Supreme Court reaffirms that professional goodwill is not marital asset; finds abuse of discretion in family court’s alimony award but provides no explanation to justify its modified award

Posted Monday, January 11th, 2010 by Gregory Forman
Filed under Alimony/Spousal Support, Attorney's Fees, Equitable Distribution/Property Division, Of Interest to Family Law Attorneys, South Carolina Appellate Decisions, South Carolina Specific

Today’s Supreme Court opinion in Dickert v. Dickert, 387 S.C. 1, 691 S.E.2d 448 (2010), resolved interesting issues of equitable distribution and alimony.  However on the alimony issue greater explanation of its rationale would have been useful.  Further the court failed to explain the factors approving the attorney fee award.

Dickert involved the dissolution of a lengthy marriage in which Husband obtained his college and dental degrees and developed a substantial dental practice while wife mainly took care of the home and children.  After twenty-nine years of marriage, around the time the parties’ last child was emancipated, Husband began an affair and decided he wanted out of the marriage.

At trial, in valuing and dividing the marital estate, the family court determined the value of Husband’s dental practice by including “enterprise goodwill” in the amount of $256,519 to arrive at a value of $360,000.  However, the Supreme Court has repeatedly held that “professional goodwill” is not a marital asset and is not subject to equitable distribution.  In Dickert the Supreme Court repeats its definition of professional goodwill: “It attaches to the person of the professional man or woman as a result of confidence in his or her skill and ability. It does not possess value or constitute an asset separate and apart from the professional’s person, or from his individual ability to practice his profession. It would be extinguished in the event of the professional’s death, retirement or disablement.”

The logic is that such professional goodwill is actually the basis of a professional’s income; in this case, the court held Husband’s income to be approximately $360,000 per year.  Because the “enterprise goodwill” that the family court valued and distributed was in the nature of “professional goodwill” (that is, it would extinguish on Husband’s death) the Supreme Court reversed this award of goodwill.  Because it was removing this “goodwill” from the marital estate, it also remanded the 55-45% equitable distribution award (in Husband’s favor) for reconsideration.

The Supreme Court’s alimony decision could have provided greater analysis and explanation.  The family court awarded wife $8,600.00 per month in permanent periodic alimony.  It appeared that the parties’ marital lifestyle had greatly increased the last 1 ½ years of marriage, after they moved into their “dream home” in May 2002.  Husband’s main contention is that the award of $8,600 a month allowed wife to enjoy a standard of living better than the marital standard.  Husband pointed to several factors to show that during the majority of the marriage the couple did not live an extravagant lifestyle: for approximately twenty years of marriage the couple lived in the Sugar Creek subdivision; they did not move into Thornblade [their “dream home”] until May 2002; they did not drive luxury automobiles; and the wife even admitted that the standard of living she enjoyed in the Thornblade house was not the standard of living she enjoyed during the course of marriage.

Husband’s expert testified that the income wife needed to maintain the pre-May 2002 lifestyle was $4,669 per month; Wife’s argued she deserved $10,290 per month to maintain the “marital” standard of living.  The family court found Husband’s expert was generally correct concerning Wife’s alimony needs.  The Supreme Court and the family court noted that Wife’s expert only considered two years in determining alimony.  Further Wife remained unemployed.  Instead of seeking employment, the court noted that she spent a significant amount of time playing tennis at the Thornblade Country Club.  The family court imputed income to wife of imputed earnings of $1,167 per month to Wife, a figure neither party appears to have challenged.

The Supreme Court found an abuse of discretion in the family court’s award of alimony and reduced the alimony award to $7,000 per month.  Given that the Supreme Court cited with approval Husband’s expert on the Wife’s need of only $4,669 per month in income to support the marital lifestyle, it would have been nice for the Supreme Court to provide some explanation as to why it rejected Husband’s suggestion of $3,502 per month ($4,669 in need minus $1,167 in imputed income) in permanent periodic alimony or some suggestion as to why $7,000 is a more appropriate award than $8,600 per month.  If alimony was to be based on the pre-May 2002 lifestyle than the Supreme Court’s award would appear to dissuade Wife from becoming self-supporting to the extent possible.   If alimony was to be based on the current lifestyle, the Supreme Court should have explained why it was reducing her award.  If alimony was to be based on some combination of the historical and current lifestyle, some explanation as to how courts are to weigh this combination would have been helpful.

Finally the Supreme Court affirmed the award of $99,000 in attorney’s fees to Wife, explaining that the family court analyzed the appropriate factors and did not abuse its discretion in a case presenting complex issues that required a great deal of time and energy to assess.  Again it would have been helpful for the Supreme Court to provide some explanation of the factors it, and the lower court, relied upon in reaching its decision.

While the Dickert decision does an excellent job explaining why professional goodwill should not be equitably distributed, it provides the bench and bar little guidance on how alimony should be set when the marital lifestyle increases significantly in the last few years of a lengthy marriage or what factors might justify an attorney fee award that approaches six figures.  The Supreme Court’s finding that $8,600 a month in alimony was an abuse of discretion but that $7,000 a month was appropriate seems completely arbitrary.

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