Heated divorce disputes may impact business valuations, assets

Readers may know that marital estate obligations may impute both profit and debt liabilities to divorcing spouses. However, a spouse’s actions may also impact business valuations.

Specifically, divorce law principles of determining the marital estate might be required even in the case of a business that was owned by just one spouse prior to the marriage. The rationale is that increases or decreases in the value of a business during the course of a marriage might be attributable to the other spouse’s efforts. For that reason, the advice of an attorney experienced in divorce law and property division can be essential.

Although jointly liable debt is a more common example, today’s story illustrates that a divorce court has great latitude in determining how spouses might share in a business’ declining assets or value. Specifically, the court lowered a spouse’s percentage of her husband’s partnership value in the divorce.  

Although many private law firms experienced some difficulty in the months and years following the 2007 economic recession, the spouse in today’s story took to posting negative comments about her husband after they filed for divorce in 2007. Her efforts caught the attention of a website called Above the Law, which profiles lawyers in a sarcastic manner. The husband -- a partner in private law firm -- earned the dubious distinction of being profiled by the website. 

The husband claimed that the negative publicity contributed to the decline in his legal earnings at the partnership, and the divorce court agreed, lowering the wife’s valuation percentage in the partnership to 17 percent. 

Source:  ABA Journal, “Ex-wife gets less in divorce of BigLaw partner because her badmouthing hurt rainmaking, judge says,” Debra Cassens Weiss, Apr. 9, 2014