Upkeep formulation: One other warning message | Fox Rothschild LLP

Over the years I’ve blogged about alimony formulas, “rules of thumb,” and similar types of maintenance. I say done because, in most cases, courts are not allowed to use a formula to determine maintenance. There are basically two types of formulas that we often see. You take a percentage of the income differences (or imputed incomes) of the parties to get a fixed amount of maintenance. The other – often used in cases where a person’s income fluctuates significantly from year to year – calculates alimony payments as a percentage of total income, often up to a ceiling, but sometimes not. In most cases there is also a reason for maintenance. Just as a court cannot use a formula for fixed alimony, neither can it use a formula for variable alimony, although I have seen the Appeals Department confirm such constructs from time to time.

On November 16, 2020, in the case of PJWVEBW, the Appeals Division issued an unreported (non-priority) opinion that interestingly addressed an agreed formula. For the last 4 years of marriage, the husband’s average income was $ 910,000 per year. When the parties divorced in 2013, they agreed that the husband would pay the wife 25% of the husband’s total gross compensation up to a total of $ 1,250,000.00 in maintenance per year (payable as 25% of his salary upon receipt and 25% of the bonus The agreement also contained a standard clause whereby the parties could try to change the maintenance due to a change in circumstances.

For the first five years after the divorce, the husband’s average income was $ 850,000. However, in October 2017, he was notified that he would be released from January 5, 2018. After looking for a job, the husband got a job with a basic income of $ 200.00 ($ 220,000 less than his previous basic income). . The husband then submitted an application to reduce his alimony and child support payments. The court found that, at first sight, there had been a change in circumstances and ordered the discovery and a plenary hearing. As a result, both parties hired employability experts. Prior to the plenary hearing, the husband accepted a new job with a salary of $ 265,000, with the potential for bonuses and stock options, which updated the expert reports.

After the plenary hearing, at which the experts differed as to whether the husband had carried out a job search in good faith, the court granted the plaintiff’s motion to change his maintenance obligations by asking the plaintiff to pay 25 percent of his salary and bonuses on the basis of his compensation to be paid by his new employer and the appeal followed. The appeals department upheld the maintenance decision.

However, the rationale for the decision was fascinating. First, the Appeals Division agreed with the court that the 25% formula was not limited to just the husband’s employer at the time of the divorce. However, the Appeals Department went further, in some ways suggesting that the plenary hearing was not even necessary when it did:

“Given our interpretation of the support agreement, the plaintiff did not have to prove any change in circumstances. Even if the plaintiff had to prove such a change, the findings of fact made by the family court show that the plaintiff had a change in circumstances which justified a reduction in his maintenance obligation. It is undisputed that the plaintiff was fired from his job at
Barclays. So he lost the position that paid him over $ 900,000 a year. (Emphasis added)

The Appeals Division also denied the wife’s claim that the husband was voluntarily underemployed and contradicted the court’s view that the husband had made good faith efforts to find new employment in order to maximize his compensation.

The cause for concern was the finding that the agreement did not require the husband to demonstrate any change in circumstances. Despite an apparent reduction in income close to $ 400,000 or more, it didn’t seem to make a difference as the formula was simply enforced. Perhaps it would not have made any difference in this case because the court found that the job search was done in good faith and circumstances changed. However, for the same reason, it might not matter whether the agreement is being sought in good faith if the agreement is strictly enforced. While the outcome in this case may have been fair (although I suspect the woman disagrees), if a future court follows that reasoning, the outcome may not be as fair.

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