lJa
Court Clerk: Exhibit 669-R is marked for identification

Mr. Voth:
ae
Q. Okay. Then looking at 669-R, Mr. Fishman, I would like to draw your attention to Page 2.
And I'll be reading the section which is ... which says Notes and ... all right. "Note. The business
ich
principles in this presentation are based on the Love Show in Vegas in which Mirage owns the
theatre and operates the show, and Cirque and Apple create, produce, and present the show." Did
I read that statement correctly?
mM

A. Yes.

Q. And this was a presentation given to the estate in September of 2009? Do you see the
September 2009 at the bottom?
a
Te

A. I see the date, yes.

Q. Okay.
w.

Mr. Toscher: Are you ... objection. Are you asking him a question? It's vague and ...
ww
 om
Mr. Voth: I was asking him if I read it correctly, Steven.

n.c
Judge Holmes: Overruled.

Mr. Voth:

so
Q. Given the existence of ... all right. Let's put aside our differences as to what's the scope of
right of publicity, okay? Given the existence of the Beatles Love Show before Michael Jackson's

ck
death, coupled that in September of 2009 there's a presentation given to the estate which
references the Beatles Love Show, it's foreseeable that there could be a Michael Jackson theme
show, given the existence of love prior to Michael Jackson's death, correct?

lJa
A. It would be foreseeable that there would be a possibility that Cirque de Soleil would be
interested in doing a Michael Jackson show. ae
Q. And in our deposition, you said certainly possible, correct?
ich
A. I think I just said the same thing, but yes.

Q. Well, possible and certainly possible are - - to me, they're different.

mM

A. Okay.

Q. Did you say at our deposition certainly possible?

a
Te

A. I don't remember saying that, but I'm okay with that. It's certainly possible.

Q. Okay.
w.

Mr. Voth: Just one moment, Your Honor.

ww
 om
Judge Holmes: Okay.

n.c
Mr. Voth:

Q. All right. Your analysis did not take into consideration any potential commercial exploitation
of any footage or audio owned by Michael Jackson. Is that correct?

so
A. Correct.

ck
Mr. Voth: Your Honor, may I approach the Clerk to have a document marked for identification?

lJa
Judge Holmes: Certainly.
ae
Mr. Voth: May I ask the Clerk to please provide a copy to the witness?

Court Clerk: Exhibit 670-R is marked for identification.

ich

A. Thank you.
mM

Mr. Voth: All right. What was the number again?

Court Clerk: 670.

a

Mr. Voth: 670. Thank you.

Te

Mr. Voth:
w.

Q. I'm assuming you're familiar with this document, Mr. Fishman?

A. I am.
ww
 om
Q. That's a document ... it's an article that you wrote with Jeremy Smith. Is that correct?

n.c
A. Yes.

so
Q. Entitled The New Dynamic for Celebrity Businesses. Is that correct?

A. Yes.

ck
Q. So I would like to draw your attention to Page 491 of your article, Exhibit 670-R marked for

lJa
identification. And among other things, you describe the acquisition of Elvis's name and likeness
rights, Graceland, correct?

A. Name and likeness rights, Graceland, motion pictures, licensing ...

ae
Q. Okay.
ich

A. ... whatever the document says.

mM

Q. Okay. And if we look at the top of Page 491 of Exhibit 670-R marked for identification, the
second sentence reads, "With respect to image and likeness, it also includes the ability to license
its use for commercial exploitation and the use of video and/or audio clips of Elvis from the
motion pictures he starred in and the TV shows the company owns." Did I read that statement
correctly?
a

A. Yes.
Te

Mr. Voth: Your Honor, Respondent moves into evidence Exhibit 670-R marked for
identification.
w.

Mr. Toscher: Objection, Your Honor.

ww
 om
Judge Holmes: Why?

n.c
Mr. Toscher: Relevance. Is there a statement in here that you find inconsistent?

so
Judge Holmes: Mr. Voth?

Mr. Voth: Okay. Just waiting ... if you wanted me to reply, Your Honor.

ck
Judge Holmes: I do.

lJa
Mr. Voth: Yeah. I think ... Respondent thinks that it's relevant that Mr. Fishman was aware of the
potential exploitation of film and audio, which in Respondent's view is equivalent to either
footage of Michael Jackson or audio of Michael Jackson. And that was not included as part of his
analysis.
ae
ich
Mr. Toscher: Your Honor, it has nothing to do with his analysis of the rights of publicity based
upon, you know, the work and projections performed by Mr. Roesler. I just don't see any
relevance here.
mM

Judge Holmes: Objection is overruled. I'll admit this one. What was the number again, Ms.
Wood?

Court Clerk: 670.

a

Judge Holmes: Okay.

Te

Mr. Voth: Your Honor, also as a housekeeping matter, Respondent moves into evidence 669-R.
w.

Judge Holmes: Which one was that, Ms. Wood?

ww
 om
Court Clerk: It was the Cirque de Soleil rules and responsibilities.

n.c
Mr. Toscher: Objection, Your Honor. There is no foundation with this witness on this exhibit.

Judge Holmes: Oh, lay a foundation, if you can, for that one. How does he know what it is?
How do I know what it is?

so
Mr. Voth: It's actually a fair objection, and Respondent will lay a foundation with a different

ck
witness, Your Honor.

Judge Holmes: Okay. For now, that one's out.

lJa
Mr. Voth: One moment, Your Honor. ae
Judge Holmes: Certainly.
ich
Mr. Voth: And I'm ready.

Judge Holmes: Go ahead.

mM

Mr. Voth:

Q. All right. Mr. Fishman, in your view, it's more attractive to sell Michael Jackson's name and
likeness with the ability to also deliver his music IP, correct?
a
Te

A. Yes.

Q. Now, sometimes lines are blurred between these two industries, correct?
w.

A. We have to define what you mean by ... I mean, you're referring to something I wrote, but you
ww

have to tell me what you mean by two industries.

 om
Q. Well, with respect to the name and likeness and music IP.

n.c
A. I think the Court deals with touring versus music versus music compositions. It talks about the
ways artists generate ...

so
Q. No. I'm not referring to your article.

ck
A. Okay.

lJa
Q. So perhaps it's best if I ...

Mr. Voth: One moment, Your Honor? ae

Judge Holmes: Okay.
ich

Mr. Voth: May I approach the Clerk to have a document marked for identification?

Judge Holmes: Certainly.

mM

Court Clerk: Exhibit 671-R is marked for identification. It is a copy of the deposition of Jay
Fishman.
a

Mr. Voth: Thanks.

Te

Mr. Voth:
w.

Q. And Mr. Fishman, I'm solely using this deposition just to refresh your memory and to ensure
that we're on the same page.
ww
 om
A. Okay.

n.c
Q. If you can please go to Page 110, Lines 10 through 23 ... actually, go through all the way to 25
and then continue on to Lines 1 through 5 of Page 111.

A. Okay.

so
Q. You there? Okay.

ck
A. I'm sorry. Where was I ... I thought you wanted me to stop. Page 111, Line 10?

lJa
Q. Line 5.

A. Okay. Okay, fine. Great.

ae
Q. Okay. All right. So it says sometimes lines are blurred between film, music, and books. Is that
ich
correct?

A. Yes. Wait a minute. Excuse me.

mM

Q. I'm looking at Page 110, Line 10.

A. Right. Okay.
a

Q. Okay. So that was ...

Te

A. We're talking about the film industry, the music industry, and the book industry, right? It says
between industries.
w.

Q. Right. Yeah.
ww
 om
A. Okay.

n.c
Mr. Toscher: I would request that the answer be read into the record because I think there's a
mischaracterization of the answer.

so
Judge Holmes: You'll have your chance then, Mr. Toscher. Go ahead, Mr. Voth.

ck
Mr. Voth:

lJa
Q. All right. And then we're also looking at Page 111. And sure, let's read it into the record to
ensure we're all on the same page.

Mr. Voth:
ae
A. What line?
ich

Q. So we're looking at Lines 2 through 5. "I'm looking at it as, you know, the exploitation of my
name and likeness, unassociated with the music, but I may have to do something with the
music." Did I read that statement correctly?
mM

A. You read it correctly.

Q. So let's just briefly talk about a potential buyer of this intangible asset. It's possible that a
a

pass-through entity could have been a purchaser of this intangible asset, correct?
Te

A. It's possible.
w.

Q. All right. Let's just briefly talk about Elvis and Marilyn Monroe. Some of it was talked about
with Mr. Toscher. You're familiar with Graceland, correct?
ww
 om
A. I know where ... I have never been there.

n.c
Q. Okay.

A. I know where ... I know what it is, yes.

so
Q. You know of Graceland, correct?

ck
A. Yes.

lJa
Q. People go to Graceland because of Elvis?

A. Yes.
ae
Q. Elvis's name is inextricably linked to Graceland?
ich

A. I think people recognize ... they go there because Elvis lived there.

Q. But it's fair to say that they wouldn't go there but for Elvis having lived there, correct?
mM

A. I wouldn't go there unless I knew that Elvis lived there, but I can't speak for what other
people ... I have never been there, so I don't know what's attractive to it.
a

Q. Okay. So I would like to turn your attention to your deposition, Page 131, Lines 7 through 9,
and please let me know when you're there. Are you there, Mr. Fishman?
Te

A. Yes. Yes.
w.

Q. All right. So when I was at ... when we were talking about Elvis, I asked you, "So isn't
his name inextricably linked to Graceland?" "ANSWER: Yes." Did I read that correctly?
ww
 om
A. Yes.

n.c
Mr. Voth:

so
Q. Move on to Marilyn Monroe. So in 2008, you were hired to value the name and likeness of
Marilyn Monroe for a potential sale, correct?

ck
A. Yes.

lJa
Q. The buyer wanted you to operate under the assumption that the Court would determine her as
being domiciled in California. Is that correct?

A. Yes.
ae
Q. To get the protection afforded by the California post-mortem right of publicity statute?
ich

A. I assume that's what they meant. They asked me to assume that they owned it exclusively.
mM

Q. Okay. Now, the Court eventually determined that she was actually domiciled in New York,
correct?

A. Yes.
a

Q. And so the buyer then did not make an offer for Marilyn Monroe's right of publicity. Is that
Te

correct?

A. Yes.
w.

Mr. Voth: No further questions, Your Honor.

ww
 om
Judge Holmes: Redirect?

n.c
Mr. Toscher: Your Honor, could I take 10 minutes?

Judge Holmes: That would be fine.

so
A. May I step down?

ck
Court Clerk: All rise

lJa
RECESS

Court Clerk: The court is in session.

ae
Judge Holmes: Redirect. Please be seated.
ich

Mr. Toscher: Yes, Your Honor. Thank you. Mr. Fishman ... does Mr. Fishman have a copy of
670-R?
mM

Court Clerk: Yes, he does.

A. Is that this?
a

Court Clerk: It's the BBR .. Yep.

Te

A. Okay.
REDIRECT EXAMINATION
w.

Mr. Toscher:
ww
 om
Q. Yes. Mr. Fishman, would you please review ... it's Page 490 and 491 of that. You were
questioned by Mr. Voth regarding it.

n.c
A. Yes.

Q. This is an article you did, sir?

so
A. Yes.

ck
Q. Okay. I think the focus was on ... I guess starting with Page 490, you indicate the licensing
and intellectual property business includes copyrights, trademarks, names, logos, and you go.

lJa
You describe the various aspects of the deal transaction. Were you an express ... were you
expressing an opinion here or just describing the deal as you understood it from the
documentation? ae
A. The latter. It's just a recitation of what I read in the 10-K.
ich
Q. Okay. All right. The ... you mentioned before ... I think you were questioned about a company
called Corbis. And you said you thought they managed talent. What did you mean by that?
mM

A. Yeah. I got a little jargon on there. People ... they were ... they managed people. And then as
the article says, when they bought Roger Richman, they started to do celebrity rights of publicity.
But mostly, it's a people management business.

Q. Mostly people management ... so to the extent they're doing rights of publicity, that would be
a

consider ... that would be living people, correct?

Te

Mr. Voth: Objection. Leading, Your Honor.

w.

Judge Holmes: Sustained. Easily rephrased.

Mr. Toscher:
ww
 om
Q. What is your understanding of the types of rights of publicity aspects that Corbis would be
involved with? Would it be ...

n.c
A. It would involve both living and dead people.

so
Q. The ... okay. Let me turn your attention to the CKX transaction. And can you go to Page 11 of
your rebuttal report, which I don't have the number in front of me. 667.

ck
A. I'm sorry. You said Page 11?

lJa
Q. I'm sorry.

Mr. Toscher:
ae
Q. Do I have it wrong? Okay. This is the rebuttal, correct?
ich

A. Is that a question to me? The answer is, yes, I believe so.

mM

Q. That is your rebuttal report, Page 11?

A. Yes.
a

Q. And tell us what you were trying to do ... what are you ... what is the information on Page 11
when it says, the first part to failure to incorporate expenses, what point of recovering and what
Te

does the chart below it attempt to do?

A. What I'm trying to show is that the theory that there was a company that existed that bought
w.

Elvis Presley or Mohammed Ali and incurred no additional marginal expenses ...

Q. Stop for a second. You said there was a theory. What are you specifically referring to?
ww
 om
A. I thought I was asked a question about whether or not, if a company bought them, they would
pay a commission.

n.c
Q. Okay. Go ahead.

so
A. And all this is trying to show is that in their line of business analysis, CKX shows that there
are direct expenses relating to the ... managing these two properties. And in fact, as I said, for
Ali, they do pay outside commissions as well.

ck
Q. Okay.

lJa
A. So that's what this is showing. This is, by the way, before any CKX overhead.
ae
Q. Okay. So ... but explain what you're trying to show here, the expenses. Are you trying to
reflect that there are expenses? What does the chart reflect ...
ich

A. So ...

Q. ... regarding expenses incurred by CKX?

mM

A. Let's just use an example.

Q. Please.
a
Te

A. So Mohammed Ali generated $4 million in revenue from his ROP rights, and there were $3
million of expenses associated with that. For the Elvis Presley licensing ... royalty and licensing
in 2008, there was 18.2 million. And then I have to be candid. The 2.4 was for the generation of
videos. But there was $5.3 million of expenses. So it cost CKX directly 3 million dollars to run
w.

the Ali before corporate overhead, and 10.5 million dollars to run the Elvis business when they
acquired them. So it wasn't ... it wasn't like there were no expenses associated with it.
ww
 om
Q. Okay. So let me ... so you have an opinion of whether a hypothetical buyer, such as CKX,
bought these types of licensing businesses, either Ali or Presley, that they would have to incur
expenses to generate revenue.

n.c
Mr. Voth: Objection. Leading, Your Honor.

so
Judge Holmes: Sustained.

ck
Mr. Toscher:

Q. Would a company such as CKX, if they acquire those ROP rights of those individuals, would

lJa
they incur expenses to generate revenue relating to the ROP rights?

A. I expect they would, yes. Especially based on this example.

ae
Q. Okay. Now, going back now in your r export in determining expenses relating to the revenue
ich
projections for Michael Jackson's right of publicity, did you make an independent determination
for purposes of your report, of the expenses which would be incurred?

Mr. Voth: Objection. Leading, Your Honor.

mM

Judge Holmes: Overruled.

Mr. Toscher:
a
Te

A. Yes and no. I mean ...

Q. Okay. Tell us how you determined the expenses for your report.
w.

A. So a number of them were based on information that Mark gave me. Specifically, the legal
expense and the public relations expense.
ww
 om
Q. Okay. Stop one second now. Legal expense. In addition to the information from Mr. Roesler,
you have other information regarding based upon the preparation of report that legal expenses

n.c
would have to be incurred at a certain stance like Michael Jackson.

A. Yeah.

so
Mr. Voth: Objection. Leading, Your Honor.

ck
Judge Holmes: Sustained.

lJa
Mr. Toscher:

Q. Okay. What other information do you have regarding legal costs that helped you form your
opinion.
ae
ich
A. Well, there are two elements that are associated in this particular instance with legal costs.
The first is, to clear the title because there are a number of actions out there in which people ... or
alleging that they had rights. And the second, the nature of the licensing business is such that
there's infringement occurring all the time. And so the two elements of legal expense would be to
mM

protect the unauthorized use and the second is ... I got it backward ... to clear the title. There was
Heal the World, there was Howard Mann, there was a Japanese gentleman named Matsura .. who
all contended that they had some form of right to use the rights of publicity and trademarks of
Michael Jackson. That's unusual to me. So you would need first to make sure that happens, or
anyone else who made that claim, and/or those who were just plain infringers.
a

Q. And that information, which I believe is in your report, formed part of your basis for
Te

determining expenses associated with the revenue.

Mr. Voth: Objection. Leading, Your Honor.

w.

Judge Holmes: Overruled.

ww
 om
Mr. Toscher:

n.c
A. It gave me comfort that the information that I was receiving from Mark made sense. The
profit margin that I ended up with, was close to the profit margin that CKX shows for these
businesses. So I was comfortable with it.

so
Q. Okay. Now, I think some questions were raised about whether you independently verified
certain information from Mr. Roesler. To the extent you did not independently verify, was there a
reason you felt you did not have to independently verify the information?

ck
A. Yes.

lJa
Q. Tell the Court why you didn't feel you had to independently verify it.
ae
A. It's the reason I recommended that Mark get involved in this project. There isn't anybody I
know that's like him that does what he does, that actually does it. And so his judgement and his
methodology seemed to me to be the best that I could find in doing this project.
ich

Q. You were questioned regarding the Cirque show. I believe you were showed what was marked
at 669-R, and I believe you testified when asked whether the Cirque show was a ... you were
asked whether it was a possibility. And you said, "Yes." My question to you, do you have an
mM

opinion as to whether the Cirque show for Michael Jackson was a reasonable foreseeable
opportunity at the date he died.

A. Yes, I do have an opinion.

a

Q. And what is your opinion?

Te

A. The answer to that would-be no.

w.

Q. Okay. Will you explain to the Court the basis of your opinion, please?
ww
 om
A. The idea sounds interesting. There was an Elvis show going on and at the date-of-death, CKX
actually was planning ... did I say Elvis show ... a Beatle show going on, and then CKX was
planning an Elvis show. In CKX's 10-K, it mentions that they had to come up with 25 or 30

n.c
million dollars as part of the joint venture to do this Elvis deal. Which by the way, failed. From
what I've heard listening to testimony and understanding the finances, I don't know that at that
point in time, the estate had 25 or 30 million dollars that they would contribute to have this deal
done. The deal that ended up being done is not the deal that would have been available at June

so
25, 2009. They didn't have the money, and so that's why I say it's not reasonably foreseeable.

Q. What about a hypothetical buyer?

ck
A. Well, if a hypothetical buyer had that kind of money that they had to put in there then ... first

lJa
the question is, is it a right of publicity or is it something else?

Q. Leave that aside for a moment. ae

A. Okay. The capital markets were such that, that kind of financing would ... I think a buyer
would be reluctant to spend that kind of financing at the moment of death.
ich

Q. Could you ... what do you believe the level of certainty would be for a hypothetical buyer
would have been able to achieve a Cirque show transaction at the moment of death.
mM

A. I think it would almost nil. Again, it's possible. It wasn't probably, nor reasonably foreseeable.

Q. I'm going to turn to ... I don't know if you have your Deposition up there.
a

A. I do.
Te

Mr. Toscher: What's it marked as?

w.

Court Clerk: 671.

ww
 om
Mr. Toscher: Thank you. 671.

n.c
Q. Can you turn to Page 131, Mr. Fishman .. Read just from Line 2 through Line 17.

A. You want me to read it out loud or read it ...

so
Q. No. Just to yourself.

ck
A. Read it to myself. Okay.

lJa
Q. Let me know when you're ready Mr. Fishman.

A. Okay.
ae
Q. Got it?
ich

A. Yes.

Q. Okay. So I believe Mr. Voth read into the record Line 7 through 9, and ... but he did not read
mM

in Lines 10 through 15. Could you read Lines 10 through 15 ... or read Line 7 through 15 into the
record please.

A. "Question: Isn't his name inextricably linked to Graceland. Answer: Yes. Question: How is it
separate from his name and likeness from your perspective? Answer: Because the income is not
a

generated from the use of his name. The income is generated from the use of a facilities, tours in
Te

the facility, and any Graceland has its own. Question: Separate? Answer: No. It's its own level of
intellectual property. There is a point to be made, but I think it's de minimis."
w.

Q. Okay. Read 21 through 24 just for completeness here.

A. Okay. You want me to read it out loud ...

ww
 om
Q. Yeah. Go ahead and read it out loud so we have a complete record on that for what the
Deposition said.

n.c
A. "Why do you think it's de minimis. Because I don't think when they bought Graceland they
were buying anything for his name and likeness."

so
Q. Okay. Now, I want to turn your attention to Page 26 of your Rebuttal Report. You have it sir?

ck
A. I do.

lJa
Q. Okay. Tell us what part of this report you're trying to do. It looks like it says a Summary of
Assets Acquired. Tell us about this transaction and what it reflects.
ae
A. Okay. So when this purchase occurred in 2005, they paid 114,194,000, I think it was for 85
percent, and then they had to do an allocation of what they call allocation of purchase price. So
current asset, cash, receivables, things like that were allocated 13,332,000. Property and
ich
equipment was 25,730,000. Goodwill was 14,642,000. And then they allocated to intangible
assets 77,945,000. If you go to the bottom where it says CKX Elvis Presley's Summary of
Intangible Assets Acquired, they further allocated that 77 million in intangible assets, 28.9
million was record music publishing, film, and video rights, 1,785,000 was relationships with
mM

licensees, 5,525,000 was rights to use Presley's name, Graceland memorabilia rights were
38,570,000, and then trademarks, publicity rights, and other intellectual property was
38,165,000.

Q. Okay. This was based upon CKX's 2007 for the 10-K.
a
Te

A. Yes.

Q. Explain for the record and the Court.

w.

A. Six.
ww
 om
Q. Excuse me, I didn't hear what you said.

n.c
A. 2006 Form 10-K ... oh, I'm sorry 2007. You're right.

Q. Yeah. Can you look at that?

so
A. Yes.

ck
Q. Okay. What is a Form 10-K?

lJa
A. It's a filing that a public company makes with the Securities and Exchange Commission.

A. "K" means annually.

ae
Q. And why would they ... is the top part, part of the 10-K too?
ich

A. Yes.

Q. Okay. And why are they disclosing this? What's your understanding of why they need to
mM

disclose this?

A. If it's a material transaction, according to general accepted accounting principles, you have to
disclose it.
a

Q. Okay. And is the breakdown of the intangible assets below, is that part of the 10-K as well?
Te

A. Yes.
w.

Q. And why would they need to break that out as well?

ww
 om
A. It's part of the required disclosure.

n.c
Q. Okay. By the Securities Loss.

A. Yes. You want your shareholders to make appropriate decisions, and this is the kind of
information that's required to give to them.

so
Q. Okay. Including the allocation of the intellectual property and the different assets here.

ck
A. Correct.

lJa
Q. Okay. And I noticed in looking at this ...
ae
Mr. Toscher: Can you put this back up please?

Mr. Voth: Page 11, Mr. Toscher?

ich

Mr. Toscher: Twenty-six.

mM

Mr. Toscher:

Q. Going back to the bottom chart, if you can highlight that, they broke down the intellectual
property and the ones I want you to focus on are rights to use Presley's name, and then
trademarks, publicity rights, and other intellectual property. I believe you testified before that
a

you didn't rely ... you didn't find the CKX transaction comparable and for use in doing a ... the
Te

valuation. I see here the use of the Presley name 5 million 525 for the value. That's a 2007
transaction.
w.

A. 2005 transaction, yes.

Q. 2005 transaction.
ww
 om
A. Yes.

n.c
Q. Okay. So why is it that you decided not to rely upon that number.

so
A. Because I'm troubled by the word publicity rights under the 38,165,000. I don't know what
that is.

ck
Q. Okay. I'm asking you about the 5,525.

lJa
A. Well, because ...

Q. I'm sorry ... I mis ae

A. That's okay ...
ich

Q. ... I got it.

A. The reason I didn't say that his right of publicity was merely 5,525,000, is because of the line
mM

it says, "Trademarks, publicity rights, and other intellectual property." The word publicity rights
rang a bell with me. Was that publicity rights related to his names, likeness, his voice or was it
related to something else? Graceland, there are a bunch of trademarks that he had. And so I
wasn't willing to use the lowest number, including the full 38 million didn't seem to make sense
either. I couldn't ... the bottom line is ...
a

Q. Why didn't it make sense?

Te

A. Well, because it says trademarks, publicity rights, and other intellectual property. It doesn't
necessarily ... there was intellectual property related to Graceland. It was ... he had actually
w.

trademarked the words Love Me Tender. And a bunch of other things. So if I'm trying to get to
right of publicity, and associated trademarks with his name, I couldn't tease out from that what
that number should be.
ww
 om
Q. Okay. Could you go to Page 110 of your Deposition.

n.c
A. Yes, sir.

so
Q. Well, Mr. Voth questioned you regarding your comment regarding sometimes there was
blurring of lines between the industries. Can you tell the Court what you meant by that?

ck
A. Well, we were talking about how entertainers make their money, and we talked about film,
music, books, and various tours and to me they are distinct industries. The music industry is a
distinct industry. That's what I was trying to say, but sometimes they overlap. I think Mark gave a

lJa
great example too when he had to deal with Jackie Robinson, or you have to go to the studio to
get some things, or you have to go to the photographers that own the copyrights of a picture. So
they all ... there are multiple stakeholders that need to be approached if you're going to use some
of these, if you're going to commercially exploit some of these assets.
ae
Q. Great. Do you have 668R with you? I think it's the excerpt of the McCarthy Treatise.
ich

A. Yes, I do.
mM

Q. Okay. Could you read, it's on Page 2, Advertising is Not Exempt.

A. Okay.

Q. Now, you were asked a question whether you considered the A3 ... let's see. Let me make sure
a

I'm reading that right. Excuse me, Your Honor. Whether you considered the A3 Exemption in
Te

what you did. I think you said no. Do you know whether Mr. Roesler took into account the
exemption for advertising.

A. I think he did.
w.
ww
 om
Q. The ... and you said before ... if you can just maybe read the example again, because I think
you did say you had your opinion. I want you to read the example here, and then I'm going to ask
you your opinion.

n.c
Mr. Voth: Your Honor, I respond with an object to the extent of his opinion as to the respective
legal conclusion that he arrives at if it has to do with value, the respondent has no objection.

so
Judge Holmes: I concur. It will be limited to value.

ck
Mr. Toscher:

lJa
A. I read it.

Q. Okay. And is it your understanding that a connection with the valuation you rendered that the
ae
exception talked about here is an exception for the advertisement of tennis shoes.
ich
A. That's what it seems to me to be, yes.

Q. And is it your understanding that in this type of product placement, Mr. Roesler would have
taken that into account in terms of this type of merchandising revenue?
mM

A. Yes.

Mr. Toscher: One second, Your Honor. Just a few more questions, Your Honor.
a
Te

Mr. Toscher:

Q. Mr. Fishman, in terms of the valuation of valuing ROP rights, is it appropriate to assume that
w.

the owner of the ROP rights also owns all the copyrights out there concerning photographs.

A. Not under fair market value.

ww
 om
Q. Okay. Is that because there may be other people that own photographs?

n.c
Mr. Voth: Objection. Leading, Your Honor.

so
Judge Holmes: Sustained.

Mr. Toscher:

ck
Q. Okay. Explain your answer.

lJa
A. I think Mark made the point about Ella Fitzgerald, same thing. There are people that have one
thing, right of publicity and associated trademarks that may have movie rights. There are people
that have right of publicity and there are other people that may have music rights. So it comes
ae
down to, to me under a fair market value, we're not looking at a particular owner, or particular
buyer, we're looking at a hypothetical buyer who's not a party. And so, you know, it's possible,
but I would think that, that it ... you can't count on that happening routinely.
ich

Q. The ... are you aware of whether the Estate of Michael Jackson owns all the copyrights to his
footage, film footage, or photos.
mM

A. I'm not ... I don't know.

Q. You don't know. Okay. The ... one more ... I think you were asked some questions concerning
management. Let's focus on management of Michael Jackson's ROP rights. Would hypothetically
a

if you knew that Michael Jackson ... would a different manager, a good manager, during the
Te

period leading up to Michael Jackson's death, assume hypothetically, would that alter your
opinion of the fair market value of the ROP rights?

A. No.
w.

Q. Why not?
ww
 om
A. As I said, you know the expression I used was nuclear winter. The tape was bad, he hadn't
been live in a live concert for a long time. I don't think it was for a lack of trying. I just don't

n.c
think the opportunities were there.

Q. Okay. I think you were asked the question on cross whether the ... you considered any

so
footage, which I assumed that meant film footage, in terms of your valuation. And I ... I'm not
sure I knew what your answer was, but do you know whether Mr. Roesler would have considered
the possibility of footage in terms of his ROP projection?

ck
A. He would consider it depending on who owns the copyrights and if he could have access to it,
but the footage may be copyrighted by someone else.

lJa
Q. Okay. And is ... in your judgment and experience is the copyrighted footage part of rights of
publicity?
ae
A. No.
ich

Mr. Toscher: No further questions, Your Honor.

mM

Judge Holmes: Oh, I have a few.

CROSS-EXAMINATION
Judge Holmes:
a

Judge Holmes:
Te

When you talked about Marilyn Monroe and said that the value of her right of publicity was
often dependent on getting an agreement with copyright holders and photographs, famous
photographs of Marilyn Monroe, is that right?
w.

A. Yes.
ww
 om
Judge Holmes:
What is your opinion on the value of the right of publicity in Monroe's estate without those
copyrightable photos, compared to with those copyrightable photos?

n.c
A. I think ... let me do the with first. Having access to the copyrightable photographs would
allow the, if I was running the right of publicity, to use them in connection with merchandise.

so
Which would put me in a ... it would give me an ability to generate more revenue and more
opportunities.

ck
Judge Holmes:
So combining the rights would benefit, all of these things being equal, the beholder of the
copyright and the holder of the right of publicity if they were able to get them together.

lJa
A. I mean the answer to that has to be ... I think it would make it more attractive.
ae
Judge Holmes:
Is there something similar going on with the Estate of Michael Jackson where combining the
ich
rights of publicity, and combining with the rights to master recordings, his performances, and his
compositions, his songs, would create enough value so that it would exceed the value of each of
those groups of rights taken individually.
mM

A. I don't think so. It might make ... you might be able to save what admin costs, you know
transactions costs perhaps, but I don't know that it would enhance the right of publicity very
much at all. So that's the answer to your question.

Judge Holmes:
a

Do you have 667-R Ms. Boden ..? That's that business valuation reports article.
Te

Judge Holmes:
If we have a copy, that'd be even better. I see it there. You were asked by Mr. Voth about the
w.

statement you had on Page 491 of this report, so turn there if you would. You say, "Includes the
name, image, likeness, and trademarks of Elvis Presley, as well as trademarks and various names
and images associated with it. It also includes the ability to license its use for commercialized
ww
 om
exploitation, and the use of video and audio clips of Elvis from the motion pictures he started,
and the TV shows the company owns." Did you intend to include in that second sentence,
"Copyrighted materials?"

n.c
A. The simple answer is, I didn't intend to include anything. This is what the 10-K said. This is
not my opinion. This is what I'm explaining in this part of this article is the elements that were

so
purchased, and that's how they classified it.

Judge Holmes:

ck
Can you put that up for me. Thank you. To return to your appraisal, well we've been calling it the
rebuttal.

lJa
A. Okay.

Judge Holmes:
ae
It's the 667-P. Let's go to 667-P, the devil's own report.
ich
A. The devil.

Mr. Voth: Which number are we looking at Your Honor?

mM

Judge Holmes: Six sixty-six.

Judge Holmes:
a

If you can go to Page 10. This is basically where we're at. You say that the merchandising deal
was not reasonably foreseeable at the date-of-death because there was no tour agreement in
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place. What's the basis for that assertion?

A. Let me just read it a second. There was not a final ... there wasn't a final tour, first of all there
w.

was no tour, but there was no final tour agreement agreed to. Michael had agreed to I think it was
something like 295 items. There was a dispute as I understood about the quality. There was no
advance on the tour merchandise. My frank opinion is, I think they were waiting for him to show
ww

up in England before they were going to pay him anything.

 om
Judge Holmes:

n.c
Does this sentence refer only to the foreseeability of the specific income stream from Bravado or
from all potential merchandising and income stream which exploited Mr. Jackson's rights of
publicity.

so
A. I think here I'm just talking about the Bravado situation.

ck
Judge Holmes:
Did you ... Do you believe in your opinion that a merchandising deal using Mr. Jackson's rights
of publicity was foreseeable, feasibly foreseeable at the time of his death?

lJa
A. Eventually, but it would have taken some time.

Judge Holmes:
ae
How much time do you think?
ich

A. Six months to a year.

mM

Judge Holmes:
And do you have an opinion, or do you just adopt Mr. Roesler's opinion that the amount of
money that such a deal would have brought in, as far as income projections, for the rights of
publicity that Mr. Jackson held at the time of his death.
a

A. The latter, I'm basing what I did on Mr. Roesler.

Te

Judge Holmes:
On Page 29 of your report, you talked about discounting the cash flows by 35 percent. Why did
w.

you chose that number?

A. I'm sorry, where am I?

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 om
Judge Holmes:

n.c
On Page 29 of your report, 666-P. The first full paragraph on Page 29.

A. I'm sorry. The first full paragraph? The tax right. The tax right I used was 35 percent. Why did
I use that?

so
Judge Holmes:
Correct.

ck
A. Right, because it seemed the most likely pool of buyers here would be corporations, would be
C Corporations.

lJa
Judge Holmes:
In your other opinions as to valuation, in other situations, have you similarly reduced cashflows
by the tax rate of 35 percent.
ae
ich
A. Not necessarily, no.

Judge Holmes:
mM

In what circumstances have you not?

A. If in fact there is, as Ms. Fana .. told you, if in fact it is a pass-through entity that we're
looking and that would be the pool, then I would use the marginal personal tax rate, whatever
that would be, adjust it for the state, and adjust my discount rate downward to reflect the
premium associated with a pass-through entity.
a
Te

Judge Holmes:
You also stated on Page 29 that intangible assets are not typically financed with debt, but include
in your debt to equity adjusted cost of capital 20 percent per debt. Why was that?
w.

A. I decided to use the rate of return from the seven comparables that I used, and they had debt.
And so it seemed if they could borrow against their own assets, that, that's the cost of capital that
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 om
I should be using. I guess the real answer is I couldn't develop a cost of capital singularly for this
asset, so I went to a company, seven public companies, and developed it that way.

n.c
Judge Holmes:
What seven companies did you use? Where are they listed in there?

so
A. They are in ... they're in Tab 2, Your Honor.

ck
Judge Holmes:
Oh, okay. I didn't see numbers associated with them, but did you take them from the SCC filing
for these seven companies?

lJa
A. Yes. There is ... I think there is in Exhibit 4 there are some ... Exhibit 6 in Tab 1 shows some
of the rate of return information that I got from the public companies.
ae
Judge Holmes:
ich
On Tab 6 you said?

A. Exhibit 6, Tab 1.
mM

Judge Holmes:
I'm sorry. Exhibit 6, Tab .... Tab 1

A. Exhibit ...
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Judge Holmes: Oh, Tab 1, Exhibit 6.

A Sorry.
w.

Judge Holmes:
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 om
Coming from the genius to this species that's how it works .. Oh, okay. All right. On Page 32, tell
me when you're there.

n.c
A. Okay. Yes.

Judge Holmes:

so
You selected a risk premium for the equity component of the cost of capital used in calculating
your discount factor of 12 percent. Tell me how you got to that number.

ck
A. Okay. So this section is how I got my discount rate using the build-up method, and the
additional premium for size got me to 12.5. It really comes down to that third paragraph, Your

lJa
Honor. I looked at all the studies with the relevant historical equity risk premiums that were most
comparable to this interest, meaning the right of publicity here, and it ranged between 10.3 and
15 percent. I took kind of the mid-point. ae
Judge Holmes:
And this was based on data between 1926 and 2008.
ich

A. Yes.
mM

Judge Holmes:
What were the average risk premiums for an interest of this size in the period immediately before
Mr. Jackson's death, 2006, 7, 8.

A. If you're looking at '26 to 2008, it didn't vary all that much. That's why we look at that long
a

period. There's another way I did this that looked at a shorter period that Ms. Fana .. was talking
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to you about it. This is based on what they call a crisp data, Center for Research stock prices at
the University of Chicago. There's the Duff & Phelps Study which is based on copy stats that's
1963 to 2008.
w.

Judge Holmes:
Okay. On Page 33, you boost another two percentage points for this specific risk premium. How
did you get that number?
ww
 om
A. That is a judgment call on my part. I can explain to you the theory blah, blah, blah, but the
bottom line is ...

n.c
Judge Holmes:
Now is the time to do that.

so
A. Okay. So all of these are based on something called the Capital Asset Pricing Model which

ck
assumes that you can diversify away your company's specific risk, because you're looking at a
portfolio of companies that are, what they call negatively correlated. This is an asset. Just one
asset, and there are specific risks associated with this asset. And so that two percent is what I'm
trying to capture. We have in the valuation profession tried to quantify this and there's no

lJa
practical way to do it, so this was a judgment call on our part.

Judge Holmes:
ae
Page 34 if you would, next up. Doing the CAP-M Model for the cost of capital, and hence the
discount rate, you have an equity risk premium there of six percent. On Page 32, you came up
with one for 12 percent. Explain the difference, in the buildup method.
ich

A. Mm-hmm.
mM

Judge Holmes:
Explain the difference.

A. The 12 percent includes a small stock premium. The six percent doesn't. That's added on later.
a
Te

Judge Holmes:
And the magnitude of that small stock fee was six percent?
w.

A. No. We have to ... if you multiply by ... hold on. The small stock premium was ... It's on Page
36. For two of the ways I did it, it was a size premium of seven percent, and for the CAP-M
adjusted for the size premium, we didn't add it in separately.
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 om
Judge Holmes:

n.c
And where did you get the seven percent for size premium?

A. That comes from the Duff & Phelps Studies.

so
Judge Holmes: Okay. I think that's it for me. Follow up questions, Mr. Toscher.

ck
Mr. Toscher: One moment, Your Honor.

lJa
Judge Holmes: Sure.

Mr. Toscher: Just one more question, Your Honor.

ae
REDIRECT EXAMINATION
ich

Mr. Toscher:
Q. I think the Court was questioning you on the reasonable foreseeability of a merchandise
transaction, and you indicated yes. Did your answer include the assumption that there would be
mM

rehabilitation of Michael Jackson's image within that six-month period?

A. Yes.
a

Mr. Toscher: No further questions, Your Honor.

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Judge Holmes: Follow up, Mr. Voth?

w.

Mr. Voth: No further questions, Your Honor.

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 om
Judge Holmes: I take it he's going to be a part of the rebuttal phase, or sit around here and
maybe be part of the rebuttal phase.

n.c
Mr. Toscher: I think that's fair, Your Honor. We'll make that assessment. Your Honor, I do have.
Okay. We have a few ...

so
Judge Holmes: Housekeeping. What can I do for you?

ck
Mr. Toscher: Your Honor, we would like to admit some exhibits that have not been submitted
yet, which I'm just going to go slow so you guys know what they are, and did you discuss this
with the group?

lJa
Mr. Voth: No.
ae
Mr. Toscher: Okay. The first one is ... okay. Let me go slow for the record. The first one is 622P
which is the hand-written ... I'm going to pass these to him. May I walk across, Your Honor?
ich
Judge Holmes: Of course.

Mr. Toscher:
mM

A. hand-written note that was published during Mr. Branca's testimony.

Mr. Voth: Do you want me to put that up on the screen counsel?

a
Te

Mr. Toscher: Excuse me?

Mr. Voth: Do you want me to put that up on the screen?

w.

Mr. Toscher: Yes, for the Court. Yes, please. Let's take it slow.
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 om
Judge Holmes: Do you have another Ms. In meticulous order.

n.c
Mr. Toscher: Yeah. Take your time.

Mr. Voth: One second. We have a copy. Just a second. Actually, you know. I never got a copy
622-P I believe.

so
Mr. Voth: I'll print one.

ck
Mr. Voth: Thanks. Thank you Steve. That's okay.

lJa
Mr. Toscher: Okay. These are the other two.

Mr. Voth: 650 and 651.

ae
Mr. Toscher: Yes. You should have copies of those.
ich

Judge Holmes: What was the first number now, Mr. Toscher, 622?
mM

Mr. Toscher: Your Honor ...

Ms Herbert: We have no objection.

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Mr. Voth: As to 622-P, no objection from respondent, Your Honor.

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Judge Holmes: It is thus in.

w.

Mr. Voth: Okay. Let me make a note, please. Just a second Steven.

Mr. Toscher: No. Take your time. I'm the one who ...
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 om
Mr. Voth: Okay. Next is, go ahead Steve for the next one, 650-P.

n.c
Mr. Toscher: 650-P.

so
Ms Herbert: Do we object?

Mr. Voth: Respondent objects to the email. It's a hearsay.

ck
Judge Holmes: 650?

lJa
Mr. Toscher: Right.

Judge Holmes: Okay.

ae
ich
Mr. Toscher: This was an email to Michael Kane, and it's ...

Judge Holmes: Oh, this one.

mM

Mr. Toscher: And we'd request 650 and 651 because of the sensitive nature regarding Mr.
Jackson's ,,,,,,Which we will address separately in our motion.

Judge Holmes: What is your purpose in the emails, 650?

a
Te

Mr. Toscher: It shows the confirmation of ... that there was no advance. And this is sort of like a
business record. The fact that it was said, it's not hearsay. It's not a balking exchange, it's like a
contract.
w.

Mr. Voth: There's no foundation laid for this. Well ...

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 om
Judge Holmes: Oh. Well, there was a foundation for the ... I'm sorry, for the second email in this
chain because we had Mr. Philips testify precisely about that point.

n.c
Ms Herbert: This came in, sorry, during Michael Kane's testimony, and Michael Kane is a
recipient ...

so
Judge Holmes: A recipient. So he can authenticate the email on this one, but the rest of it. I
mean that's the sensitive part here, isn't it?

ck
Mr. Toscher: No, I don't think the rest of it is even ...

lJa
Ms Herbert: It's not relevant, to be honest.

Mr. Voth: I'm sorry. I put this in. It's not relevant. I didn't think it was appropriate to redact an
email. It's just something that ...
ae
ich
Judge Holmes: No, no. I understand.

Mr. Voth: ... you're not going to consider.

mM

Judge Holmes: This side seems to be sensitive. Oh, this isn't the one email that ...

Mr. Toscher: No. That's the other one at 651P.

a

Judge Holmes: I'm sorry. I was thinking of the other email. Yes, this one I'll let in. That one's
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admitted.

Mr. Toscher: 650?

w.

Judge Holmes: 650.

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 om
Mr. Toscher: Subject, we're going to include it in our seal motion, Your Honor.

n.c
Judge Holmes: That's okay.

Mr. Toscher: And the other one is 651 which is the sensitive one. This is from Kenny Ortega to
Randy Philips, Your Honor.

so
Judge Holmes: Oh, this is the one I thought the other one was. Okay, 651 is the sensitive one.

ck
Mr. Voth: No foundation, Your Honor.

lJa
Ms Herbert: It's from Michael Kane.
ae
Mr. Toscher: One at a time guys. The consensus on this side is it came in through Michael Kane.

Mr. Voth: The original email was not from Michael Kain.
ich

Judge Holmes: It's not a unanimous vote.

mM

Ms Herbert: It was sent from Randy Philips to Michael Kane ...

Mr. Toscher: So it's hearsay?

a

Judge Holmes: The problem ...

Te

Judge Holmes: Too many people are talking. Mr. Toscher, you can confirm that the more
eligible junior people do know about this.
w.

Mr. Toscher: Okay. Let me go over ...

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 om
Judge Holmes: Always feel free to talk.

n.c
Mr. Voth: Your Honor, I'm not understanding what the issue is. This was sent to Kane by Randy
Philips who received the email, and then Mr. Kane said it was later discussed, the whole issue.

Judge Holmes: Mr. Kane can certainly authenticate it, but might there be another objection?

so
Mr. Voth: Hearsay within hearsay, Your Honor. It's a forwarded email.

ck
Judge Holmes: There you go. Why is this not hearsay. It appears to be based on the perceptions
of Mr. Ortega.

lJa
Mr. Voth: It goes ... I'm sorry. It goes to the state of mind of all of these individuals with respect
to what was taking place. It's very relevant. It depends on the weight you give it ...
ae
Judge Holmes: On what subject, the condition of Mr. Jackson?
ich

Mr. Voth: Yes, and ... listen the weight was one thing, but it's clearly relevant, and I believe it's
also admissible. You're going to decide what weight, if any, you're going to give it.
mM

Mr. Voth: Well, Mr. Kane was already available to testify regarding Mr. Jackson's condition. I
believe so. I'm not sure why we need this.

Judge Holmes: No. This is hearsay within hearsay. I'm going to exclude this one.
a
Te

Mr. Voth: 651 is out.

Mr. Voth: Hearsay within hearsay?

w.

Judge Holmes: Yes. It's relevant, but it's based on the immediate perceptions of Mr. Ortega,
clearly it would affect Mr. Kane's statement based on his perception, Mr. Ortega's credibility, and
ww
 om
the competence in observing Mr. Jackson, but he was not perceiving those himself. So he wasn't
perceiving those, Mr. Kane was not perceiving those conditions himself. That's the problem.

n.c
Mr. Voth: Just so I understand, so if Mr. Branca were testify that he received it as well, you
would exclude it for the same reason.

so
Judge Holmes: Maybe. It depends on if Mr. Branca was in oral communication with Mr. Ortega,
or something like that.

ck
Mr. Voth: Very well.

lJa
Judge Holmes: He'll be here later. In the meantime, you don't want this one public, do you?

Mr. Toscher: That's correct, Your Honor. That's the sensitive one.
ae
Judge Holmes: This one too. Those are my copies.
ich

Mr. Toscher: Your Honor, there was a number of stipulation exhibits and some are, they are
joint exhibits, and I assume ... but there are two. I don't know what happened here 27P and 28P.
What I would suggest is, what we would like today, I think, the respondent's not ready to go. We
mM

believe we are at the end of our case, but we would like the opportunity to sort of look at things
to see if there's anything else concerning the documents, and we can do this housekeeping in the
morning before we start tomorrow?

Judge Holmes: I would be happy to do a petition of housekeeping, but there are no witnesses
a

tomorrow. Would that work for you?

Te

Mr. Toscher: At this point, since I don't believe there are any witnesses, that will work, Your
Honor.
w.

Judge Holmes: I don't want to have you ambush the ...

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 om
Mr. Toscher: No. Your Honor.

n.c
Judge Holmes: Then, you yourself said yesterday that you wanted some information from the
respondent about what they're going to do it.

Mr. Toscher: Yes. Thank you, Your Honor. So I ...

so
Ms Herbert: Your Honor ... sorry ... could I get a little clarification. Are we going to be going

ck
through hundreds of exhibits in the morning?

Mr. Toscher: No. We want to review everything. I think (inaudible) is working on some stuff.

lJa
We'll talk to you this afternoon as to what the status of all the issues are so this is just a few, but I
think we can handle it with other stuff. I want to look at everything first before I close it up. So
we're not going to take much of your time. If that's what you're ...
ae
Mr. Voth: Before you close your case.
ich
Mr. Toscher: Yes. That's the ... yes.

Judge Holmes: And it will just be documents. No surprise witnesses in other words for you to
mM

worry about. And he's promised to call you in the afternoon during normal business hours and
resolve everything that way, enmity, (inaudible) ...

Mr. Toscher: I'm sorry, Your Honor?

a

Judge Holmes: ... civility.

Te

Mr. Toscher: We have been getting a lot of . So ... no, go ahead. Right. The Judge
just asked them the question so can you give us the proposed witnesses for tomorrow? And we'd
w.

also like to know what topics you're going to put on first for . for I guess Friday.

Mr. Voth: Tomorrow?

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 om
Ms Herbert: Okay. Well, for tomorrow ...

n.c
Mr. Toscher: You can't tell us ...

so
Ms Herbert: ... tomorrow we still have the same schedule which is (inaudible) in the morning,
and Mr. Neederlander .. in the afternoon.

ck
Mr. Toscher: Okay. Just those two.

lJa
Ms Herbert: Correct.

Mr. Toscher: Okay. And you're not prepared to tell us which topic ...
ae
Judge Holmes: They are. They are. Branca is Friday. Are you planning to start with Hanson on
Friday, if we get through Branca.
ich

Ms Herbert: Yes. Yes, that's the plan.

mM

Judge Holmes: Okay.

Mr. Toscher: Your Honor, can we acquire as to which opinion?

a

Judge Holmes: That is what we were going to. Which of the Branca, and ...
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Ms Herbert: Okay. It's going to be MIJAC music on Friday.

w.

Judge Holmes: MIJAC music. Okay. And there you go.

Mr. Toscher: Thank you, Your Honor. Is that it for the today Ms. Herbert?
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 om
Ms Herbert: Yes.

n.c
Judge Holmes: Is that it for the day, Mr. Toscher?

so
Mr. Toscher: Yes, Your Honor. Thank you.

Judge Holmes: I'll see you all tomorrow.

ck
lJa
ae
ich
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w.
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