UPDATES IN MICHIGAN FAMILY LAW

Business Valuation | Double-Dipping Issues in COA Decision

The Michigan Court of Appeals ["COA"] yesterday decided a case involving some interesting issues: business valuation,  spousal support, double-dipping, property distribution, attorney fee award, and spousal support. The COA affirmed the trial court.

The defendant husband argued that the trial court improperly used the parties’ business income twice, once in property distribution and again in calculating spousal support, resulting in an unfair
“double dip” into the same stream of income. This is an issue that arises often in cases involving division of a business asset and also a spousal support award.

Attorney Fees Not Dischargeable in Bankruptcy | In the Nature of Support

In response to a query for a link to the appellate decisions related to the U.S. 6^th Circuit Court affirmation of a bankruptcy judge’s ruling that attorney fees that were ordered in a particular divorce case were non-dischargeable, as they were a “domestic support obligation”  I post here links to the 6th Circuit Opinion and also to the lower court opinion.

Download Kassicieh_v_Kassicieh6thCircuit

Download Kassicieh_v_Kassicieh.US Bankruptcy Ct SD Ohio

"Cohabitation" as Grounds for Terminating Alimony

The Michigan Court of Appeals released an opinion on October 16, 2012 discussing how a trial court should interpret a provision in the parties' judgment of divorce that the alimony obligation is terminated upon "cohabitation [of the obligee] with an unrelated male." The court had previously ruled on a similar case [Smith v Smith, 278 Mich App 198; 748 NW2d 258 (2008)], finding  the term “cohabitation” to be “unclear” or “equally susceptible to more than one meaning.”

The Smith panel established a "totality-of-the-circumstances test" trial courts should consider when determining whether "cohabitation" exists that justifies termination of an alimony obligation. Specifically, the Smith panel gave examples of three types of evidence trial courts should consider when determining whether a person is "cohabiting" with another within the meaning of the alimony provisions in the judgment. According to Smith, the trial court should examine the following issues:

• The nature of the couple’s living arrangements and the extent to which they share a common residence.
• The nature of the couple’s relationship
• The couple’s financial arrangements.

Loutts v Loutts Decision Withdrawn; New Opinion for Publication

On September 20, 2012, just two weeks after releasing its opinion in Loutts v Loutts, the Michigan Court of Appeals ordered the opinion vacated and a new opinion was released. There were three issues in Loutts: (a) Whether the trial court should award to Wife her attorney fees and cost of appraisals; (b) Whether the imputation of income to Husband of $130,000 annually rather than his actual compensation of $240,000/year and wife was appropriate or whether the trial court's imputation  of income to Husband of only $130,000 was appropriate to avoid "double-dipping" since Wife was awarded one-half of the value of the business and whether imputation of $40,000 to wife was an abuse of discretion; and (c) whether the non-compete clause in the judgment was overbroad and was an abuse of discretion.

Spousal Support, Division of Assets & Whether "Double-Dipping" is Appropriate

In Loutts v Loutts, Court of Appeals Docket No 297427 [For Publication], several issues were presented. The financial issues were complex, and it is apparent that, especially with the valuation and "double-dipping" issue, there was much expert testimony.

The Court  first considered the Appellant's issue regarding failure of the trial court to award attorney fees and costs of expert valuations.

Although the defendant repeatedly requested an award of attorney fees and expert fees during the course of this divorce case, the trial court never addressed her requests. Therefore, the COA held that consideration of the issue was necessary to a proper determination of the appeal, and that the COA had the right to consider it because the trial court’s failure to address the defendant’s repeated requests for an award of attorney and expert fees constituted plain error. This issue was remanded to the trial court.

Adultery in the Marital Bedroom | A No-no

An article in the New York Times yesterday gives new meaning to the phrase "Don't Try this at Home!" Several lawyers and marriage counselors around the country are quoted, among them Richard Roane, a Michigan family law attorney with Warner, Norcross and Judd in Grand Rapids; Randall Kessler of Kessler & Schwartz, P.C. in Atlanta, Georgia and chairman elect of the Section of Family Law of the American Bar Association; Ken Altshuler, Portland, Me. and president-elect of the American Academy of Matrimonial Lawyers; and Susan Bender, of the New York firm Bender, Rosenthal, Isaacs & Richter.  What not to do? No hanky panky in the marital bed!

Having sex with your paramour raises the emotional stakes, makes divorces more acrimonious, and can result in a disparate property settlement. In some states, Georgia, for example according to Kessler, a cheating spouse cannot get alimony.

Whether you're a family lawyer or a layperson, you'll be sure to find something in this interesting article. You can read it here. A one-time registration may be required.

Wadler, Joyce, Don’t Try This at Home: Adultery in the Marital Bed, New York Times, Jan. 12, 2011 [Last accessed on Jan. 13, 2011]

See an earlier post on this blog here:  Marital infidelity | The fallout after a spouse has an extra-marital affair

Do you need help with a divorce or custody case? To find a Michigan Family Lawyer near you, click on the image below.

Financing your divorce

The New York Times, exploring a concept new to divorce law, discussed niche firms emerging that will invest in divorce cases to help a spouse who has little or no control over family finances identify marital assets, pay for litigation to get a fair property settlement and fair support.

One of these firms was founded by Stacey Napp, a lawyer by training who has spent her career in finance. She used money she obtained from her own divorce to establish Balance Point last year. She has since provided more than $2 million to 10 women seeking divorces. She says she is helping to ensure both sides can defend their interests.

“Everybody knows somebody where at the end of the day, the divorce was not equitable,” she said. “We want to help those people, the underdog, to make sure they get their fair share.”

Divorce cases may be a promising niche for lenders because costs can mount quickly — some top lawyers in Los Angeles charge more than $500 an hour — and because state laws uniformly require plaintiffs to pay lawyers upfront, rather than promising them a contingency fee, or a share of any winnings, as is common in other civil cases.

You may read Taking Sides in a Divorce, Chasing Profit, by Binyamin Appelbaum, published in the NY Times on December 4, 2010 here.

Spousal support | Penalties for late payment dischargeable in bankruptcy

Support payments are not dischargeable in bankruptcy. But what about penalties imposed for failure to pay support? The 1st Circuit Court of Appeals held in a ruling released on November 12, 2009 that $50 per day penalties owed by the husband because his spousal support payments were late are not "in the nature of support." [Note the penalties had accumulated to some $75,000+ over a period of years.] Thus the former husband could discharge them in bankruptcy.

Spousal support | When? How much? How long? Conditions?

An article published in The Wall Street Journal on October 31, 2009 garnered over 170 online emotionally charged comments over the weekend.  The tenor of the article is set at the beginning: "Long viewed as payment for life, divorce settlements are facing strict new limits as some ex-spouses—primarily men—protest the endless support of a former partner. For richer, for poorer, forever?"

Bottom line: Alimony (spousal support) is not available to many women. Those who were married fewer than 7 to 10 years should expect no alimony award. Rehabilitative alimony is normally awarded to former wives who have children to raise and who have stayed out of the job market for many years. This disqualifies women in short-term marriages from an alimony award.

But what about women married for 15 to 20 years or longer?

Inflation Calculator

How is inflation affecting your client? Is a reduction in support appropriate? Or should there be an increase in support? A picture is worth a thousand words and I've found a terrific way to show the Court the effect that the economy is having on a client.

Example: My client receives $250/month in spousal support under a 2003 Judgment of Divorce. The Judgment says that her spousal support is modifiable, and that it terminates upon her death or remarriage, but survives the death of the payor. Three weeks after the payor dies, a motion is filed by the estate (i.e., the greedy kids) to terminate Mom's support. A Consumer Price Index Calculator shows that it would take $293.06 in 2009 dollars to be equal the $250/month payment.

This calculator is found on the website of the United States Department of Labor, Bureau of Labor Statistics. The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used.

Modification of alimony / spousal support | The need for precise language

On March 26th, the court of appeals reversed a trial court's decision to enter a judgment of divorce that included conditions regarding termination that were not included in the settlement placed on the record. This case illustrates how important it is to fully state the parties' agreement on the record in open court and to avoid making assumptions that "what we usually expect" as conditions for termination of alimony will also belong in the judgment.

Spousal support | Modifiable or not?

In an appropriate case, spousal support may be ordered by a judge in a divorce case. Normally, court-ordered spousal support will be modifiable. Most cases settle before trial, though. Some divorcing parties may agree to spousal support. If their settlement agreement and/or divorce agreement doesn't specify that the spousal support is non-modifiable, then Michigan law provides that upon proof of changed circumstances, one of the parties can file a motion in court to raise or lower the amount, or to terminate the support altogether.

Parties have another option, which is to enter into an agreement for non-modifiable spousal support. In effect, they are contracting to bind themselves to pay or to receive a certain amount of money monthly or annually.

Judgment amended to correct error or omission

Michigan’s court of appeals decided in an unpublished opinion that the trial court committed error by not permitting Husband to amend a consent judgment of divorce to add language that the payments would terminate upon Wife’s death and would therefore qualify as deductible alimony.

In this case, as sometimes occurs, H was to make payments to W, taking advantage of Section 71(b) of the Internal Revenue Code. Often property settlements are paid out in installments, and it is advantageous to shift income from the party in a higher tax bracket to the party with a lower tax rate.

Divorce and Military Families

The stress faced by military  families, frequent moves and deployments can spell disaster for military families. For you, as for most families, divorce can be a life tragedy. You and your spouse entered into marriage with plans for a happy and long future. Perhaps you have children who are young and vulnerable. Divorce can leave your children feeling afraid and uncertain about their future. It can also leave you feeling vulnerable and lost, particularly if you are far from home, without the support of friends and family.

A frequent question asked by military spouses is whether they have to file for divorce in the State where they are based and their children are living, or whether they can file in Michigan. This is particularly true when Michigan is the place they call "Home."

Cohabitation - Finally, a test for trial courts to apply

On March 18, 2008, In Smith v Smith, decided (For Publication), the Michigan court of appeals adopted the test from an Ohio decision to determine what constitutes “cohabitation.” In Smith, the parties' consent judgment of divorce mandated termination of spousal support upon “cohabitation.” Mr. Smith filed a motion to terminate alimony, claiming that his ex-wife was cohabiting with another man. The trial court denied his motion, after carefully analyzing whether the ex-wife's conduct as described constituted "cohabitation." Mr. Smith appealed.

Alimony | Imputing income & impeachment

In Andrews v Andrews, decided by the Michigan court of appeals on March 11, 2008, Husband claimed that the trial court erred in not enforcing a prenuptial agreement that limited alimony to his net income as reflected by his federal tax returns. The trial court imputed income of $300,000/year to H after he transferred his interest in a partnership to his parents, allegedly to repay a $340,000 debt to them.

H wanted the trial court to believe that his transfer of the interest to his parents, which had been reduced to a sum certain in a default judgment, was not a voluntary or bad faith reduction in income that justified imputation. He also claimed that since Wife had not produced evidence directly impeaching his testimony, the trial court had to believe his testimony.

Income-averaging to calculate child support

Interesting reading today in the slip opinions from the Court of Appeals (COA). In addition to some interesting support issues, the property issue was also an interesting read.

In Griffin v Griffin, Docket No. 271194, an Oakland County case, Husband appealed the property division, disputing the trial court's ("T/C'") award of a stock account and 60/40 distribution of a bank and annuity investment, while giving H 100% of his various businesses.

The COA noted that the T/C found H's business appraiser not credible. In addition, the T/C offered to split everything (including the businesses) 50/50, and H declined. Hmmm. What does that say about H's idea of the value of his businesses?

H also found fault with the calculation of child support, which he said was inflated.

Permanent spousal support?

In many divorce cases, the issue of whether one of the parties is entitled to an award of spousal support / alimony arises. If it appears that the trial court might grant a request for alimony, the next question is: "How long might that alimony award last?" Part of the answer to those questions is: "The trial court's decision is dependent upon the specific facts of your case."

In Michigan, appellate court decisions establish that trial courts will apply 11 factors when deciding whether spousal support should be awarded and the amount of such an award. These factors are:

"Fault" after the fact doesn't negate an alimony award

This is a pretty strange case . . . reminds me a little of the "War of the Roses."  The Missouri Supreme Court ruled recently that even though a woman tried to have her ex-husband  rubbed out, he still must continue to pay alimony to her.

These are the facts:

• In the course of divorce proceedings, the spouses entered into a non-modifiable agreement. Husband agreed to pay monthly spousal support to Wife.
• The divorce was finalized.
• The the ex-wife attempted to hire a hitman to kill her ex-husband.
• The ex-husband discovered and thwarted the planned "hit."
• The ex-husband asked the court to terminate his alimony obligation.
• The Missouri Supreme Court ruled that the ex-husband had agreed that the spousal support would not be changed "regardless of the relative circumstances of the parties." As a result, the ex-husband remains liable for the spousal support despite the fact that if the ex-wife's plan to have him killed had succeeded, his death would have terminated his spousal support obligation.

See  Richardson v Richardson, 218 S.W.3d 426 (Mo. 2007).

Court of Appeals: Infidelity alone doesn't negate alimony award

Where the trial court, in denying alimony, focused only upon the defendant wife's infidelity, her failure to admit her infidelity, and her unjustified attempts to make her husband look like a bad man, the Michigan Court of Appeals held it was reversible error to focus on only 1 of the 12 factors used in determining spousal support.

The COA also reversed the trial court's denial of the wife's request for attorney fees.  See Berry v Berry, Docket No. 273427, decided July 24, 2007. Unpublished.

Technorati tags: alimony, spousal support, infidelity