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The New York Court of Appeals Thursday sanctioned a highly controversial practice that enables custodial spouses to “double dip,” or draw child support twice from the same income stream. The immediate effect of the ruling is that an Albany, N.Y., physician must pay his ex-wife two-thirds of his net income, about $91,000 a year, since his child support calculation ignores the fact that she is already drawing from the value of his medical license. In a 5-2 ruling, the court agreed with the Appellate Division, 3rd Department, and found no statutory authority for deducting enhanced earning contributions from the child support calculus. The majority concluded that “it appears that the Legislature did not wish to have a child’s lifestyle and support altered based on a distributive award.” In a strongly worded dissent, two judges criticized the court’s “wooden application of the statutory formula,” complained that neither the trial nor appellate court took a real-world view of the impact of its holding and called for far narrower application of O’Brien v. O’Brien, 66 NY2d 576 (1985). In that case, the Court of Appeals became the first — and last — court of last resort to hold that a professional license is marital property subject to equitable distribution. Thursday’s ruling raised a stir among the bench and the bar and is likely to become a popular topic on the continuing legal education circuit, observers said. It involved a physician, Dr. Robert K. Holterman; his wife of 19 years, Amy; and their divorce in Albany County Supreme Court in 2002. Ms. Holterman, a homemaker for nearly the entire marriage, suffers from chronic fatigue syndrome and fibromyalgia. The couple has two children. Supreme Court Justice Joseph Cannizzaro of Albany awarded Ms. Holterman $35,000 annually in maintenance and $21,288 annually as an equitable share of Dr. Holterman’s enhanced earning capacity attributable to his medical license. He was ordered to pay yearly child support of $34,876. The child support was based on Dr. Holterman’s income, excluding spousal maintenance but including the value of the medical license. On appeal, Dr. Holterman’s attorney, Michael P. Friedman of Friedman & Molisek in Delmar, Albany County, offered the same argument made with mixed success in similar cases — that it was “intellectually dishonest,” unfair and contrary to Court of Appeals precedent to base child support partially on income that was already awarded to Ms. Holterman. Shawn D. Flaherty of Albany’s Arroyo, Copland, Flaherty & O’Brien, counsel for the wife, insisted that nothing in either the statute nor Court of Appeals precedent supports Dr. Holterman’s position. Last summer, the 3rd Department ruled against Dr. Holterman, finding “no controlling case law or statutory authority to support defendant’s argument that the annual payment he makes to satisfy the equitable distribution of his enhanced earnings is deductible in computing his child support obligation” (see 307 AD2nd 442). Since then, Justice Robert A. Ross of Nassau County Supreme Court, in Goodman v. Goodman, 201099-00, has agreed there is a lack of authority on the issue but found that an enhanced earnings distribution should not be included in calculating child support obligations. More recently, in April, the 2nd Department weighed with Murphy v. Murphy, 775 NYS 2d 370, in which it concurred with the 3rd Department. HIGH COURT SPLIT Thursday, the question split the Court of Appeals. The majority, led by Judge Victoria A. Graffeo, agreed explicitly with the 3rd Department and implicitly with the 2nd. Graffeo said neither of the two key precedents cited by Dr. Holterman — McSparron v. McSparron, 87 NY2d 275 (1995) and Grunfeld v. Grunfeld, 94 NY2d 696 (2000) — apply here. In both of those cases, the court said spousal maintenance and enhanced earnings awards should not come from the same income stream. But it has never applied anti-duplication principles to child support and specifically declined to do so in Holterman. “We hold that the husband’s proposed reallocation formula — or any formula that requires a deduction of a distributive award paid over a period of years from the licensed spouse’s income for purposes of calculating child support — is impermissible under the CSSA,” the Child Support Standards Act, Graffeo wrote. “Had the Legislature intended to make distributive awards deductible from one parent’s income and includable in the other’s, it could easily have so provided.” Graffeo said it appears the Legislature, in not making such awards deductible, wanted to ensure that a distributive award did not diminish child support. She was joined by Chief Judge Judith S. Kaye and judges Carmen Beauchamp Ciparick, George Bundy Smith and Albert M. Rosenblatt. Judge Robert S. Smith dissented in an opinion with Judge Susan Phillips Read. The dissenters said all of the courts that considered Holterman mechanically adopted “an illogical and unfair method of allocating the parties’ income for purposes of calculating child support.” They said none of the courts considered the overall fairness of their rulings. “It makes no sense at all to calculate child support as if no such distribution had occurred — as though the transferring spouse still owned the asset and received the income it generated,” Smith wrote. “Yet the majority concludes that this irrational procedure is required by the CSSA — as indeed it would be, except that the CSSA expressly permits departure from its formula to avoid an ‘unjust or inappropriate’ result.” ‘ATTACK ON O’BRIEN Smith and Read also attacked O’Brien, stopping just short of calling for its withdrawal. They observed that in the 19 years since the Court adopted the O’Brien rule, not a single other state has followed suit. The dissenters also recognized that O’Brien has been roundly criticized and suggested that any benefits of the rule are outweighed by the “complexities and uncertainties” it has imposed on divorce litigation. “It may be doubted whether an innovation which has attracted so little imitation, and so little praise, will endure forever,” Smith wrote. Yet, in not urging the court to “now overrule O’Brien,” Smith proposed a “more modest” solution — “that O’Brien be applied only in those situations where there is a problem for O’Brien to remedy — not where O’Brien puts the parties and the court through a complex and largely empty exercise.” Matrimonial law expert Timothy M. Tippins, an adjunct professor at Albany Law School and a columnist for the New York Law Journal, said the decision will have “perverse results,” particularly in those cases where it is the custodial parent paying a distributive award under O’Brien. “Say a [custodial] mother is required to pay thousands of dollars per year to the father as a distributive award,” Tippins said. “She no longer has that income available to her to use for the children. Then, adding insult to injury, the father will pay no child support on that income. The result is a lower child support award because of the failure to reassign income.”

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