Durational Limits on Alimony Obligations are Constitutional

In 2011, the Massachusetts Legislature passed the Alimony Reform Act, making significant changes to laws concerning alimony in the Commonwealth. Among those changes were durational limits imposed on alimony obligations from marriages that lasted fewer than twenty years.

In essence, those durational limits act as presumptive termination dates for alimony payments. For example, in the case of a four-year marriage, alimony may terminate after two years of payments upon divorce. Under some circumstances, a party may request that the court deviate from the prescribed termination date, where deviation is required in the interests of justice.

But are those durational requirements constitutional?

In two recent cases, the Massachusetts Supreme Judicial Court considered whether the durational limits operate as an unconstitutionally retroactive law. The Court held that the durational limits were in fact constitutional.

In Van Arsdale v. Van Arsdale, the Court considered a direct appeal where the husband’s alimony obligation was terminated. 1 The parties married in 1979 and divorced in 1997. The husband was ordered to pay $3,333 per month in child support and $3,333 per month in alimony. The parties agreed to review the husband’s alimony payment obligations when their youngest child became emancipated and when the husband retired from full-time employment, so long as he was at least 62 years old.

In 2005, the husband filed a complaint for modification, as the parties’ youngest child had become emancipated. The parties agreed to discontinue child support payments and increase alimony payments to over $7,500 per month. In 2015, the husband successfully sought to terminate his alimony obligation based on the fact that he retired, and based on the Alimony Reform Act’s durational limits. The wife appealed.

In reviewing the wife’s argument that the durational limits were unconstitutionally retroactive, the Supreme Judicial Court considered whether the law attached new legal consequences to events that were completed before the law’s enactment. “The durational limits merely create a presumption of termination that a recipient spouse…can rebut by showing that deviation from the limits is ‘required in the interests of justice.’ Applying such a presumption is not impermissibly retroactive,” the Court noted. 2

The Court reasoned that a party may argue for a deviation from the durational limits, which would require the trial judge to consider the parties’ circumstances at the time of filing, and not at the time of divorce. “By requiring such a temporal focus, the statute ensures that any new legal consequences that result from the durational limits are not the result of actions that predated the act, but rather are based on the circumstances of the parties as they exist before the judge deciding a modification complaint,” the Court explained, upholding the durational limits. 3

Following its decision in Van Arsdale, the Court decided the case of Popp v. Popp. 4 In that case, the husband was ordered to pay $12,000 per month in alimony. In 2015, the husband sought and received a modification of those payments, as he had retired. The judge also applied the new alimony durational limits and ruled that payments would cease in 2020, based on the length of the parties’ marriage.

Similarly to the Van Arsdale case, the wife in Popp claimed that the durational limits on alimony payments were unconstitutional; she also claimed that the trial judge failed to consider certain factors, such as her ability to maintain marital lifestyle and her lost economic opportunity as a result of the marriage. In line with the Van Arsdale decision, the Supreme Judicial Court held that the durational limits were not unconstitutional and upheld the trial court’s decision.

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1 Van Arsdale v. Van Arsdale, SJC 1-2223, March 6, 2017. – May 31, 2017.

2 Id., at 8.

3 Id., at 9.

4 Popp v. Popp, SJC 1-2228, May 31, 2017.

Income Imputed Where a Party Left a Well-Paying Position Due to Unfortunate Circumstances

Under some circumstances, there may be income imputed to a party for purposes of calculating alimony and child support. For example, if a party voluntarily changes careers to a less lucrative or takes an early retirement, the court may impute income to that party to reflect his or her potential and demonstrated earning capacity. But what if the party left his or her job – though voluntarily – reluctantly and due to unfortunate circumstances? Should the court impute income? The Massachusetts Appeals Court recently addressed this issue.

In the case, 1 the husband had a high-paying position as head of a private school: including his base salary, bonuses, and other benefits, his compensation package equaled approximately $450,000 annually. However, after engaging in an affair with one of his subordinates, the husband resigned from his position. The parties separated, and the husband engaged in an extensive job search—he applied for dozens of comparable positions, traveled frequently to meetings and interviews, worked with recruiters, and honed his professional skills to increase his marketability. After eleven months, the husband received one job offer, which he accepted. However, his new position paid him considerably less. In fact, he was making about a third of his previous salary.

Meanwhile, the parties divorced. The trial judge ordered the husband to pay child support and alimony and based the respective calculations on the husband’s previous income, with income imputed to the husband. After accepting his new offer of employment, the husband petitioned the court for a modification of his child support and alimony payments. He noted that his income was substantially less than it had been at the time of divorce. The wife, meanwhile, filed several complaints for contempt, alleging that the husband owed her back alimony and child support.

During the trial proceedings, the divorce judge concluded “that no material change in circumstances had occurred because the husband’s ‘actual earnings…are less than his potential and demonstrated earning capacity,’ and the reduction in the husband’s income was caused by ‘his voluntary decision to resign from [his job.]’” 2

On appeal, the Appeals Court disagreed with the divorce judge’s decision. “The facts of this case are distinguishable from the voluntary career change line of cases. The husband did not take an early retirement, nor did he resign from [his job] to pursue a less lucrative career in a completely unrelated field. Moreover, while the judge found that ‘[t]he [h]usband’s position…remained available to him, but for his resignation.’ there was no evidence demonstrating that the husband’s employment with [his previous employer] would continue indefinitely,” the Appeals Court stated. 3

The Appeals Court also noted that the trial judge failed to give proper consideration to the efforts of the husband to find higher-paying employment. “not only did the judge fail to make a specific finding that the husband could earn more with reasonable effort, it is apparent that such a finding cannot be made on this record.” 4

If you have any questions about issues of divorce, custody, or support, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.

1 Emery v. Sturtevant, No. 16-P-443 (December 2, 2016 – May 12, 2017).
2 Id., at 6.
3 Id., at 15-16.
4 Id., at 19.

Intellectual Property Counts As Marital Property During Divorce

In what ways is intellectual property important during a divorce? Is it something that may be divided by the court between the parties?

Intellectual property and domestic relations

Intellectual property includes patents, trademarks, copyrights, trade secrets, and trade dress. Each of those categories may present property to be considered by the court as part of a couple’s marital estate. Therefore, during a divorce, it is important to consider any intellectual property holdings in property assignment.

The Massachusetts Probate and Family Courts use a process called equitable distribution to divide marital property in general. Here, the term “equitable” means “fair,” and not necessarily equal: the court will determine how best to divide marital property in the fairest manner in each particular case. Intellectual property, like all other property, will be divided in this manner.

Future income from intellectual property

In addition to present property values, future income must also be considered. For example, royalties from copyrighted work or licensing fees from patents and trademarks may present considerable future income opportunities.

In one 2015 case, 1 the Appeals Court held that future royalties derived from a wife’s tremendously successful novel should be divided equitably between the parties. In that case, the trial judge noted that the husband supported his wife financially and emotionally while she wrote the novel. The judge also noted that the wife’s earnings from the novel neared $3,000,000 at the time of the divorce, and he ordered that she pay the husband a lump sum of $570,000. As for future royalties, the trial judge held that because they were too speculative, the husband was not entitled to them.
The husband appealed, seeking equitable distribution of future royalties obtained by the wife.

The Appeals Court agreed with the husband, holding that the wife’s “contractual rights to future royalty and other payments do not, in our view, involve mere expectancies as described in the foregoing cases. While the amount of the royalty and other payments to be received by [the wife] in the future cannot yet be ascertained, the right to receive those royalties and other payments was contractually established at the time of the divorce. Indeed, [her] interests in the present case are, in certain respects, analogous to a party’s interest in the payment of pension rights which has been recognized as marital property subject to division.” 2

The Court suggested that future royalties were particularly suited to “division on an “if and when received” basis, with the judge determining the percentages of any future payments to be assigned to [wife and husband.]” 3

Valuing intellectual property during a divorce

In many cases, it may be possible (whether through past royalties or payments or expert valuation) to establish the value of intellectual property. In those cases, the court may use those reasonable values in calculating marital property division.

If the value of intellectual property is too speculative to consider, however, the judge may opt to exclude the property from marital property calculations. In one case, for example, 4 the court considered the invention of the husband, who held patents on artificial skin. The trial judge held that future income from those patents was so speculative that they did not need to be included as part of property assignment. The Supreme Judicial Court agreed that the judge did not abuse his discretion in his division of the marital assets.

“He was not obliged to place a value on the husband’s royalties, patents, or copyrights. He was warranted in declaring uncertain the value of the husband’s patents on artificial skin,” the high Court noted. “The judge could have concluded on the evidence that the present value of the husband’s future income from this source was too speculative to consider. The asset was not one which obviously has current value but is difficult to appraise (such as a close corporation).” 5

1 Canisius v. Morgenstern, 87 Mass. App. Ct. 759 (2015).
2 Id., at 767.
3 Id., at 771.
4 Yannas v. Frondistou-Yannas, 395 Mass. 704 (1985).
5 Id., at 714.

Measuring the Start of the Durational Period for Alimony

The durational period for alimony is the length of time for which alimony payments will be ordered by the court. In a situation where alimony is awarded years after a divorce decree is entered, what is the starting point for the durational period of those alimony payments? Does the durational period begin to run at the time of divorce, or at the time of the alimony order? If there is a temporary alimony order, does the date of the first temporary payment affect the durational period?

This has become an important issue in recent years, as Massachusetts no longer recognizes lifetime alimony in most cases—therefore, the duration of alimony payments must be closely looked at under most circumstances.

In the recent case of Snow v. Snow, [1] the Massachusetts Supreme Judicial Court addressed this issue. In that case, the wife did not pursue her alimony claim during the divorce proceedings, but she sought an alimony order more than four years after the divorce was final. The wife explained that circumstances had changed: the husband had been supporting her with weekly payments of $1,000 but stopped making them. The wife became homeless and was living out of her car. She filed a request for alimony and received an order of temporary alimony in the amount of $850 per week. Approximately four months later, she received an order of general alimony in the amount of $810 per week, to be paid for the duration of 179 months. The judge noted that the start date for the durational period was the date of the first temporary alimony payment. Both parties appealed.

Transferring the case on its own, the Supreme Judicial Court held that the durational period for former wife’s general term alimony began to run on the award of general term alimony, and not on the date of the divorce judgment nor the date of the award of temporary alimony. Temporary alimony, the high Court reiterated from previous cases, is NOT general alimony. Here, the wife’s complaint was an initial request for alimony, rather than a modification, and the general term began at time the alimony order was issued.

In addition, the Court addressed two other issues. First, the Court held that Probate and Family Court was required to consider the husband’s post-judgment overtime income in determining the award of alimony. The trial judge erred because he only considered the husband’s base pay as his income for purposes of calculating alimony payments. Second, the Court held that the Probate and Family Court was required to make a specific determination as to whether health insurance should be provided by the husband to the wife. The wife successfully argued that this issue should have been addressed by the trial court.

If you have any questions about divorce or other domestic relations issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.

[1] Snow v. Snow, 476 Mass. 425 (2017).

Unvested Stock Options: What Constitutes “Double-Dipping?”

May the calculations for alimony payments include a spouse’s unvested stock options, particularly if those options were not considered to be part of marital property for purposes of equitable distribution? This question was recently answered by the Massachusetts Supreme Judicial Court. In Ludwig v. Lamee-Ludwig, the Court said yes. [1]

At issue was a practice colloquially known as “double-dipping,” which brings up “the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” [2] As an example, double-dipping would occur where a party’s unvested stock options were divided equitably during the divorce, and later, when vested, counted as the party’s income for purposes of calculating alimony payments.

In the case at hand, the parties were divorced in 2014. Under their separation agreement, the wife was awarded alimony based on a portion of the husband’s annual base salary, and also awarded additional alimony based on a sliding-scale calculation of the husband’s bonuses and other forms of compensation. The trial court applied “the time rule” to this case: this rule considers the number of unvested options, as well as the length of time the employee spouse has owned those options PRIOR to the dissolution of the marriage.

The Court noted that because the trial judge did not consider the unvested stock options as part of the marital property to be divided among the parties during the divorce, no double-dipping occurred. “Here, there is no such injustice because the contested shares were not part of the equitable distribution of assets; by operation of the time rule, they were assigned to and retained by the husband outright.” [3] The source of property assignment only included options which were attributable to the marital partnership, and did not include stock options which were given for post-marital efforts. Therefore, the Court noted, those unvested options could be considered income for alimony calculation purposes.

Interestingly, the Court also pointed out that the practice of double-dipping is not prohibited as a matter of law—it may be done, so long as the trial judge considers the equities of each situation.

 

 

[1] Ludwig v. Lamee-Ludwig, No. 15-P-1177 (October 17, 2016-February 7, 2017).

[2] Id., at 5, quoting Champion v. Champion, 54 Mass. App. Ct. 215, 219 (2002).

[3] Id., at 5.

Case of the Week: Deviation from Alimony Termination Dates

Is “lifetime alimony” truly dead in Massachusetts?

The Alimony Reform Act became effective on March 1, 2012, and it allowed for an alimony award to be modified in amount and duration if there is a material change in circumstances. The Alimony Reform Act also provided presumptive termination dates for any alimony obligations for a marriage which lasted fewer than twenty years. For example, if the marriage lasted five years or less, then alimony would continue for no longer than half of the months of marriage. If the marriage lasted five to ten years, then alimony would continue for no longer than 60% of the months of marriage.

The Alimony Reform Act, however, did provide an exception to this rule on termination dates: a judge may deviate from the dates if the judge finds that it is in the “interests of justice” to do so.

Under what circumstances may such a deviation be in the “interests of justice?” That question was clarified in the recent case of George v. George,[1] where the Supreme Judicial Court considered the appeal of a claim for modification which had been dismissed by the Probate and Family Court judge below.

The judge had denied the modification claim based on two reasons:  first, the payor’s claim for modification was filed prematurely, before the permissible filing date set out in the Alimony Reform Act; second, deviation from the durational time limits set out in the Alimony Reform Act was warranted. The judge noted that at the time of the divorce, the wife “bargained for” a specific termination date for alimony payments in exchange for a certain division of property. If the wife had known that alimony payments would terminate prior to that, the judge theorized, she would likely have insisted that the property division terms be different.

The Supreme Judicial Court agreed that the modification claim was filed prematurely. However, it disagreed with the Probate and Family Court judge in his holding that deviation from the time limits was warranted. In particular, the Supreme Judicial Court noted that a judge must evaluate circumstances regarding alimony modification “in the here and now:” not at the time of divorce, but rather at the time of the modification being sought. (The Court noted that if there are continuing circumstances which existed at the time of divorce and continue to exist at the time modification is sought – such as the disability of one of the spouses – then those circumstances may be considered in determining whether to deviate from the time limits.)

But here, the trial court’s analysis was flawed, the Supreme Judicial Court noted, in theorizing that the payee spouse would have bargained for a different property division award if she knew that alimony payments would cease. “[T]his logic might prevent nearly all payor spouses with alimony obligations predating the act from ever gaining the benefit of the act’s durational limits, because recipient spouses could argue that, had they known that their alimony payments would be affected by the act, they would have negotiated their separation agreement differently,” the Court stated. “This is in direct contravention of the Legislature’s intent that the durational limits apply to preexisting alimony awards.”[2]

[1] George v. George, SJC-12059 (September 6, 2016-November 23, 2016).

[2] Id., at 11.