Spousal Support Always Modifiable Once Awarded by Family Court

If the parties to a divorce do not settle their divorce, then a family court will decide the issues in the case, including spousal support and whether income should be imputed to a non-earning spouse. The court's decision is discretionary thus, what the court orders will stand unless that powerful discretion is somehow abused; that is precisely what happened in Loutts v Loutts regarding the issue of alimony.

The Loutts case is an interesting case study on the valuation of a business and the calculation of alimony. Both spouses had PhDs and both were "hands-on" in the running of a global laser business developed by husband.

The Washtenaw Circuit Court cannot seem to get the alimony equation correct as the case has made two trips to the Michigan Court of Appeals and the appellate court has twice reversed the decision of the lower court. The first appellate decision addressed the "double dip" concept of alimony: where the business is valued by capitalizing the income derived from the operation of the business while, at the same time, factoring that same income stream into a spousal support calculation. The court cannot count the same dollars twice. 

The second appeal involves the statute that allows alimony to be modified by the family court upon the petition of either party. The right to modify alimony, once awarded by the trial court, cannot be extinguished according to this case. The only way to foreclose any future modification of alimony is for the parties to make this agreement themselves, and to expressly memorialize this bar in their initial divorce decree.

A trial at which a family court makes the initial alimony determination will keep the question open, subject to modification, apparently forever. The family court cannot place what is known as a "presumptive term" on an alimony award and then deny any request for modification filed after the term expires. Once awarded by the family court, the question of spousal support remains open.

The irony of this case is that, although the reviewing court held it was error to foreclose the request for modification of alimony, it concluded the error was harmless because Wife did not persuade the family court that there was a change of circumstances to merit an extension of her alimony payments.

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Double-Dipping for Alimony

The original "double-dip".

Many of us, when we think of “double-dipping,” immediately envision George Costanza nonchalantly eating chips and dip at a boring party. He bites the chip, dips, bites again, dips again, oblivious and happy.

Meanwhile, a fellow party-goer and disgusted onlooker cannot contain the impulse to put a stop to this obvious dip-contaminating behavior and confronts George. Inane hilarity ensues; check it out here.  [Note: Post-Seinfeld generation and long-time Seinfeld enthusiasts – you’re welcome.]

Double-dipping, in the world of family law, typically refers to the way assets are valued in the division of a marital estate.  A recent Michigan Court of Appeals decision, Loutts v Loutts, addresses this issue of “double-dipping” in the spousal support context.

This divorce case originated in the Washtenaw County family court.  One of the main issues in the case was how to determine an appropriate spousal support award where the marital assets included a business valued at more than a quarter million dollars.

The husband started, owned, and operated the business. When the family court awarded half of the business value to his wife, the question became: what income should be imputed to husband now that half the value of the business had been conveyed to wife?

When determining spousal support, the parties’ incomes must be determined so that the family court may decide how to equitably balance the incomes. The Michigan Court of Appeals has articulated a balancing test such that:

the primary purpose of spousal support is to balance the parties’ incomes and needs such that neither party will be impoverished, and spousal support must be based on what is just and reasonable considering the circumstances.

The family court can only perform this balance test on a case-by-case basis – typically unwilling to follow any bright-line rules for determining the rate and term of a spousal support award.

The family court in Loutts, after awarding wife half the value of the business, imputed approximately $130,000 income to husband.  This imputed income was utilized to “equitably balance” the incomes of the parties.

In doing so, the family court judge relied on case law to determine that “the value of a business may be used for the purpose of either property distribution or spousal support, but not both.” On appeal, wife argued that the court should have used the full-value of the business in determining her spousal support award.

The Court of Appeals disagreed, remanding this issue back to the family court for a re-determination of spousal support based upon the specific facts and circumstances of the case.  In their opinion, the Court of Appeals stated that the trial court’s reliance upon the Heller v Heller case was misplaced to the extent that, “the appellate court stated that its determination that a double-dip was inequitable was based on the facts of that case alone and was not a determination that double-dipping is never permissible.”  [The emphasis is ours.]

The obvious "take-away" from this recent case is that, when it comes to determining spousal support, bright-line rules simply do not apply. Rather, the family court judge should consider a variety of factors, including: the conduct of the parties, their ability to work, their ages, needs, health, present situation, prior standard of living, ability to pay alimony, and general principles of equity.

Double-dipping might be ok – given specific factual and equitable circumstances.  Exactly what those circumstances are remains a fuzzy, mutable, arguable enigma, ripe for the art of legal persuasion.

The one constant is that each case before the family court is unique and should be considered so by the judge.

Also of note in the Loutts decision is that the Court of Appeals wasted no time in upholding a 3-year non-compete provision that applied to the business and to which wife agreed, but appealed.  The Court held that you get what you bargain for.

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WSJ Readers Respond Emotionally to Article on Alimony

Alimony, now known as spousal support here in Michigan, is one of those topics in family law that elicits an emotional response from nearly everyone.  In tough economic times, most people have a gut reaction to the concept of paying financial support for an ex-spouse. 

Whether alimony is appropriate, however, is a fact-specific analysis, with each family bringing much different facts into court and into the equation.  A recent WSJ article by Jennifer Levitz takes an anecdotal look at the concept of alimony.  Her readership posted 175 emotionally-charged comments to the article on this apparently sore subject.

Levitz's article focused on the inequities that can result from alimony awards when years pass, and circumstances change.  The article also noted that many states, (Ohio, Pennsylvania, Massachusetts, Oklahoma, Florida, Arizona, and North Carolina, among them), are considering legislation to limit alimony.  Some of the states have activitst groups (with memberships of "burned" former spouses, no doubt) that have hired lobbyists for the task.

In Michigan, spousal support is alive and well; but it's not your Grandfather's alimony.  Unlike child support which is calculated by a formula using the inputs of the relative incomes of the parents, and the number of overnight parenting sessions with the "non-custodial" parent, alimony is always negotiable.

Significant considerations include whether spousal support is forever barred, or whether it is awarded and, if so, whether the award is modifiable.  In some cases, it makes sense to bargain for the certainty of non-modifiable alimony; the payor knows what he's in for, and for how long.  Other cases call for a compete ban on alimony, either because each spouse is professionally equal, the marriage was of relatively short-term, or because the property division favored the "lesser-earning" spouse.

These are all considerations one must take into account as a divorce proceeds toward judgment.

If you are facing a divorce that may include some of these issues, contact our firm to discuss your options.  We can provide you with immediate peace of mind with sound legal advice based on your specific circumstances.

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