Looking at Divorce with Big Eyes

January 12, 2015 Leave a comment

Although I have not yet seen the movie Big Eyes, I am familiar with the premise of the movie. This movie tells the story of the relationship between Margaret Keane and her second husband, Walter Keane. Ms. Keane is known for her paintings (usually of children) with very large eyes. This “based on a true story” film, shows the rise in popularity of the paintings, how Walter took credit for the paintings, and how Margaret eventually brought a law suit to reclaim her own artwork.

The purpose of this blog is not to provide a review of the movie, but rather to look at certain facts in this story through the lens of current Pennsylvania Family Law. So, let’s posit that we have a couple. One of the spouses is a prolific painter. The other is not. (Let’s avoid the whole aspect of one person taking credit for the paintings of the other). Let’s also assume, the parties are divorcing, which is what the Keanes actually did. How could these paintings be treated?

There are several ways that this situation could be considered.  First, the paintings could be considered as personal property, like any other piece of art owned by either of the parties. If the artwork came into the possession or control of either or both parties at any point between the date of the parties’ marriage and the date of their final separation, there would be a presumption that the artwork was marital property subject to equitable distribution.  It would not matter which of the spouses painted the picture; the time when the painting came into existence would determine whether or not the painting was marital property.

Whether either party created the painting would go to the value of the asset. So, if one spouse were an established painter, that piece of artwork may have a greater value than the art created by the unknown artist.  If one spouse were the actual painter (Margaret) and the other spouse was taking credit for the paintings (Walter), then if it was eventually disclosed that Margaret was the actual painter, it could have an impact on the value of the paintings.  Further, under this analysis, the marital estate would only include those paintings owned by the parties that were not yet sold. Walter would have no claim to the future paintings.

It is also possible, that this painting enterprise can be viewed as a business. It would depend upon how the parties operated it. If there was also posters, postcards, refrigerator magnets, t-shirts, etc. using designs from the paintings, being sold by the parties or being sold on their behalf, the parties probably established some type of corporation to protect their personal assets.  There might have been a corporation, LLC, a partnership or some other business entity established to pitch these wares.  In such a case, the unsold paintings could be considered inventory owned by the business. The business itself would also have a value with or without the inventory.

However, under Pennsylvania law, personal goodwill is not an asset subject to equitable distribution. Personal goodwill is the additional value that a company has due to the efforts of a specific person. Without that person’s involvement, does the value of the business change? For example, suppose someone always goes to the same person to get his or her hair cut. If that barber/hairdresser changes locations, does that person go to the new location? If the answer is yes, then there is some personal goodwill connected to that barber/hairdresser. If that same person goes to a particular location for a haircut because of the price or where it is located, then personal goodwill is not a factor.  In the present situation, the question then becomes what would this business be worth without the painter in the picture. Could the business be sold without the painter creating the underlying artwork? It may still have a value is it were possible to license out the mass production of the posters, cards, etc. based on the paintings.

In addition, one of the factors that the Court considers when dividing the marital estate is the ability of each of the parties to acquire assets in the future. The ability of the painter-spouse to continue creating artwork that sells would be a factor that the Court would have to consider when dividing the marital estate. Until what age can someone continue to paint? For how long would there still be a market for the artwork and the other merchandise?

The purpose of this posting is not to answer all of these questions. There are so many other facts and factors that would go into answering these questions.  Rather, I wanted to offer something to consider when watching the movie or reading about the legal drama that took place between the Keanes.


A New Day is Dawning

October 28, 2014 Leave a comment

I remember back when I was first starting to practice law. At that time, there were three possible locations for a family law matter in Philadelphia: some matters were in City Hall, some were at 1801 Vine Street, and other matters were at 1600 Walnut Street. At some point in the 1990’s, Family Court was to be consolidated into a single building: 34 South 11th Street. This location was just to be for Domestic Relations Matters. Juvenile and Dependency proceedings and Adoption proceedings were to remain at 1801 Vine Street. Since that move, the needs of Family Court in Philadelphia have expanded – or at least there was a recognition that it would be better for people to use different entrances to different aspects of Family Court instead of walking through the maze of hallways that connected 34 South 11th Street (main court building), 42 South 11th Street (custody and divorce masters), 27 South 12th Street (support masters and some judicial chambers), and 1133 Chestnut Street (court filings). All of these addresses have been used by Family Court in Philadelphia for different proceedings.

All that is changing in the next few weeks. The new Family Court building, which is going to be named after Justice Ronald Castille, will be open for business on November 17, 2014. The new building is located at 1501 Arch Street. It is a single multi-level building which will house ALL of Family Court – Domestic Relations and Dependency. Family Court will be closed from November 7th through November 14th as the courthouse files and other things are physically moved and the new courthouse is set up.

Things may be hectic for parties who have been scheduled for hearings in the old buildings as they will be getting notices of the new location (if not a new date) for their court appearances.

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Maybe I am just being picky….

There is a new reality-TV show on Bravo called “Untying the Knot” In this show, matrimonial attorney Vikki Ziegler, Esquire, who practices law in  New York and New Jersey at the firm of Ziegler and Zemsky LLC, works with clients on the resolution of the economic issues related to the dissolution of their marriage.  From what little I watched from the only two episodes that have aired, the show does not deal with the litigation of divorce matters such as the division of marital property and alimony. Rather, the program promotes Ms. Ziegler as a mediator.  This is where I have a slight issue with the program, so far.

When I was trained as a mediator, I was taught that the mediator helps facilitate communication between the parties and helps the parties come to a resolution on the issues. In the most recent episode that I watched, Ms. Ziegler ascertained the issues, i.e. which items of personal property still need to be divided. Okay – so far so good. She then obtained independent valuation of those assets. Not something that mediators usually do. If the parties come to an understanding as to what an item is worth, then that is usually the value that is used. I can understand a mediator asking the parties to get appraisals if there is a dispute as to the value. But, for the purpose of making the show more entertaining, I can accept this aspect of the show.

Toward the end of the 30 minute program, however, Ms. Ziegler announced her decision as to which assets each person would receive. WHOA! That is not what a mediator does. The mediator does not decide who gets what assets. The mediator does not even offer an opinion as to who should get what.  An arbitrator can decide issues for the parties.  An arbitrator could decide who gets what assets, but not a mediator. Mediation is a process than enables the parties to decide the resolution of their issues. A simple explanation of what mediation is can be found here.

I don’t begrudge Ms. Ziegler how she operates her practice and the services she offers her clients. I am concerned, however, that people will get the wrong impression about the role of a mediator. Parties who enter into mediation thinking they have to convince the mediator that they are right will be missing the point of mediation. If parties do not fully understand what mediation can and cannot do, perhaps they should not be mediating.

If a reality TV show is going to be promoting someone as a mediator, then the person should be mediating not making decisions for the parties. There are other reality shows where one person makes a decision for the parties: Judge Judy, The People’s Court, et al. The reality of what a mediator does should not be obscured to make more entertaining television.

Coming up on the end of another year

November 22, 2013 3 comments

As I write this post, Thanksgiving Day is less than a week away. Christmas and New Years Day will be upon us sooner than we would like. For many this is the time of the year when people get together with their families (family of birth, or family by choice) to enjoy the holidays.

For married couples who are separated, this can be a difficult time of year. When there are children involved, there can be squabbles about where the children should be for the holiday. Parents can’t afford to get what they want for their children because they do not have enough money. Children are often caught in the middle as they want to spend time with both parents. The better thing for parents to do is work out as many of these issues in advance and outside of the hearing of the children. Better to work out the pick up/drop off time and place for Thanksgiving a few days before the holiday as opposed to resolving it on Thanksgiving Day.

For divorcing parties who have no children or for whom there are no problems regarding custody, the end of the year can have an important impact for tax purposes. For federal income tax purposes, a person’s filing status is determined by that person’s marital status as of December 31st. If a divorce decree is not entered before 12/31, then the parties can either file jointly or “married filing separate.” For some individuals, they want to rush that divorce decree to make sure it is entered before the end of the year. For others, they prefer to delay the entry of the divorce decree until after December 31st. If you are not sure which way is better for you, you should consult your attorney and/or an accountant.

Learning Lessons

So one of the latest stories that has been circulating the internet concerns the pending divorce of Harold Hamm, the founder and CEO of Continental Resources, a prominent US oil company.   One such article, found here, lists 10 facts that you need to know about the divorce. Really, some of the fact are more about the company and some are about the people involved.  However, there are lessons to be learned by anyone who is involved in a divorce case – even those not worth billions of dollars.  Through this article I want to highlight some of those lessons.

1. Hamm is America’s 32nd Richest Man:  The lesson here is that, rich or poor, people get into relationship and sometimes those relationships end. Being worth millions or billions of dollars does not guarantee happiness.

2. The Couple Didn’t Sign a Prenup: This may be the one fact that can hurt Mr. Hamm and benefit Mrs. Hamm. People enter into prenuptial agreements for many reasons. One reason is to decide, before the parties marry, what will happen in the event of death or divorce.  For reasons probably known only to the parties, their attorneys, and their financial advisors, they decided not to have a prenuptial agreement.  You do not need to be worth millions to have a prenuptial agreement. If two people are planning to get married and the parties have assets they want to protect from distribution in the event of death or divorce,a prenuptial agreement is the best way to proceed.  Without one, however, the law of the state where one of the parties files for divorce (not where the parties married necessarily) will determine what assets are marital property subject to division by the court.

3. This Could be the Most Expensive Divorce Ever: This “fact” remains to be seen.  Mr. Hamm is reported to be worth over 11 billion dollars. That is not the size of the marital estate.  There may be assets that are not part of the marital estate. Under Pennsylvania law, those assets and debts that existed prior to marriage and those that came into being after separation are not marital property subject to equitable distribution.  Only the increase in value of pre-marital assets is subject to division as part of a divorce.  In Pennsylvania, this is true whether or not either party had a hand in the increase in value.  This is not true of every state. Gifts and inheritances to one of the parties would also be excluded from the marital estate and not subject to equitable distribution, except for the increase in value. It is not uncommon for parties, through pre-nuptial agreements, to exclude certain assets from the division as part of a divorce, including the increase in value.

4. Sue Ann Has Been Surveying Harold Since 2007:   The article referenced above indicates that the Daily Mail reported that Sue Ann Hamm has been spying on her husband since 2007 electronic surveillance.  There are several important considerations raised here. First, electronic surveillance is not automatically legal and/or admissible in Court.  Factors that influence this how the surveillance was obtained and whether or not Mr. Hamm had knowledge/had consented to it.   Under federal law, only 1 party to a telephone conversation has to consent for the conversation to be recorded. So, under federal law, whomever Mr. Hamm was talking with can consent to a call being recorded without Mr. Hamm’s knowledge.  Under Pennsylvania law, however, BOTH parties have to consent. Otherwise, the recording of the conversation is illegal.  Since this is a divorce action, state law will control.

5. The Couple Agreed on a ‘No-Fault’ Divorce: So, despite the surveillance, the parties have agreed to a no-fault divorce.  Under Pennsylvania law, there is a preference for a “no-fault” divorce over a fault divorce. A fault divorce can be entered for such reasons as Mr. Hamm having committed adultery.  There are several reasons why, however, parties can agree not to proceed with a fault divorce:

  • Under Pennsylvania law, the person seeking a fault divorce has to be the “innocent and injured spouse”. So, if Mr. Hamm would be able to prove that Mrs. Hamm engaged in conduct which would also give rise to a fault divorce, she could not obtain a fault divorce;
  • Perhaps, Mrs. Hamm did not have enough conclusive evidence to prove Mr. Hamm had engaged in adultery;
  • The parties do not want to “air their dirty laundry”. In many instances, if a party wants to obtain a fault divorce, there will have to be a hearing.
  • The parties do not want to pay for a fault divorce. As will be mentioned again below, under Pennsylvania law, the fault of a party which resulted in the divorce will not entitled the other party to more in the division of assets.

6. Harold’s Lawyers Want Sue to Turn Over the Recordings:  Supposedly, Mr. Hamm wants the recordings to show that the marriage of the parties was over long before the date of separation claimed by Mrs. Hamm.  If that is proven, then the end point for determining what is part of the marital estate has been shifted possibly 10 years earlier.  As mentioned above, under Pennsylvania law, the court will divide the assets and debts that were acquired prior to separation. The assets that exist after separation are not divided by the Court.

7. Hamm’s Company Has Nearly Quintupled Since 2007: If Mr. Hamm can prove that the parties’ date of separation was 10 years earlier, as he is alleging, then a significant portion of the increase in value of Continental Resources is excluded from division by the Court.  Of course, this can result in Mrs. Hamm getting a greater portion of the marital estate if there is a sizable amount of assets to which Mrs. Hamm has no claim.

8. They Initially Tried to Keep Divorce a Secret:  In many jurisdictions, family court records, like those in divorce cases, are not readily subject to public scrutiny. In Pennsylvania, even in counties where one can free access the docket entries for any case, the general public is not allowed free access to the actual documents filed.   In some situations, where there is a legitimate reason to keep the names of the parties private, especially in cases where children are involved, courts have used the initials of the parties instead of the parties full names.

9. Hamm Could Lose Controlling Stake of His Company:  It is speculated that Mrs. Hamm could receive half of Mr. Hamm’s 68% interest in Continental Resources.  While this is for the judge in the case to decide, if Mrs. Hamm were to receive 50% of the marital estate (which is not automatic under Pennsylvania law), a court could decide that Mrs. Hamm is not going to get any percentage of the business. Mr. Hamm might have to give Mrs. Hamm more of other assets so that she does not end up going into business with him.  Or, Mr. Hamm may have to liquidate some of his shares  of Continental Resources in order pay Mrs. Hamm her share of the marital estate.

10. The Couple Has Two Daughters:  These parties’ daughters are adults. The should not be thrust into the limelight as a result of their parents’ divorce.  Even if the children were minors, the children should not be the focus of any divorce case. A divorce case involves the end of the relationship between a husband and a wife. The relationships between parents and their children should not be legally impacted by the entry of a divorce decree. All too often, parents drag their children into the divorce proceedings telling them the details of the divorce. One does not have to be a mental health professional to know that this is not good for the children – especially for minor children.

There may be many more lessons that one can learn from high-profile divorce cases such as the one between Harold and Sue Ann Hamm.

Parents and Their Children

January 21, 2013 2 comments

Here is a link to a great article entitled, “8 Things You Should Never Say to Your Kid.” These suggestions are applicable to intact families as well as those where the parents of the children are not living together, i.e. divorced, separated, never married, etc.

How to Effectively Co-Parent After Divorce

January 18, 2013 2 comments

The following post was written by guest blogger Scott Morgan, a Texas divorce lawyer with the Morgan Law Firm.

Everybody agrees that children thrive in happy two-parent homes. Unfortunately, divorce is a reality for so many families. If you have children, divorce isn’t just the end of a relationship–it is the beginning of a new relationship as co-parents. In the aftermath of a divorce, ex-spouses need to refocus their energy into creating a new relationship that can help their children adjust to their new family circumstances. After practicing family law for nearly two decades I am convinced that if divorced parents would put their children’s interest first and co-parent with their ex (even if deep down, they really dislike him or her), there would be very little post-divorce litigation. Co-parents need to work together to raise happy, well-adjusted children in a stable environment. So here are my top tips on on how to effectively co-parent after divorce.

Tip #1 Leave the Pain of the Divorce Out Of Your Parenting

Your children did not ask for a divorce. Your children did not cause your divorce. Do not punish your children for the actions (or inaction) of your former spouse. Specifically, you should:

  • If you need to vent about your former spouse, call a friend or a therapist–do not rely on your child to be a sounding board.
  • Avoid taking it personally if (when) your child tells you they prefer something about your former spouse. It is all part of the adjustment.
  • Keep negative feelings and statements about your ex-spouse to yourself. Sharing them with your child will only hurt your child.

Tip #2 Communicate with the Other Parent

There is never a circumstance where it is okay to use your child as a messenger or bearer of bad news. Act like an adult and find a way to communicate with your co-parent. See if any of the following ideas can make this easier:

  • If you can’t effectively speak to each other, use email or a shared journal to write notes back and forth.
  • Technology can help you keep shared calendars up to date. Put important dates on this calendar, and update as soon as you become aware of changes.
  • Make sure your co-parent has up to date contact information, including cell phone and email, whenever possible.
  • Be sure to share information about school events, birthday parties, and sporting events. Give your co-parent enough notice that they can make make proper arrangements.

Tip #3 Treat the Other Parent With Respect, Whether Deserved or Not

If you are going to have an effective co-parenting relationship with your ex it is crucial that you treat that person with respect. As soon as they feel disrespected by you they are much less likely to be reasonable, to communicate with you, or to do any of the other things necessary for an effective relationship. Then you will be less likely to communicate with them and a vicious cycle has begun. Avoid this negative process by treating the other parent with respect. If it helps, try to deal with them as you would a difficult co-worker.

Co-parenting is not always easy, but it is much easier than the alternative of constantly fighting with your former spouse. The more you can work with your ex to establish an effective co-parenting relationship, the happier your children will be. I’m sure your children’s happiness is something you can both agree on.

You can see more divorce articles and videos on the Morgan Law Firm’s Austin divorce blog.


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