Case Watch: For Mediators
The following case analyses are part of a regular series we publish to help neutrals broaden their knowledge of rulings of Georgia’s appellate courts that may affect your practice. Remember: mediators should not give legal advice or opinions
Review of Ellis v. Ellis, S11F1506,decided February 27, 2012, appeal to the Georgia Supreme Court of a ruling by Judge David T. Emerson, Douglas County Superior Court.
CaseWatch for Mediators:
Self-Employment Income Complicates Child Support Calculations
Seasoned domestic mediators know that disagreements about parental income and child support are among the most heated. And nothing ratchets up tensions around child support more than a child’s monthly extracurricular expenses that the custodial parent insists upon receiving. Ellis looks at how a trial court reconciled vastly conflicting monthly income claims of the parents in trying to determine the correct amount of child support. It shows what consideration one trail court gave to the cost of a child’s extracurricular activities. And it shows what additional documents you as a mediator might inquire about to find clarity and a middle ground in the financial negotiations.
Complicating matters in Ellis was the fact that Husband was self-employed. Anytime a mediator has a divorcing party who is self employed, a caution flag should go up in that it is notoriously difficult to verify income figures, particularly when the spouse disagrees with what has been submitted. After all, the spouses have lived together and should have an accurate idea of their disposable income. Income and expenses from self-employment or operation of a business should be carefully reviewed to determine an appropriate level of gross income available to the parent to satisfy a child support obligation.
Financial affidavits and child support guidelines are the bread and butter we use to determine child support. But what happens when the self-employed Husband submits a financial affidavit showing a monthly income of $3,000 and a child support worksheet showing a monthly income of $4,474, and Wife submits six months of deposits from Husband’s business showing his monthly income to be $20,446.25?
The Ellis trial court examined the parties’ testimony; their 2008 joint tax returns; and the Husband’s profit and loss statement. The court also relied on the Georgia code to calculate Husband’s income for child support purposes. O.C.G.A. § 19-6-15 (f)(1)(B) defines income from self-employment as gross receipts minus ordinary and reasonable expenses required for business operations. Thus the court determined that Husband’s income was not the monthly salary he paid himself ($3,000), or his business’s gross monthly receipts ($20,446.25), but was the net profit of his business, the most credible evidence of which was the $4,474 on Husband’s child support worksheet and profit-and-loss statement.
In a rare public expression of frustration, the Supreme Court noted that neither party had hired an accounting expert to determine the Husband’s monthly income. Rather, the parties presented “just kind of a mess thrown up to the Court” which it then had the “opportunity and privilege of sorting.” Sound familiar? The next time your parties don’t make the effort to control their own financial futures, ask them if they would rather have a very annoyed court making those decisions instead.
As to the Ellis child’s competitive cheerleading expenses, Wife wanted an increase from the support guidelines ranging from $237 to $385 per month. The statute (O.C.G.A. 29-6-15 (i)(3)(J)(ii)) provides that a trial court may deviate from the presumptive amount of child support in the event of special expenses incurred for child rearing, including school sponsored extracurricular activities. The Ellis trial court, however, declined to award an increase deviation for that expense, finding that the competitive cheerleading was not a necessity. The Supreme Court upheld the trial court’s findings as they were not clearly erroneous. The trial court is free to reject a claim for a deviation from the presumptive child support amount, the Supreme Court said.
“Subjective” and “discretion” are two words that the parties should always be reminded of as it pertains to what a trial court can do. Keeping those words in mind, it appears the parties’ odds for success at trial are holding at 50/50. Make sure they are also reminded of the time, expense and emotional toll of trial, and maybe they will make a more concentrated effort at mediation.