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Divorce Mediation Blog

Pre-marital Cohabitation in Defining Marital Length Clarified; But, In Rejecting Normalized Income for Alimony & Accepting Early Valuation Date: Why won’t the Appeals Court tell us what they really think?

Wednesday, May 30, 2018

BORTOLOTTI V. BORTOLOTTI - Part 2

Levine Dispute Resolution - AlimonyAfter announcing one useful alimony holding, which we discussed in Part 1, the appellate panel in Bortolotti v. Bortolotti speed-wrote six issues that are common to many divorce cases, and where the bench and bar could use some real direction. In this blog entry, we will focus on two of them:

  1. the trial judge’s decision to use “normalized” salary for business valuation purposes but half that amount for alimony calculation; and
  2. the judge’s acceptance of a 2014 real estate valuation at a 2016 trial.

The Appeals Court upheld both decisions, simply noting that each was within the Probate and Family Court’s discretion, but with the thinnest possible explanation, giving little critical value to the reader.

Bearing in mind that “unpublished” opinions are not formal precedent, but that the Appeals Court invites their use for “persuasive value”, why wouldn’t the appellate bench want to write its opinion persuasively? Why not share their actual analysis?

In our first example, trial court accepted the uncontested adjustments that a valuation expert made to the husband’s salary, in furtherance of an income-based valuation, for which salary “normalization” is an essential component. Normalization is an effort to approximate the owner’s actual economic yield, or more traditionally, that which a hypothetical buyer might fairly expect achieve in the future.

Common adjustments are one-off expenses, personal expenses written off against revenues and S Corporation tax effect. A potential business buyer uses this to measure likely return, so as to rationalize its investment, including acquisition debt. The divorce court does it to determine the value to the business owner who is cashing out the opposing spouse’s marital interest.

The Appeals Court owed no explanation for upholding the acceptance of the normalized salary in the valuation context because no one disputed the substance of the finding at trial. But, then, the panel addressed the trial court’s determination to use only half of the normalized sum for alimony purposes because “there was evidence that [the husband] did not derive any actual income from” his company.

What does this mean? Were the actual earnings zero? Were they normalized to a positive value, more than zero based solely on adjustments? Alternatively, did the expert find positive earnings, but zero salary and/or profit distributions made? If so, did the judge determine that half of the realized but undistributed income was retained for legitimate business purposes?

In short, it matters what the essential facts were, and why the Appeals court found the trial decision to be sound. Discretion is not unbridled; and appellate analysis is, or should be, an explanation of why the judge did not abuse it so that the bench and bar may learn from an elucidated point of view, from which they may analogize with intellectual consistency. Instead, we are left with bare bones, and a conclusory statement, which may create mischief in place of clarity.

Some lawyer soon will assert that Bortolotti supports the proposition that “actual income” and “realized income” are opposites (they are not) and that a rigorous application of JS v. CC is not really required for alimony matters, when a controlling owner does not distribute realized income. Neither is a healthy result.

It is possible the trial court did apply JS v. CC factors comprehensively and well, and this was not reported in keeping with the Rule 1:28 admonition that the opinion does not “fully” address the facts. Yet, the facts that are key to the decision should be discussed or at least identified. Otherwise, what is the point of making the decision publicly available?

Similarly, where the judge applied a two-year-old real estate appraisal value to the marital home, the Appeals Court simply opined that the date was halfway between the date of separation and the date of trial and that the judge was within his or her discretion. This conclusion leaves us wondering: Were all assets valued as of the interim date? Was there intrinsic significance to the halfway point? Was the Court choosing between bad alternatives (2-years-old v. older)? Did only one party offer a value? Was a more recent value offered, but on an infirm basis?

The answers to these questions, and others, matter; and we; and we suspect other curious minds would like to know the why as much as the what.

 

Pre-marital Cohabitation in Defining Marital Length Clarified

Tuesday, May 15, 2018

But, In Rejecting Normalized Income for Alimony & Accepting Early Valuation Date:
Why won’t the Appeals Court tell us what they really think?
BORTOLOTTI V. BORTOLLOTTI - Part. 1


Levine Dispute Resolution - Alimony

We have previously lamented the shortcomings of Massachusetts Appeals Court’s Rule 1:28 opinion practice, and the recent Bortollotti v. Bortollotti has us at it again, but that will have to wait until Part 2.


Today, instead, we focus on the court’s helpful clarification of the legislature’s provision that tasks trial judges with determining if and when a marriage may be construed to begin before its legal registration, for purposes of calculating the length of marriage, and the resulting presumed durational limit calculated under M.G.L., ch, 208, § 48. When we say it is helpful, it is not to say that we agree or disagree with the concept, but rather, that, like a puzzle part, it fills a gap that makes the statute more understandable and, therefore, more predictable in outcome.

The concept of a de facto relationship giving rise to an obligation normally associated with a legal one preceded the Alimony Reform Act (“ARA”), beginning with California cases involving child support by estoppel (obligations arising from unrelated-party voluntary undertakings and resulting reliance), to pre-marital contribution in equitable division cases (see, Liebson v. Liebson and Moriarty v. Stone) and, more recently and directly on point, judges’ grappling with the inequities of same sex couples who were divorcing after long relationships and fact-based economic unions, but to whom marriage was foreclosed until implementation of 2005’s Goodridge decision.

In ARA, the legislature expanded the notion to all marriages in the alimony context.

Section 48 allows the trial court to back-date the start of marriage for a “significant marital cohabitation that includes ‘economic marital partnership’”, per Bortollotti. In this case, the trial judge found that the parties had, in fact, cohabited before legal marriage, but that the wife had not contributed income to the partnership, therefore, an economic marital partnership did not exist.

With logic more parallel to actual marriage, and historic alimony law, the Appeals Court reversed, stating that the wife’s very economic dependence signified that the marital partnership had begun. They reconciled three ARA features: the enumerated criteria for awarding alimony; the “common household” needed to trigger a payor’s post-divorce right to demand redress; and the pre-marital issue, here.

Since economic dependence is one of the enumerated alimony factors, the appellate court reasoned, it will suffice to extend the length of marriage retrospectively, for alimony’s presumed durational limit purposes.

The holding is fairly simple. It will apply to many cases, sometimes with minor, and other time substantial effect. The most extreme, obviously, will be when this metric leads to a finding that a 19 ½-year marriage was preceded by a more than 6-month cohabitation with economic dependency, stripping the payor of any presumed durational limit whatsoever, especially where the payor is more than 16 years shy of full social security retirement age. We can expect that this aspect of those cases to be most hotly contested.

The next time, Rule 1:28 and why the rest of Bortollotti is frustratingly sparse.

 

Why was the GOP out to get Alimony?

Monday, January 22, 2018

Levine Dispute Resolution - Alimony

Well, they did it. In December, Congress repealed the alimony deduction, and as a result, support for divorce families will become more expensive and less generous, beginning in 2019.

Unbeknownst to us, the federal alimony deduction was on Republican chopping block wish list for a long time, with previous failed repeal attempts in 1984 and 2014. Few of us thought it important enough to the president or the GOP caucus to actually make it happen this time, especially when the senate bill did not mention it in its bill. Boy, were we wrong.

The question is: why?

To save majority lawmakers from having to reach actual consensus with Democrats, God forbid, by keeping the red ink caused by the 2017 Tax Cuts and Jobs Act below $1.5 trillion over the next ten years, permitting a budget reconciliation maneuver and permitting passage on Republican votes only?

Whatever happened to simplification and revenue neutrality: watchwords of tax reform and Republican faith, for as long as memory serves? Not this Congress, and not this time.

But, really, how much did it help that cause? According to the House Ways and means Joint Committee on Taxation, repeal of the alimony deduction, upon which divorcing families have relied for three-quarters of a century, will “save” $8.3 billion from the aggregate deficit over 2018-2027. See here.

A drop in the bucket…

… especially in context. When a Fox Business reporter asked Treasury Secretary Mnuchin about the president’s abandonment of his campaign-guaranteed crackdown on carried interest preferences for private equity and hedge fund principals, which would have saved an estimated $100 billion over the same ten years, he blathered that, “…it’s not that much money…”. Really. Listen for yourself here.

So, we come back to “why”, if not budget reconciliation? Was it the moralism of Paul Ryan’s wing of the GOP, punishing divorcing families for their failings? If so, we are dangerously more like the theocratic regimes that our president loves to praise or castigate, depending on his momentary whim, than we like to believe.

In the meantime, families are the collateral damage. So much for family values.

 

GOP Plan to End Alimony Deductibility: Time to reform the Alimony Reform Act?

Monday, November 20, 2017

Levine Dispute Resolution - Alimony

The House GOP seems to think that repealing §215 of the Internal Revenue Code is a good idea. We have long believed that there are probably too many alimony-paying lawyers in Congress to let this day ever come. It probably won’t, but if it does, it will plunge the Alimony Reform Act (ARA) (eff. 3.1.12) into crisis. Either way, the legislature needs to respond.

M.G.L., ch. 208, §48 defines “alimony” as: “the payment of support from a spouse, who has the ability to pay, to a spouse in need of support for a reasonable length of time, under a court order”. Nothing about tax impact. The drafters, like us, clearly took deductibility under federal and state law for granted.

Moreover, M.G.L., ch. 208, §53(b) defines a “reasonable and lawful” presumptive formulation for general term alimony, stating the general term alimony should generally not exceed the recipient needs, or 30-35% of the difference between the parties’ applicable gross incomes.

This statutory range makes the same once-safe assumption: that IRC §215 allows parties to leverage dollars to the family’s benefit, by shifting income tax from a higher progressive tax rate of the payor, to the payee’s lower rate.

If the alimony deduction dies, it will take the viability of §53(b) along with it. Yet, the zombie statute will persist, entitling litigants to rely on it, despite its infirmity; unless and until the state legislature takes corrective action. This will not happen overnight – these things never do – and in the meantime… Sophisticated divorce agreements have “savings” clauses, which help people adjust alimony sums in the unlikely event of a deductibility repeal, and the GOP plan grandparents existing judgments, at least until modification. But modification cases and new divorces won’t get off so easy.

Maybe, the legislature should take the GOP proposal as a warning shot, at least. The legislature could act pre-emptively. Sections 48 and 53(b) at least need reformulation, regardless of Congress’ ultimate action. We should convert the assumption of the tax-shifting leverage of continued deductibility for alimony into a clear predicate for the ARA, with provisions to address the alternative.

And, if the unthinkable happens, it’s better get started now.

 

The SJC Weighs in on Self-Adjusting Alimony Orders and Recipient “Need”: Young v. Young, Part 3

Wednesday, November 15, 2017

What did the court decide and why; and might it have decided differently?

Levine Dispute Resolution - Alimony

Here, we delve into the SJC’s analysis in Young v. Young.

Young was high income case, in which the husband’s executive compensation fueled a persistently rising lifestyle (“affluent, upper class”) for the parties during a 24-year marriage. Both parties sought fixed sum alimony in the wife’s favor, but at broadly disparate levels.

After trial, the Probate and Family Court judge concluded that the wife’s sworn representation of the costs required to maintain the marital station (i.e., her “need”) was unreliable; and that the husband’s compensation scheme (i.e., his capacity to pay) was complex, not clearly predictable, but implicitly at least, likely to maintain an upward trajectory.

Critically, the judge did not quantify the wife’s “need” in a finding. Instead, the opinion suggests, the trial court defined the marital living standard as an intangible expectation of rising station, supported presumably by family history, and with no apparent end in sight.

In light of her findings, the trial judge rejected both parties’ alimony proposals, and ordered the husband to pay the wife 1/3 of his gross income derived from his work compensation in its various forms, with neither a base guarantee for the wife (floor) nor an upper limit for the husband (ceiling). Recognizing that the judgment would leave the parties in a thicket of disclosure, verification, enforcement and potential conflict, the judge imposed a special master to address future conflicts, at the parties’ expense. Think, alimony coordinator. (More on that in a later blog entry.)

The husband appealed, and prevailed, when the SJC vacated the formulaic alimony award and remanded to the trial court to re-cast the alimony obligation as a fixed sum. The core rulings are neither complex nor novel on their face. They are:

  1. Variable or self-adjusting alimony orders are not per se prohibited, but they are to be limited to “special”, though not necessarily “extraordinary”, circumstances; and that
  2. Self-adjusting alimony orders that “intend” to elevate the recipient spouse’s standard of living above the marital station are prohibited.

Now, just what are “special circumstances”? We are tempted to emulate the late Supreme Court Justice Potter Stewart and say that we would know them when we see them, but to date, we only know of two examples, both noted by the Young court:

  1. An alimony recipient living in a foreign land during high inflationary times, with a self- adjusting cost-of-living increase that is intended to protect the value of an alimony order that is a sum, per Stanton-Abbott v. Stanton-Abbott, 372 Mass. 814 (1977); and
  2. An alimony payor who is ill at the time of divorce, with depressed earnings for a period of recovery, and the expectation of resumed earnings that are closer to the marital experience, when health returns, per Wooters v. Wooters, 42 Mass. App. Ct. 929 (1997).

The paucity of fact precedent has long made trial judges reluctant to even consider variable support awards, and we expect that the Young decision won’t likely change this institutional reticence. As we discuss below, we see this as unfortunate.

In the meantime, what of the marital station? The SJC’s emphasis on recipient “need” is both deeply entrenched in our law, and unsurprising. After all, need and ability to pay have long been the accepted pillars of spousal support. But we wonder several things:

  1. What if the trial court had made a traditional finding of “need”, expressed as a dollar amount required to meet it;
  2. What if she had made a finding that even at the rarefied level of Young finances, when following the 30-35% range of a “reasonable and lawful” alimony order (Hassey v. Hassey, 85 Mass. App. Ct. 518 (2014)), the wife could not live at the marital standard formerly funded when the parties lived as one household?
  3. What if the trial court had quantified “need”, and capped the amount that the Wife could have received by application of the percentage formula, at that level?

Would these counterfactuals have led the SJC to find that the orders were not “intended” to exceed to wife’s recovery beyond the marital standard? After all, the Young court stated, with credit to both Stanton-Abbott and Wooters, that:

    [We] reject the argument, as we have before in a different context, that a judge lacks statutory authority to order a supporting spouse to pay alimony in an amount that may vary according to variables or contingencies set forth in the order, such as the income of the supporting spouse…

    [and]

    [We] do not consider every change in the amount of payment under such an alimony order to be a modification of the judgment, which we recognize would require a showing "by the party favorably affected the conditions [have] changed justifying the modification” …

    [and]

    [T]here may also be special circumstances where an alimony award based on a percentage of the supporting spouse's income might not be an abuse of discretion, such as where the supporting spouse's income is highly variable from year to year, sometimes severely limiting his or her ability to pay, and where a percentage formula, averaged over time, is likely not to exceed the needs of the recipient spouse.

    [but]

    Here, the percentage-based award ran afoul of the act and therefore was an abuse of discretion not because of its variable nature but because it was intended to award the wife an amount of alimony that exceeds her need to maintain the lifestyle she enjoyed during the marriage. (Italics ours)

If those findings had been made, we think they could, and should have, held differently.

Interestingly, the SJC did not comment upon the fact that the Young percentage-based support award also protected the husband from the very danger noted above: that his income might dip (it generally does at some point), and “severely limit his ability to pay” support commensurate with the marital standard. Had this been noted by the judge, might the SJC been more sparing in its critique? Maybe.

The primary purpose of an SJC case is to determine if there was error in the case before it, and secondly, but not necessarily secondarily, to create precedent for future cases. For every Young case, the trial court will encounter thousands of cases in which the marital station is in no way attainable on a 30-35% alimony award, and in which the court could carefully craft orders that meet all of the SJC’s concerns discussed above, without consigning the courts and the parties to serial modification actions.

In this respect, the Young decision represents a missed opportunity, in our view.

Finally, the SJC noted that variable support orders can lead to contention because of poorly worded criteria and complex compensation schemes. Correctly, the Young court pointed to the trial court’s appointment of an alimony coordinator (our term) to police the judgment; an unauthorized and unaffordable solution for most couples (though, ironically, affordable for thee parties). The court also lamented that formulaic orders could encourage fraud, and collusion between employers and employee alimony payors.

These are real concerns, but ones that exist in every case, regardless of the support structure, and based on this rationale, the trial courts should not accept settlements with self-adjusting formulae, which they properly do every day. It is equally lamentable, that the SJC does not apparently deem the bench and bar capable of proposing and adopting high quality judgments. We fear that this aspect of the case is rejecting the good because it is not perfect.

In our next entry, we will discuss the Young case treatment of determining how to determine “need” and the trial court’s particular challenge in this case to do what the SJC has ordered with respect thereto.

 

The SJC Weighs in on Self-Adjusting Alimony Orders and Recipient “Need”: Young v. Young, Part 2

Tuesday, November 07, 2017

“What are they, anyway?”

We introduce the subject that the Supreme Judicial Court (SJC) addressed in Young v. Young by examining the kinds of orders from which the case arose: variable or self-adjusting support orders. Here, we address the basics.

What are self-adjusting support orders? They are alimony orders expressed by a formula rather than a sum. The payor computes alimony periodically by applying a percentage to his or her defined income. Sometimes, different (usually declining) percentages apply to different tiers of income, and increasingly, thanks to M.G.L., ch, 208, § 53(b) (of the Alimony Reform Act (ARA) of 2011, eff. 3.1.12) the percentage(s) may apply to the parties’ income differential.

Think: Client A pays Client B 32.5% of the difference between the two parties’ gross pre-tax employment income each year, as received, and subject to a periodic true up after sharing of agreed income verification.

Who makes self-adjusting orders? Most often, self-adjusting alimony orders are a creature of agreement. A judge then approves and incorporates the agreement in its judgment, making the self-adjusting features court orders. For reasons discussed in previous and subsequent blog entries, judges rarely initiate such orders, being limited to doing so only in “special circumstances”, which Massachusetts caselaw has thus far identified only two: where an alimony recipient lives on another continent during high inflation times, which may justify an automatic cost-of-living provision; and one in which the payor was ill at the time of divorce, with resulting depressed earnings, but the court expected return of his historic income when his health recovered. We will discuss this standard more fully in a later blog entry.

Who uses self-adjusting orders? Most parties adopt this approach because the alimony payor’s income is subject to significant fluctuation, sometimes on the upside (think: bonuses or commissions) and sometimes up or down (think: profits). It protects the payor from having to pay alimony on income that he or she does not actually receive (downside risk protection), and the recipient is compensated by sharing when income is higher (upside benefit sharing). It echoes the way an intact couple live, economically.

Why don’t courts initiate many self-adjusting orders? The general answer is that self-adjusting orders “feel” like a violation of “due process” rights because they change the amount of support without the right to a court hearing for the purpose of showing current facts and circumstances that might mitigate against the change. The more precise reason is that case law discourages it. Young v. Young will likely reinforce the reticence of cautious judges; but we will suggest later that this ought not necessarily be the case.

In the next blog entry, we will begin to discuss the analysis that the SJC used in Young, and the standards suggested by it and earlier law.

 

Just What is a “New Legal Consequence”?

Wednesday, June 07, 2017

Not a Shifting Alimony Presumption, under Van Ardsdale v. Van Ardsdale

Levine Dispute Resolution - Alimony

The crux of the Massachusetts Supreme Judicial Court’s (SJC) recent Van Ardsdale v. Van Ardsdale, is that the retroactive effect of durational limits under the Alimony Reform Act (eff. 3.1.12) (ARA) is constitutional because the imposition of these constraints is “merely” presumptive and, therefore, do not “attach new legal consequences to events completed before its enactment”.

We do not question precedent. While its comparison of a sex offender’s right to contest registration requirement for adjudications that occurred before the registry legislation, in Doe, Sex Offender Registry Bd. 3839 v. Sex Offender Registry Bd., to alimony recipients’ right to seek deviation from the “presumed” durational limits is cringe-worthy, we get the analysis. Because the sex offender and the alimony payee both have some chance of eluding the impact of new legislation, the former by an appeal to the Board, and the latter by an “interests of justice” court deviation from alimony termination, the individual’s jeopardy is not foregone; therefore, it does not rise to the level of a “new legal consequence”.

Presumptions, the SJC reasons, are “simply rules of evidence”.

But, sometimes good legal analysis defies reality, or at least practicality.

Before ARA, the burden of proving changed circumstances to justify the termination of alimony sat squarely on the shoulders of the payor. Retirement? Just one circumstance to consider. Income loss? Well, maybe, but just how did that happen, anyway. Cohabitation of the recipient? Forgettaboutit.

Now, the burden falls just as squarely the recipient, as the secondary holding Van Ardsdale, and the same day’s Popp v. Popp, demonstrate. It is a small sample to be sure, but the appellate scoreboard on reported cases for alimony payees seeking to extend alimony beyond “presumed” time limits is 0-2. In many cases, the answer will be the same for recipients as it used to be for obligors whose alimony check supported the household of not only the ex- spouse, but a new “friend” as well.

We are not at all criticizing that this burden shift has occurred. That is a policy question, and one properly reserved to the legislature. The old alimony system was, in many respects, out of control.

But, calling a major burden shift as a mere rule of evidence trivializes a very real and substantive change in our statutory law. And, it denies the everyday experience of litigants and their counsel, many of whom will not sue for alimony extensions, because presumptions are meant to be hard to overcome. And, expensive. And, risky.

 

A “Growing Business” Negates Argument of Double Dipping in Washington State in Marriage of Cheng

Wednesday, March 29, 2017

In the Washington Court of Appeals’ recent case, Marriage of Cheng (denominated “unpublished” as in our Appeals Court Rule 1:28) the court set out an interesting marker for double counting analysis with closely held businesses that are valued by income methodologies: if it is a business with expectations for income growth, awarding alimony (they call it “maintenance”) from its future earnings is not a “double recovery” or, as we call it “double count” or “double dip”.

The husband in Cheng ran a consulting business with 2013 net income to the owner of over $900,000.00. Both experts valued the practice by capitalizing the “excess earnings” over the owner’s “replacement income” (the market value of the owner’s services to the company, putting aside compensation for the risk associated with his investment).The judge assigned a $3.6 million value to the enterprise, of which the wife received half, under Washington’s community property laws.

The judge also ordered the husband to pay a declining term of maintenance. The husband argued that this constituted double counting because the initial monthly sum of alimony exceeded the husband’s replacement income, and the first step-down was ¾ of his replacement income. Therefore, the husband argued, the alimony was, inevitably, to be paid from the capitalized portion of income.

The Court of Appeals disagreed, opining that to constitute a double dip, the maintenance award would have to “erode [the company’s] value.” Since the Husband predicted that his 2013 income would likely hold up for the year after divorce, the court reasoned that the he would have more than enough income to pay the maintenance, without any diminution of value; hence, no double dip.

This decision suggests that double dipping is a concept that considers alimony in relation to value itself, and not to the income that was used to determine value.

If Washington is a “fair market value” state, the Cheng court’s eyes are on that theoretical terminal event from which the business owner reaps the rewards of sale to a third party, when the hypothetical buyer will be disinterested that his or her seller was beleaguered by support obligations, focussing solely on the likelihood of continued cash flows for his or her own benefit.

Where we are a “fair value” state for divorce business valuation, in which the focus is on the value of future cash flows to the divorcing owner, and not directly premised on an imagined future arm’s-length sale, it is hard to envision the Cheng conclusion here – that it is not double dipping- on the same facts, since he core of the double dipping controversy here is whether alimony impedes on capitalized income, a distinction that can be consequential.

But, since our law does not preclude double dipping per se, but only that which is “inequitable”, the Cheng reasoning could lead to the same bottom line in Massachusetts. Our courts could conclude that the Cheng facts do, in fact, implicate double counting, but still be within the bounds of discretion, because the other spouse has needs and owner has the cash flow to afford to pay the alimony ordered.

It’s enough to make business owners , and their counsel, swoon.

 

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.

 

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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