You could not have the ability to scale back your youngster assist funds in case your voluntary sale of your small business reduces your earnings | Fox Rothschild LLP
More and more often we see medical practices being bought out by hospitals, big medical companies and venture capitalists who combine the practices into mega-practices or networks. In these cases, often a doctor in a group has no power to stop the sale even if they wanted to, so the question of whether it really is a voluntary sale is a real question (even if the doctor eventually signs it off) . .) But what if a solo or small practice is voluntarily sold, reducing the professional’s ability to pay child support and child support? Can this professional take legal action to obtain a reduction in his maintenance obligations?
This is exactly the scenario that transpired in the Oshidar v. Oshidar case, an unreported (non-precedent) decision by the Appellate Division that was released on October 26, 2021. In this case, the parties divorced in 2012 after nearly 20 years of marriage. The husband, a dentist in his own practice, was earning $428,127 a year at the time. Just two years after the divorce, the husband sold his practice for $570,000 (received a down payment and then $96,300 a year for 5 years). He then took a job as a dentist (clerk) in a dental clinic and earned about half of what he had previously earned. A little later he applied for a reduction in his maintenance obligations. In February 2015, “the trial court denied the defendant’s request for a reduction in child support payments, dismissed his argument of change of circumstances and found that his job change was “both voluntary and temporary.”
The husband worked at the clinic for 2 years before opening a new private dental practice in 2016 (sounds like there must have been a non-compete clause in the terms of sale – although the opinion doesn’t refer to it). In late 2019, he submitted another request for alimony, which his wife objected to. Based on the documents submitted, the court found that the husband had shown a change of circumstances and ordered a plenary hearing. Early in the plenary hearing, the trial judge ruled out testimony as to whether circumstances had changed, stating “… that he “had already determined that a change in circumstances warranted a review of maintenance, so we shouldn’t have to talk about that.” .”” When the wife, who had represented herself, attempted to cross-examine the husband, “…whether the defendant had ‘voluntarily’ chosen to ‘sell [his] lucrative practice to start a new one’ the court ruled out this question. At the conclusion of the hearing, the trial judge reduced child support from $12,500 per month to $8,000 per month.
The wife appealed and the Appeals Division reversed the finding that the husband had even demonstrated a change of circumstances. The case provides a good discussion, if not an introduction, to the law governing requests for modification of child support payments, particularly from a self-employed debtor. The Appeals Division agreed with the wife’s arguments regarding the contestability of the voluntary nature of the business sale. The court found:
The plaintiff argues that the trial court overlooked important legal principles by failing to conduct a thorough analysis of the defendant’s motives, reasonableness and good faith in selling his dental practice and then upheld the defendant’s objection when the plaintiff attempted to do so Address the problem yourself by asking the defendant at the plenary hearing. Do we agree.
The records, including the trial court’s January 2020 order, show that the court failed to adequately investigate the motives, reasonableness and good faith of the defendant’s post-divorce career choice. The court made no meaningful attempt to distinguish between the 2015 and 2020 amendments on these important issues, although the 2015 motion was denied and the 2020 motion was granted.
The Appeals Department liked the voluntary sale to someone who is willing to give up a job. The law is fairly clear that in most cases, debtors cannot voluntarily change jobs or careers and then receive a cut in assistance, even if the change is made in good faith. Here the Appeals Division ruled:
We conclude that the trial court’s finding that the defendant had discharged his burden of proof in relation to changed circumstances was “apparently unsupported” by the case-file. Although it didn’t exactly line up with “quitting job” because the defendant sold his business, and while technically he didn’t “change careers” because he remained a dentist, the changes in defendant’s employment status in the years following the divorce fell into this area what the court saw as a voluntary change of circumstances. Given its finding, the trial court was required to conduct further inquiries into the defendant’s motivation, sanity and good faith while making these critical life decisions. This preliminary investigation was necessary to determine whether the defendant really fulfilled his burden of proof by outweighing the credible evidence to prove changed circumstances. Only then would a second Lepis analysis be required to determine whether a maintenance reduction was justified. In addition, the trial court should have allowed the plaintiff to cross-examine the defendant to testify in order to resolve the issues of the defendant’s motivation, appropriateness and good faith. Without the steps outlined above, the trial court cannot support its judgment and its decision constitutes an improper exercise of discretion.
This is not the end of the story as the matter has been referred back to a new plenary hearing.
Well, maybe the man’s reason for the sale was legitimate. It just wasn’t addressed in the opinion and possibly not in the application papers below. There can be many business, personal, or health reasons why such a move made sense. Perhaps there was an expectation that income would not change significantly that was not fulfilled. Perhaps there was more competition, lower insurance reimbursements, or other reasons why revenue might be lower for this type of practice, with or without sales. Who who practices family law hasn’t represented a doctor or surgeon who made a high six or seven figure sum in the past, only to now make a lot less because the practice has changed? I mentioned one of these changes in the first paragraph, which has resulted in many doctors losing their jobs and/or having their incomes cut significantly.
Furthermore, although not mentioned in this Opinion, prima facie (first) indications of a change in circumstances are not relevant but essentially rebuttable presumptions. The reason for this is obvious, there is no detection or possibility to cross-examine a party in a motion. In any case, it will be interesting how this case ultimately ends.