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Divorce Mediation Blog

Need and variable support orders: they are not mutually exclusive

Friday, June 17, 2016

[NOTE: This piece ran as a letter to the editor of Massachusetts Lawyers Weekly in its May 16, 2016 edition, under MLW’s chosen title “Need, variable support orders aren’t mutually exclusive in Probate Court”. We re-produce it here in its original form, and with our given title.]

David Lee’s April 25th rejoinder (“Court has it right regarding self-adjusting support orders”) to our March 28th article, (“The curious case of variable support orders…”), begs a clarification from us, and a related illustration of why one may wish to re-examine current law and practice.

In our piece, we advocated for a presumption in favor of sound and reasoned discretion for the judges of our highly specialized and carefully vetted Probate and Family Court, in fashioning self-adjusting support orders. We did so, both as a matter of consistency with the actual words of SJC precedent; and largely because, in most cases most of the time, there is insufficient income to leave an alimony recipient at the marital station, our long established measure of “need”.

Why should the law exclusively advantage the party who generates greater income, by shielding his or her rising income capacity from the party who is still in “need”, as defined by law; and by putting the disadvantaged party to the uncertain and costly test of initiating new litigation in the hope that the increased capacity is there? (The same principle would apply in reverse, of course. Why should a payor with sufficient income to meet all recipient “need” be blocked from a self-executing reduction where the court finds that the recipient’s need is likely to decline over time by reason of increasing independent earnings.)

We do not advocate for untethering alimony from its historic anchor of need, despite the fact that the legislature risked muddying the waters when it failed to include the clarifying words “lesser of” or “either” in stating that “… alimony should generally not exceed the recipient’s need or 30 to 35 percent of the difference between the parties’ gross incomes…” in the Alimony Reform Act (“ARA”). See, M.G.L., ch. 208, §53(b). In fact, we agree with Mr. Lee that the trial judge’s variable support order in Hassey v. Hassey was properly vacated, if it did not vindicate the purpose of meeting “need”.

But, what if the judge had found that Ms. Hassey’s “need”, based on marital lifestyle was $8,000.00 per month; that the alimony sum based on his 32.5% of his salary would likely net her $5,000.00 per month; that a history of earned bonuses established a reasonable likelihood that Dr. Hassey would have the ability to further assist in meeting Ms. Hassey’s “need”; and that it is equitable, therefore, that he pay additional alimony of 30% of his gross bonuses, to a sum that is no greater than $3,000.00 monthly, that which would return her to the marital station? Sound discretion could certainly condition the variable portion on a comparison of the parties’ incomes as per §53(b). The sheer weight of “the 99%”, for whom the marital station is at best an aspiration after divorce, and upon whom the cost of future litigation casts the greatest burden, suggests a re-examination of this doctrine.

 

GUEST BLOG: The Appeals Court Has it Right Regarding Self-Adjusting Support Orders

Wednesday, May 25, 2016

By: David H. Lee

William and Chouteau Levine’s March 28, 2016 Opinion Piece seems to suggest support for and the value of self-adjusting support orders in family law cases. In support for their position they reference the case of Stanton-Abbott v. Stanton-Abbott, 372 Mass. 814 (1977); suggest a chilling effect on negotiated resolutions as a result of limiting the court’s authority to enter self-adjusting support orders; and speculate that courts might reject agreements reached which contain self-adjusting formulae. While recognizing the general acceptance that such self-adjusting court imposed orders offend due process, the authors seem to suggest that construction of the law endorsing such support orders will give a greater opportunity for people to reach agreements including adjustments based on future circumstances.

All good family lawyers strive to assist their clients in achieving a settled resolution whether by encouraging mediation or by counsel directed negotiation. Creative and competent lawyers and mediators are often able to assist parties in achieving a settled resolution without their support case having to be tried in court. But expanding the Trial Court’s authority to enter self-adjusting support orders in order to accommodate opportunity for possible out of court settlement is not an acceptable basis for the compromise of established law and due process rights of the parties.

The Stanton-Abbott case recognizes its own uniqueness. Justice Kaplan identified the use of a self-executing formula in that case as being appropriate based on the special case circumstances presented there (a paraplegic payee living in a foreign country and the consideration of the payor’s resources to meet the judgment supporting an annual adjustment of the payee’s alimony by 50 percent of the UK equivalent of the consumer price index increase). He also acknowledged that the question was not reached in that particular case whether a variable provision was “advisable on the merits or compatible with the fundamental purposes of alimony.”

Since that decision almost forty (40) years ago, there have been fewer than a handful of appellate decisions which have supported any such type of judgments in the absence of the parties’ agreement, and each of those has been based upon “special case” circumstances. See Wooters v. Wooters, 42 Mass. App. Ct. 929 (1997); Drapek v. Drapek, 399 Mass. 240 (1987); Kirtz v. Kirtz, 12 Mass. App. Ct. 141 (1981).

Contingent or variable provisions for support orders in a divorce judgment such as termination on death of a party, remarriage of a recipient, events relating to children (which avoid concern for IRC Section 71 considerations), known future dates of trust or estate distributions or other identified events having a reasonable basis founded upon statute, fact, or trial evidence can be understood to often be appropriately included in judgments. But these examples are quite different from judgments applying fixed percentages to unlimited amounts of increased payor income in establishing future support obligations.

The general extension of the concept of “self-adjustment” or “self-modification” to support judgments poses serious concerns which run afoul of history, statutory direction and the Constitution. The CPI adjustment of an alimony order as in Stanton-Abbott is more a preservation of an existing order translated into future value than it is a substantive modification of a set support order. The entry of a judgment ordering support to be paid based upon a sharing of a future level of income or future source of income is a very different matter.

In Hassey v. Hassey, 85 Mass. App. Ct. 518, 528 (2014), the Appeals Court properly reversed the trial court’s judgment ordering alimony to be paid without limit as a fixed percentage of the payor’s gross income in excess of $250,000. This was done without consideration of the incomes and general financial circumstances of the parties at the time the additional income might be received and without consideration of the then existing need of the recipient. See also North v. Stephens-North, Rule 1:28 Decision (June 18, 2015) (reversing alimony award of 30 percent of payor’s bonus income because a self-modifying support order based on payor spouse’s income increases results in an automatic increase in alimony without the recipient spouse being required to show a material change in circumstances, and without judicial findings regarding the recipient spouse’s needs or the provider spouse’s ability to meet them).

A self-adjusting alimony order based upon a fixed percentage of the payor’s income, without limitation, is unsupportable. Alimony is a creature of statute and has historically been based upon the need of the recipient and ability of the payor to pay. Need has been defined by case law as referring to the lifestyle maintained by the parties during the course of the marriage. No modification can be made unless the party seeking modification shows a material change of circumstances warranting modification since the entry of the earlier judgment. Kelley v. Kelley, 64 Mass. App. Ct. 733 (2005); Binder v. Binder, 7 Mass. App. Ct. 751 (1979).

G. L. c. 208, § 49(e) states: “Unless the payor and recipient agree otherwise, general term alimony may be modified in duration or amount upon a material change of circumstances warranting modification.” G. L. c. 208, § 53(b) provides that the measure of need or difference between the parties’ incomes in setting alimony is to be established “at the time of the order.” If the measure of alimony set on a statutory basis is based upon need of the recipient at the time of the issuance of the order or the difference of income between the parties at that point in time, the self-adjusting alimony order applicable to a later point in time bypasses the well-established standard of change of circumstance. In essence, the law provides that alimony is set at one point in time “at the time of the order.” Alimony generally is not to exceed the recipient’s need at the time of the order of 30 to 35 percent of the difference between the parties’ gross incomes at the time of the order. G. L. c. 208, § 53(b). Thereafter, alimony may be modified in duration or amount upon a material change in circumstances warranting modification. G. L. c. 208, § 49(e). A self-adjusting order, without limit and without the requirement of showing change in circumstance, disregards the predicate for alimony. It circumvents established law, failing to consider the needs of the recipient at some future time, what the disparity in income may be between the parties at some time or whether or to what extent there have been any changes in circumstance which would warrant a modification. Case law also supports the principle that an award of alimony is improper absent a finding of corresponding financial need of the recipient. Heins v. Ledis, 422 Mass. 477 (1996). That essential element is not satisfied in an unlimited self-adjusting alimony order.

Massachusetts has long held that future earnings are not a marital asset to be divided by the court incident to divorce. The court cannot equitably assign to a spouse a present interest in the future earnings of the other spouse. Drapek. Awarding a fixed percentage of the future income of the payor effectively treats the payor’s increased income as a property element. The recipient is made an effective “owner” of a share of an indeterminate amount earned by the payor subsequent to judgment irrespective of circumstantial review, reference to need and other factual considerations which would typically be taken into consideration by the Court in determining whether any modification is appropriate.

Irrespective of the limitation on the Court’s ability to impose a self-modifying order, there is essentially no practical limitation placed on parties’ reaching an agreement which may contemplate support changes by the inclusion of self-adjusting provisions. Such provisions might be specific to the support issue or be in consideration of other provisions of the integrated settlement agreement. The suggestion that courts might not accept negotiated, reasoned self-adjusting provisions of an agreement is not supported by experience nor would it be supported by the strong Massachusetts public policy and case law encouraging parties to reach agreements. Moore v. Moore, 389 Mass. 21 (1983).

It is far more important in our legal system for the court, absent an agreement, to be able to timely assess each case on its merits after hearing and enter appropriate modified support judgments consistent with the law than run the risk of formulaic approaches becoming the norm for predetermining uncertain future circumstances. Expanding the court’s authority in an effort to lessen the alleged “chilling effect” on mediation or negotiation is not an acceptable basis for a compromise of fundamental legal rights.

The decisions of the Appeals Court in Hassey and the more recent North v. Stephens-North are not inconsistent with the special case standard of Stanton-Abbott and Wooters. It is the exceptional situations such as in Stanton-Abbott or Wooters where a self-adjusting alimony order may be acceptable, but not a common practice to be encouraged in setting alimony orders.

 

Family Law Arbitration Supported by Appeals Court, But Questions Remain: Gravelin v. Gravelin

Wednesday, May 11, 2016

In its recent Gravelin v. Gravelin, the Massachusetts Appeals Court flatly confirmed that:

  1. There is strong public policy in favor of arbitration in Massachusetts.

  2. Arbitration is a valid means of resolving family law disputes.

  3. A judge may not order parties to binding arbitration without their agreement.

  4. A judge may enforce parties’ valid agreement to arbitrate present disputes.

  5. While the Massachusetts version of the Uniform Arbitration Act (M.G.L., ch. 251) does not explicitly govern family law matters, its overarching principles apply.

  6. Review of an arbitral award is limited to determine if the arbitrator:

      a. Awarded relief beyond that to which the parties agreed;
      b. Awarded relief prohibited by law; or
      c. Decided a matter based on fraud, arbitrary conduct or procedural irregularity.

  7. A judgment that enters upon confirmation of an arbitrator’s award on a matter that is modifiable, remains modifiable, by the court under applicable standards.

Four important questions that Gravelin did not confirm or clarify, with our comments:

  1. While a judge may enforce of a valid agreement to arbitrate a present dispute, is it error not to do so?
    Comment: We would think so given that the applicability of MUAA “principles”, which include an obligation to enforce a valid agreement to arbitrate.

  2. Does Justice Blake’s comment that the appellant had the advice of counsel in agreeing to arbitrate establish that as a quid quo pro to enforcement?
    Comment: Advice of counsel is not required to bind a party to arbitrate in a commercial context, as we all know from the boxes we routinely check with every software purchase and credit card transaction. Perhaps counsel should be required in the special context of family law.

  3. Is a judge precluded from enforcing an agreement to arbitrate that is embodied in a previous agreement, such as a separation agreement, for a dispute that arises later in time?
    Comment: Justice Blake invoked Bloksberg v. Bloksburg (1979) to suggest that enforcement of such an agreement to arbitrate is not required, because that would implicate established ban on courts imposing arbitration where the parties have not agreed to it. Bloksburg, in turn, suggests the policy justification that this might permit a judge to slip an arbitration clause into a judgment on his own initiative; and that a previously agreed arbitration clause is inherently modifiable. This precedent, and reliance upon it, strikes us as simplistic, because:
      a. If the parties validly agreed to arbitrate future disputes in an incorporated separation agreement, how has the court usurped their rights?
      b. If the court declines to enforce an arbitration provision from a separation agreement on the theory of modifiability, should that decision not require findings of material changed circumstances for a merged provision, or something more, for a surviving one?
  4. Whither the concepts of greater review for child support or parenting matters?
    Comment: Gravelin was a child support modification matter. The previous Reynolds v. Whitman matter included a child support award, too. In the earlier case, the Appeals Court found no fault for not applying any heightened level of review beyond a “fair & reasonable” or “fair & equitable” test, as it implied was required for asset division, because the trial judge showed “meticulous attention to the argument of the parties”, thus, the appellate court observed, negating the need for de novo review. Taken together, do the two cases close the matter of child support review? Unfortunately for the appellant (and for readers), appeal of the review hearing process by the trial judge was foreclosed by procedural defect, so clarity remains. And, since parenting issues were not a part of this case, or any other reported case, just where do we stand on arbitration of parenting matters?

No question, Gravelin is a helpful case, but, as you’ve read here before, a dedicated family law arbitration statute could surely help clarify these remaining questions. Thanks to the Appeals Court for highlighting this, intentionally or otherwise.

 

Beware Facts v. Law: Goddard v. Goucher, a Cautionary Tale

Wednesday, April 27, 2016

The Massachusetts Appeals Court recently upheld a judgment of the Superior Court, in which the trial judge adopted the parties’ statement of uncontested facts, but rejected their agreed subsidiary conclusion drawn therefrom. In Goddard v. Boucher, 89 Mass. App. Ct. 41 (2016), the trial judge applied the stipulated events surrounding a draft purchase and sales agreement, but ruled that no enforceable contract had arisen, despite the parties’ contrary agreement.

A piece in the April 18, 2016 issue of Massachusetts Lawyers Weekly (p.38) highlighted the case, catching our eye. We are grateful to the authors, Vincent J. Pisegna and Anthony J. Cichello, because we might not otherwise have noticed this important case, since the context falls outside our usual family law bailiwick. Yet, the Goddard holding applies, no doubt, to all trial proceedings, including family law matters in the Probate and Family Court; and it provides a bright caution light for all litigating counsel. In our service as special master and arbitrator, it is pertinent to our practice, too.

As the Goucher court pointed out, fact stipulations are both “common” and “useful”, Id., at 45, and they will be honored by the trial judge unless “improvident or not conducive to justice.” Id. However, “…the court cannot be controlled by agreement of counsel on a subsidiary question of law.” Id. (Our italics.) In other words, the parties can agree to facts but should not expect the court to be bound by the legal conclusions of that they may draw therefrom.

In divorce, modification, contempt and other Probate and Family Court matters, the court encourages stipulations of uncontested fact. Pre-trial and trial orders generally require them. But how many times have we all entered into, or seen, stipulations that mix facts and law this way.

Some common examples of fact-based legal conclusions:

    -- The parties agree that an equal division of the marital estate is equitable.
    -- Neither party engaged in conduct that is relevant to the distribution of property.
    -- The parties have lived a [upper] [lower] [middle] class lifestyle.
    -- The parties have equal opportunities for future [assets] [income].

Woe to the trial counsel who so stipulates and then watches the opposing party put in facts that belie one of those subsidiary conclusions. Under Goucher, the court may conclude otherwise – prompted or not by the opposing party – to the detriment of the party who made strategic trial decisions in reliance on the stipulation as a whole.

Similarly, the parties may choose to put mixed fact and law statements into separation agreements. Under Goucher, some unhappy litigant in an enforcement or modification dispute may find that the court is not bound by agreed legal conclusions, such as:

    -- The termination of [alimony] [child support] [allocated support] shall be deemed a substantial and material change of circumstances permitting modification of[child support] [alimony] [expense sharing provisions].
    -- A delay in performance shall be deemed a material breach that entitles the other party to statutory interest and counsel fees.

-- A [particular parental decision] shall be deemed to be [consistent with] [contrary to] the best interests of the child.

-- A parent’s move to a location of greater than [20 miles] [20 minutes] from the [other parent’s home] [child’s school] shall entitle the other parent to a modification of the agreed parenting plan.

Best practice urges that we all re-examine our drafting practices, whether in litigation or in agreement drafting, in light of this challenging ruling.

 

What does Katz, Nannis say about family law arbitration? Katz, Nannis & Solomon v. Levine – Part 2

Wednesday, March 30, 2016

In our last entry, we commented on the Supreme Judicial Court case that recently held contracting parties to the tightly limited review provisions of the Massachusetts version of the Uniform Arbitration Act, M.G.L., ch, 251 ("UAA"), and barring contractual terms that broaden review. Katz, Nannis was a civil action involving the involuntary of ejection of a partner from a CPA firm, and a dispute over enforcement of an arbitral award denying him exit benefits, and assessing damages for breach of non-compete provision, all pursuant to the principals’ election of binding arbitration in their business agreement.

Today, we wonder how that may impact current state of family law arbitration, here.

The most prominent family law appellate case in Massachusetts is Reynolds v. Whitman, 40 Mass. App. Ct. 315 (1996), wherein the prime issue was. "… whether alimony and child support were properly made the subjects of voluntary and binding arbitration pursuant to a separation agreement." Id., at 316. The former husband, aggrieved by an arbitrator's award, argued that arbitration of this dispute violated public policy.

The Appeals Court disagreed, finding the arbitration provision enforceable and the award properly confirmed. Underscoring its view of enforceability, the appellate panel noted that:

    Rather than discouraging arbitration of domestic disputes, the cases support it. Arbitration may offer a more efficient resolution of the dispute, reduce court congestion, and minimize acrimony that often occurs with divorcing parties. Id., at 318.

However, the court concluded with the caveat that:

    Any arbitration award must, of course, be subject to review by the judge, who has the authority, and the obligation under G.L., c. 208, s. 34, to make a fair and equitable distribution of property. Id.

While the contested issues in Reynolds included support, the court noted that the Probate and Family Court had found the arbitration award to be fair and reasonable. It is only fair to conclude that family arbitrator's awards must be found to be fair and reasonable as well as free from defects that can give rise to denial of confirmation of an award under the UAA.

The Reynolds Appeals Court noted that nothing in the parties' agreement to arbitrate would "...strip the judge of non-delegable supervisory functions." Id. We presume that the court, here, refers to child custody matters, wherein the parties may not strip the court of its parent patraie powers. This suggests either that the trials court should apply a higher "best interests" review to an award on point; or more extremely, a non-was able right to trial de novo.

Finally, it is pertinent to the current topic, that the Reynolds separation agreement called for arbitration to be binding "...unless modified by the Probate Court." We cannot know if this was an artful use of "modified", referring to a later alteration of the the award for proven changed circumstances in a modification action; or less artfully, to the vacation or revision of an award, at the confirmation stage. We presume the latter.

So, does Katz, Nannis change any of this? Since all arbitration arises from the UAA, we family law arbitration has the same root. Therefore, we infer that parties to a domestic relations agreement to arbitrate cannot impose a standard of review on the trial court that is different from that expressed in the UAA.

But what of the Appeals Court's own apparent declaration of a "fair and reasonable" standard, that itself exceeds M.G.L., ch. 251's review provisions? And the Probate and Family Court's non-delegate parents patriaie responsibilities? There are so few appellate cases that involve family law arbitration that it may be a very long time before we know. We will operate under the assumption that Reynolds remains good law; and that parens patraie trumps all.

A dedicated family law arbitration statute, of course, could resolve this question, and clarify other aspects of the unique of law vis vis arbitration, to everyone's benefit.

 

Good News and Bad News: Arbitration Just Became a Little Bit More Final

Wednesday, March 16, 2016

Katz, Nannis & Solomon, PC v. Levine

Late last year, we anticipated the decision in this case, and expressed the hope that the SJC would rule that parties may contract for levels of review of arbitration awards that are broader than those expressed in M.G.L., ch. 251, the Massachusetts version of the Uniform Arbitration Act (UAA). We felt, and still believe, that many family law counsel and clients shy away from this private, efficient and effective private dispute resolution methodology, for fear of giving up traditional litigation rights of appeal for errors of law and abuse of discretion. Well, the SJC didn't it.

In Katz, Nannis & Solomon, P.C. v. Levine, an accounting firm partner, Bruce Levine (no relation) was purged from his firm for reasons that the other parties characterized as "for cause"; and such a termination was, under the firm agreement, deemed to be "involuntary", and therefore subject to forfeiture of both share redemption payments and deferred compensation benefits. Also, the partners alleged that Mr. Levine's conduct ran afoul of the non-compete provisions of the agreement, demanding damages. All matters were subject to mandatory binding arbitration, but accompanied by contractual rights of court review that exceeded those of the UAA, if short of full appellate rights.

When Mr. Levine suffered an adverse arbitration award, he pressed the agreed form of review, which his ex-partners challenged, on the basis that the UAA precludes the right to contractual rights of review. The trial judge sustained the challenge, ruling that UAA review provisions are exclusive and preclusive of any additionally negotiated review rights; and Mr. Levine appealed. The SJC took the case on direct appellate review.

The adverse award ripened into a full-fledged disaster for Mr. Levine (nearly $1.75 million plus interest) when the SJC ruled that the UAA trumps contractual efforts to deviate from its extremely narrow grounds of review, as a matter of law. Mr. Levine complained in his reply brief that the expanded right of review was an essential element of the agreement to arbitrate, and its deletion would nullify the entire arbitration clause, thus rendering the award void. The SJC dispatched the claim as too little, too late, since Mr. Levine had not raised the issue either in the court below, or even in his brief-in-chief: harsh result, perhaps, but not a particularly surprising one, on the appellate record described.

While the decision seems consistent with underlying law, and the UAA policy that arbitration awards should be quite nearly final when issued (hence, the good news) we regret the outcome in the family law context (hence, the bad news). As divorce mediators and arbitrators, we are all about expanding people's rights, and not narrowing them. If constricted review discourages an otherwise useful and efficient process for parties engaged in domestic relations agony, why shouldn't they be able to devise their own intermediate rights of review, if it will make both parties more amenable, potentially saving the parties years of costly and frustrating litigation of cases.

Since the SJC decision is one of statutory construction, and not constitutionally based, our legislature could, of course, adopt broader review rights for family law cases exclusively, as has occurred elsewhere. One day, perhaps…

 

Ohio Continues to Stew about Double Dipping Settele v. Settele

Wednesday, February 17, 2016

Our friend and colleague, Michael Flores of Orleans, knows that we obsess about these things, so he recently sent along September 2015’s case, Settele v. Settele. It is Ohio’s latest foray into the fractious realm of double counting income, to value small businesses, and then for support. The Delessio, Champion, Sampson and Adlakha cases have made Massachusetts lawyers and courts acutely sensitive to the issue, and debate rages daily, here, about what is or is not an “inequitable”, and thus impermissible, double dip.

Ohio lawyers seem to be equally tuned in, as the spate of recent reported cases indicates. That state has gone from relative clarity in Heller I, II and III (2008 -11) [Excluding business income above “reasonable compensation” used in discounted cash flow valuation because: "[t]rial courts may treat a spouse's future business profits either as a marital asset subject to division, or as a stream of income for spousal support purposes, but not both."]; to repudiation in 2015’s Bohme [upholding the trial judge’s use of capitalized income as a simultaneous source of support because double counting is an economic fallacy]; to broad discretion in last year’s Gallo [the courts have been “softening” Heller since its inception and a judge will know an “unfair” double dip when he or she sees it; and is fully armed to mitigate it].

In Settele, Ohio adds denial.

In Settele the court addresses the following question: where a business is valued by net worth calculation only, but including accounts receivable (A/R) as an asset, is support that is drawn from the future collection of those specific A/R a double dip that is barred by Heller I? The husband-appellant complained that his available income stream should have been reduced for support calculation purposes to reflect that a portion that income was A/R at the valuation date, and thus divided already with his wife.

Rather than indulge the “we’ll fix it if it is unfair” approach of Gallo, the Settele court decided, instead, that because A/R have already been “earned”, just not collected, no double dip would occur at all. So, the court concluded, the question of unfairness need not be reached. The decision certainly lines up with the orthodoxy, both here and in Ohio, that an asset-based valuation will generally not yield a double dip problem. But, is it right? Where the asset-based valuation does include A/R, why is it not a double dip to use those specific collections as a source of support? Doesn’t the bare statement that the A/R dollars are already “earned” deny the reality of a cash basis taxpayer? Surely, an owner takes his or her chances on collecting A/R dollars for which he or she has been charged a divisible asset value. Does not the use of those assets (which may never, in fact, be collected) for support, double the owner’s jeopardy?

As Gallo asserts, the Ohio courts have broad discretion to find that double dips are outweighed by other equities. Certainly, A/R, which hopefully yield income in the relative near-term, present a problem of lesser degree than indefinite future cash flows that have been capitalized to form an opinion of value. But, that does not make them inapposite in principle.

It seems that the court could have acknowledged that A/R as a support source may well be a double dip, but that its impact may be minimal, is trumped by other equities, or may be remedied, by exercise of discretion. This would have, it seems, been truer to Gallo by, softening, but not simply disregarding the core of Heller.

 

The Appeals Court Speaks on RSU’s in Child Support: This is Going to Be a Challenge Hoegen v. Hoegen

Wednesday, February 03, 2016

In this child support modification case, a Probate and Family Court judge declined to “count” the husband’s income derived from restricted stock units (RSU’s), granted in a corporate compensation package. He did so on the theory that, in the parties’ divorce agreement, the wife had waived all rights in the husband’s “stock plans”. The Massachusetts Appeals Court reversed this month in Hoegen v. Hoegen, ordering the trial court to re-calculate the increased child support with the husband’s RSU derived income included, because:

  1. The Child Support Guidelines (CSG) definition of income is all-encompassing;
  2. Prior case law (Wooters v. Wooters II), established that stock option generated income is countable towards child support
    (an egregious misstatement of the Appeals Court’s own case, since Wooters was not a child support case at all, and it reviewed the construction of broad underlying alimony judgment that gave rise to a contempt controversy, not addressing the discretion of a court to order alimony from stock option derived income, per se);
  3. The husband “regularly” earned income from RSU’s;
  4. The wife’s waiver was not, under any circumstances, binding on the children (who are the beneficial targets of child support);
  5. The court did not make written findings to justify exclusion of this income, other than the wife’s improperly enforced waiver; and that
  6. The order did not comply with the policy of the CSG, and earlier case law, of enhancing child support to reflect the higher standard of living enjoyed by the financially stronger parent.

The appellate decision has a rational basis, but will be difficult to implement; and, as often is the case, it has implications well beyond the results for these parties. Here are a few that come to mind:

  1. Where the legislature determined that income for alimony purposes is defined by the CSG (as the trial court may change it from time-to-time) does every child support case necessarily require examination for alimony implications?
    We think so.
  2. Where the Appeals Court mandated that RSU’s be counted towards CSG income, does this open the door to more self-adjusting litigated judgments (as distinct from incorporated agreements) in both child support and alimony matters?
    It may have to, given the challenges of doing otherwise.
  3. If not, does this decision encourage speculative alimony and child support awards by requiring judges to project market action between grant date and vesting? Is past performance a reliable indicator of future value? Must a judge allow evidence that it may not be?
    Yes, no and, we believe, very probably.
  4. If the market betrays the judge’s projection, high or low, is that a material change of circumstances?
    Why would it not be?
  5. If the judge bets high, as measured against ultimate market value, and resulting income at vesting, would that make the judgment unenforceable by contempt?
    Given In re: Birchall especially, one would expect so.
  6. If self-adjusting judgments are used, when would RSU income realized for support purposes?
    The only reasonable inference would be at the time of vesting, as that is when income is realized. What right does this imply if employee terminates employment and RSU’s are lost?
  7. If self-adjusting judgments ensue, how does this square with Hassey v. Hassey’s prohibition in the alimony context?
    It doesn’t, because the Appeals Court reversed Hassey’s 30% bonus order as related to §34 contributions, and not to traditional needs and ability to pay alimony criteria. The rules may just evolve differently for the two forms of support, despite the legislature’s deference to the trial court’s discretion to define income via CSG. Not ideal, certainly.

 

Important Arbitration Case Pending: May Have Particular Impact on Family Law

Monday, January 18, 2016

We read with interest about the pending case Supreme Judicial Court (SJC) case, Katz Nannis & Solomon, PC v. Levine (no relation), in the October 12, 2015 issue of Massachusetts Lawyers Weekly. Holland & Knight’s Attorney Gordon P. Katz wrote “SJC to Consider Expanded Review of Arbitrators’ Awards”, about the case, a civil action between estranged shareholders of an accounting firm. The question on appeal arises from an arbitration agreement; and specifically whether or not parties can bind each other and the court to rights of review that are broader than those that are set forth in the Massachusetts version of Uniform Arbitration Act.

M.G.L., ch. 251, § 12 limits the right to vacate an arbitral award to the grounds of: corruption or fraud; evident arbitral partiality; exceeded authority; and arbitrator’s refusal to grant a continuance sought with reasonable cause; or failure to admit material evidence. The contract in Katz case added that a court could overturn an award if it were based on “material, gross and flagrant error”, a higher threshold for appeal than provided in civil litigation, but broader, certainly, than §12. The SJC should rule on the matter sometime next year

One of the more frequently cited impediments to the growth of divorce arbitration, despite its manifest opportunities (efficiency, expediency, convenience, privacy, cost and control of selection of decision-maker), is that lawyers are deterred by the general loss of appellate rights. While everyone is well aware that appeals are rare, lengthy, obscenely costly, often inconclusive and always unpredictable, they are slow to relinquish the fail-safe for the true outlier result that they may encounter. We certainly understand the defensive impulse: divorce litigation clients are among the more litigious with their lawyers, post-divorce.

We have long believed that the law should allow people to agree to that level of review that they, as competent contracting parties, feel is appropriate. The American Academy of Matrimonial Lawyers Model Family Law Arbitration Act, includes the right of parties to elect appeal of errors of law to the trial court judge, in the first instance, then to the appellate level. The local AAML has advanced a Massachusetts version of that model act here, without success so far. It, too, contains that right to vary review and appeal provisions.

We hope that the SJC recognizes this important contractual right; and that if they do, divorce lawyers will take another look at matrimonial arbitration.

We’re always happy to talk.

 

DeMarco v. DeMarco: Three Surprising Things

Wednesday, January 13, 2016

Three rarities --

    -- a “Hail Mary” pass that works,
    -- a trial court order that makes news, and
    -- a judge who takes the hit for a litigant --

-- all converge in Judge John D. Casey’s recent decision in De Marco v. De Marco, for the Suffolk Probate and Family Court, making it remarkable beyond its outcome.

Michael DeMarco asked Judge Casey to terminate his alimony obligation to Katherine DeMarco, under M.G.L., ch. 208, §49(f), the social security full retirement age provision of the Alimony Reform Act (eff. 3/1/12). The judge advised the parties at the start of trial that he believed the result to be foregone: that §49(f) applies to all cases, and therefore, DeMarco alimony would end. The attorneys adopted the court’s view and devised a surviving settlement agreement with a terminal lump sum payment, and the end of periodic alimony.

Then, the Supreme Judicial Court (SJC) decided to the contrary, in Chin v. Meriott and two companion cases, ruling that §49(f) applies prospectively only, to those alimony payors whose divorce judgments followed March 1, 2012. While it is fair to say that Judge Casey’s belief reflected a consensus view of the bench and bar at the time, the SJC proved it flawed. It is not the first time that an appellate court nixed a trial judge’s view of the law, and certainly won’t be the last. The law develops, accordingly.

What makes this case interesting is that:

  1. Ms. DeMarco, asked Judge Casey to vacate the judgment that arose from the parties’ settlement contract, by way of a motion under Mass. R. Dom. Rel. P. Rule 60 (b) (5) and (6), which is the Hail Mary pass of litigation. Vacating an established judgment by mere motion is a last resort relief for a litigant. Every veteran litigator has weighed the odds of bringing one against the chance of being assessed with fees for being wrong; many have taken their shot; and few have succeeded.
  2. Trial court divorce decisions are rarely noted outside of the parties themselves, and a bit of occasional gossip, especially motion practice. After all, it is appellate work that creates precedent, shaping the law, debate, future strategies and outcomes. Unusually, this case was the lead story in Massachusetts Lawyers Weekly, and the buzz persists.
  3. Judge Casey fell on his sword, where he could easily have demurred. He gave the parties honest direction, without any warranty of perfection. Ms. DeMarco did not have to accept the judge’s colloquy. She could have tried the case and forced Judge Casey to apply the law as he saw it; and then challenge him on appeal. Yet, the judge ruled that his was an incorrect interpretation of the statute, upon which Ms. DeMarco had “detrimentally relied”, and vitiated the judgment.

The fact that the judge allowed the Rule 60 to negate a contract of the parties, as distinguished from a judgment that he had, himself, written, is substantively remarkable – and potentially dangerous – as attorney David H. Lee (disclosure: Mr. Lee is William M. Levine’s former longtime law partner) pointed out in the Lawyers Weekly piece. Certainly, it is a challenge to the policy of finality. It is also understandable that Judge Casey, always a gentleman, felt responsible for the harsh result to Ms. DeMarco.

This was no simple “mulligan”, but one with combined factors that we won’t likely see again soon.

 



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