Outside Counsel

Equitable Distribution and License Acquired During Marriage

, New York Law Journal


Albert J Emanuelli
Albert J Emanuelli

The New York Legislature is considering the viability and merit of continuing the long-standing approach of equitably dividing the enhanced earning capacity of a license between divorcing spouses pursuant to its Domestic Relations Law, O'Brien v. O'Brien, 66 N.Y.2d 576 (1985). This article offers some thoughts on whether New York's Domestic Relations Law should continue to provide to the non-licensed spouse a share in the value of a license acquired during the marriage for the non-licensed spouse's contributions as a distributive award of property or by some new form of maintenance.

It addresses several questions. First, is there a significant difference in evaluating and distributing the enhanced earning capacity generated by a license recognized as an asset under DRL Sec. 236(B)(5) and evaluating and distributing the enhanced earning capacity of a "career" or" career potential" not generated from an asset? Second, if the current concept of evaluating and sharing the enhanced earning capacity generated by a license between divorcing spouses by a distributive award is to be eliminated, how best does the Legislature craft new language to appropriately provide for that property award to the contributing non-licensed spouse?

Third, some foreign jurisdictions differ from New York State's equitable distribution property approach and award rehabilitative or reimbursement maintenance to the contributing non-licensed spouse. If this approach were to be now adopted in New York, what factors would the Legislature craft to measure the award? What would be the guidelines and parameters for the courts to follow when reimbursing the non-licensed spouse for his or her direct and indirect contributions to the acquisition of that enhanced earning capacity?

Would not a special classification of maintenance have to be created so it was not modifiable, dischargeable in bankruptcy, taxable to the recipient and not tax-deductible by the payer as normal maintenance in order to achieve an equitable result if the distributive award of property were eliminated? How then would the rehabilitative maintenance factors and process to evaluate the non-licensed spouse's contributions be materially different?

O'Brien Rationale

The filed briefs and oral arguments before the Court of Appeals in O'Brien satisfied pivotal points raised by the judges and were instrumental in leading to its decision. For example:

a) The license was in fact an asset by all standard and accepted definitions of property and should be the place and point of beginning when balancing the equities between the divorcing spouses as opined by Judge Richard Simons.

b) The methodology used to evaluate the enhanced earning capacity of the license had already been established by accepted standards, likened to the evaluation of one's working life in a wrongful death action.

c) Judge Fritz Alexander concluded that while the holding in O'Brien would have to apply to all licenses, including a driver's or hairdresser's license, their evaluation would prove to be too miniscule to be worth pursuing. That has held true over the past 28 years.

d) The possibility to double count the value of the license and other assets acquired during the marriage concerned Judge Judith Kaye. It was resolved as outlined in Loretta O'Brien's briefs by suggesting the concept of a Merger Doctrine; ("Valuing Professional Licenses, Before, During and After Merger Into the Career").1 That is, there comes a time when the license holder achieves his or her station in life, whether as a salaried employee or non-salaried enterprise. The value of the enhanced earning capacity of the license holder's career has been achieved and the separate value of the license has now merged and been subsumed into the traditional assets acquired.

e) A distributive award of property does not relegate the license holder to a life of involuntary servitude in a line of work they may no longer wish to pursue or be able to perform. The property award is a share in the asset for the non-licensed spouse's contribution. The distributive award obligation is sacrosanct, regardless of any potential change in lifestyle by the licensed spouse because the license holder leaves the marriage with that enhanced earning ability whether it is used or not. Otherwise, the license holder could feign a change in one's career path or health to avoid the obligation. But a remedy exists to the license holder if there is an inability or hardship which renders it difficult to satisfy the obligation. It is found in yet a new concept, the Modifiable Distributable Award.

f) The Modifiable Distributable Award provides a remedy to the license holder by application for a temporary suspension or reduction of the obligation based on a substantial change in circumstances. In this way, the distributive award is preserved and further litigation greatly reduced.

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