Wednesday, May 1, 2013

Derivative Explorations



LaMothe v. LeBlanc, 2013 VT 21

As complicated as family law can get, the core principles are pretty straight forward.  When it comes to the husband and wife, the courts are trying to be fair.  When it comes to the children, the question always goes to their best interest.

Do the right thing and take care of the kids.  Sounds simple, right? 

If you learn nothing else from reading this blog, know this: the simple is rarely easy, and cases by their specific, complex nature almost never lend themselves to straightforward applications.

Why then do we have these core principles?  Why tease us with simplicity when the whole endeavor is going to spiral into a maze of arguments and brambles?

We can see from the cases that there are really two schools of thought as to how such principles and central purposes inform a case and function within the context of the dispute. 


In some cases, the court uses the principles and central purposes as a shoreline.  The decision should always stay in sight of such principles, and the final test of any line of reasoning is whether the central principles are kept close.  The message is an incremental one.  Stay in sight of previous decisions.  That way you will not lose sight of the purpose by which all results shall be measured.

But sometimes, such checks are impossible.  When the SCOV drifts into new territories these core ideas and principles act as primitive compass and astrolabe to guide the decision through Sargasso Seas of uncharted application.  In such cases, the principles do not check the outcome but offer direction and navigational aid as the law expands to address a new situation.

The difference between these two schools of thought is the key to understanding today’s case and the dispute it creates between members of the SCOV.

Let’s start the analysis at the point of least contention.  Father sought to modify child support obligations arguing three points.  First, father argued that mother owed him child support because she was underemployed and should be credited as being capable of earning more income.  Second, father sought credit for a lump sum payment made by social security.  Third, father argued that the child’s derivative benefit, which social security paid to mother, should be credited as income coming from him and should count as a credit to him when calculating the parties’ child support obligations. 

From these arguments, father sought to convert the existing order that neither party owed child support to the other into an order requiring mother to pay father child support. 

At both the magistrate and trial court level, father lost on all points.  Father appealed, and the SCOV takes up each issue in turn for a different outcome.

Father was a pro ser throughout the case.  So a lot of the argument at the SCOV-level stem from the question of whether father did or did not raise the issues and whether or not he preserved his appeal. 

To the first point, the SCOV unanimously rejects father’s contention that mother is purposefully under employed.  When a parent is purposefully underemployed or unemployed, the courts will look to the potential income of the underemployed.  So if a husband is a hedge fund manager who quits and starts working the second shift at McDonalds to thwart his wife, the court will still impute income to him commiserate with the profession that he voluntarily left.  In other words, you cannot use a divorce as an excuse to leave your anesthesiologist practice to become a Sherpa.

Here, mother testified that she was laid off work and was actively seeking new employment.  That was good enough for the trial court, and the SCOV agrees.  Being laid off is not voluntary underemployment, and with no further evidence that wife purposefully sabotaged her job, there is no imputation of income.

Next, the SCOV is also unanimous in reversing the trial court on the issue of counting a lump sum disability payment from Social Security as a credit toward father’s obligation to pay a portion of the child’s orthodontist bill. 

Apparently, father became disabled several years ago following a motorcycle accident.  He applied for disability benefits from Social Security, which after a two-year review period were granted.  This meant that Social Security made a one-time lump sum payment to mother to bring what they call the “derivative benefit” up to date. 

A derivative benefit is a separate payment that Social Security makes for the child of a disabled adult.  It is separate from the adult’s disability benefits and is intended strictly to benefit the child—because the disabled parent will no longer be able to provide for the child as fully as he or she did before their disability.  Because this benefit is for the child, it goes to the child directly.  In the case of divorce, that means, the benefit goes to the parent with legal custody of the child.

At the trial court level, the court denied father’s request that he receive credit for this lump sum payment.  On appeal, though, the SCOV uses the reasoning and rationale from prior cases to conclude that this derivative benefit must be credited to the disabled parent.  The rationale is that but for the parent’s disability, the child would not receive the derivative benefit, which is, in some ways, intended to take the place of father’s lost income due to his injuries.  The SCOV notes that such a credit is fair because otherwise the mother would be entitled to collect the benefit and receive payment from the father, which would constitute a double payment windfall. 

Given the low income of both parties, though, it is hard on a certain level to call this a “windfall”—when you are poor extra money is almost never a “windfall.”  Nevertheless, the SCOV’s point is that this benefit derives from father’s condition and takes the place of income father would otherwise have to contribute.  It is only fair that he get some credit for it.

This leads to the final issue, which sharply divides the SCOV, and raises the question of how much credit can father take for the derivative benefit and how much of that benefit should he receive. 

Father argues that because mother receives the on-going $190-per-month derivative benefit and because the parties share physical custody of the child, he should receive some credit for this additional, on-going income.  Furthermore, since the court had determined the parties’ income and expenses to be equal, this $190 tips the scales to mean that father is entitled to child support payments from mother.

Let’s start with Justice Dooley’s dissent.  The dissent starts by noting that what father is essentially asking for is a deviation from the child support guidelines in the original child support order.  Basically, dissent characterizes father’s request as one to deviate from the standard child support guidelines that would normally govern the parties’ obligations.  The dissent notes that father did not properly raise the deviation issue and that the magistrate who heard the original issue did not open a deviation hearing or take full testimony from the parties about their total income that might offset or cancel out the supposed credit created by this $190 derivative benefit.  As a result, the dissent would not take up the issue as improperly preserved and improperly waived. 

The dissent, however, also goes to the merits of the issue.  Its analysis sticks to the shore and never leaves sight of the purpose and core principles of the derivative benefit.  The dissent notes that this benefit belongs entirely to the child and that the mother is bound by a fiduciary duty to the child to use the payments for the child’s benefit.  As part of this program she must account for all payments to the Social Security Administration on a yearly basis. 

The dissent notes that this on-going benefit is not really income attributable to the father and cannot, by federal law, be broken up or shared between the parents.  The dissent notes that no court in the United States has credited a disabled parent for these benefits when it comes to allocating child support obligations.  They are a factor in the analysis of the child’s needs, but they do not constitute a basis for one parent to make payments to another.  In fact, courts have routine ruled the other way. 

When a disabled parent has claimed such benefit it has been denied.  True, in all cases, the disabled parent did not share custody, but for the dissent that is not the point.  The derivative benefit payment is a separate fund strictly for the child, which the custodial parent receives and holds in trust.  For these reasons, the dissent would affirm the trial court and deny father’s motion for whatever credit or payment he sought on this ground.

The majority disagrees and sets sail for more adventurous seas.  The majority begins with the question of whether father properly preserved and raised the issue.  The majority disagrees with the dissent’s analysis that father was requesting or that the magistrate denied a deviation hearing.  Instead, the majority characterizes father’s motion as a request to modify the child support order.  Under this framework, the majority finds that the request was properly made, squarely denied, and properly appealed. 

In other words, cast off this analysis is sailing. 

Comparing the dissent and the majority, it is clear that the majority is giving some leeway to the father’s pro se filings and arguments.  On one hand, it is frustrating for lawyers to watch how the SCOV and the courts grant a bit more discretion to self-represented litigants.  On the other hand, you can note that the pro se father in this case nearly sunk his own craft by inarticulate arguments at the trial court level. 

So the majority dives into the question of whether father deserves a credit for the derivative benefits.  The majority rests its analysis on a prior case, Cantin v. Young.  In that case, the SCOV ruled that a derivative benefit to the child resulting from a parent’s disability should be considered part of the parent’s gross income and that any calculation of child support should credited as a payment from the disabled parent. 

The majority finds that the magistrate correctly imputed the derivative benefits as income to the father, but that the magistrate failed to make the second step and award father credit for such payments in its final calculations.  For the majority, this is a matter of logical consistency and adherence to the principles underlying child support calculations.  The benefits take the place of what the disabled parent would otherwise bring in income, and a result, they must be counted and credited. 

In response to the dissent and the trial court’s positions, the majority notes that this is not a matter of splitting the derivative benefit but of adding it into the pot and of giving the father credit for these payments as contribution to child support. 

Here is where the majority goes a little further, though.  Crediting father with the derivative benefits means that father has effectively “over-contributed” to his child support obligations.  Mother argued that this was inappropriate since a derivative benefit cannot create payment obligation.  In other words, if you consider the derivative benefit to be an over payment, then father will be entitled to a payment back from mother.  As Mother and dissent note, no court has done this.

The majority, however, goes there.  The difference here is that mother and father share physical custody of the child.  Therefore, the underlying purpose of the derivative benefit and child support payments is served by crediting father with these payments because father is providing close to 50% of the child’s living environment. 

To put it more simply, the majority rules that it is fair to credit father for these payments even if it means mother will owe father because father will use the money to provide for the child. 

In coming to this conclusion, the majority creates a distinction of which practitioners should take note.  If the disabled parent does not have shared physical custody of the child (meaning custody of the above the threshold amount of 30%), then derivative benefits should not be credited to the disabled parent.  But if the parent does have shared custody, then the derivative benefits can and will be credited to the disabled parent in calculating the child support payments obligations. 

As the majority notes, the result may very be that the custodial parent who has physical custody of the child a greater portion of the time may still end up owing the other parent for child support. 

The problem the majority notes is that none of the previous decisions have had to face the question of allocating derivative payments in a shared custody decision.  All of the cases cited by the dissent dealt with situations where the disabled parent did not have shared custody.  This is a distinction that the dissent disregards, but it is one that the majority charts as key.  The majority notes that if it ruled either way it would be breaking new ground. 

There is a little more back-and-forth between the majority and the dissent analyzing the underlying cases and what each characterizes as the real issues at play in the case, but the majority’s opinion also seems poised to defend its choice and position to the larger legal community and to make clear when a derivative benefit may be credited as part of the child support calculations.  The majority’s efforts are to make its reasoning and application stick.

With four votes, the majority carries today.  The case is reversed and remanded with direction to the trial court to credit father with the amount of derivative benefit received by mother on behalf of the child.  Of course, the majority all but invites mother to file her own deviation motion to argue that notwithstanding the credit the parties should still be kept at the present zero-child support obligation level. 

No doubt one can hear the mother’s attorney already sharpening her pencil to take on this brave new world.

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