Appeals Court Vacates Adverse Attribution of Income Judgment in a Win for Jouret's Divorce Client

The Massachusetts Appeals Court last week vacated the attribution of income and marital estate portions of a divorce judgment that was adverse to Jouret’s client. In particular, the Appeals Court agreed with Jouret that the record before the Probate and Family Court did not support an attribution of income to Jouret’s client of $400,000 and $250,000 during periods of unemployment.

In the case, the Probate and Family Court judge made certain findings pertaining to the husband's (Jouret’s client’s) work history. From May of 2006 to March of 2009, the husband worked as a portfolio manager and equity analyst for Fidelity Investments (Fidelity), earning approximately $600,000 per year (comprised of a $220,000 base salary and bonuses). In December of 2010, after being unemployed since March of 2009, the husband accepted a director of equity research position with Knight Capital (Knight), earning approximately $500,000 per year (comprised of a $200,000 base salary and bonuses). In August of 2013, after being laid off by Knight two months earlier, the husband accepted a senior equity analyst position with Baird Kailash (Baird), earning a $125,000 base salary with potential bonuses up to 125 percent. His total income in 2014 was $179,560. In June of 2016, shortly before the end of trial, the husband was laid off from Baird.

In determining that attribution of income was proper, the Probate and Family Court judge found that the husband had "not made reasonable efforts to earn an income commensurate with his education, skills, employment history and prior earning level" since serving the complaint for divorce on the wife in May of 2013. Specifically, the judge found the husband capable of earning $400,000 per year based on his "compensation history," "outstanding credentials," and "promising employability." Given the husband's recent layoff from Baird, however, and his "period of prolonged unemployment during the marriage," the judge attributed to him an annual income of $250,000 "while [he] is unemployed" and ordered him to pay weekly child support of $1,029.

Jouret argued that it was an abuse of discretion to attribute income to him because he had recently been laid off and there was insufficient evidence of readily available positions at the attributed income level. The Appeals Court agreed. It noted that, in determining a party's income for purposes of setting a child support order, "[i]n the proper circumstances, '[a] judge is not limited to a party's actual earnings but may . . . consider potential earning capacity.'" C.D.L. v. M.M.L., 72 Mass. App. Ct. 146, 152, 889 N.E.2d 63 (2008), quoting Heins v. Ledis, 422 Mass. 477, 485, 664 N.E.2d 10 (1996). "The child support guidelines allow a judge to attribute income to a party when a finding is made that the party is earning less than he or she could through reasonable efforts." Ulin v. Polansky, 83 Mass. App. Ct. 303, 306, 983 N.E.2d 714 (2013). Before attributing income, however, the judge must "consider all relevant factors including without limitation the education, training, . . . past employment history of the party, and the availability of employment at the attributed income level." Massachusetts Child Support Guidelines § I.E (2013) (Guidelines).

Here, the Appeals Court noted, in finding the husband capable of earning $400,000 per year and then attributing an annual income of $250,000 to him "while [he] is unemployed," the judge credited the testimony of the wife's vocational expert that the husband was a "stellar candidate" for a director-level equity analyst position in Boston, with the yearly salary range for such a position typically falling between $400,000 and $750,000. The judge also credited the expert's opinion that the husband's Baird compensation was too low in light of his qualifications and was more in line with a salary offered to a recent Harvard graduate. Conspicuously absent from the expert's testimony, however, is any indication that the husband was overqualified for his position at Baird. See Emery v. Sturtevant, 91 Mass. App. Ct. 502, 512, 76 N.E.3d 1039 (2017) (reversing income attribution to husband who accepted substantially lower-paying position "commensurate with his training and experience" after extensive job search). Moreover, the expert testified that the type of upper-level equity analyst position appropriate for the husband is somewhat rare, admitting that there were no open positions at the time of trial and that in such a "competitive field" he "can't predict when" one might "come up." The relative scarcity of these positions is underscored by what the judge characterized as the husband's "period of prolonged unemployment during the marriage."

While the Appeals Court found no error in the Probate and Family Court Judge's determination that the husband is "eminently" qualified for a director-level equity analyst position earning upwards of $400,000 per year, it is unclear from this record if and when such a position will become available. The timing of the husband's layoff by Baird, shortly before trial ended, further muddies the waters. See Flaherty v. Flaherty, 40 Mass. App. Ct. 289, 290, 663 N.E.2d 280 (1996) (reversing attribution of income to husband who was recently laid off and "was readying himself to seek new employment"). Though the judge reduced the husband's attributed income to $250,000 in light of his sudden unemployment, the Appeals Court noted, the attribution was ultimately based on the judge's subsidiary findings regarding the husband's ability to secure a salary of at least $400,000. Furthermore, there was no evidence that there were available positions even at the $250,000 level when the husband was laid off from Baird, or that he had a meaningful opportunity to conduct a job search prior to the close of evidence. In these circumstances, while the judge "was not required to point to a specific position or job opening" when attributing income, C.D.L., 72 Mass. App. Ct. at 157, the Appeals Court did not think that the evidence adequately demonstrates the "availability of employment at the attributed income level." Guidelines § I.E. See P.F. v. Department of Revenue, 90 Mass. App. Ct. 707, 711, 64 N.E.3d 940 (2016) ("relevant inquiry for attribution of income is . . . whether the payor is presently able to obtain employment through 'reasonable efforts'").  As a result of this analysis, the Appeals Court stated that it “must remand for further findings as to whether the husband exercised reasonable efforts, since his layoff from Baird, to secure employment commensurate with his education, training, and work history. See Emery, 91 Mass. App. Ct. at 511 ("The reasonable efforts inquiry is critical, and is generally the determining factor in whether to affirm the attribution of income to a party based on his prior earning capacity").

The Appeals Court also vacated and remanded other aspects of the Probate and Family Court’s property division.

A copy of the decision is available in the link below .