An Arizona appeals panel has thrown out a divorce court’s calculation of the amount that the ex-wife of a Greenberg Traurig partner deserves for the value of his professional reputation.

The Arizona Court of Appeals in Phoenix on October 2 ruled unanimously that the price of attorney E. Jeffrey Walsh’s professional goodwill was not limited to the stock redemption value of his stake in the firm, which totaled $140,000. The court found that the method a family court judge used to determine the worth of Walsh’s goodwill — the value of his reputation that is likely to generate future business — was too restrictive.

“The value of ‘goodwill’ is well established in the case law, and it cannot be eliminated by a recital in the corporate documents,” Judge Donn Kessler wrote for the appeals panel. “The family court should have considered Husband’s personal goodwill in valuing Husband’s law practice beyond his stock redemption interest in the firm.”

The panel also found that the lower court incorrectly determined the award of $2,000 in child support. The panel remanded the case for a recalculation of both amounts and awarded the ex-wife, Cheryl Walsh, attorney’s fees for her appeal.

Jeffrey Walsh is co-chairman of the litigation group in the 65-attorney Phoenix office of Greenberg Traurig. His practice focuses on business, real estate and construction litigation. He did not respond to messages seeking comment.

Cheryl Walsh, also an attorney, said it was uncertain whether he would appeal. “We hope that he’ll come to his senses, but if he doesn’t, we’re ready to go to distance,” she said.

The Walshes were married in 1986 and enjoyed “an extremely high standard of living during their marriage,” according to the decision. She graduated from Washington & Lee University School of Law in 1982 and he graduated from University of Pittsburgh School of Law in 1979. They had three children, including one who is still a minor.

At the time that she filed for divorce in 2010, Cheryl Walsh owned a public relations business that had experienced a dramatic decline in revenue during the recession. Jeffrey Walsh “continued to earn substantial compensation between 2006 and 2009,” the court wrote. Cheryl Walsh is now a shareholder in the Phoenix law firm Burch & Cracchiolo.

During the divorce proceedings, they disagreed about the value of his professional goodwill. He argued that it should have been a concrete, “realizable benefits” number of $140,000 — his stock redemption value pursuant to the firm’s shareholder agreement.

She argued that the value of goodwill should have totaled about $1.3 million, based on a “capitalization of earnings” approach that took into account her husband’s tax returns, historical income performance, earning sustainability, reputation and client loyalty.

The family court found that using her method would be “mere speculation,” especially if he were to leave Greenberg Traurig.

“Wife’s contention that Husband could move from [the firm] with his book of business, does not take into account a number of difficulties with such a move including conflicts that may occur at another law firm and the assistance of [the firm's] ‘platform’ in assisting Husband to bring in clients.”

But the appeals court said the lower court’s valuation based on the stock agreement was too literal. “Those realizable benefits apply to Husband’s interest in the firm’s net assets, not his goodwill based on his reputation and experience,” Kessler wrote.

“We conclude that the family court conflated the firm’s net assets which were subject to the [shareholder] agreement with Husband’s own goodwill, and that the evidence demonstrates that Husband possessed goodwill beyond the amount designated by the family court,” he wrote.

Joining Kessler in the opinion were Patricia Norris and Peter Swann.

Contact Leigh Jones at ljones@alm.com.