Determining what a person’s income is for the purposes of establishing what their child and/or spousal support obligations are is an all-too common issue in Family Law cases. While such a determination can cover a vast array of legal issues, one topic of particular importance is: What is an appropriate representative income sample period for determining future child/spousal support? Unless a court is imputing minimum wage income, it must have some basis to determine what a party’s likely immediate future income is, so how does it determine that? How far back should the court look? What sample or representative length of time should the court look at?
In In re Marriage of Riddle, the Court of Appeal for the 4th District, Division 3, held that, for the purposes of determining spousal and child support, it was an abuse of discretion for a trial court to “take so small a sliver of time to figure income that the determination essentially becomes arbitrary.” In re Marriage of Riddle, 125 Cal. App. 4th 1075, 1083 (2005). Thus, the court recognized that, keeping in line with Family Code §§ 4060 and 4064, there is a presumption that a twelve-month period of time is a representative sample period, however, since those provisions allow for judicial discretion, the twelve-month period should not be made a bright-line rule. Id.
In Riddle, the trial court looked at the husband’s year-to-date earnings, a mere two months at that time, and divided the number by six weeks, which accounted for the periods identified in the earnings statement. Id. at 1078-1079. It then took the weekly income amount arrived at and multiplied it by four weeks to ascertain the husband’s “monthly” income. Id. at 1079. The court of appeal took issue with this approach determining that it yielded an unrepresentative sample period of time.
In explaining the problem with the trial court’s unrepresentative sample, the court of appeal used three alternative samples: (1) fourteen months; (2) one year, or twelve calendar months (January to January); and (3) the most recent twelve months (February to February). Id. While each of these calculations yielded slightly varying numbers, within a $1,000 range of one another, the overall effect was that the husband’s monthly income was, before anything else was calculated, some ten thousand dollars less than what the trial court had determined it to be based on its use of the unrepresentative, two-month, sample period. Id.
Relying on principles espoused in In re Marriage of Hall, 81 Cal. App. 4th 313, 317-18 (2000), County of Placer v. Andrade, 55 Cal. App. 4th 1393, 1396 (1997), and In re. Marriage of Rosen, 105 Cal. App. 4th 808, 821 (2002), the court of appeal in Riddle emphasized that “a court must arrive at a stable number in order to make a support order,” and that “the idea behind this stable number is to have a reasonable predictor of what each spouse or parent will earn in the immediate future[,]” so “[t]he time period on which income is calculated must be long enough to be representative, as distinct from extraordinary.” Riddle, 125 Cal. App. 4th at 1082 (emphasis in original).
Accordingly, the court of appeal recognized twelve months as a sufficient sample period for determining income for the purposes of child and/or spousal support in most cases. Id. at 1083. It also recognized that, given the facts and circumstances of parties to a case, a sample period may need to be adjusted to a longer period. It provided the example of an author who publishes a book which is a smashing success for one year but then whose sales fall off in subsequent years. Id. at 1084.
Other examples where a longer period of analysis might be appropriate include:
- Game/videogame makers, others whose sales of their products fall off over time, much like an author;
- Film industry personnel whose income may be largely dependent upon the caliber and/or number of projects they take;
- Those whose work is subject to great fluctuation year-to-year (i.e., influencers, artists, art brokers who sell only one or a few pieces a year); and
- Those whose income is dependent upon external factors beyond their control, such as those in specialized areas whose products may be more in demand depending upon circumstance (i.e., sellers of emergency supplies for a particular region/locale).
Why is it important to understand Riddle and be aware of it in terms of practical use? For one thing, a solid understanding of Riddle is helpful to analyzing the income sample period that should be applied to your client. Should an analysis of their income for support purposes be evaluated on a twelve months basis or longer? What is it that the client does, and does that yield static or fluctuating income? What twelve-month basis should be analyzed: a standard calendar year from January to December or something else? Being able to recognize the nature of your client’s income, whether or not it’s static or severely fluctuating, will allow you to determine what valuation period will be most beneficial to your client in addressing support.
It’s also important to recognize that Riddle is separate and distinct from Rosen, from which Riddle draws inspiration. Rosen pertains to the issue of “goodwill” in a business and it recognizes that, much like personal income, business revenue may ebb and flow such that looking at revenue for one single fiscal year will likely have the effect of presenting an unrepresentative sample of revenue data. While similar principles underlie both cases, it is important to distinguish why Rosen would naturally and necessarily look to a period of multiple years while Riddle would not. Arguably, goodwill cannot reasonably be looked at on a microcosm of a month-to-month period. It would be extremely difficult, if not impossible, not to mention largely unnecessary, to determine the fluctuation of goodwill on such a basis; it serves no purpose. Income, on the other hand, can and should be examined in the microcosm of a month-to-month period and a representative sample of those months is beneficial to determining a party’s income in the immediate future.
With that, I encourage all who practice in this area to give consideration to the questions posed above and I remind all of why it matters with this question from Batman’s the Riddler: “What is it that no man wants to have but no man wants to lose?” “A lawsuit.”
To see the article that was published in OC Lawyer Magazine, click here.