1. Home
  2.  » 
  3. Family Law
  4.  » New Appeals Court Case Addresses Attribution Of Income Where Spouse Had Been Under-Earning In The Years Leading Up To A Divorce

New Appeals Court Case Addresses Attribution Of Income Where Spouse Had Been Under-Earning In The Years Leading Up To A Divorce

In Davae v. Davae, the husband was a licensed physician, board-certified in the field of diagnostic radiology. While practicing at a medical center, the husband started a teleradiology business. The husband left his hospital practice and started working at his teleradiology business full-time in 2007. The husband’s earnings at his teleradiology business varied year-to-year. He had earned less income in the years leading up to the divorce than he had previously. A judge may, under the Alimony Reform Act, and the Child Support Guidelines, attribute income to a party who is underemployed and capable of earning more income with reasonable efforts. Therefore, the husband’s earning capacity and whether income should be attributed to the husband and, if so, in what amount became issues during the divorce. During the divorce trial, both the husband and the wife presented expert testimony about the husband’s earning capacity. The trial judge rejected the opinions of both experts and, instead, relied on an average of the husband’s past earnings from 2007 through 2016, excluding as outliers the two highest- and lowest-earning years. The wife appealed.

Among other things, the wife challenged the judge’s determination of the husband’s earning capacity, including the judge’s rejection of her expert witness’ opinion, who based his determination on the earnings of radiologists of similar qualifications, education, and experience of the husband in the area. The Appeals Court discerned no error in the trial judge’s decision to reject the opinion of the wife’s expert. First, the husband’s expert testified that a ten-year absence from hospital would be a disadvantage to a radiologist seeking employment in a hospital setting, which the wife’s expert did not consider in his opinion. Second, and more significantly, the wife’s expert did not base his estimate on the average earnings of a radiologist with a practice comparable to that of the husband. The Appeals Court noted that the husband transitioned from a hospital-based practice to teleradiology years before the parties separated, therefore his career change cannot reasonably be viewed as an attempt to manipulate his income or reduce or avoid his support obligation. Because the question was whether the husband could, with reasonable effort, earn more as a teleradiologist, the judge was within his discretion in concluding that the husband’s earning capacity should be determined in the context of his existing practice model of teleradiology.

The next issue was how the judge calculated the income attributable to the husband. Given the nature of the husband’s business, which was dependent on the husband’s efforts, the Appeals Court found that no error in the trial judge’s use of an average of the husband’s past earnings as a basis for determining the husband’s earning capacity, nor did it find error in the judge’s decision to exclude the husband’s highest- and lowest-earning years from the calculation on the basis that the judge determined that they were not representative of what the husband could earn with reasonable effort as a teleradiologist.

However, the Appeals Court agreed with the wife that the trial judge’s reliance on the husband’s earnings from 2012 through 2016 to calculate the husband’s average earning capacity was error. This is because the trial judge found that the husband had not been earning a salary commensurate with his earning capacity since at least 2012. The Appeals Court concluded that there was no proper basis on which the judge could have determined an average earning capacity, assuming reasonable efforts, based in part on earnings figures that the judge determined did not represent reasonable efforts. As such, the Appeals Court found that the judge erred in relying on the husband’s annual earnings from 2012 through 2016 in determining the husband’s earning capacity. The Appeals Court vacated the parts of the divorce judgment related to child support and alimony and remanded the case for a re-determination of child support and alimony after recalculating the husband’s attributed income consistent with the Appeals Court decision.

Categories

Fitch Law Partners LLP reports news and insights on complex litigation topics. Clients, colleagues and friends may receive The Fitch Briefs by signing up here.