Thursday, March 11, 2010

Days in Confusion: The Appellate Court Says What?

Thank heaven we get clear and concise decisions from our appellate courts which provide guidance to lawyers, clients and trial courts.This way, we have some understanding of exactly what the law is...Did I just say that? I must have had a momentary lapse. Don't get me wrong now, I know the drill. These cases are "fact driven" we are told. There are "no trends" they say. OK. I get it. The appellate court does not want to be pinned down. But, certainly where the basic facts are similar, the result on the law should be pretty close, right? WRONG!

So now, I just had an article published in the New York Law Journal on February 26, entitled "'Rodriguez' Offers Common Sense Revisiting Of Double Dipping". The gist of it is as follows: after messing up the law in several cases which addressed a principle previously established by many courts, to wit: where an income stream is converted into an asset and distributed, the income used was no longer also available for spousal support—it was classified as an impermissible "double dipping" or "double counting". The appellate division corrected its mess-up in Rodriguez v Rodriguez,    AD3d    , 2010 NY Slip Op 00944 (2d Dept. 2010)issued on February 9, 2010. Here was the rule as we knew it: If your property (let's say a business) has a value which is based upon its ability to produce income and your spouse gets a piece of it through equitable distribution, your spouse does not get to use the same income to claim support on. Still confusing? I know. It's a strange concept. Let's try this (it's tough not to talk in lawyer)... English Translation: If you own a business which is worth $1,000,000 based upon the fact that it earns $1,000,000 in income, and your spouse gets an award of $500,000 as his/her share, your spouse cannot also ask for spousal support/maintenance/alimony based on that $1,000,000 because he/she already got a piece of that income in the distribution of the business. You don't get it twice. Makes sense, yes. Of course it does..., but not so fast.

In two cases, however, the Second Department in Griggs v. Griggs, 44 AD3d 710 (2d Dept. 2007) and Groesbeck v. Groesbeck, 51 AD3d 722 (2d Dept 2008), the appellate court somehow forgot about the no double dipping rule and distributed the business value AND awarded spousal support on the same income stream. Then on February 9, the same court issued Rogriguez and righted the ship again, pointing out

Moreover, we agree with the defendant that the Supreme Court impermissibly engaged in the "double counting" of income in valuing his medical practice, which was equitably distributed as marital property, and in awarding maintenance to the plaintiff (Grunfeld v. Grunfeld, 94 NY2d at 702; Murphy v. Murphy, 6 AD3d 678, 679). The valuation of the defendant's business involved calculating the defendant's projected future excess earnings. Thus, in valuing and distributing the value of the defendant's business, the Supreme Court converted a certain amount of the defendant's projected future income stream into an asset. However, the Supreme Court also calculated the amount of maintenance to which the plaintiff was entitled based on the defendant's total income, which necessarily included the excess earnings produced by his business. This was error.

So, all is now again right with the world, yes? Not so fast. Less than 30 days later on March 9, the same appellate court decided Kerrigan v Kerrigan,      AD3d    , 2010 NY Slip Op 01929 (2nd Dept 2010) and said

The award of maintenance to the defendant in the sum of $1,500 per week for a period of five years was appropriate (see Kriftcher v Kriftcher, 59 AD3d 392, 393-394). The plaintiff's contention that the Supreme Court engaged in "double dipping" with respect to the award of maintenance is without merit, as the plaintiff's business constitutes a tangible, income-producing asset, rather than an intangible asset (see Keane v Keane, 8 NY3d 115, 119; Griggs v Griggs, 44 AD3d 710, 713). (emphasis added) 
To paraphrase John McEnroe in his Wimbeldon screaming days, "You've Got To Be Kidding Me!!" You just got it right in Rodriguez! That was last month! You used Griggs again! Griggs was wrong, the no double dipping rule is not limited to intangible assets, it includes service businesses! The Court of Appeals said so in Keane v Keane! You're the same court! It's a double dip!!

At this point, before I soil my tennis whites, I leave you with this: we cannot have this confusion. There are now two classes of litigants, those who are lucky enough to have a court which understands the rule and those who will get creamed (or get an unfair windfall, depending on who is the business owner) by appearing before a court which is erroneously following Groesbeck, Griggs and Kerrigan. Hopefully, Kerrigan will be further appealed or reconsidered so we are all governed by the same rule. After all, even when we stand before the curtain of uncertainty which is extent whenever a court is deciding your fate, when the law says you are entitled to the rotisserie, you sould get the rotisserie. Getting the canned squid instead, is just plain insulting.

NOTE: If you didn't get the last part, watch a few old episodes of "The Odd Couple".