Changes meant to protect the poor are mandating bigger alimony payouts

When New York adopted no-fault divorce in 2010 after decades of failed attempts, lawyers and families praised legislators for eliminating the need for one of the bitterest elements of a divorce: assigning blame.

More than a year later, critics say more troubling aspects of the reform package have emerged.

One of the changes included a little-noticed law that set a strict formula for judges awarding temporary alimony during the divorce. The statute was meant to provide more consistency and ensure that low-income New Yorkers who couldn't afford attorneys were treated fairly.

In dozens of interviews, lawyers, academics and divorcing spouses said that despite the law's honorable intent, it is exacting a steep toll. For some more affluent couples, the law is creating shifts in income that don't level the playing field so much as turn it upside-down, transforming the richer spouse into the poorer one, sometimes dramatically so.

No independent measure of the law is yet available. Still, a host of legal associations, including the Women's Bar Association of the State of New York, have called for its repeal.

"It really impacts the payer spouse in a way that sometimes is draconian," said Sondra Miller, a retired judge who led a state commission between 2004 and 2006 to evaluate New York's divorce laws and currently mediates divorces. "It's not a well-thought-out piece of legislation."

Supporters acknowledge some flaws but believe they are fixable.

They point to successes, including a woman who was initially awarded $285 a month in family court, despite earning $70,000 a year less than her husband. After filing for divorce, she was awarded monthly payments of more than $2,000 under the new formula.

"I actually think it's a good law, and I differ with most of the matrimonial lawyers," said Manhattan attorney Harold Mayerson. "You need to look at what the law was trying to do, and it was trying to remedy a problem throughout the state of New York that judges were not being uniform in terms of trying to see that the non-moneyed spouse got a fair shake."

"There are areas that have to be clarified," he added, "but that is not the first time the Legislature passes a law that needs clarification from the courts."

The law is now being analyzed by the state's independent Law Revision Commission, with a report expected in April. That would leave a narrow window for making any changes before the legislative session ends in June.

"There were some mistakes in that law which we are all in agreement should be fixed," said Antoinette Delruelle, a senior attorney at the New York Legal Assistance Group, a nonprofit that works with low-income New Yorkers.

But she strongly disagreed with those who want to make the formula less binding on judges. "If it's advisory, it would lose all of its effect," she said. "Having a formula is really, really essential."

Few areas of divorce law are as fraught as alimony, also known as maintenance. Across the country, states have been experimenting with a variety of guidelines, formulas and rationales behind the awards, including movements in New Jersey and Connecticut to make the laws less onerous to the payer spouse, who is usually the husband.

Previously, New York judges had broad discretion to determine support awards during and after the divorce. Those who couldn't afford attorneys, often women, were at a disadvantage.

Still, the formula applies to individuals earning up to $524,000 a year and looks primarily at salary. The law is silent on how judges should address factors more common with wealthier couples, such as fluctuating annual bonuses, savings accounts and mortgage payments.

It is "just pure redistribution of wealth brought down to the family level," said Timothy Tippins, a former president of the New York state chapter of the American Academy of Matrimonial Lawyers and now an adjunct professor at Albany Law School. "They've dropped any pretense of predicating the award on the actual needs or circumstances of the parties."

In 2009, investment banker Jeffrey Goldberg and his wife, Jill, lived with their three children in a large house in the Long Island suburb of Syosset. A live-in nanny helped with child care and did the family's laundry. Mr. Goldberg said they frequently went out to dinner and took vacations to Disney World.

After Mr. Goldberg's wife filed for divorce in 2010, a court ruled that his annual income was $500,000, the majority of which was due to a substantial bonus.

Once the formula was applied, and a judge added other household and personal expenses and child support, Mr. Goldberg's monthly payment was determined to be at least $17,244, with additional expenses that varied. His take-home pay adjusted for taxes was slightly less than $12,000, he said.

When his 2011 bonus arrived, he said it was substantially less than it had been before: $70,000. In August he was laid off.

"I need to pay in excess of 100% of my income in order to provide the support that the court felt was necessary," Mr. Goldberg said. He said he has drained his savings and is now using funds from his retirement account to cover costs. "This can't possibly be the intended result."

At the time of the divorce filing, Ms. Goldberg, who has a master's degree, earned $103,000 a year and had a savings account of $250,000, according to court papers. She calculated her monthly expenses at just over $18,000, nearly the amount of her monthly award from her husband. He also was directed to pay $30,000 of her legal fees.

After he lost his job, Mr. Goldberg continued paying child support but stopped making any other payments, both sides said.

"I just want what is fair and right and going to be in the best interest of the kids," Ms. Goldberg said, adding that she had used half her savings account to cover costs.

Mr. Goldberg switched attorneys and appealed the decision. This month, the couple learned that the court had made "mistakes," Ms. Goldberg said. Now both are awaiting a new ruling.

"It was a new law—that is what they told us—and there were a lot of features in the law that they didn't quite understand," said Ms. Goldberg. "I went into this system like anyone else, just trying to get divorced and just because there was this new law, it spiraled."

"They just took this law and used us as guinea pigs," she continued. "Jeff and I are paying for it."

The law was changed at the 11th hour from covering post-divorce awards to temporary maintenance, creating some confused language in the statute, all sides agree. Legislators say the formula was intended to be an experiment.

"Interim was always designed to be that—an interim proposal until we could have consensus on changes to final maintenance laws," said Assemblywoman Helene Weinstein, a Brooklyn Democrat who chairs the Assembly Standing Committee on Judiciary.

Judges have the authority to mitigate any ill effects by deviating from the formula, she said.

But doing so requires them to write a detailed explanation that many called too time-consuming in a state court system burdened by budget cuts—including $170 million last year—and increased case loads.

Some judges have also noted the constraints on their ability to adjust awards. In a January 2011 decision, Brooklyn Judge Jeffrey Sunshine noted that the statute's language left him little room to change the support payments "as an act of equity."

In February, an appeals court issued the first ruling on the new law, but some lawyers expressed disappointment that it didn't provide more clarity on what spouses could expect to pay under the formula.

It did confirm that the defendant, Manhattan banker Jasvinder Singh Khaira, was responsible for his wife's legal fees even though they had already been covered by her parents. That ruling was based on another new law, which requires the richer spouse to cover legal fees for both parties, even when each person has substantial personal resources.

The combined result of the new laws can be the opposite of what the law intended, critics say.

"If you're sitting on the other end of a case where someone is paying your attorneys' fees and they're providing you with sufficient support to maintain the life you had before the divorce, and you hate the other person, you can just sit and ride out the process," said Manhattan matrimonial lawyer Juan Luciano. "I've been on both ends of that."

Supporters of the law noted that a similar outcry arose after New York instituted a formula for child-support awards in 1989, which is now widely regarded as fair. They also point out that the AAML recommended similar alimony guidelines in a recent report.

The AAML disputes that characterization. "It was never intended to be in any state an official guideline that a state could adopt," said James Hennenhoefer, then-president of the AAML. Mr. Hennenhoefer dismissed similarities with child support.

Spousal support is "enormously more complicated," he said, noting that children's expenses are fixed and they have no ability to earn money and live independently, unlike adults.

Now all sides are waiting for the ruling of the Law Revision Commission, which is already two months behind schedule as it sorts through arguments and gathers its own data.

There is a "definite tug of war" between recognizing the value of a formula for low-income people and the problems of shoehorning complicated, unique marriages into a single approach, said Rose Mary Bailly, the commission's executive director.

The commission's role is only advisory. Still, its voice carries weight and legislators said they were awaiting the report.

"Frankly, that group is holding us up," said Westchester Assemblywoman Amy Paulin, the primary sponsor of the alimony law. She added that she thinks the new law is "better for women. But we do want to make it fair, and we do want to respect everyone involved."

"You don't want to have to revise it a third time," she added. "You want to get all the problems once."

Law changes at last minute

Advocates of no-fault divorce never intended the law's successful passage to be coupled with alimony reform.

For decades, couples seeking a divorce in New York had to prove that one spouse had committed one of several serious transgressions, including adultery, cruelty or sexual abandonment. By 2010, New York was the only state in the nation not to allow no-fault divorce.

Under no-fault, one spouse can declare the marriage over. Advocates for low-income New Yorkers and domestic-violence victims feared its passage would strip clients of their main leverage in settlement negotiations: refusal to grant a divorce.

The wide latitude that had been given to judges meant that maintenance awards could vary wildly. Spouses who couldn't afford a lawyer fell into poverty, they said.

In 2004, advocates began drafting a bill that used a formula to calculate alimony, reducing the need for attorneys.

"We never actively worked against no-fault," said Emily Ruben, co-supervisor of Legal Aid's Family Law and Domestic Violence Practice and one of the bill's authors. "We just said we have a finite amount of time, and we're going to spend it on something that really makes a difference" for clients.

In 2010, Democrats controlled the state Senate. Advocates on all sides spied an opening. But no-fault supporters were wary of packaging the bills together, noting that the maintenance law hadn't been adequately scrutinized. In June, the state's independent Law Revision Commission agreed, warning against adopting any kind of formula before it had "been fully vetted." Less than three weeks later, after only one public hearing, the Legislature passed a divorce reform package. It included an alimony formula.

But there weren't enough votes to pass a formula for post-divorce alimony. Advocates struck a hurried compromise: The formula would apply to temporary alimony instead. "No-fault on its own would just make a bad situation worse," said Assemblywoman Helene Weinstein, head of the body's judiciary committee and an ex officio commission member.

Because of the rushed revision—a week or less, estimated multiple participants—everyone agrees some mistakes snuck in.

"You're talking about thousands of people and you're talking about their economic futures and their children's futures," said Andrew Schepard, director of the Center for Children, Families and the Law and a professor at Hofstra University. "You have a responsibility to do this rationally and do your due diligence. And if you're asking me did they do it? No."

(Published by WSJ - March 11, 2012)