Enhanced Earnings, Enhanced Confusion

Here is a recent article in the New York Law Journal where Judge Lebowitz of Queens County Court of Claims and Acting Judge of the Supreme Court comments on the confusion that landmark decision in O’Brien v. O’Brien has created. Judge Lebowitz also comments on how New York is the only state in the country that still requires grounds for a divorce, which in practice only causes people to tell lies on the stand. This article makes several interesting points, feel free to add what you think below.

New York Law Journal
Divorce, New York Style
By Jeffrey D. Lebowitz
June 29, 2009

(The following article is based on a speech delivered by Judge Jeffrey D. Lebowitz to the Family and Divorce Mediation Council of Greater New York on June 11.)

Congratulations on the 25th anniversary of the Family and Divorce Mediation Council of Greater New York. It is my feeling that this organization is more relevant, more meaningful today to the practice of Family Law than it was 25 years ago.

When this group started, equitable distribution had just been enacted, the courts and lawyers were feeling their way and the body of law that has since developed was in its nascent stage. Today, in my opinion, after almost six years in the Matrimonial Part and 16 years as a judge, the practice of Matrimonial and Family law is, not to mince words, a mess.

Challenges in New York’s Matrimonial Law

While New York is a glamorous place to get married, it is a tough place to get divorced. We have created such elaborate laws and concepts that only the most collegial of divorcing couples and attorneys can navigate the morass we now know as matrimonial practice. Unfortunately, if one or both sides insists on litigating, or one or both lawyers do not see the benefit of early mediation or settlement, we are off to the races.

The Role of Family and Divorce Mediation

The litigants. Divorcing couples are in a sensitive and stressful time in their lives. Research has shown that other than the death of a spouse or close family member, the most trying time in a person’s life is when they are going through a dissolution of their marriage.

That can never change. Those emotions will always be in the case. That is where mediation can be of tremendous value. The ability to collaboratively resolve cases, the opportunity for the litigants to feel that they have a say in the dissolution of their marriage, that someone is listening to them about what has occurred at the hands of the other party, all go a long way toward prompt settlement and perhaps more importantly, a lasting resolution.

The courtroom is not a place for catharsis or open ended speeches by litigants. I have little time to hear out litigants in depth, not only because of time constraints, but because I believe they are inimical to the settlement of a case, opening up a so-called Pandora’s box of ill will that can only be reciprocated by similar statements from the opposing side.

Issues in Matrimonial Law

The state of the law. We have developed in New York theoretical concepts that no other state has seen fit to follow. When Equitable Distribution began in 1980, it was a concerted attempt to help the non-monied spouse, usually, the wife. It was well intentioned and necessary. As long as the distribution of marital property was awarded by title, the non-titled, non-monied spouse was at a severe disadvantage, but as with many things, when a wrong is righted, we often swing the pendulum too far the other way. This is where we are today in matrimonial practice.

Perhaps the most glaring example is the concept of enhanced earnings. Enhanced earnings is nothing more than a crap shoot based on facts and circumstances that may or may not occur, and unlike maintenance or child support, is not subject to modification if those circumstances do not bear out. Using a variety of discount rates and different methodologies to calculate enhanced earnings only add to the problem.

The Need for Change

We are starting to see the courts rebelling against these concepts. The most recent cases seem to put a cap on enhanced earnings at around 20 percent, and often as little as 10 percent, unless it is a case similar to O’Brien, (O’Brien v. O’Brien, 66 NY2d 576, 498 NYS2d 743 (1985)), which started this whole fiasco, where the non-license holding spouse puts a license holding spouse through school, helps him or her study, brings in the money, feeds the kids, puts them to sleep. Then maybe 50 per cent is warranted.

The answer is simple, eliminate enhanced earnings and provide a stream of income that is not subject to termination just because the non-license holding spouse remarries or dies. A stream of income will take into account all the variables that enhanced earning evaluators can only guess at in reports and will reflect the real world value of the asset over a specified period of time.

Appreciation of separate property is a tempest in a teapot. We have to establish the value of the property at the commencement of the marriage and of the matrimonial action. Then we need to look at how much of the appreciation was subject to market forces, so-called “passive appreciation,” which is not subject to distribution, and the amount of appreciation that is a result of the contributions of each side. We then have to decide how each contribution is valued in terms of equitable distribution.

I suggest that the concept of appreciation of separate property, which is statutory in nature, should be eliminated and replaced by either providing appreciation of separate property regardless of contribution, to be subject to equitable distribution, or let separate property remain separate property during a marriage regardless of appreciation. Take your pick, but a bright line rule will help avoid the confusion that now ensues between the appellate departments and the trial courts in dealing with the issue of appreciation of separate property.

Grounds. Then, of course, there is the issue of grounds, where again, we lag pitifully behind all 49 states. This great cosmopolitan State of New York still requires people to fib on the stand about establishing their grounds. The Assembly has held this bill captive and now is trying to barter guidelines for maintenance similar to that for child support in return for agreeing to establish no-fault divorce. Guidelines for maintenance will only complicate matters since, unlike child support, maintenance is not always awarded and, in fact, is becoming a vanishing issue in the era of two income earning families.

I feel I am in the company of similarly minded individuals, who believe the best interest of the litigants is served by a prompt resolution in a fair and reasonable manner. However, we still have many lawyers who look at a case and don’t think about settlement first. If they are experienced, they understand the parameters of a fair settlement from the outset of the case. Unfortunately, there are still a significant number of lawyers who view litigation as a “cash cow” and as long as they litigate the more that they can milk that cow.

That’s why, you and I, and others similarly situated have taken a step forward and concluded that the litigation process, the adversarial process, in many cases is inimical to the best interest of parties.

I am hopeful that over time, more judges and attorneys will understand that alternatives to litigation, such as mediation and arbitration, should become the vehicle of first resort, not the last, to resolve matrimonial matters. Only then can we begin to improve the harrowing experience of divorce in this state.

Queens County’s Mediation Pilot Program

Mediation Pilot Program: Queens County is introducing a pilot mediation program. The administrative judge’s office will be accepting applications for mediators until the end of June. We have rigorous standards that must be met before one is even eligible to apply. It is very important that we have the most experienced mediators available. If we do not and this program fails to get off to a successful start, we may be doomed to failure. Once all resumes are submitted, a relatively small number of mediators will be selected for the initial phase of the program.

We don’t know how many cases will be sent to mediation. We don’t know if it will be eventually used by the other matrimonial judges in Queens County. If more cases are sent to mediation and more judges become involved, there is a reasonable chance additional attorneys will be selected to join the panel.

Generally speaking, the program will allow a judge to send any case out to mediation at any point in the litigation. At the first mediation session, there will be no charge. At the conclusion of the initial session, if the litigants want to continue with mediation, financial arrangements will be worked out with the mediator, with a fee cap of $200 per hour. The pro rata obligations will be fixed by the parties or the court.

The matter will, thereafter, be adjourned for mediation. The content of the mediation is privileged and will not be brought to the attention of the court. However, within 75 days, the matter will be returned to the court where we will continue litigation or place a settlement on the record in keeping with the mediation agreement. Despite the 75 days set forth in our protocol, I will not concern myself with an arbitrary adherence to the protocol. If I am told that mediation is working but more time is needed, I will provide the parties with a reasonable period of time to work out their differences.

Any matter that is unresolved may be subject to mediation, whether it be financial, custodial or grounds.

We have taken steps to avoid situations where there is a gross imbalance in the respective positions of the parties, financial or emotional, to avoid the mediation process. It is also agreed that if there are real issues of domestic violence, then mediation may not be appropriate.

I believe that this pilot program is in keeping with your organization’s mission statement, “to increase public awareness in the use of family and divorce mediation.”

I look forward to all of us continuing to play a meaningful part in mediation throughout this city and state as we collaboratively attempt to clean up the mess I have come to think of as “Divorce, New York Style.”

Jeffrey D. Lebowitz is a judge of the Court of Claims and Acting Supreme Court Justice in Queens County assigned to the matrimonial term. The opinions expressed in this article are his own.

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