A new Connecticut Appellate Court case provides us with a window into what may be a shift in judicial attitudes on the issue of whether to look at earning capacity vs. actual or reported earnings in alimony and support cases.
In 2009 when Sandy and Scott McRae — both small business owners — were divorced, the trial court entered an alimony award based not on the couple’s respective financial affidavits, but instead on what the court estimated their real earning capacities to be — a higher number for both husband and wife. Based on those assumptions, the court entered an order that, in theory at least, equalized their incomes.
Mr. McRae wasted no time petitioning the court to reduce the award. On his third attempt in 2011, he finally met with success. Judge Trial Referee Herbert Berall reduced Mr. McRae’s weekly alimony obligation from $250 to $150 per week. Better still, from Mr. McRae’s point of view, the court allowed one half of that amount, $75 per week, to be treated as payments toward a substantial arrearage Mr. McRae had accumulated by unilaterally reducing his alimony payments without the benefit of a court order. At that rate, Mr. McRae’s arrearage would not be fully paid for approximately 7 years and, meanwhile, even the remaining $75 — the new current order — would drop away before long under the terms of the original decree.
Sandy McRae appealed the order on a number of grounds. The question that interests us the most was whether the court erred by comparing apples to oranges — 2009 earning capacity to 2011 reported earnings. The court made it clear on the record that it considering Mr. McRae’s financial affidavit and tax returns in deciding whether to modify the 2009 alimony rather than looking beyond those numbers as the first court had done to consider, instead, Mr. McRae’s earning capacity.
The point is a technical but important one. Under Connecticut law and the law of most other states as well, courts cannot modify alimony without first finding, as a matter of fact, that there has been a substantial change in the financial circumstances of one or both of the parties. There were two sides to Ms. McRae’s argument. If the trial judge had looked at earning capacity rather than his actual reported earnings, then the judge hearing the motion for modification should have done the same thing.
Conversely, she argued, if the court was considering Mr. McRae’s reported income in 2011, it should compare it, not with his 2009 earning capacity, but with what he had reported his real earnings to be in 2009 — about the same number he reported in 2011. Effectively, her argument was that if the court had compared apples to apples — reported earnings with reported earnings — it should not have modified her alimony because Mr. McRae was reporting about the same level of income in 2011 that he had reported in 2009.
The appellate court disagreed even though the judge who modified the order clearly said that he was basing the new order on Mr. McRae’s financial affidavit and recent tax returns. The judge said this about the 2009 finding that Mr. McRae had higher earning capacity than his real earnings suggested: ” Well reality set in … [s]o much for predictions. I will tell you, this court, certainly in the last year and a half, has made no decisions finding people’s earning capacity.”
The appellate court rejected Ms. McRae’s arguments finding essentially that the modifying judge based his decision on an assumption that Mr. McRae’s earnings and earning capacity were one and the same so the order was still based on a comparison between past and present earning capacity. This despite the lower court judge’s own words.
So what does all this mean? In part that depends on how many other judges agree that lower incomes are more likely to be the result of economic reality than of divorce game-playing. The case-law in Connecticut makes it clear that courts have the right to consider a person’s earning capacity if they believe that the individual is under-employed. We often encounter clients who insist that their spouses are deliberately under-reporting income or keeping his or her earnings artificially low in order to achieve better results in divorce court. Now it seems, convincing the court of that may be harder in a bad economy than it has been in years past.
This does not mean that earning capacity is lost as a concept in divorce law, but it does mean that the standards of assembling proof, including the use of expert witnesses where appropriate, are higher than ever.
We see it all the time — divorced or divorcing parents who see every compromise on issues of visitation or custody as a loss and who return to the courts time and again to settle everyday disputes.
In a case to be released next week, Lori Hibbard vs. Tony Hibbard, the Connecticut Appellate Court upheld the decision of a trial court to pick a side in such a case, and to do so in a big way.
The couple divorced in 2007 returning in less than a year with disputes about money and visitation. In the next 4 years, the parties filed a total of 30 post-judgment motions between them. According to the appeals court, the disputes increasingly involved access to their daughter –only two years old at the time of the divorce.
Initially, it appears from the decision that the plaintiff mother had a fair amount of success managing to limit the defendant father’s access more and more. At various points, this even involved requiring that visits be supervised and that overnight visits be suspended.
By the time they returned to court to litigate their last set of four motions — two filed by each party– visitation by the father had been whittled to one weekday afternoon and two 7-hour weekend visits every other week together with some specified holidays and birthdays.
The mother’s two motions sought further restrictions on the father’s access, the father, for his part, asked that the mother be held in contempt of court for failing to allow him several scheduled visits and –more importantly –asked that custody of their child be granted to him.
The mother defended against the contempt motion claiming that although she had not allowed the visits it was because her daughter had reported being touched inappropriately by a friend of the father during an earlier visit.
The trial court did not find the mother’s claim to be credible noting in a detailed 20-page decision that, in the past, the mother had made various other unrelated claims that had not been substantiated by investigators or by the child’s therapist. She had argued that the child was afraid of her father, but again was not backed up the child’s therapist. The judge further noted that the mother had terminated therapy for the child when the therapist asked to meet with the father and had terminated longstanding daycare arrangements after a worker shared information about the child with the father’s current wife.
Concluding that the mother’s strategy was to eliminate the father from their child’s life, the judge awarded sole custody to the father, granting the mother visitation rights. Considering that she had originally been awarded custody and had historically succeeded, at least to some extent, in controlling the father’s access, it is a fair guess that this was an unexpectd result.
The mother appealed and lost.
In this blog, we have commented before about the toll that contentious and protracted custody and visitation litigation takes on families, and especially on children. The adverse effects of serious and prolonged parental wrangling on children — not just while it is happening but well into adulthood — has been amply documented.
For most families, the financial toll taken by the cost of serial court appearances makes a difference in the quality of life of the entire family and colors the attitudes of the adults towards each other. This, in turn, makes it even less likely that the children who are at least the official subject of the fighting, can enjoy a carefree, guilt-free and happy childhood.
We do not claim to be in position to judge or evaluate the merits of Ms. Hibbard’s attacks on Mr. Hibbard’s parenting. What we can say, however, from many years of experience, is that once custody and visitation issues have been addressed and decided — whether by agreement or by trial — future efforts to change the deal become subject to increasing skepticism. As lawyers, we must always respect the obligation of parent’s to do what they believe to be in the best interest of their children. At the same time, however, we must always counsel our clients — as the experienced lawyers in this case no doubt did — to consider at every step, whether they are motivated by genuine concern for their children or by relationship issues between the adults. At a minimum, they should be made aware that this will be a question that the court will consider in every instance.
Writing recently for the New York Times, author Matt Richtel in an article entitled, ” Till Death, or 20 Years, Do Us Part”, mused about whether setting an expiration date for marriage might be the best way to address new attitudes about marriage — those that render it expendable depending on circumstances.
Richtel, who writes most often about technology, makes his case for a twenty-year contract with tongue in cheek but does make the serious point that no real mechanism exists, short of prenuptial contracts, to mitigate the drama and stress of divorces that happen at statistically predictable stages of marriage.
Richtel implies that making marriage contracts renewable might have the double advantage of lessening the stigma of divorce where it proves inevitable, and, conversely, of raising the consciousness of couples whose marriages will grow stronger if re-examined and effectively re-negotiated at intervals that coincide with marriages’ biggest stressors. Various experts cited in the article suggest that these milestones involve the birth of a child, a job change, the death of a family member, or when the couple finds themselves living in an empty nest. While most of these events are unpredictable, others are not. Generally, for example, empty-nest syndrome shows up at roughly the twenty-year mark. The president of the American Academy of Matrimonial Lawyers, Kenneth Altshuler, quoted in the article, noted that, in his own practice, divorces seem to cluster around the 7 and 20 year marks. As it turns out, the seven year itch may be more than a movie title.
None of this is to suggest seriously that renewable marriage contracts are really ripe for serious thought given the tenor current political dialogue on the overall issue of marriage. Instead, however, Richtel’s article makes us think more seriously about what should be done at the beginning of a marriage to lessen the trauma and bitter discord that so often characterizes the end.
True, prenuptial agreements do put a temporary crimp in the image of unsullied romance that we expect to survive from the first date to the end of the honeymoon. (Although anyone who has ever planned a large wedding knows that only a strong dose of denial can keep that illusion alive.)
On the other hand, at what other point in a relationship will a frank and, mercifully, hypothetical discussion about the practical issue of divorce take a lesser toll on a couple’s relationship? Balance this against the angst that the couple will suffer if their marriage is among the half that end in divorce and at a time when love and goodwill are no longer the most important underpinnings of the negotiations. Once that comparison is made, the only remaining question is what will better serve the couple and their future children — betting everything that they will beat the odds, or promising from the start to do the right thing in the unexpected event that they won’t?
After more than 20 years of marriage that ended in divorce in 2003, Connecticut resident Peter Larson seems to have been no stranger to the courts. When he returned to court in 2010 to seek a reduction of child support and alimony orders, he had two previous efforts at modification under his belt and probably felt confident that he would win his pro se bid for relief. After all, his income had gone from about $85,000 in 2003 to about $21,000 and he was unemployed.
And, in fact, he did come away with some degree of success without the help of a lawyer. The trial court recalculated his child support dropping it from its original level of $347 per week to $115 per week. In addition the court reduced his alimony order to $1 per year — not a permanent victory on the alimony front, but still an important win.
Unfortunately, Mr.Larson’s former wife, Matilde, did hire a lawyer who filed a counter-motion for contempt seeking past due child support and attorney’s fees. Ultimately, although he received a break in his current orders, Mr. Larson was also ordered to pay almost $100,000 in past-due support and was also ordered to pay almost $27,000 in attorney’s fees.
In a per curiam decision of the Connecticut Appellate Court scheduled for release next week, the Court upheld the trial court’s action.
As he had at the trial court level, Mr. Larson represented himself on appeal. His arguments of error were;
- The trial court hadn’t reduced child support enough
- The trial court should not have found him in contempt of prior orders
- The order of attorneys fees was excessive because the fees were unreasonable
The Court’s response to these claims makes it clear that Mr. Larson would have benefitted from consulting with a lawyer before filing his motion and, later, before filing his appeal. First, the court stressed the enormous discretion accorded to trial courts by appeals courts in family matters. It is never enough on appeal that the appellate judges might have decided the case differently. This means that strategic errors at the trail level can rarely be corrected on appeal.
Second, Mr Larson would have been cautioned that, because he was not fully in compliance with existing orders, he should have expected a counter-offense if he chose to seek a modification. Based on the amount of the arrearage that the court found, it is clear that his former wife had tolerated his non-compliance for a very long time up to the point that he made the first move in 2010. To the extent that Mr. Larson thought his current financial situation would — or even could — protect him from being held in contempt for falling behind, he was mistaken and any experienced lawyer would have made that clear to him.
Third, he would have been advised that law that requires courts to consider the respective finances of the parties when allocating responsibility for attorneys fees in divorce cases, does not apply in enforcement proceedings where there has been a finding of willful contempt. In such cases, attorney’s fees can be shifted to the party who failed to obey a court order as a simple matter of punishment.
While Larson complained that he had not been given a fair chance to challenge the reasonableness of the fees, the appellate court noted that, not only had the trial court afforded him the opportunity to do that, but had actually scheduled a separate hearing for that very purpose. Although Larson attended the hearing he did not, according to the court, present any evidence on the subject. It is not unusual for inexperienced litigants to expect the trial judge to take the lead in a factual inquiry.
In a 201o op-ed piece published in the New York Times entitled “A Nation of Do-It-Yourself Lawyers” John T Broadrick, chief justice of New Hampshire, and Ronald M. George, chief justice of California, stressed the disadvantages faced by litigants who, for financial reasons, feel compelled to go it alone. The authors urged members of the bar to step up to help mitigate the problem by offering so-called unbundled legal services so that litigants who could not afford comprehensive representation could nonetheless receive limited assistance in the form of consultation, coaching, and help with document preparation.
What many do not understand is that limited representation can be a minefield for lawyers since the rules in many states do not adequately protect them. We cannot reasonably expect lawyers who would otherwise be willing to play a supporting role in a lawsuit, to risk taking responsibility for the final outcome of litigation they do not fully control or to be required to provide additional or even comprehensive services without remuneration.
Still, in every community there are lawyers who recognize the problem and who are willing to address it as long as roles are clearly defined and the expectations are clear. When the stakes are high, it makes sense to seek them out.