My law practice has been distinguished over the years by being a prominent advocate for parents and children, especially when there are complex and difficult clinical issues involved in child custody matters. Having been a member of the American Psychological Association for over 15 years and following the seminars and literature on clinical issues in divorce and custody practice, I have tried to make a difference in this area of law and practice.
Yet, having been in my law school’s joint JD/MBA program, and being a student of accounting and finance, along with membership in divorce financial planning associations, I take a keen interest in the financial and valuation side of divorce practice as well. Occasionally, there are some big wins: the recent case of In re Marriage of Liszka, 2016 IL App (3d) 150238 – Illinois Courts
is a case that I tried (over many weeks of trial) that resulted in a very positive appellate decision for my client, along with having the law in Illinois on retained earnings in divorce clarified. Said the appellate court:
Retained earnings are marital property. In re Marriage of Lundahl, 396 Ill. App. 3d 495, 504 (2009). Here, the evidence showed that ISP had no retained earnings in 2011, the year of
Zouzias’s valuation of ISP. However, ISP may have had retained earnings in 2013. On remand, when the parties present evidence of the value of ISP, they should also present evidence
regarding the existence and amount of retained earnings of ISP in any year after 2011 until the date of dissolution. If retained earnings exist and are not included in the new valuations of ISP, they should be divided between the parties.
Key to my argument was the fact that the Liszka business was a closely held family business, where, in the past, retained earnings in the corporation had been distributed as dividends to the parties, and accounted for as personal income on their tax returns. The family business had sufficient revenue to fund expenses outside of the retained earnings, and no evidence was resented that the retained earnings at the time of trial were to be used for extraordinary expenses. I argued that these cash earnings carried on the business balance sheet should be classified as marital cash and allocated to the parties, independent of any valuation of the business. The Appellate Court agreed with this analysis, resulting in a hypothetically fair and substantial (issue to be retried after appeal) accrual of booked cash to my client. Further, the Appellate Court recognized that discovery abuses committed by the opposing party frustrated my client’s efforts to get a proper valuation into evidence, the issue of the valuation of the marital business will also be sent back to the trial court for retrial on that valuation issue.
The Liszka case has been cited by a number of blogs, both within Illinois and nationally, and reflects the interest that divorcing parties and lawyers nationally have in these important financial issues in divorce. Having a strong psychology/clinical background is, to me, integral to the practice of custody and parenting law, but one must also have the ability to work with financial statements, to understand accounting principles and valuation methodologies, and be ready to try a case that presents some complex financial and valuation issues for one’s clients. The Illinois Appellate decision in Liszka is a very positive result for my client, and at the same time, this decision has clarified important issues in Illinois divorce practice law.