In August 2011, I posted an article on this blog entitled "Appellate Court Rejects ‘Rule of Thumb’ Formula to Calculate Alimony – Sort Of." In that article, I noted that there was a dirty little secret used by judges and lawyers in New Jersey to come up with a "ball park" as to what alimony should be. This "rule of thumb" does not take into account all of the statutory factors. Rather, the formula simply subtracts the lower income (real or imputed) from the and multiplies the difference by a percentage. I have been told that that percentage is 30% or one-third in the northern part of the state and 25% in the southern part.
More importantly, I noted that judges really cannot use this formula and must make findings considering the law and all of the statutory factors. This post was as a result of a case where the judge seemingly used the formula to determine alimony. The Appellate Division remanded the matter to the trial court to determine alimony using the alimony factors.
So much to my surprise, a new case came out yesterday emanating from a legal malpractice case filed by a litigant against her divorce attorney. Lo and behold, the Appellate Division notes that using this "rule of thumb is an appropriate way to calculate alimony.
In the underlying divorce case, which was noted as contentious, the parties were married for 22 years. They had two children. The husband’s (who was a lawyer) average income over the 3 preceding years was $246,000. The wife’s earning history was $42,000 per year. Under most factors in the alimony calculus, this should have been a permanent alimony case – except the husband apparently did not want to pay permanent alimony and long and acrimonious negotiations ensued. Without getting in to specifics, it is alleged that the wife was ultimately pressured by her attorney into accepting less alimony than she might have received and limited duration alimony. She alleged that she received inadequate consideration for waiving permanent alimony under the circumstances. As a result, she filed a legal malpractice action.
Her expert in the malpractice action issued a report, in which she cited the rule of thumb as a means to calculate alimony to show that the amount was insufficient. The wife’s divorce attorney moved for summary judgment saying that this was a net opinion. An expert’s opinion must be based upon facts or data and cannot be speculative. Moreover, the opinion must be based upon generally accepted objective standards of practice. The divorce lawyer’s motion was granted by the trial court and the case dismissed. The Appellate Division reversed this finding.
Of note, the rule of thumb was embraced:
Consequently, the expert opined that the accepted standard of care required Grayson to recognize that plaintiff would be entitled to permanent alimony and to act accordingly. So
measured, the expert concluded that the settlement in this case was substantially below the range of award she most likely would have received at trial because plaintiff waived her entitlement to permanent alimony in exchange for a lump sum $50,000 payment;
gave up her right to receive an award of counsel fees for no apparent consideration; and abandoned her option to retain the marital home worth $720,000 for only her rightful one-half share of the equity therein.
The expert laid the foundation for this conclusion, detailing step-by-step the methodology she employed. Before quantifying the amount of anticipated alimony to be awarded at
trial, the expert correctly recognized — citing Crews v. Crews, 164 N.J. 11 (2000), and Lepis v. Lepis, 83 N.J. 139 (1980) — that the purpose of alimony is to allow the dependent spouse to enjoy the standard of living she had during the marriage and
that the other spouse should pay alimony in that amount, if he is able to. The expert then estimated the range of yearly permanent alimony to be between $65,000 and $72,000 based on each party’s historical earnings and utilization of a formula widely accepted amongst members of the matrimonial bar.
As to the former, the expert used the average of the husband’s income over several years to account for spikes and dips in his solo law practice, and arrived at a range of between $200,000 and $250,000 annually. Plaintiff, on the other hand, after returning to work in 1999, averaged about $42,000 per year. The expert then derived a yearly alimony figure by taking one-third of the difference between the spouses’ incomes. In doing so, the expert relied on a generally accepted objective standard of matrimonial attorney practice and not simply a standard personal to her. See Fernandez v. Baruch, 52 N.J. 127, 131 (1968). She also opined, based on her experience, that the ultimate alimony award would be in the higher estimated range because the weight of statutory factors — the couple’s age, established standard of living, and large disparity in income and earning capacity — heavily favored plaintiff and therefore justified the upward adjustment.
In determining that the expert’s opinion was not a net opinion, the account accepted that the expert employed "a generally accepted professional standard" to calculate alimony. While the court noted that the expert’s report was not beyond attack at trial, the plaintiff had a right to have the jury determine the credibility and weight of the evidence.
So the take away from this case is that the rule of thumb likely exists as a valid tool to estimate alimony. However, if there are special circumstances, the factors still have to be considered. Whether judges can use it remains unclear but is probably unlikely.
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild’s Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or firstname.lastname@example.org.