Thursday, March 10, 2011

In Re Marriage of Kochan (Cal. Ct. App. - March 9, 2011)

I get what Justice Bigelow is saying here.  And agree.  You generally can't "impute" income to a spouse (in a divorce case) just because s/he could make more money doing a different job.  Sure, if they're not doing anything, that's one thing.  But you can't say, for example, that a superior court judge -- to take an setting near and dear to many of our hearts -- can have extra income inputed to him just because he could easily retire and take a better-paying job with JAMS.

There are, however, exceptions.  You can't deliberately underemploy yourself.  You can't leave your doctor job and become a janitor just to spite your wife and reduce your support obligations.  So the "no-imputation" rule isn't nearly as categorical as one might think.  We do indeed impute income on occasion.

Now, for me, I think the dividing line is that a spouse should be able to stay at their existing job if they want.  Maybe there is a limited exception; for example, if -- without good reason -- a spouse refused to accept an obvious promotion, I might be willing to impute income there as well.  So the actual rule is:  "Imputation sometimes.  No imputation other times."  With the general caveat that you get to stay put.

But this is a case that seriously tests that proposition.  Perhaps even justifying another caveat.

Roman Kochan was (and is) the Dean of Library Services at Cal State Long Beach.  He's been at CSULB since 1969, and we know what that means.  Big pension.  One that's worth over $1.5 million.

But that's not all.  It also means that Kochan can retire and still collect a hefty chunk of his salary.  Under a collective bargaining agreement available to Kochan, Kochan is entitled to (1) retire, and thereby draw his full retirement benefits; (2) have those benefits untaxed by Social Security (unlike his current salary); (3) stay at CSULB as a senior librarian, performing the same duties he's doing now, working half-time and obtaining half pay, as well as obtaining benefits.

But Kochan has an even bigger incentive to do so.  If he continues to work, his retirement benefits actually decrease, since he's already maxed out on years of service and is just getting older every day (which thus reduces the value of his benefits).  So there's a huge reason to retire, go half time, and still do your job.

Except for one big thing.  Retiring helps his ex-wife.  Conversely, staying on the job screws her.  Which is what he feels like doing.  Reducing the value of his retirement benefits hoses his ex-wife because she owns part of those benefits, whereas any salary he earns at this point is all his.  Plus, if he retires now, she's fine if he dies.  But if he doesn't retire, and then he dies, she gets a huge decrease in benefits.  So by continuing to work, his last thought on his death bed will be how he's stuck it to his ex-wife one last time.

You may say to yourself:  "Shaun, you're being overly harsh on Kochan.  I'm sure that's not his thought process."  Because who would ever want to harm financially their former spouse, right?  As for whether Kochan's that kind of guy, see if this gives you a little insight:  He recently stopped paying all his debts (including his community debts), and filed bankruptcy.  After the bankruptcy was over, he also stopped paying his mortgage, and still doesn't pay it, figuring he could live in it rent-free until the bank foreclosed on the house.  His ex-wife -- who owned part of the house -- was desperate for him to sell it, but he testified he just "never got around to it."  Oh, and he could pay the mortgage on the house if he were to retire and use his enhanced salary to do so.  But he just doesn't feel like it.

The Court of Appeal reverses the trial court and holds that it can't impute income to Kochan for his failure to retire and obtain an increase in salary on the theory that you can never "force" someone to leave their job for another one.  I understand the principle.  But this may be -- or at least comes darn close -- to an exception.  It'd be one thing if Kochan's retirement stopped him from working.  But he can retain nearly the exact same job even after retiring due to the collective bargaining agreement, albeit half-time.  And you know what?  If he wants to work full-time, go right ahead.  Don't tell me that CSULB will say:  "Since we're only paying you to be here two and a half days, we're not going to let you work all five."  University libraries would love for a little volunteer work.

When the only reason you don't maximize your income is to game the process (or out of spite), I'm not sure that imputation is inappropriate.