New York Divorce Law Blog : New York Divorce Lawyer & Attorney : Law Offices of David A. Gabay, PC : Serving New York City, Long Island, Suffolk County, Nassau County

The valuation of a professional practice in a divorce action in New York is a complex process. There are numerous legal, financial, practical, and evidentiary factors and considerations which must be identified, analyzed, and reconciled before a judge can determine the true value of a practice. 

Lee Rosen, of the Rosen Law Firm in North Carolina, recently published a concise overview of the valuation process. I thought the article did a very good job of identifying all of the steps in the valuation process and identifying the different issues which need to be addressed in a appraisal of a professional practice. The process and procedure for a valuation described by Rosen is generally the same in New York. 

The key to understanding how valuation is done in New York divorce actions is this: (1) there is no single required valuation method or technique, (2) the role of the expert appraiser is absolutely critical, and (3) the Court has enormous discretion in deciding what method to adopt, how to apply the method to the facts of the case, and in deciding the precise value of the practice. This ambiguity leaves a good deal of room for a competent, well-prepared, attorney or appraiser to effectively advance the client’s case.

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Today’s Wall Street Journal  has an article about employers who offer marriage training seminars and classes to their employees. The idea behind the classes is that married employees who are experiencing domestic difficulties are less productive than they would be if their relationships were not so problematic. A recent study has put the cost of this lost productivity at about $6 billion per year.

It seems that employees going through a divorce or other domestic problems have higher absenteeism rates, higher health care costs, increased stress, and increased distractions while at work. 

The same study found that in the year following a divorce, employees lost an average of four (4) weeks of work.

If you own a business or professional practice, an employee who is going through domestic difficulties can place enormous stress on the business or practice. Missed work due to Court dates, interruptions to take calls from children, attorneys, and others associated with the situation, and the distractions of providing documents and information needed to deal with the problem all  impact the successful operation of the business or practice.

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A recent  AP story on MSNBC.com reported that My Space is going to provide law enforcement authorities with information about registered sex offenders using its site. The article is yet another example of the impact My Space and other internet sites have on family law maters today.

In my practice, the internet and My Space have figured prominently in several issues involving children which I have handled in the past 3 months.

In a divorce case, my client’s spouse sought a divorce from my client because the spouse believed my client was involved in inappropriate online conversations with a person my client met on the internet and to whom the spouse believed my client introduced the child of the parties.

One of my custody and visitation cases was made very interesting when my adversary told me my client had posted comments on a My Space page regarding my client’s plans to stop visitation with the other parent of their child.

Finally, my client in a divorce case was being asked by his spouse to take their child to a birthday party and my client did not want to do so. It turned out that the father of the child having the birthday party had a very unusual hobby or interest which was featured on his My Space page.

I’m fairly certain that many of my colleagues could tell similar tales. In today’s environment, the internet and My Space are two sources for information and evidence that cannot be overlooked by a family law attorney.

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An article in today’s New York Post reported on federal statistics showing that the divorce rate in the United States gas fallen to the lowest level since the 1970’s. While this information had first been reported over a week ago by the Post and other major media outlets, there is an interesting aspect of the article which deserves some additional attention.

The article quotes Raoul Felder as stating that he has drafted what he calls “living together agreements” for unmarried couples living together which spell out who gets what assets in the event of a break up.

This type of agreement is essentially a post-nuptial agreement for an unmarried couple. It is based on the general law of contracts and is informed (but not necessarily governed by) the Domestic Relations Law. For owners of businesses and professional practices who are living with someone to whom they are not married, these types of agreements should be considered as one way to deal with some very complex legal issues surrounding the rights of their current partner regarding the business or professional practice.

A carefully crafted ‘living together agreement’ should address the amount of money that should or could be awarded to the partner of the professional or business owner on account of the increase in value of the business or practice during term of the relationship. Also, the agreement should specify the conditions under which such a payment would be made, the method of payment, and the manner in which the payment would be calculated. In effect, this agreement would be a privately negotiated form of equitable distribution.

I am not aware of any case in New York which has interpreted such an agreement. If you know of such a case, please let me know and send me a copy of the decision if at all possible.

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Expert testimony is required to determine the value of a party’s enhanced earning capacity based upon the acquisition of a professional license during the marriage. The quality of that expert’s work, including his methodology, assumptions, and allowance for different variables is absolutely critical to the Court in determining whether to accept or reject the testimony of that witness.

Sometimes, however, a retained expert’s work consists simply of plugging in some biographical information and income figures into a computer program and declaring the results to be his or her expert opinion. Little or no attention is paid to the unique facts and circumstances of the particular case. The Court’s reaction to such imprecise work can be devastating to the expert, the attorney, and the party who retained the expert.

In Somnnenfeld v. Sonnenfeld, Justice Robert A. Ross, the supervising justice of the Nassau County Supreme Court, reviewed and dicected the work of two expert evaluations of the enhanced earning capacities of the parties to a divorce action. The experts’ reports, which both attorneys stipulated to admitting into evidence at trial, were so bad in the eyes of the Court that it rejected them both and decided to appoint its own expert.

Sonnenfeld is an object lesson in the importance of retaining the right expert for equitable distribution purposes. It is also a reminder to attorneys that they are ultimately responsible (to the Court and their clients) for the quality and legal sufficiency of the expert’s report.

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For professionals and business owners involved in a divorce, one of the most emotional and difficult problems they face is balancing the demands of their work with their desire to be a parent to their children. Frequent business travel, unexpected work related emergencies, and the long hours that come with owing a business or practicing a profession often render the typical visitation schedules suggested by judges, attorneys, and child counselors completely unworkable. 

One solution to this challenge is to employ “virtual visitation.” Originally developed in connection with child relocation and estrangement cases, virtual visitation can be an effective tool to keep parents and their children connected and in touch in cases where traditional scheduling is not workable or appropriate.

Virtual visitation uses webcam technology to allow parents and children to see and talk to each other when they are physically apart. Using webcams to facilitate visitation helps keep parents and children connected because they can see each other’s eyes and faces and interact with each in real time, and the time spent together can be much more emotionally satisfying than a traditional telephone conversation.

Several states already have legislation authorizing virtual visitation, although New York is not one of them.  However, if the parents can agree on how and when to allow these visits, I am fairly confident most judges would encourage and approve of the arrangement

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Owing child support arrears may affect your ability to get a passport to travel abroad. The United States Department of State’s rules and regulations require that a passport application be denied if the applicant is in arrears on his or child support payments. Arrears in excess of $2,500.00 will result in the denial of a passport, and that threshold can drop to as low as $1 depending on the state in which the applicant resides. 

The limit for New York residents is the federal limit of $2,500.00.

If your application is denied because of child support arrears, the only way to address this issue is to reduce the arrears to an acceptable level. Once that is accomplished, your state child support agency will notify the federal government (the Department of Health and Human Services). The State Department advises passport applicants that they will need approximately 5-10 business days from the date the arrears are reduced for your name to be removed from the list of person to be denied a passport.

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Almost all shareholder or operating agreements contain provisions regarding the sale of a partner’s interest. Generally, the agreements restrict the sale of a partner’s interest to outside parties (by requiring that the other partners agree to the sale or by giving them a right of first refusal). 

One issue frequently overlooked by corporate attorneys when drafting these sale or transfer provisions is the effect of a divorce of a partner on the other partners and the operation of the business itself. If a partner is divorced, his interest in the business can be awarded in whole or in part to his spouse. If that happens, your new partner is now your old partner’s ex-spouse. This can cause a severe disruption in the operation of the business, to say the least.

However, this situation can be avoided and the health of the business preserved with some advance planning and careful drafting. 

In my opinion, the most effective way to protect the business and its partners from having to take on an ex-spouse as a new partner is to provide language in the agreement specifying that the entry of a final judgment of divorce for or against any partner automatically results in the affected interest being offered for sale to the business or the remaining partners. The cost of purchasing the departing partner’s interest can be structured in any number of ways and can be paid for by an appropriate insurance policy.

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