New York Law Review

Tag: Professional License

  • Grunfeld v. Grunfeld, 94 N.Y.2d 696 (2000): Prohibition Against Double Counting in Divorce Settlements

    Grunfeld v. Grunfeld, 94 N.Y.2d 696 (2000)

    When calculating equitable distribution and maintenance in divorce cases involving professional licenses, courts must avoid double counting income streams already considered when valuing the license.

    Summary

    In a divorce action, the New York Court of Appeals addressed whether the Appellate Division improperly based both the equitable distribution of the husband’s law license and his maintenance obligation on the same projected professional earnings, thus engaging in prohibited double counting. The Court of Appeals held that the Appellate Division erred and remitted the case to the Supreme Court for further proceedings, clarifying that the same income stream cannot be the basis for both a distributive award and a maintenance calculation.

    Facts

    Rochelle and Harold Grunfeld married while Harold was in law school. Harold became a successful customs lawyer. Rochelle gave up her teaching career to raise their children. As Harold’s income grew, so did their lifestyle. The couple separated in 1991, and Rochelle initiated divorce proceedings in 1992.

    Procedural History

    The Supreme Court dissolved the marriage, granted Rochelle custody of their child, ordered child support, and awarded maintenance. The court determined the value of Harold’s law practice and license, excluding the license from marital assets to avoid double counting income already considered for maintenance. The Appellate Division modified, including one-half the value of Harold’s professional license in the distribution without adjusting maintenance. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the Appellate Division erred by including the value of the husband’s professional license in the equitable distribution award without adjusting the maintenance award, thus resulting in an impermissible double counting of income.

    Holding

    Yes, because the Appellate Division double counted the husband’s income by ordering distribution of the value of the law license without adjusting the maintenance award, which was also based on the same income stream. This is inconsistent with the prohibition against double counting as articulated in McSparron v. McSparron.

    Court’s Reasoning

    The Court of Appeals emphasized the principle that professional licenses acquired during marriage are marital property subject to equitable distribution (O’Brien v. O’Brien). However, it cautioned against double counting income streams. The Court explained that a professional license’s value is tied to the future earnings it enables. If those same earnings are also used to determine maintenance, the licensed spouse is essentially being charged twice for the same asset. The Court stated, “To the extent, then, that those same projected earnings used to value the license also form the basis of an award of maintenance, the licensed spouse is being twice charged with distribution of the same marital asset value, or with sharing the same income with the nonlicensed spouse.” The Court noted that there are two ways to avoid this problem: reducing the distributive award based on the income already considered for maintenance or reducing the maintenance award itself. The Court remanded the case, instructing the Supreme Court to recalculate the distributive award, taking into account any income from outside sources used in setting maintenance. The court also found the trial court did not abuse its discretion in valuing the practice at the date the action was commenced, following the active/passive asset distinction. The court also affirmed the Appellate Division’s decision to order interest on the unpaid portion of the distributive award, as the husband had not been paying in a timely fashion.

  • McSparron v. McSparron, 87 N.Y.2d 275 (1995): Valuation of Professional Licenses in Equitable Distribution

    McSparron v. McSparron, 87 N.Y.2d 275 (1995)

    The economic value of a professional license earned during marriage is a marital asset subject to equitable distribution, regardless of how long the license has been held or whether the licensee has already benefited from it; the concept of ‘merger’ of a license into a career is rejected.

    Summary

    In this divorce case, the New York Court of Appeals addressed the valuation of professional licenses as marital property. The husband, an attorney, argued that his law license had ‘merged’ into his career and should not be considered a separate asset. The wife, a doctor, argued that her medical license should not be included. The Court of Appeals rejected the ‘merger’ doctrine, holding that a professional license retains economic value subject to equitable distribution, even if the licensee has already benefited from it. The case was remitted for a new valuation of the husband’s law license, considering post-commencement events that affected its value.

    Facts

    The parties married in 1969. The husband obtained his law license in 1973 and worked as an attorney. The wife earned a master’s degree in psychology and later obtained a medical license in 1989, shortly before commencing the divorce action. During the marriage, the husband was the primary financial provider, while the wife pursued her education. The wife filed for divorce in 1989.

    Procedural History

    The Supreme Court initially included the value of both professional licenses in the marital estate. The Appellate Division modified, holding that the husband’s law license had merged into his career and should not be included. The Appellate Division also found the wife’s medical license had been overvalued. After a remand to the Supreme Court, the Appellate Division affirmed the redistribution of marital property. The wife appealed to the Court of Appeals.

    Issue(s)

    1. Whether a professional license that has been exploited to establish and maintain a career may be deemed to have ‘merged’ with the career and thereby lost its character as a separate distributable asset.
    2. Whether the Appellate Division erred in treating the husband’s law license as having merged with his career.
    3. Whether post-commencement events should be considered when valuing a professional license.

    Holding

    1. No, because the concept of ‘merger’ should be discarded. A professional license retains economic value independent of the licensee’s career.
    2. Yes, because the license had a residual economic value independent of the husband’s career, making its exclusion from the marital estate erroneous.
    3. Yes, because the trial court has discretion to consider post-commencement events that may have affected the value of the license.

    Court’s Reasoning

    The Court of Appeals rejected the ‘merger’ doctrine, which held that a professional license loses its value as a separate marital asset once it is used to establish a career. The Court reasoned that a valid professional license maintains its economic value throughout its existence. The Court criticized the merger doctrine as difficult to apply, inconsistent with the goal of equitable distribution, and favoring short-term marriages over long-term ones. The Court emphasized that the key is to value the license in a way that avoids duplicative awards. The Court stated, “O’Brien permits the court to include in the marital estate the present value of any increased earning capacity attributable to a professional license earned during the marriage. That increased earning capacity continues to exist, to a greater or lesser degree, throughout the life of the license.” The Court also held that while the valuation date is within the trial court’s discretion, post-commencement events, like the husband’s job loss, could be considered when valuing the license. The Court emphasized avoiding double-counting of assets and income in determining equitable distribution and maintenance.

  • Bonacorsa v. Van Lindt, 71 N.Y.2d 605 (1988): Effect of Certificate of Good Conduct on License Denial

    Bonacorsa v. Van Lindt, 71 N.Y.2d 605 (1988)

    A certificate of good conduct creates a presumption of rehabilitation under New York Correction Law Article 23-A, which the licensing agency must consider even when a direct relationship exists between the applicant’s prior crime and the license sought; however, the agency retains discretion to deny the license after considering all relevant factors, including public safety.

    Summary

    Joseph Bonacorsa, whose harness racing license was revoked following federal convictions for perjury and obstruction of justice related to race fixing, applied for a new license after receiving a certificate of good conduct. The New York Racing and Wagering Board denied his application, citing the direct relationship between his crimes and the racing industry. Bonacorsa challenged the denial, arguing the certificate entitled him to a presumption of rehabilitation. The Court of Appeals held that the certificate creates a presumption that the Board must consider, but the Board retains the discretion to deny the license after evaluating all relevant factors under Correction Law § 753(1). The Court found the Board’s denial was not arbitrary or capricious.

    Facts

    Bonacorsa was previously licensed as a harness racehorse owner, trainer, and driver. In 1973, he testified before a federal grand jury investigating corruption in harness racing. As a result of his testimony, he was convicted of making a false declaration to a grand jury and obstructing justice. These charges stemmed from his concealing the true ownership of a racehorse connected to an individual previously barred from racing for race-fixing allegations. His license was revoked in 1974 following these convictions. After completing his sentence, Bonacorsa obtained a certificate of good conduct from the New York State Board of Parole. In 1985, he reapplied for a racing license.

    Procedural History

    The Racing and Wagering Board denied Bonacorsa’s application after a hearing. Bonacorsa filed an Article 78 proceeding challenging the Board’s decision. The Supreme Court granted the petition, annulling the Board’s decision and remitting the matter for further consideration. The Appellate Division reversed the Supreme Court’s decision and dismissed the petition. The Court of Appeals granted Bonacorsa leave to appeal.

    Issue(s)

    Whether the presumption of rehabilitation accorded by a certificate of good conduct under Correction Law § 753(2) applies when a public agency denies a license due to a direct relationship between the applicant’s criminal conviction and the license sought.

    Whether, notwithstanding the presumption of rehabilitation, the public agency retains the discretion to deny the application after examining the factors listed in Correction Law § 753(1).

    Holding

    Yes, because the presumption of rehabilitation created by the certificate of good conduct applies even when the statutory definition of a direct relationship has been satisfied. The agency must consider the factors mentioned in section 753(1) to determine if the direct relationship is sufficiently attenuated to warrant issuing the license.

    Yes, because even with the presumption of rehabilitation, the agency retains discretion to deny the license after considering the factors in Correction Law § 753(1) and determining that the public interest and safety outweigh the presumption of rehabilitation.

    Court’s Reasoning

    Article 23-A of the Correction Law aims to eliminate bias against ex-offenders by requiring employers and public agencies to deal equitably with them, while also protecting public safety. While the statute generally prohibits denying a license based solely on an applicant’s status as an ex-offender, it recognizes exceptions for direct relationships between the crime and the license sought or where the license would pose an unreasonable risk.

    The court reasoned that the presumption of rehabilitation applies even when a direct relationship exists. Section 752 states a conviction cannot be considered a basis for denial when the applicant has a certificate, unless one of the two exceptions apply. The Court noted the need to give meaning to the provisions, determining that consideration must be given to the certificate where a direct relationship applies, though the public agency retains the discretion to deny.

    The Court differentiated between the direct relationship exception and the unreasonable risk exception. In both cases, the certificate creates a presumption of rehabilitation but does not establish a prima facie entitlement to the license. It’s only one of eight factors to consider under §753(1). The Board’s determination was not arbitrary or capricious. The Hearing Officer considered the factors in § 753(1), including the public policy of encouraging licensure of ex-offenders, the time elapsed since the conviction, Bonacorsa’s age and experience, and the seriousness of the offenses. Most importantly, the Hearing Officer considered the Board’s legitimate interest in protecting public safety. The court cited Matter of Tappis v. New York State Racing & Wagering Bd., stating that denying a license to someone involved in covering up for another who was barred from horse racing is a legitimate way to prevent the appearance of impropriety. The Court held that the Board did not discriminate against Bonacorsa solely because he had been convicted of criminal offenses.

  • O’Brien v. O’Brien, 66 N.Y.2d 576 (1985): Professional Licenses as Marital Property Subject to Equitable Distribution

    66 N.Y.2d 576 (1985)

    A professional license acquired during a marriage is considered marital property subject to equitable distribution in a divorce proceeding, reflecting the economic partnership inherent in marriage.

    Summary

    In a divorce action, the New York Court of Appeals addressed whether a husband’s medical license, obtained during the marriage, constituted marital property subject to equitable distribution. The court held that it did, reasoning that the Equitable Distribution Law recognizes spouses’ equitable claims to marital assets. The court emphasized the contributions of the non-licensed spouse to the attainment of the license and ruled that the license’s enhanced earning capacity is a marital asset. The court remanded the case to the Appellate Division to determine the facts and exercise its discretion in making the distributive award.

    Facts

    The parties married in 1971, both working as teachers. The wife supported the husband while he obtained his bachelor’s degree, completed pre-medical courses, and attended medical school in Mexico. She contributed her earnings to their joint expenses and sacrificed her own educational goals. The husband obtained his medical license in 1980, and the divorce action commenced shortly thereafter. The wife’s expert valued the license at $472,000 based on projected earnings, and the trial court awarded her 40% of that value.

    Procedural History

    The Supreme Court (trial court) determined that the husband’s medical license was marital property and made a distributive award to the wife. The Appellate Division reversed, holding that a professional license is not marital property. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a professional license acquired during a marriage constitutes marital property subject to equitable distribution under Domestic Relations Law § 236 (B) (5).

    Holding

    Yes, because a professional license acquired during marriage is marital property within the meaning of Domestic Relations Law § 236 (B) (1) (c) and is subject to equitable distribution.

    Court’s Reasoning

    The Court of Appeals reasoned that the Equitable Distribution Law contemplates two classes of property: marital and separate. Marital property is broadly defined as all property acquired during the marriage. The court noted that the statute explicitly refers to contributions to the career potential of the other party. The legislative history supports the interpretation that marriage is an economic partnership. The court stated, “[T]he Legislature has decided, by its explicit reference in the statute to the contributions of one spouse to the other’s profession or career (see, Domestic Relations Law § 236 [B] [5] [d] [6], [9]; [e]), that these contributions represent investments in the economic partnership of the marriage and that the product of the parties’ joint efforts, the professional license, should be considered marital property.”

    The court rejected the argument that a professional license is not marital property because it lacks exchange value. It stated that “[a] professional license is a valuable property right, reflected in the money, effort and lost opportunity for employment expended in its acquisition, and also in the enhanced earning capacity it affords its holder, which may not be revoked without due process of law.” The court also rejected the argument that alternative remedies, such as rehabilitative maintenance, are sufficient, stating that “[l]imiting a working spouse to a maintenance award, either general or rehabilitative, not only is contrary to the economic partnership concept underlying the statute but also retains the uncertain and inequitable economic ties of dependence that the Legislature sought to extinguish by equitable distribution.”

    The court further clarified that the working spouse is entitled to an equitable portion of the license’s value, not merely a return of funds advanced. The value is the enhanced earning capacity it affords. The court emphasized that valuing a professional license is similar to valuing a professional practice. The court remanded the case to the Appellate Division to determine the facts, exercise its discretion, and set forth the factors it considered in making the distributive award.