# Can a Court Reject the Valuation Reports from Both Parties in a Dispute? ▴ Question

**Published:** 2025-08-01
**Categories:** Question

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## Concept

The judicial system possesses the absolute authority to reject [valuation reports](https://prime.greeks.live/question/can-the-information-leakage-in-lit-markets-be-quantified-and-included-in-tca-reports/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) from both parties in a dispute. This power is a fundamental component of the court’s function as a gatekeeper of evidence. Its objective is to ensure that the eventual judgment is founded upon reliable, relevant, and methodologically sound information.

The court operates as a system of logic, where expert opinions are inputs that must meet specific standards of quality and credibility before they can be integrated into the decision-making process. When an expert report fails to meet these standards, it is deemed an unreliable input and is excluded to protect the integrity of the judicial outcome.

This gatekeeping function is codified in rules of evidence, most notably the federal [Daubert standard](https://prime.greeks.live/area/daubert-standard/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and its state-level equivalents. The Daubert standard, stemming from the Supreme Court case _Daubert v. Merrell Dow Pharmaceuticals, Inc._, requires trial judges to assess whether an expert’s testimony is based on scientifically valid reasoning and methodology. This framework applies to all forms of [expert testimony](https://prime.greeks.live/area/expert-testimony/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), including financial and business valuation.

The court scrutinizes the expert’s report not for its conclusion, but for the rigor of the process used to arrive at that conclusion. An opinion that disregards critical facts, relies on an inappropriate analytical framework, or presents conclusions that are manifestly incredible will be rejected.

> A court’s primary duty is to ensure that any expert testimony admitted is a product of reliable principles and methods, serving to clarify complex issues for the trier of fact.

The authority to exclude evidence extends to situations where both parties submit flawed analyses. A court is not obligated to choose the “better” of two unreliable reports. If both valuations are based on erroneous assumptions, ignore crucial market realities, or employ discredited methodologies, the court can and will discard both.

This action leaves a significant evidentiary vacuum, compelling the court to rely on other available evidence or to seek a more reliable source of valuation expertise. This underscores a critical principle for litigants ▴ the objective is to provide the court with a credible, defensible analysis, as an attempt to win through exaggerated or unsupported valuations often results in the complete nullification of one’s own evidence.

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## The Court as an Evidentiary Gatekeeper

The court’s role as a gatekeeper is an active, supervisory function. It is designed to prevent “junk science” or biased, unprofessional opinions from influencing the outcome of a trial. Under Federal Rule of Evidence 702, an expert may testify if their specialized knowledge will help the trier of fact understand the evidence or determine a fact in issue.

The testimony must be based on sufficient facts or data, be the product of reliable principles and methods, and the expert must have reliably applied those principles and methods to the facts of the case. When a [valuation report](https://prime.greeks.live/area/valuation-report/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) deviates from these requirements, it ceases to be helpful and becomes a potential source of confusion or error, justifying its exclusion.

This responsibility is taken seriously, as the admission of unreliable expert testimony can place a significant burden on the opposing party and the judicial process itself. The court’s gatekeeping function promotes the efficiency of trials and the objectivity of judgments by filtering out reports that are so fundamentally flawed they serve no constructive purpose. A valuation that ignores zoning laws, conservation easements, or the economic infeasibility of a proposed development project is a prime example of a report that a court would exclude for being untethered from reality.

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## What Are the Primary Legal Standards for Admissibility?

The landscape of admissibility for expert testimony is primarily shaped by two landmark standards in the United States, with various states adopting one, the other, or a hybrid approach. Understanding these frameworks is essential to grasping how a valuation report is scrutinized.

- 
**The Daubert Standard**. Used in all federal courts and a majority of state courts, this standard establishes a multi-factor test for reliability. The court considers whether the expert’s theory or technique can be tested, whether it has been subjected to peer review and publication, its known or potential rate of error, and its general acceptance within the relevant professional community. This standard grants the judge significant discretion.

- 
**The Frye Standard**. Used by a minority of states, the Frye standard is older and more narrowly focused. It requires that the scientific principle or methodology underlying an expert’s opinion be “sufficiently established to have gained general acceptance” in the particular field to which it belongs. This is a more conservative test focused on consensus within a profession.

Regardless of the specific standard applied, the core expectation is the same ▴ the expert’s valuation must be grounded in a recognized and reliable methodology. A failure to adhere to these foundational legal requirements provides a clear pathway for the court to reject the report, irrespective of the conclusions it contains.

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## Strategy

The strategic decision to challenge an opponent’s valuation report, and the imperative to fortify one’s own, rests on a clear understanding of the specific vulnerabilities a court will look for. A court’s rejection of a valuation report is not an arbitrary act; it is a calculated response to identifiable failures in methodology, factual grounding, or [professional standards](https://prime.greeks.live/area/professional-standards/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Litigants and their counsel must therefore analyze valuation reports through the critical lens of a judge, anticipating the arguments that could lead to exclusion.

The most common reason for a court to exclude financial expert testimony is a demonstrated [lack of reliability](https://prime.greeks.live/area/lack-of-reliability/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This unreliability can manifest in several ways, from the application of a fundamentally inappropriate valuation model to a complete failure to corroborate the data upon which the analysis is built. For instance, an expert who uses a discounted cash flow (DCF) method but concedes that the company’s income is too unstable for reliable projections may have their report excluded for internal inconsistency. Similarly, an appraiser who accepts management’s financial projections without performing any reasonableness testing or cross-checks against industry data risks having their opinion deemed unreliable and inadmissible.

> A valuation report is a tool of persuasion directed at the court; its strategic value is directly proportional to its methodological integrity and factual accuracy.

Procedural missteps are another significant area of strategic vulnerability. Courts operate on strict deadlines and rules of disclosure. An expert report submitted after a court-ordered deadline without a showing of “good cause” is likely to be precluded from use at trial. This is a matter of judicial docket management and fairness to the opposing party, who must be given adequate time to review the report, prepare a rebuttal, and depose the expert.

Attempting to submit a new or revised report late in the proceedings, especially after an unfavorable ruling on a summary judgment motion, is viewed as a prejudicial tactic and is rarely permitted. Therefore, a core strategic principle is adherence to all procedural requirements, as a substantively brilliant report can be rendered useless by a simple failure of timeliness.

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## Common Grounds for Judicial Rejection

A court’s decision to reject a valuation report typically falls into one of several distinct categories. Understanding these provides a framework for both challenging an opposing report and strengthening one’s own submission.

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**Methodological Unsoundness**. This is the most frequent basis for exclusion. It involves the expert’s choice and application of valuation techniques. A report can be challenged if it uses a methodology that is not generally accepted within the valuation community or if the chosen method is inappropriate for the specific asset being valued.

- 
**Factual Deficiencies**. An expert opinion must be based on the actual facts of the case. A report that ignores or misrepresents key data points ▴ such as restrictive covenants on real property, market trends, or competitive landscape ▴ is fundamentally unreliable.

- 
**Violation of Professional Standards**. Appraisers and valuation experts are often bound by professional codes of conduct and standards, such as the Uniform Standards of Professional Appraisal Practice ([USPAP](https://prime.greeks.live/area/uspap/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)). A material violation of these standards can be grounds for excluding the expert’s testimony.

- 
**Lack of Expert Qualification**. While less common if the expert is properly vetted, a challenge can be made if the expert lacks the specific knowledge, skill, experience, training, or education required to opine on the matter at hand. The expert’s qualifications must match the subject of their testimony.

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## Table of Common Valuation Flaws

To provide a clearer picture of what courts look for, the following table contrasts sound valuation practices with common flaws that can trigger exclusion.

| Valuation Component | Sound Practice (Admissible) | Flawed Practice (Risk of Exclusion) |
| --- | --- | --- |
| Data Verification | Independently verifies or performs reasonableness checks on management-provided data against industry benchmarks. | Blindly accepts all data and projections provided by the client without any independent validation. |
| Methodology Selection | Selects a valuation method (e.g. income, market, or asset-based) that is appropriate for the industry, company maturity, and available data. Provides justification for the choice. | Uses a method that is inconsistent with the nature of the asset, or contradicts their own prior analyses without explanation. |
| Consideration of Facts | Analysis incorporates all relevant factors, including negative ones like zoning restrictions, economic downturns, or legal encumbrances. | Ignores or dismisses inconvenient facts that would lower the valuation. The report appears to be an advocacy piece rather than an objective analysis. |
| Professional Standards | The report and the underlying analysis fully comply with applicable professional standards like USPAP or AICPA standards. | Contains material departures from professional standards, indicating a lack of rigor or competence. |

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## Execution

When a court executes its authority and rejects the valuation reports from both parties, the litigation enters a new and uncertain phase. The immediate consequence is the creation of an evidentiary void on the central question of value. This is a critical juncture where the court must decide how to proceed without the benefit of the expert guidance it was supposed to receive. The execution of this judicial power fundamentally alters the landscape of the case and forces the parties and the court to adopt alternative measures to resolve the valuation dispute.

The court is left with several potential paths forward, each with significant implications for the litigants. The judge is not required to simply split the difference between the two rejected valuations or to guess at a number. The primary goal remains to reach a reasoned and defensible conclusion based on credible evidence.

The rejection of both reports is a clear signal that the initial submissions were inadequate for this purpose. Consequently, the court’s subsequent actions are aimed at generating a new, more reliable evidentiary basis for its decision.

> The exclusion of both parties’ valuation reports is a procedural reset, compelling the court to either appoint a neutral expert or decide the issue based on the remaining, often incomplete, factual record.

One of the most powerful tools at the court’s disposal is the authority to appoint its own neutral expert. Federal Rule of Evidence 706 explicitly grants federal judges this power, and many state courts have similar provisions. The court-appointed expert is responsible to the court, not to the parties. This expert can be tasked with preparing a new, independent valuation report, or with reviewing the rejected reports and the underlying data to provide the court with a neutral assessment.

The cost of this expert is typically borne by the parties as the court directs. This path removes the valuation issue from the hands of the adversarial parties and places it into a neutral framework, which can be a desirable outcome for the court but a significant loss of control for the litigants.

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## What Happens after Both Reports Are Rejected?

The procedural aftermath of a dual rejection is determined by the judge’s discretion and the specific rules of the jurisdiction. The following table outlines the most common judicial responses and their strategic implications for the parties involved.

| Court Action | Description | Strategic Implication for Litigants |
| --- | --- | --- |
| Appoint a Neutral Expert (FRE 706) | The court selects and appoints its own expert to conduct a valuation. This expert’s findings are submitted as evidence and the expert can be deposed and cross-examined by both parties. | Parties lose control over the selection of the expert and the narrative. The neutral expert’s report often carries significant weight with the court, making it a pivotal piece of evidence. |
| Order Parties to Secure a Joint Expert | The court directs the parties to agree upon and hire a single, joint expert to perform the valuation. | Requires cooperation between adversaries. It can be a cost-effective solution but may be difficult to achieve if the parties are deeply entrenched in their positions. |
| Proceed Without Expert Testimony | The court decides the valuation issue based on the other evidence in the record, such as financial statements, transaction data, lay witness testimony, and other factual documents. | This creates high uncertainty. The outcome becomes highly unpredictable as the judge, who is not a valuation professional, must construct a value from raw, uninterpreted data. |
| Allow Parties to Submit New Reports | In some circumstances, the court may permit the parties to cure the defects and submit new reports, often with strict instructions and a new, firm deadline. This is less common. | Provides a “second bite at the apple,” but parties who failed the first time are under intense scrutiny to produce a credible and reliable report. |

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## The Imperative of Credibility

The execution of the court’s power to reject expert reports serves as a powerful reminder of a central truth in litigation ▴ credibility is paramount. An [expert valuation](https://prime.greeks.live/question/what-is-the-role-of-expert-determination-in-resolving-complex-derivatives-valuation-disputes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) should be constructed from the ground up to withstand judicial scrutiny. This requires a commitment to objectivity, methodological rigor, and a thorough grounding in the verifiable facts of the case.

The goal is to provide the court with an analysis that is so well-reasoned and defensible that it can serve as a reliable foundation for the court’s own ruling. Parties who treat valuation as an exercise in advocacy, pushing for extreme and unsupportable numbers, run the severe risk of having their primary evidence discarded, leaving them in a position of significant disadvantage and uncertainty.

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## References

- Gerzog, Wendy C. “Excluding Expert Valuation Testimony.” ScholarWorks ▴ UB Law’s Institutional Repository, 2011.

- Freiberger, Jeffrey M. and Jonathan H. Freiberger. “The Value Of A Proper And Timely Expert Valuation Reports.” Freiberger Haber LLP, 2018.

- Lankler, Stephen F. and Daniel P. Schmedlen. “Challenges to Expert Appraisers in Valuation Proceedings.” New York Business Divorce, 2022.

- Hitchner, James R. and Brian A. Rapoza. “Challenging Expert Valuation Opinions in Divorce Cases ▴ An Oasis or Mirage in the Trial Desert?” Faegre Drinker, 2017.

- Ireland, Thomas R. “Legal Decisions Involving Admissibility of Experts.” University of Missouri-St. Louis, Working Paper, 2007.

- PricewaterhouseCoopers. “A Study of Daubert Challenges.” Annual reports.

- Daubert v. Merrell Dow Pharmaceuticals, Inc. 509 U.S. 579 (1993).

- Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137 (1999).

- General Electric Co. v. Joiner, 522 U.S. 136 (1997).

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## Reflection

The court’s capacity to nullify expert analysis from both sides of a conflict prompts a necessary recalibration of strategy. It moves the focus from pure advocacy to defensible reasoning. The central question for any litigant or counsel should be whether their valuation report functions as a durable component within the logical architecture of a judicial decision.

Is the report built to withstand the pressures of cross-examination and the intense scrutiny of a judge acting as a gatekeeper? Or is it a brittle structure, designed to present an aggressive position at the risk of total collapse?

Ultimately, presenting a valuation to a court is an act of submitting your reasoning to a system that prizes coherence and reliability above all else. The power to reject flawed evidence is the system’s primary defense mechanism against irrational outcomes. Understanding this allows one to transform the valuation process from a contentious battle of opinions into an opportunity to provide the court with a superior analytical tool. The most effective report is one that empowers the judge to make a sound decision, thereby building the credibility that is the true currency of any legal dispute.

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## Glossary

<a href="https://prime.greeks.live/question/can-the-information-leakage-in-lit-markets-be-quantified-and-included-in-tca-reports/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Valuation Reports

Yes, information leakage can be quantified via advanced models and integrated into TCA reports to isolate an order's true market impact. </a><a href="https://prime.greeks.live/area/expert-testimony/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Expert Testimony

Meaning ▴ Expert testimony refers to the presentation of specialized knowledge, analysis, or opinion by a qualified individual within legal, regulatory, or arbitral proceedings. </a><a href="https://prime.greeks.live/area/daubert-standard/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Daubert Standard

Meaning ▴ The Daubert Standard defines the criteria for the admissibility of expert witness testimony in U.S. </a><a href="https://prime.greeks.live/area/valuation-report/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Valuation Report

Meaning ▴ A Valuation Report is a formal, systematically generated document that quantifies the current economic worth of a specific asset, portfolio, or liability, providing a precise assessment critical for financial reporting, capital management, and risk frameworks within institutional operations. </a><a href="https://prime.greeks.live/area/professional-standards/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Professional Standards

Meaning ▴ Professional Standards define the codified principles and operational benchmarks governing conduct, data integrity, and systemic robustness within institutional financial operations, particularly in the nascent and evolving digital asset derivatives landscape. </a><a href="https://prime.greeks.live/area/lack-of-reliability/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Lack of Reliability

Meaning ▴ The term 'Lack of Reliability' denotes a systemic condition where a component, process, or data stream consistently fails to perform its designated function within defined parameters, leading to unpredictable outcomes. </a><a href="https://prime.greeks.live/area/uspap/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Uspap

Meaning ▴ USPAP, the Uniform Standards of Professional Appraisal Practice, constitutes a comprehensive set of ethical and performance standards for appraisal professionals in the United States and its territories. </a><a href="https://prime.greeks.live/question/what-is-the-role-of-expert-determination-in-resolving-complex-derivatives-valuation-disputes/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Expert Valuation

Expert determination is a contractually-defined protocol for resolving derivatives valuation disputes through binding, specialized technical analysis. </a>

**Tags:** [Daubert Standard](https://options.greeks.live/area/daubert-standard/), [USPAP](https://options.greeks.live/area/uspap/), [Expert Valuation Testimony](https://options.greeks.live/area/expert-valuation-testimony/), [Procedural Preclusion](https://options.greeks.live/area/procedural-preclusion/), [Court Appointed Expert](https://options.greeks.live/area/court-appointed-expert/), [Business Valuation Dispute](https://options.greeks.live/area/business-valuation-dispute/)	

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### [How Do Courts Typically Determine the Fair Market Value of Collateral in a Dispute?](https://options.greeks.live/question/how-do-courts-typically-determine-the-fair-market-value-of-collateral-in-a-dispute/)
![A sleek, segmented capsule, slightly ajar, embodies a secure RFQ protocol for institutional digital asset derivatives. It facilitates private quotation and high-fidelity execution of multi-leg spreads a blurred blue sphere signifies dynamic price discovery and atomic settlement within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-3.jpg)

Courts determine collateral's fair market value by weighing expert testimony, comparable sales, and income analysis to approximate an open market transaction.

- 
### [What Are the Primary Legal Defenses for a Determining Party’s Close-Out Calculation under the 2002 ISDA?](https://options.greeks.live/question/what-are-the-primary-legal-defenses-for-a-determining-partys-close-out-calculation-under-the-2002-isda/)
![Abstract depiction of an advanced institutional trading system, featuring a prominent sensor for real-time price discovery and an intelligence layer. Visible circuitry signifies algorithmic trading capabilities, low-latency execution, and robust FIX protocol integration for digital asset derivatives. This represents a principal's operational framework for optimized RFQ protocols and atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-high-fidelity-rfq-protocols.jpg)

A defensible ISDA close-out calculation is the output of a system designed for objective reasonableness in both procedure and result.

- 
### [What Constitutes a Commercially Reasonable Determination under the Close out Amount Methodology?](https://options.greeks.live/question/what-constitutes-a-commercially-reasonable-determination-under-the-close-out-amount-methodology/)
![An abstract composition depicts a glowing green vector slicing through a segmented liquidity pool and principal's block. This visualizes high-fidelity execution and price discovery across market microstructure, optimizing RFQ protocols for institutional digital asset derivatives, minimizing slippage and latency.](https://options.greeks.live/wp-content/uploads/2025/07/optimal-precise-digital-asset-derivative-rfq-execution-via-smart-protocols-for-institutional-trading.jpg)

A commercially reasonable determination is an objective, evidence-based calculation of the economic cost of replacing a terminated derivative.

- 
### [How Can a Rebuttal Expert Witness Effectively Discredit an Opposing Valuation Report?](https://options.greeks.live/question/how-can-a-rebuttal-expert-witness-effectively-discredit-an-opposing-valuation-report/)
![An intricate mechanical assembly reveals the market microstructure of an institutional-grade RFQ protocol engine. It visualizes high-fidelity execution for digital asset derivatives block trades, managing counterparty risk and multi-leg spread strategies within a liquidity pool, embodying a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-architecture.jpg)

A rebuttal expert discredits a valuation by systematically exposing its flawed analytical architecture and lack of empirical support.

- 
### [How Do You Select an Appropriate Peer Group for a Comparable Company Analysis?](https://options.greeks.live/question/how-do-you-select-an-appropriate-peer-group-for-a-comparable-company-analysis/)
![A beige, triangular device with a dark, reflective display and dual front apertures. This specialized hardware facilitates institutional RFQ protocols for digital asset derivatives, enabling high-fidelity execution, market microstructure analysis, optimal price discovery, capital efficiency, block trades, and portfolio margin.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-terminal-for-high-fidelity-execution-and-precise-market-microstructure-analysis.jpg)

Selecting a peer group is the architectural process of defining a company's competitive universe to calibrate its market value.

- 
### [What Constitutes a Commercially Reasonable Procedure When Calculating a Close out Amount under the 2002 ISDA?](https://options.greeks.live/question/what-constitutes-a-commercially-reasonable-procedure-when-calculating-a-close-out-amount-under-the-2002-isda/)
![A metallic structural component interlocks with two black, dome-shaped modules, each displaying a green data indicator. This signifies a dynamic RFQ protocol within an institutional Prime RFQ, enabling high-fidelity execution for digital asset derivatives. Internal mechanisms underscore algorithmic trading and pre-trade analytics for capital efficiency and best execution.](https://options.greeks.live/wp-content/uploads/2025/07/modular-rfq-protocol-engine-for-digital-asset-derivatives-prime-os.jpg)

A commercially reasonable procedure for calculating a Close-Out Amount under the 2002 ISDA is an objective, good faith process.

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---

**Original URL:** https://options.greeks.live/question/can-a-court-reject-the-valuation-reports-from-both-parties-in-a-dispute/
