1 nov 1 8 2015 v,., u,a caun 2...
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FILED SUPERIOR COURT OF CALIFORNIA . COUNTY OF ORANGE
LAMORF'" JX JI.lS~I(''' """'TER NOV 1 8 2015
ALAN CAKLW", v,.," o. u,a Caun
BY:~:R~~~ SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF ORANGE
LAMOREAUX JUSTICE CENTER
7 In re the Marriage of: Case No. 120000041
8 Petitioner: KIMBERLY M. JONES TENTATIVE STATEMENT OF DECISION FOLLOWING TRIAL 9 and
10 Respondent: FLETCHER JONES, JR. DEPT. L-611
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Comes now the court and publishes this tentative state~ent of decision1 in support
of the court's trial rulings published November 16, 2015. The court's rulings followed trial
14 that commenced April 27, 2015 and continued over 23 days with the undersigned judge
15 presiding. During the trial, Petitioner Kimberly M. Jones ("Kimberly") was represented by
16 the Kolodny Law Group, and attorneys Stephen A. Kolodny, Heidi L. Madzar, and Alexa
17 S. Wolff, and also represented by the Law Offices of Steven E. Briggs, and attorney
18 Steven E. Briggs. Respondent Fletcher Jones, Jr., ("Ted") was represented by Seastrom
19 & Seastrom, and attomeys Philip G. Seastrom and Emily J. Nickles, and by Wasser,
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I The purpose of a statement of decision is to explain the factual and legal basis for the Court's decision on the principal controverted issues. Detailed statements of evidentiary facts are not required. (Code Civ. Proc., § 632; In re Marriage of Garrity & Bishton (1986) 181 Cal.App.3d 675, 686-687.) This Court, in "rendering a statement of decision under Code of Civil Procedure §632 is required only to state ultimate rather than evidentiary facts. [It] is not required to make findings with regard to detailed evidentiary facts or to make minute findings as to individual items of evidence." (Kazensky v. City of Merced (1998) 65 Cal.App.4th 44,
26 67.) This Court also need not make findings on immaterial issues and it need not address
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each question listed in a party's request. (Id. at p. 68.) -1-
1 for temporary support pending trial. The parties agreed that pending trial, Ted will pay to
2 Kimberly $450,000 per month (family support - non-taxable to Kimberly). Along the way,
3 Ted contributed to Kimberly's attorney fees and costs in the approximate amount of $3.5
4 million.
5 II
6 THE NEVADA AND CALIFORNIA LITIGATION
7 THE NEVADA ACTION
8 Meanwhile, Kimberly contested the parties' Prenuptial, Marital Settlement, and
9 Postnuptial Agreements and would not concede their validity and enforceability, so Ted
10 launched the "Nevada Action." (See generally Nevada District Court Family Divisions,
11 Clarke County, Case No. D-12-470239-U). Ted sought declaratory relief in Nevada (the
12 jurisdiction specified in the Agreements) 4 to determine the validity and enforceability of
13 the agreements. 5 The Nevada court considered the following issues:
14 1. Declaratory relief and specific performance of the terms of the three
15 agreements previously entered into by the parties:
16 i. The prenuptial agreement;
17 ii. The marital settlement agreement;
18 iii. The postnuptial agreement.
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4 The agreements required the parties to litigate any challenge to the agreements in the state of Nevada and agreed Nevada law will apply.
5 Kimberly filed a motion in California seeking a fee-shifting order for fees related to the Nevada action. Judge Kreber granted Kimberly's request for attomey fees and costs on the basis the Nevada action was related to the California action, and ordered Ted to contribute $375,000 toward her Nevada fees. Ted appealed that order, and the attorney fees and costs
26 was affirmed by the Fourth District Court of Appeal, Division Three, Case No. G049640
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(unpublished opinion). -3-
I b. Cross claims for attorney fees and costs based on "prevailing party"
2 status6; Kimberly also asked for need-based attorney fees based on a
3 disparity of income between the parties.
4 Trial in the Nevada Action took place over 31 days, The Honorable Judge Gayle
5 Nathan, Department T, presiding. Final judgment was entered September 24, 2014 in
6 favor of Ted. The Nevada court ruled:
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1. The three agreements were valid and enforceable;
2. Kimberly was ordered to return certain property and monies;
3. Ted was declared the prevailing party, and pursuant to the agreement
Kimberly was ordered to reimburse Ted his attorney fees and costs
incurred in the Nevada action ($4 million).
i. See Nevada District Court's Findings of Fact, Conclusions of
Law, and Judgment filed September 24, 2014.
ii. Kimberly filed an appeal (still pending).
16 THE CALIFORNIA ACTION
17 Meanwhile the "California Action" continued-on; The California court addressed
18 the following limited issues:
19 0 Termination of Marriage;
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21 0 Child support and spousal support;
22 0 Kimberly's request for attorney fees and costs.
23 During the marriage and after date of separation ("DOS"), until just recently the
24 parties lived in very close proximity to one another, Kimberly remaining in the former
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6 The prenuptial agreement entitled the prevailing party to attorney fees. 1 The parties settled custody and visitation by stipulated judgment.
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1 family residence while Ted moved nearby. After DOS the parties mostly cooperated in
2 sharing the children, with some squabbles along the way. Then, Kimberly decided to
3 relocate to Montecito, Santa Barbara County, and that intended move ignited litigation.
4 However, the parties settled on a parenting schedule and entered into and filed a
5 stipulated partial judgment regarding custody and parenting schedules. The leftover
6 California issue was support, plus Kimberly's request for attorney fees.
7 Before start of trial, Kimberly wanted to litigate and/or collaterally challenge issues
8 resolved by the Nevada court. Upon motions, the undersigned judge8 took judicial notice
9 ofthe Nevada judgment, granted Ted's motion affording the Nevada judgment its full Faith
10 and Credit, declared the Nevada rulings res judicata of the issues decided therein, and
11 ruled Kimberly was collaterally estopped from re-litigating the same issues in California.
12 By agreement, Kimberly's request for attorney fees and costs was bifurcated. The parties
13 agreed to resolve attorney fees and costs after trial and by submitting dueling
14 declaration(s) and written and oral argument.
15 While the parties estimated a 10 day trial on the limited issue of support, in fact the
16 trial consumed 23 days. After both sides rested, the court established a briefing schedule
17 for submittal of written closing arguments and declarations regarding Kimberly's motion
18 for reimbursement of all her attorney fees and costs.9 On August 7,2015 oral argument
19 took place and was followed by a final round of closing arguments. Each side submitted
20 a proposed statement of decision. On August 28, 2015, the issues were submitted to
21 the court for ruling. Thereafter, the court took considerable time reviewing the huge trial
22 record,10 including expert reports, read the voluminous and comprehensive closing
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8 Judge Ronald Kreber retired in April 2013 and the undersigned is the successor judge. 9 Each side lodged objections to the content of declarations; the court overrules all
objections. 10 The court's file related to the California proceedings is ginormous. The pre-trial file is
26 massive. The trial record (with trial exhibits filling 20 large notebooks) comprised the largest number of trial exhibits this family law judge has yet observed.
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1 argument, and reviewed the many dueling declarations and written arguments concerning
2 the allocation of attorney fees and costs. Along-the-way the court deliberated over its
3 conclusions, findings and rulings.
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5 III
6 THE SUPPORT ISSUES
7 Ted is a high earner. 11 Ted has the indisputable ability to pay guideline child
8 support, or, on a departure basis, pay whatever amount this court otherwise determines
9 is just and reasonable. Ted has the indisputable ability to pay spousal support in whatever
10 amount this court determines is just and reasonable. Except for the required calculation
11 of guideline child support, Ted's income is not very important, yet so much pre-trial
12 discovery, attorney fees and costs, and a lot of trial time was invested to determine Ted's
13 income.
14 A
15 TED'S INCOME
16 The parties agree: whatever Ted's income is - his recurring and sustainable net
17 disposable income is extraordinarily large. The parties disagreed over the exact amount
18 of his income for purposes of calculating guideline child support (FC §§ 4055). The court
19 listened carefully to the exhaustive and dueling analysis delivered from CPA David Swan
20 (Ted's expert) and CPA Jason Wegis (Kimberly's expert). Mr. Wegis claimed Ted's
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11 Put simply, Ted sells automobiles and he makes a lot of money. Doubt/ess from hard work and a strong business acumen, over years Ted built a management team and acquired a large number of automobile dealerships doing business in California, Nevada, Illinois, and
24 Hawaii. Among other manufactures, Ted's marquee brand is Mercedes Benz. Today, Ted's separate property includes substantial assets and holdings, and he has SUbstantial recurring and sustainable net disposable monthly income. Ted is a high income earner (compare Fe §§ 4057(b)(3). The court observed long ago Ted has the ability to pay any reasonable support
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and costs, both sides. Ted's ability to pay was never disputed. -6-
1 annual income before taxes is around $53 million. Mr. Swan testified that Ted's annual
2 income before taxes was less, around $45 million. Mr. Wegis calculated guideline child
3 support at over $500,000 per month, while Mr. Swan calculated guideline child support at
4 around $395,000 per month. Both CPA's testified at great length and authored
5 comprehensive and exhaustive reports, schedules, and analysis. (See generally Mr.
6 Wegis' report, trial exhibit 260, plus schedules). (See Mr. Swan's report, Trial Exhibit 645,
7 plus schedules, and see also his supplemental schedules at Trial Exhibit 780). The court
8 read and considered each report, schedules and notes, and a lot of trial time was
9 consumed slogging through all the many reports and schedules. The experts essentially
10 agreed upon the raw data and Ted's gross income. There was never any debate about
11 Ted's honest reporting of gross income. 12 The major factor explaining differences was
12 methodology; Mr. Wegis used an "income" analysiS while Mr. Swan used a "distribution"
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14 Since the experts did not agree, the court was called upon to give weight to their
15 credentials and experience and evaluate the different methodologies and assumptions
16 employed. Along the way the court assessed their credibility. When compared side by
17 side, the court was more persuaded by Mr. Swan's training, credentials, and experience.
18 (See Mr. Swan's curriculum vitae, Trial Exhibit 644.) Although both professionals were
19 very likeable and, at a glance, men of integrity for sure, nonetheless, the court easily
20 found Mr. Swan was far more experienced and knowledgeable. After listening to both
21 and reviewing their methods, assumptions, and analysis, again the court easily found Mr.
22 Swan more credible and convincing. Mr. Swan presented a more credible and convincing
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12 Both CPA's agreed there was not a scintilla of evidence, nor inference, to suggest Ted engaged in any "divorce planning" or structuring of income to dodge, minimize, shirk, or shrink support calculations. Indeed, there is no evidence anywhere Ted or his management team secreted away any income or disguised any perquisite.
13 There were plenty of other differences between the experts as and for quantifying the MSL and the prospective financial needs of both Kimberly and the children.
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1 analysis as and for assessing Ted's net disposable monthly income available for the
2 calculation of support, assessing the historical expenses characterizing the standard of
3 living, and assessing reasonable prospective needs.14 In the end, the court was very
4 confident in the conclusions reached by Mr. Swan as and for Ted's net disposable monthly
5 income for calculating guideline child support, quantifying the MSL, and quantifying
6 Kimberly's and the children's prospective financial needs juxtaposed to the MSL.
7 The court finds the best, most accurate, and fair method to determine Ted's historic
8 net disposable monthly income for guideline child support was to audit for the distributions
9 Ted actually received, a methodology suggested by Mr. Swan. That approach is not only
10 consistent with sound accounting practices but also well serves the mandate under FC
11 §§ 4058. In addition, that is how the parties lived; their spending patterns traced the
12 distribution's Ted actually received. And then there is this: The distribution method Mr.
13 Swan employed was also employed by the dealerships; a reasonable percentage of
14 retained earnings was earmarked and retained for operating purposes and to reinvest for
15 future growth. Besides Ted's good business acumen (and doubtless his hard work), Ted's
16 restraint in drawing income based on distributions allowed his network of dealerships to
17 be adequately capitalized and infused with reserved (new) money, allowing the
18 dealerships to thrive and grow and seed new dealerships. (See generally IRMO Blazer
19 (2009) 176 Cal.AppAth 1438.) Ted's manner of accounting and the distribution method
20 long employed not only explains a network of dealerships across four states, but also
21 supported the lifestyle the parties historically enjoyed and prospectively hope to enjoy.
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14 If the court was going to consider a downward departure from guideline child support, as Ted urged, the court was keenly interested in assessing the reasonable and necessary historical financial needs of the children and assessing their prospective needs juxtaposed to the MSL, and otherwise ensuring the children have the same standard of living as their father, proportioned to their ages and child-sized needs. In the end, the court easily found Mr. Swan more persuasive and convincing across the range of issues.
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1 The court accepts Mr. Swan's analysis over the analysis posited by Mr. Wegis.
2 Ted's gross income available for support is $45,097,985 annually, or $3,758,165 per
3 month. (Trial Exhibit 783.2A.) Using the same approach of distributions actually
4 received, Ted's income after taxes is $21,073,293 annually, or $1,756,108 per month.
5 (Trial Exhibit 783.2A.)
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8 CHILD SUPPORT
9 At trial, the two child support issues were 1) Ted's net disposable monthly income
10 available for support for the purpose of calculating guideline child support (no other
11 guideline factors disputed; and 2) Whether there exists sufficient justification to depart
12 downward from guideline formula on the basis Ted is a super high earner and formula
13 calculated support exceeded the reasonable needs of the children. Ted claimed
14 departing from guideline and ordering a lower amount is consistent with the children's
15 best interests. 15
16 Whatever the debate over Ted's income, this case presents overwhelming
17 evidence that guideline child support, however calculated, would exceed the reasonable
18 needs of the children, and departing from guideline is appropriate and serves the best
19 interest of the children. In that sense, Ted's income, either as calculated by Mr. Wegis or
20 Mr. Swan, was never very important within a departure setting, and too much time and
21 resources were consumed determining his income. That said, for purposes of calculating
22 guideline child support, as required under law, the court accepted Mr. Swan's analysis
23 (distributions actually received) as and for Ted's gross income available for support. (See
24 above.)
25 15 The children reside with both parents, 75% with Kimberly and 25% with Ted. Wherever
26 the children reside, Ted has sufficient means to maintain parity between his home and Kimberly's home. The support orders established herein provide for that.
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1 Ted's income is $45,097,985 annually, or $3,758,165 per month. (Trial Exhibit
2 783.2A.) Ted's income after taxes is $21,073,293 annually, or $1,756,108 per month.
3 (Trial exhibit 783.2A.)
4 Kimberly's actual gross income is $129,341 annually, or $10,778 per month. (Trial
5 Exhibit 784.2, Schedule 2).
6 Guideline child support, based on Ted's after-tax income of $1 ,756, 108 per month
7 and Kimberly's actual gross income of $10,778 per month is $395,970 per month. (Trial
8 Exhibit 785.3.) (See the attached DissoMaster™ data page, incorporated by this
9 reference.)
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11 DEPARTURE FROM THE GUIDELINE FORMULA
12 While both parties agree Ted is an extraordinarily high earner, only Ted claimed
13 his extraordinary high monthly income triggered the application of FC §§ 4057(b)(3). Ted
14 urged the court to grant a downward departure from the guideline formula. Given that the
15 guideline or formula calculated child support is presumptively correct (FC § 4052, 4057),
16 Ted had the burden to prove by a preponderance standard that the application of the
17 guideline formula, if applied, would be "unjust or inappropriate" because guideline child
18 support exceeds the reasonable needs of the children and the guideline amount does not
19 serve their best interests.
20 The Court acknowledges the guideline is presumptively correct (FC §§ 4052,4057)
21 and a departure is appropriate or justified only under special circumstances. However,
22 this is a unique case and FC §§ 4057(b)(3) factors are in play here. Based upon the
23 totality of the trial record, Ted presented sufficient evidence, well beyond a
24 preponderance standard, to support a finding that the application of the guideline formula,
25 if applied, is "unjust or inappropriate" and a lower amount is consistent with the best
26 interest of the children. Compare IRMO Hubner (2001) 94 Cal.App.4th 175, 183. See
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1 also Johnson v. Superior Court, (1998) 66 Cal,App.4th 68, 71. Ted proved to the court's
2 satisfaction that, in this case, granting a departure from the guideline is consistent with
3 the statutory policy and prinCiples set forth within Family Code Section 4053 et seq.
4 Findings:
5 1. Guideline child support is $395,970 per month. (See attached
6 DissoMaster™ page.)
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2. The guideline child support is unjust and not appropriate in this case
because guideline child support is approximately 300% over the historic
and current reasonable needs of the children.
a. Guideline child support well exceeds the prospective needs of the
children.
3. Child support at $ 120,000 per month will allow the children to live at
Ted's lifestyle level.
a. If awarded guideline, that amount will exponentially exceed their
needs, even at Ted's lifestyle and above the MSL.
i. The excessive funds over needs will only enrich Kimberly, and
is tantamount to a shifting of wealth, and violates the mandate
of FC §§ 770.
4. An amount below guideline is consistent with the best interest of the
children.
a. Guideline child support does not serve the best interest of the
children because guideline support vastly exceeds the reasonable
needs of the children.
5. If guideline child support is ordered, Ted's wealth and separate property
income will be inappropriately transferred to Kimberly, a result not
contemplated under California child support laws and schemes.
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6. A departure from the guideline formula and establishing below guideline
child support at $120,000 per month meets or exceeds the reasonable
and necessary expenses of the children and allows them to live at the
MSL and live in parity with Ted's high earner lifestyle.
7. Establishing a below guideline child support at $120,000 per month is
consistent with the principles set forth within FC §§ 4053 et seq.
8. In granting a departure from guideline and establishing child support, the
court considered the parties stipulation/order regarding Kimberly's
ongoing exclusive and expense-free possession of the former family
residence at California (the
"former family residence" or "Balboa residence") until January 1,2018.
13 DISCUSSION
14 Ted is a super high earner by admission and according to proof. Whether the
15 guideline child support is $500,000 per month, per analysis from Mr. Wegis, or whether
16 the guideline child support is $395,000 per month, per analysis from Mr. Swan, in either
17 case the guideline child support far exceeds the children's historical needs; the court
18 estimates by approxirnately 300% based on historical patterns of spending. 16 While Ted
19 can pay guideline child support - yes he can - in fact, any child support amount that far
20 exceeds their reasonable needs serves no purpose as and for the children and fails to
21 serve their best interests. The court understands Kimberly wants Ted to pay more, and
22 doing so only provides additional money to Kimberly who is already living at the MSL
23 under the spousal support ordered herein. While the court understands guideline child
24 16 After a comprehensive and convincing analysis from Mr. Swan, the more credible and
persuasive expert, the children's needs measured against the MSL and Ted's current affluent lifestyle are all met or exceeded if Ted pays between $112,000 - $120,000 per month as and
26 for child support. In this case, the court orders the high side of the range commencing
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1 support may sometimes have the collateral effect of improving a payee's standard of living
2 (produce a benefit to Kimberly - Compare Johnson v. Superior Court, supra, 66
3 Cal.App.4th at 71.) In this case however, Kimberly will already be living at the MSL upon
4 receipt of spousal support ordered herein, and so will the children upon an award of
5 $120,000 per month. Child support at $ 120,000 per month will allow the children to live
6 at Ted's lifestyle level. If awarded guideline, that amount will exponentially exceed their
7 needs, even at Ted's level and guideline is well above the MSL. The excessive funds
8 over needs will only enrich Kimberly, and is tantamount to a shifting of wealth, and violates
9 the mandate of FC §§ 770.
10 In summary, Ted is indisputably an extraordinarily "high income" earner within the
11 meaning of Family Code §4057 (b)(3). Ted, having the burden of proof, by persuasive
12 evidence well beyond a preponderance standard rebutted the presumption that the
13 guideline amount of child support should apply. He did so by presenting persuasive
14 evidence as to the children's historical expenses per a reasonable allocation method and
15 also quantified their prospective needs commensurate with the MSL and Ted's current
16 lifestyle. On that basis, the court easily finds the application of the guideline formula
17 unjust or inappropriate in this case. For all of these reasons, Ted's request that the court
18 depart from the guideline formula is granted. What should be the amount?
19 According to proof established in this case, ordering child support at $120,000 per
20 month will support the children's actual needs at the MSL and allow the children a lifestyle
21 in parity with their father's standard of living.I7 The estimated reasonable needs of the
22 three minor children while in Kimberly's care are met ifTed pays child support of $120,000
23 per month allocated between the children:
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1 on an allocation basis, housing commensurate with both the MSL and Ted's current
2 lifestyle. This amount will enable the children to share in their father's lifestyle, provide
3 economic parity between the two parties' households, and is in the best interests of the
4 children. It includes adequate funds to support travel and vacation expenses
5 commensurate with historical patterns of travel and includes all air travel with their mother
6 by private jet. This finding is based on convincing evidence that (a) actual expenditures
7 for the two-year period prior to the date of separation was $111,300 per month (Trial
8 Exhibit 645, Schedule 7.2); (b) current expenditures, as adjusted, for the nineteen-month
9 period ended January 31, 2015 were $119,328 per month (Trial Exhibit 780, [Schedule
10 10, revised]); and (c) expenditures, adjusted to current cost, for the two-year period ended
11 October 31,2011 were $121,373 per month. (Trial Exhibit 791, Schedule 7.6; see also
12 Schedules 10 and 10.1 [Trial exhibit 780].)
13 In addition, Ted is obligated under the stipulated order dated May 8, 2015 to pay
14 an array of expenses on behalf of the children, including, without limitation, the children's
15 medical insurance and uncovered medical; dental and other health related expenses; all
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21 SECURITY FOR FUTURE SUPPORT
22 Kimberly failed to prove any need or justification for security to ensure the full and
23 timely payment of support. Child support is chargeable to Ted's estate or living trust.
24 (Marriage of Drake (1997) 53 Cal. App. 4th 1139, 1163-1164.) Ted has established an
25 extensive estate plan with life insurance· naming the children as beneficiaries. Further,
26 there was no proof Ted is untrustworthy or has any history of not paying support. The
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1 court has no doubt whatsoever Ted will discharge is duty of support,
2 Kimberly is also provided for in Ted's estate
3 plan through a $6 million policy of life insurance coverage, and otherwise Kimberly is an
4 independently wealthy woman in her own right with no need for additional security.
5 Finally, the parties have now been separated/divorced for close to four years, almost a
6 third of the thirteen years (eleven and a half actually together) that they were married.
7 During this extended time, support has always been timely paid; no support enforcement
8 action has ever been filed. Kimberly failed to prove any need to require security for
9 support.
10 C
11 SPOUSAL SUPPORT
12 The second support issue at trial was the establishment of permanent spousal
13 support, IS another recurring issue within a family law setting. This case is atypical in
14 several ways. First, the prospective payor spouse (Ted) agreed to the establishment of
15 support - Ted agreed Kimberly has a need for support. Second, the payor's ability to pay
16 any amount was never disputed. Ted agreed he is an extraordinarily high earner and
17 admitted he can pay (ability) whatever reasonable support this court establishes. Two of
18 the very recurring (and vexing) fact-based issues, need and ability, were off the table.
19 Hence, this judge struggled to understand why this case did not resolve, and next why
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18 Whenever spousal support is at issue, the court must determine if there is a financial need, and if so, then determine if there is any ability to pay. In the Jones matter, everyone agreed Kimberly has a financial need and Ted has the ability to pay whatever reasonable support order the court may establish. The only question was the amount. In 2013 the parties
24 agreed to a pendente lite support order ($450,000 per month family support); back then, the same two accountants, Mr. Wegis and Mr. Swan's firm, agreed and quantified the MSL (by spending patterns) at around 517,000 per month. Two years later, the raw numbers had not changed, yet the court was bewildered when the experts no longer agreed at trial. At trial, Mr. Wegis substantially amended his opinions and testified family support should be $1.1 million per month.
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1 the attorneys estimated trial at 10 days, and then was very surprised when the trial (full
2 days) carried on for 23 days!
3 Whenever called upon to establish and calculate19 spousal support, courts are
4 required to consider a broad range of factors, consider the "equities of the situation," and
5 capture the "big picture." The purpose of spousal support is to assist a financially needy
6 former spouse to live at or near the approximate marital standard of living ("MSL").
7 Indeed, FC §§ 4330 tells us: " ... the court may order a party to pay support to the other
8 party, in an amount, for a period of time, that the court determines is just and reasonable,
9 based on the standard of living established during the marriage, taking into consideration
10 the circumstances as provided ... in Section 4320." Spousal support is not intended to
11 reallocate separate property wealth or reallocate separate property income.
12 Over 23 trial days, the court had plenty of time to consider all of the circumstances
13 specified in Family Code §4320, as presented by the attorneys, as and for the calculation
14 of spousal support. Let's start with the marital standard of living ("MSL"). (Compare FC
15 §§ 4332).
16 Ted and Kimberly each defined the MSL by their dueling versions of historical
17 expenses or checkbook disbursements using a two-year lookback period, making
18 adjustments and then allocating the dollars spent between Kimberly, Ted, and the
19 children. Both sides defined the MSL by a hybrid Ackerman approach, reducing the MSL
20 to dollars spent. That caused big fights about the purpose of a particular expense as and
21 for marital lifestyle or not, such as the Greece trip, or launched arguments about the
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19 The calculation of spousal support is not a mathematical calculation like the calculation of child support (compare FC § 4050), but instead a careful and nuanced examination of the relevant FC § 4320 factors against the marital standard of living ("MSL"). The amount of spousal support awarded is discretionary with the court, equitable considerations being
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1 nature of some big expense being atypical, recurring or non-recurring, such as a
2 "milestone" birthday bash costing hundreds of thousands of dollars.
3 In the end, neither party proposed a tidy and brief description as and for the MSL
4 as required by FC §§ 4332. Here it is:
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MSL DESCRIPTION
The parties enjoyed a lavish marital standard of living or lifestyle. The
parties lived in a large, custom, bayside home on the Newport Beach
Peninsula, its value hard to determine, but its FMV is estimated to be
approximately $16.5 million. The parties also owned a vacation home
in Cabo, Mexico, and valued at $6 million. Within either home, Kimberly
had an unlimited budget to purchase and maintain high-end luxurious
household furnishings. Kimberly did not work outside the home
environment and was assisted by domestic help, including a full-time
chef and caregivers
The children attended
private schools. The parties had access to a revolving fleet of new or
near-new lUXUry vehicles. The parties enjoyed frequent and exotic
vacations that sometimes included chartering a huge private yacht and
traveled to exotic places, renting large villas or suites within a super
high-end resort. All their frequent air travel was via a large 2003
Gulfstream GIV jet, owned and operated by Ted's management group
headquartered in Nevada. From Ted's distributed income from his
network of automobile dealerships, the parties spent on average
$517,000 per month to maintain their lifestyle. While not a precise
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1 calculation, in general that amount is allocated about $112,000 to the
2 children and about $243,000 to Kimberly.
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4 After characterizing the MSL, the court carefully balanced and weighed the
5 relevant factors set forth within FC §§ 4320 in the context of the MSL. The court knows
6 the amount of spousal support awarded is discretionary and equitable considerations are
7 predominant; any award must be fair and reasonable under all the circumstances.
8 The court listened to the parties and their dueling experts, in particular CPA Wegis
9 (for Kimberly) and CPA Swan (for Ted), as and for quantifying the MSL. The court noted
10 that in 2013, when establishing pendente lite support, these same experts mostly agreed
11 as and for quantifying the MSL by auditing and totaling up monthly spending, and agreed
12 the monthly (money) burn rate was just north of $500,000. Yet two years later at trial, Mr.
13 Wegis more than doubled that number, adding back expenses he once ruled out as being
14 atypical or non-recurring and adjusting upward the numbers based on his version of a
15 savings component, adding over $175,000 to Kimberly's alleged needs.
16 After listening to both experts, the court accepts the testimony and analysis from
17 Mr. Swan over the testimony and analysis of Mr. Wegis regarding the audit of historical
18 marital lifestyle expenses, as adjusted to current and as allocated amongst the parties
19 and children. The court excluded from consideration non-recurring events like milestone
20 birthday bashes,
21 Other non-recurring
22 expenses, such as milestone birthday bashes, yacht buying, and fishing trips were not
23 included. On average and while difficult to be super precise, the parties were spending
24 20 The court
25 found Ted's testimony more accurate and credible over Kimberly's recollection.
26 and the huge expense ($2.2 million) was not considered as and for characterizing or quantifying the MSL.
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1 about $517,000 per month during the last two years of marriage while living within the
2 Balboa home. Again, while not exactly precise, but good enough for government work,
3 the court accepts Mr. Swan's estimated allocation: about $243,000 allocable to Kimberly
4 and about $111,000 allocable to the children while in Kimberly's care. (See Trial Exhibit
5 645, Schedule 7.2.) The Court accepts those amounts as being reasonably accurate and
6 a good reference point to establish permanent spousal support and child support.
7 I n determining the marital standard of living, the Court specifically rejects the
8 analysis from Mr. Wegis and dismisses his analysis as being entirely unreasonable and
9 completely without any merit; Kimberly's demand for permanent family spousal support
10 at $1.1 million per month, based on Mr. Wegis' audits of historical spending and
11 adjustments, serves as a very good example of Kimberly over-litigating the case and/or
12 pursuing a very unreasonable position. (See attorney fees and costs section below.) The
13 court lost confidence in Mr. Wegis because, among other reasons, on the eve oftrial he
14 substantially changed his testimony and made many upward adjustments and
15 amendments to his conclusions, and in the end he more than doubled his opinion as and
16 for permanent spousal support. In 2013, based in part on Mr. Wegis audits, the parties
17 agreed to a $450,000 per month, non-taxable temporary family support award. 21 The
18 court agrees with Ted that Mr. Wegis offered no reasonable and credible explanation for
19 a step up from $450,000 per month (family support) to $1.1 million per month (family
20 support). Indeed, the court drew the inference Mr. Wegis' analysis was strategic and
21 intended to move to the highest number possible, leaving to the roadside any reality check
22 and skipping o~er any accurate analysis of the MSL based upon checkbook entries. At
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21 At the time of the temporary support OSC in 2013, Mr. Wegis calculated the marital standard of living and Kimberly's request for support at $511,240 per month. This amount included many expenses which Ted ultimately agreed to pay directly. (Exhibit "7," Summary of Jason Wegis' Changes - OSC v. Trial Monthly. [Trial Exhibit 795 - received as
26 demonstrative evidence]; Trial Exhibit 744.)
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I times Mr. Wegis was soundly impeached and his analysis not stable (compared to 2013)
2 without an adequate explanation.
3 And then there is this: after 450,000 was ordered paid to Kimberly (per the 2013
4 stipulation/order), after paying ordinary living expenses for herself and the children,
5 Kimberly had leftover funds. In that regard, the court accepts Mr. Swan's audit that
6 Kimberly had leftover funds after paying all monthly expenses and she used some portion
7 the family support to pay attorney fees and costs in the Nevada action. Hence, the court
8 drew the strong impression the temporary family support order over-stated family support
9 needs as measured against the MSL. The court also noted Kimberly's Income and
10 Expense Declaration, included in her Final Declaration of Disclosure, signed March 23,
11 2015, just one month before the support trial began, where she claimed that historical
12 marital expenses (without any allocation) totaled $511,240 per month. (Trial Exhibit 530,
13 Page 132.) It was not until April 14, 2015, less than two weeks before the start of the trial,
14 at a time when the parties exchanged forensic accountant reports, that Kimberly first
15 disclosed her new, drastically inflated calculation of the marital lifestyle. Kimberly's
16 assessment of the marital lifestyle more than doubled since the time of the 2013
17 temporary support hearing, going from $511,241 a month in July 2013 to an astronomical
18 $1,070,103 a month at trial. There was no credible or satisfying explanation to either
19 explain or support the ginormous and sudden adjustment upward as and for MSL.22
20 After allocating historical expenses that fairly and reasonably capture both the MSL
21 and prospective reasonable expenses commensurate with the MSL, the court finds that
22 non-taxable family support at $365,000 per month ($120,000 child support and $245,000
23 spousal support) enables Kimberly and the children to live at the MSL. Considering
24 Kimberly alone, permanent spousal support at $245,000 per month will allow Kimberly to
25 22 The court commented during the trial, " ... Mr. Wegis has changed his position in a remarkable
26 way, and I can't help but consider that insofar as deciding the weight and value to give his analysis over Mr. Swan's." (See Reporter's Transcript of Proceedings, August 7, 2015, Page 40:12-16.)
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1 live at the MSL. Combined child support and spousal support at $365,000 per month will
2 allow both Kimberly and the children to live as the MSL and in parity with Ted. The support
3 orders above are just, fair, and reasonable to both parties under all the circumstances.
4 Ordering Ted to pay more to Kimberly exceeds the MSL and is tantamount to a transfer
5 of Ted's separate property and would be a shifting of wealth not contemplated (nor
6 allowed) under California's child and spousal support laws and schemes. (See generally
7 Family Code, Division 9, Parts 2 (§ 4050 et seq.) & 3 (§ 4300 et seq.».
8 In calculating support, the court also noted Kimberly's wealth at an excess of $49.5
9 million in separate property investments. At DOM Ted was already a wealthy, successful
10 businessman while Kimberly entered the marriage with very little, almost no wealth
11 Whatsoever, and she then stepped into his pre-existing and well-established affluent
12 lifestyle. Kimberly is otherwise a high school graduate, no college, and did not have the
13 skills nor the resources to aid Ted in the furthering of his business and growing the MSL.
14 Today, Ted has the ability to pay any reasonable amount of spousal support to
15 support the MSL - both parties' houses. Kimberly cannot do so absent the family support
16 ordered above. As stated above, and to be clear for this record if reviewed on appeal,
17 certain non-recurring expenses incurred during the marriage have not been considered
18 in calculating spousal support. These expenses include milestone birthday parties, one-
19 time and/or special occasion gifts of expensive jewelry,
20 and Ted's business travel that incidentally included Kimberly and the children.
21 Of note, Kimberly's expert, Mr. Wegis, did not initially include such expenses in calculating
22 Kimberly's reasonable needs and only added them into his calculations upon being
23 instructed by her counsel to do so, a fact that undermined the credibility of Mr. Wegis.
24 Kimberly's post-dissolution marital standard of living will not include the receipt of
25 birthday, anniversary, and like gifts from Ted, nor will it include or ongoing business travel
26 with Ted as if they were still married. The spousal support established herein will, in the
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1 court's opinion, fund Kimberly's travel and vacation expenses commensurate with the
2 MSL to a reasonable extent, and that is all the law requires. While Kimberly's lifestyle
3 during marriage included travel by private jet for sure, in fact, going forward after
4 dissolution, there will be fewer occasions for the use of a private jet for her travel and
5 fewer opportunities for travel with the children, as they will have more and more of their
6 own school-related and extracurricular activities that will limit extended travel and
7 vacations. In fact, despite the availability of ample support funds post-separation,
8 Kimberly, when traveling without children, has chosen on multiple occasions to travel first-
9 class commercial, and on that basis, curbside, private jet service available on 24 hours'
10 notice is not necessary to maintain the marital lifestyle. Money has been allocated to
11 support Kimberly's private jet travel with the children at a cost of around $10,000 per hour,
12 not the $19,169 per hour that Kimberly proposes. Ted's evaluation of the cost of private
13 jet travel, which involved calculating the expenses of particular trips consistent with those
14 taken in the 24 months preceding separation, is more reasonable and reflects an average
15 hourly charge of less than half of what Kimberly claims.
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A FEW MORE FINDINGS AND CONCLUSIONS
1. Kimberly is not entitled to a "savings and investment" component of spousal
support, and her claim otherwise is wholly without any merit whatsoever.
During the marriage there were no community property earnings from which
savings could be accumulated and investments made. Kimberly is not
entitled under the guise of support to a continuation of the separate property
payments that were made to her under the parties' Prenuptial, Marital
Settlement, and Postnuptial Agreements, which payments are non-
recurring in any event.
2. Kimberly is not entitled to the expense of a vacation villa as part of the
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marital standard of living. The Cabo San Lucas property that became
community property as a consequence of the Postnuptial Agreement was
almost never used as a vacation home either before or during separation.
Further, the parties have already agreed to sell the Cabo home and split
equally the net proceeds.
3. Kimberly is not entitled to the expense of a fishing boat as a component of
the marital standard of living. She suffers from seasickness and almost
never used Ted's fishing boat during the marriage.
4. Kimberly is not entitled to the estimated rental value and other expenses of
as component of the marital standard of living. That
is Ted's separate property, which he allowed an administrative assistant to
occupy. Other components of the marital standard of living already
encompass all of Kimberly's needs for staff assistance within her own
residence.
5. For what it is worth, the reasonable rental value of the
residence is $30,000 per month, and assuming Kimberly stayed
living in the Balboa home, the parties live in comparable, luxurious homes.
The Court finds the opinions and supporting facts relied on by Mr. Byer on
the reasonable rental value of that property to be more reasonable and
persuasive than those of Mr. Cote. In fact, the court dismissed Mr. Cote's
opinions as baseless.
a. The court denies Ted request for any current or future adjustment to
support notwithstanding the stipulation related to Kimberly's
exclusive and expensive free possession of
property through December 31, 2018, including its rental
proceeds. On the other hand, the future sale of Balboa has been
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considered as and for the establishment the family support ordered
herein.
6. Regarding the Montecito move and Kimberly's choice to leave the former
family residence she exclusively occupies expense-free until January 1,
2018,
opted to relocate herself and the children to a hilltop 4.2 acre estate within
the super exclusive community of Montecito. Kimberly opted to leave the
long-time marital residence - that home the centerpiece as and for
describing the MSL with an approximate rental value of $30,000 per month
(See Trial Exhibit 633) - and lease the Montecito property at $72,500 per
month. Kimberly's move amounts to a huge upward departure from the
MSL on the basis of comparable housing. Kimberly, having made that
decision, may do so at her own expense. In calculating spousal support,
no consideration was given to Kimberly's move to Montecito and related
expenses.
7. Finally, the following Fe §§ 4320 factors were not disputed.
1. The parties were married in July 1998 and finally separated in November
2011, a marriage of approximately 13 years. They were separated
during the period November 2005 through January 2007, which was
followed by a reconciliation.
2. Kimberly is 44 years of age, and Ted is 65 years of age. The parties are
in good health.
3. During the marriage Kimberly was a stay-at-home spouse, albeit she
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had lots of help. Kimberly had little to no employment upon marriage
and during marriage had none.
a. Today, Kimberly does not have the ability to engage in gainful
employment without interfering with the interests of the
dependent children.
b. Today, Kimberly does not have significant marketable skills and
certainly cannot maintain the MSL absent support paid by Ted.
4. Kimberly has sUbstantial separate property assets.
5. There is no criminal history and no DV factors.
6. The parties have agreed that Ted's payment of spousal support
obligation will be non-deductible by him and non-includable by Kimberly.
8. "Hybrid" Gavron Admonition: In time, and no doubt over the passage of
considerable time, Kimberly should segue into the workforce so to
discharge her duties and obligations as stated within Fe §§ 3900 and
4320(1). Mindful that Kimberly has a pattern of employing domestic help
she has more freedom to work outside the
home. Notwithstanding her substantial separate assets and wealth,
Kimberly has an obligation to work and produce income, to the best of her
ability and circumstances, even if she will never be able to self-support at
the level of the MSL.
9. Both parties have sUbstantial separate wealth, Ted much more, of course.
It is more likely than not that neither party is likely to experience future
financial hardships, perhaps with this exception: During the trial there was
some testimony about Kimberly's poor business acumen and or mis-
-25-
1 management of her substantial separate property and assets following
2 DOS. 23 Ted seemed to suggest Kimberly's "at risk" investments might
3 explain her quest for more than double the spousal support, as agreed to in
4 2013 (by stipulation/order). Ted's messaging to the court that Kimberly
5 needs more money to recover her losses from failed investments was given
6 no weight by the court. 24
7 In this case, the calculation of support does not include any consideration as and for
8 restitution or recovery of lost or at risk funds/investments based on any improvident asset
9 management decisions by Kimberly's own hand.
10
11 IV
12 ATTORNEY FEES AND COSTS/FEE-SHIFTING ORDER
13 A
14 THE NEVADA ACTION
15 While Kimberly disagrees and has filed an appeal to the judgment entered by the
16 District Court, Family Division, Clark County, Department T, The Honorable Gayle Nathan
17 Judge, (Case No. D-12-470239-U), that judgment is final under Nevada law. On that
18 basis, the court granted Ted's motion in limine excluding evidence, testimony, and
19 argument as and for Kimberly's request for attorney fees and costs related to the Nevada
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23 The testimony was Kimberly opted to invest approximately $9 million of her separate property assets and funds: (a) to acquire an interest in a Newport Beach car wash, in the hope the city allowed its teardown and approved a condominium development (a proposal the city declined), that investment characterized by Ted as a failed (so far) or an "at risk" investment; (b) Kimberly opted to invest in non-marketable stock, and (c) agreed to unsecured loans for which any repayment, according to Ted, is doubtful. There are other examples.
24 Mr. Swan took another position. Whether or not Kimberly can recover or recoup her investment(s), Mr. Swan still included the book value of the investment as and for Kimberly's balance sheet he used to characterize and quantify her wealthy status. Kimberly's investments since DOS, whether failed or recoverable, played no part in the establishment of support and or allocation of attorney fees and costs.
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1 Action on the grounds that the Nevada judgment is entitled to Full Faith and Credit. The
2 court agreed with Ted. The Nevada judgment is res judicata of the issues raised therein
3 and today; Kimberly is collaterally Estopped from arguing a different result, nor is she
4 entitled to any collaterally challenge the Nevada judgment within the California
5 proceedings. Her remedy for any error or judicial miscarriage of justice lies elsewhere.
6 Except for the pendente lite fee-shifting order granted by Judge Kreber ($375,000) to
7 litigate the Nevada action, that pendente lite fee-shifting order affirmed on appeal (see
8 DCA unpublished opinion G049640), the undersigned judge reaffirms its pre-trial ruling
9 denying Kimberly's request for any further fee-shifting order or reimbursement related to
10 attorney fees as and for the Nevada Action. This judge finds as a matter of law that the
11 Nevada court had exclusive jurisdiction over its proceedings, including attorney fees and
12 costs, and the California Court has no jurisdiction to adjudicate the issues within the
13 Nevada Action, including adjudicating any fee-shifting order. The Nevada judge clearly
14 and unequivocally ruled the three agreements were valid and enforceable, granted Ted's
15 motion for summary judgment, and denied Kimberly's motion for attorney fees. The
16 Nevada court then adjudicated Ted's request for specific performance over 30 days of
17 trial, and, in the end, The Honorable Gayle Nathan entered judgment in favor of Ted,
18 characterized him as the prevailing party, and under the terms of the agreements granted
19 his motion for attorney fees and costs. 25
20 Let us assume for the moment the Nevada judgment does not end the discussion.
21 Should this court grant a fee-shifting order under FC §§ 2030/2032 as and for her Nevada
22 fees? No. The Nevada judge made toxic findings of fact characterizing Kimberly's
23 Nevada-based litigation behavior. Juxtaposed to the considerations and factors set forth
24 within 2032, and in the context of the balancing of equities required under California law,
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25 Within the Nevada court's final judgment, the Nevada court granted Ted's request for attorney fees and awarded him attorney fees payable by Kimberly. (See Nevada Judgment, Page 47:6-9; Judgment, Page 50:12-15.)
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1 those finding of fact cannot be ignored. For example, after observing Kimberly over 30
2 days of trial, the Nevada court made the following findings:
3 [§ 236. The Court finds, ...... that defendant [Kimberly] abused the legal process,
4 including without limitation:
5 a. Her perjurious testimony and presentation of false evidence;
6 b. Her knowingly frivolous allegations and fillings;
7 c. Her oppressive abuse of objections;
8 d. Her distortion of the procedural history of this case; and
9 e. Her knowing citation to bad or inaccurate law. ]
10 [§ 237. Defendant has committed perjury during the trial ... (citing examples)]
11 See Nevada judgment, page 49, § 236,237.
12 With the above findings in mind, and notwithstanding a huge disparity of income,
13 Kimberly is not entitled to any reimbursement for attorney fees and costs for litigating the
14 Nevada action.
15 Add this to the mix: Kimberly is a wealthy person, and in that context Kimberly,
16 (not Ted), contested the validity and enforcement of the agreements. While ordinarily
17 prevailing party status does not make a difference as and for a need-based claim for
18 attorney fees - here, it does. First, because the agreements said so; second, the Nevada
19 court ordered Kimberly to pay Ted $4 million as and for his attorney fees and costs; and
20 third, returning to the toxic findings, the court shuts and locks the door as and for
21 Kimberly's request for a fee-shifting order. Granting any fees to Kimberly for the Nevada
22 action, under all the circumstances, is neither fair nor reasonable.
23 Either as a matter of law or under the totality of al/ the circumstances, Kimberly is
24 not entitled to any additional reimbursement of fees traceable to the Nevada action.
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1 B 2 THE CALIFORNIA LITIGATION
3 The California issues were limited: status, parenting schedules, and support. The
4 leftover trial issue was simple: establish support within a high earner setting. That's it.
5 This judge cannot explain the massive court file, days of pretrial proceedings, the 23 days
6 of trial, the huge number of trial exhibits, and then .... $9.5 million Kimberly presents as
7 her attorney fees and costs. This entire litigation and the very expensive fees seem
8 grossly disproportionate to the California issues, especially since both sides agreed to the
9 establishment of family support payable by Ted and Ted's ability to pay. Ted's high earner
10 status was never in dispute. At trial, the only issue on the table was the amount of monthly
11 support. Instead, what followed was 23 days of trial, a mountain-sized number of trial
12 exhibits, followed by a behemoth volume of written closing arguments and declarations.
13 In fact, from billing records, it appears Kimberly was billed by Kolodny Law Group
14 $600,000 just to recover fees, that large amount being very hard to explain. And then
15 there is this: After reviewing everything, it appears to this judge this case was
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substantially over-litigated and much of the fees and expenditures incurred were not
wisely devoted to the expeditious resolution of relevant and material issues. 26
26 Before and during the trial, the court observed the diminished importance of calculating Ted's income with great precision. Apparently, Kimberly did not get that memo. She invested a lot to prove up her version of Ted's income; Mr. Wegis (Kimberly's expert) suggesting a [failed] income approach, while Mr. Swan suggested a distribution approach [accepted by the cour!.] The court acknowledged its obligation to determine Ted's income for the purposes of establishing guideline child support, but. ... "[tlhere's no question in this case we have a payor, Ted, who has extraordinarily high income. No dispute at all. The question is: no matter what figure I put into the dissomaster - Mr. Wegis' figure on an income approach, Mr. Swan's figure on a distribution approach - first of all, if r depart it really doesn't matter. Yes, I know I have to calculate support, and I will. But ifI'm fixed on departing from the guideline, the factual challenge between the Wegis approach versus the Swan approach is not very relevant." (See Reporter's Transcript of Proceedings, August 7, 2015, Page 56: 14-23.) At another time, the court also mentioned this: "I think support needs to turn on the needs of the children, the needs of Ms. Jones. His ability to pay is not applicable. That doesn't mean he's an open check, a blank check. Not at all. It just means that that side of the equation is not applicable and I look at other factors. But I don't want to invest...days and weeks where that time is better spent focusing on the needs of three children, a lifestyle that they have learned to enjoy and they have earned,
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1 At the end of the trial court proceedings, Kimberly now demands Ted reimburse
2 Kimberly for all attorney fees and costs she incurred in the California action -
3 $9.493.471. Notwithstanding Kimberly's wealth, she accepts no responsibility for any of
4 her attorney fees and costs and presents an entitled state of mind, to wit: because Ted
5 is very wealthy, Ted should pay. Kimberly is right, in part. Ted can afford the fees for
6 both sides, but that alone does not entitle Kimberly to litigate carte blanche, nor does it
7 entitle her 100% reimbursement. Even if Ted is very wealthy, as he is, fees and
8 expenditures must still be reasonable and necessary, and any allocation or re-allocation
9 must be fair and reasonable under the circumstances of this case.
10 For his part, Ted has paid or advanced (over objection) $5.4 so far as and for
11 Kimberly's attorney fees and costs in the California action. Today's ruling adds another
12 $400,000 to the total, now $5.8 million. Kimberly wants Ted to pay another $3.7 million.
13 The court agrees that Ted should contribute toward Kimberly's fees, and he has
14 complied with orders to do so without objection ... for the most part. Kimberly wants Ted
15 to pay it all. That's not fair. What is fair and reasonable is that Ted should contribute to
16 Kimberly's reasonable and necessary fees and expenditures based on a huge disparity
17 of wealth. Ted should contribute .... a lot .... while Kimberly should also contribute from
18 her own wealth. As things have turned out, Ted has paid a lot, now $5.8 million in the
19 California action, litigation that included only a few issues, custody (resolved by
20 stipulation/order) and support, the leftover trial issue. As regards fees and expenditures
21 characterized as unreasonable and unnecessary, incurred pursuing meritless claims,
22 fees over-litigating the case, fees not wisely incurred toward the expeditious resolution of
23 relevant issues, Kimberly should pay them all. It's all about the allocation.
24
25 and focus my attention there on the calculations of support and not on his ability to pay. I just don't
26 think the R.O.I., return on investment, is worthwhile." (Reporter's Transcript of Proceedings, April 1, 2015, Pages 51:24- 52:11.)
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I Let's begin with why. While both sides like to debate the other party's wealthy
2 status, and while Mr. Kolodny likes to refer to Ted's wealth using a cacophony of
3 pejorative hyperbole, suffice to say Ted is a wealthy person. But then, so is Kimberly.
4 The court also well knows that leaving aside the value of their substantial community
5 property27and after comparing side by side the parties' separate property incomes and
6 substantial separate property assets, Ted's wealth is considerably more. As our DCA
7 recently characterized, " ... Kimberly is by all accounts wealthy, her wealth does not
8 compare to Fletcher's." "Although Kimberly purportedly has sUbstantial assets, Fletcher's
9 wealth dwarfs Kimberly's." " ... Fletcher's income and his access to liquid assets
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exponentially exceeds Kimberly's." (See unpublished DCA opinion filed May 13, 2015.)
Indeed, long ago the court observed that Ted is a higher earner and Ted has the financial
ability to pay any reasonable support order established at trial, and Ted has the ability to
pay all of the attorney fees and costs reasonably incurred in this case by both sides. Ted
never disagreed. In fact, Ted affirmatively agreed. Perhaps on that basis, Kimberly never
accepted any responsibility for her own fees and expenditures, and today that state of
entitlement continues on. In her mind, Ted should pay it all because he can. For his part,
Ted assumes a more balanced position. While wanting to pay as little as possible,
nonetheless, Ted agrees to a fee-shifting order, but asks for an allocation that is
reasonable, not counting fees and expenditures Kimberly unnecessarily incurred or
incurred over-litigating the case.
Ted's agreed-upon ability to pay it all does not preclude nor excuse a nuanced
analysis required under FC §§ 2030/2032. Nor does Kimberly's (apparent) entitled state
of mind eclipse or trump a nuanced application of FC §§ 2032. Having that in mind, the
27 Ted and Kimberly own as community property a vacation home in Cabo San Lucas, Mexico, valued at approximately $6 million (no mortgage), and own as community property the former family residence in Newport Beach, its value disputed with estimates ranging between $15.5 - $23 million (no mortgage). The parties agree the properties will (soon) be sold and the net proceeds equally divided. That's a lot of money soon coming their way.
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1 court surveyed the width and breadth of the proceedings, including the litigation occurred
2 during Judge Kreber's watch.28 Having now reviewed the entire large record, plus
3 slogged through the billing records and all the many declarations, after presiding over the
4 23 days of trial, here are a few observations:
5 This family law litigation was very expensive, traceable to over-litigation by
6 Kimberly and super high attorney billing rates on both sides. The amount of attorney fees
7 and costs expended (both sides) is breathtaking, and, as will be mentioned below, a lot
8 of fees were not necessary nor wisely used for the expeditious resolution of material and
9 relevant disputes. In fact, the fees and expenditures are jaw-dropping when you consider
10 the limited and routine nature of the California issues: status, parenting schedules, and
11 establishment of child support and spousal support within a high earner setting. The
12 ginormous fees and expenditures are especially perplexing - really very hard to explain -
13 when Ted's high earner status and ability to pay any reasonable support order (and fee-
14 shifting order) was never disputed.
15 While both sides have contributed to this litigation sojourn and very expensive legal
16 battle, when compared side by side, the court finds that Kimberly was the protagonist as
17 and for being obstreperous and engaging in conduct that thwarted settlement and
18 prevented meaningful negotiations and cooperation. It was Kimberly's conduct that has
19 served to prolong this matter and increased the costs of litigation. While Ted certainly
20 agrees, this court personally observed Kimberly's pattern of unsupportable, unfounded,
21 and excessively aggressive positions. The court agrees with attorney Seastrom, and at
22 a minimum the court drew its own inference that Kimberly seldom engaged in any cost /
23 benefit analysis before launching letters, discovery requests, requests for orders, or
24 pursing her trial strategy. While Kimberly will disagree, from her litigation conduct,
25 Kimberly seemed to regard no issue or squabble too small to address and had a scorched
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1 earth approach to this case while her attorneys billed at $900 per hour. The court's
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inferences come from reviewing attorney billing records and the many dueling
declarations filed by all the attorneys, plus observing positions posited in pleadings and
then at trial. The overarching characterization is this: the attorney fees are out of
proportion with the weight of the issues, many fees and expenditures not reasonably
incurred and many fees and expenditures not wisely used for the expedient resolution of
the case. Here are a few examples, however, there are plenty more to cite.
• $50,000 to prove a potential $17,000 Corvette claim,
• $349,000 to oppose Ted's request that one of Kimberly's five nannies not
be present during Ted's custodial time after caught snooping,
• $85,323 to investigate a non-existent tax issue,
• $28,000 on Mr. Cote's fees, a sojourn to prove the rental value of Balboa at
$100,000 per month - an entirely meritless claim. In addition, the rental
value of the Balboa home was entirely not relevant. Days were spent on
that issue, all wasted.
• Kimberly also paid other experts whom she never called and wasted
approximately $86,000 (e.g. Rick Baker and Charles Dunn).
While difficult to audit to the penny, for sure, this judge estimates that
approximately $2 million out of $9.5 million in fees are characterized as unnecessary,
over-litigated, and/or not wisely used for the expedient resolution of the case. That
amount should be allocated 100% to Kimberly.
The court has read and compared the many declarations filed in support of and in
opposition to Kimberly's request for a global fee-shifting order. 29 While each side rages
29 It was a very difficult task to parse (slog) through the declarations, billing statements, and pleadings and test for Ted's hypothesis Kimberly over litigated the case. Nonetheless, this judge has done so to tbe best of his ability and energy. The court arrived at tbe same conclusion, yes, there was a chronic pattern of over-litigation. Twelve days pursuing a pendente lite support order was way too long. 23 days of trial - way too long. Many instances of failed claims or claims with no merit, such
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1 against the other, each side making cross-allegations about the other's bad or
2 obstreperous conduct, the declaration filed by attorney Philip G. Seastrom provides the
3 best, most believable, comprehensive, accurate and compelling overview of the California
4 action. Attorney Seastrom accurately and well summarizes the many unwise and
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unnecessary fees and expenditures Kimberly directed or authorized the Kolodny Law
Group to pursue at very large billing rates. Attorney Seastrom's declaration is convincing
over the declarations filed by the Kolodny Law Group. Mr. Seastrom's declaration, in
combination with the court's own survey of billing records, pleadings, and observations,
support the following findings and observations:
1. The California action presented routine issues, not complex issues.
a. This case could have and should have been resolved a long time ago
without significant attorney fees and costs.
b. The fees incurred by Kimberly in the California action ($9.5 million)
are grossly disproportionate to the complexity of the California
issues: custody, establishment of child support and spousal support.
i. Even with an ability, Ted should not have to pay for fees that
are grossly disproportionate to the issues.
2. Kimberly engaged in litigation tactics and incurred a very significant amount
of attorney fees and expenditures that were not wisely devoted to the
expeditious resolution of the limited and routine issues at hand, the wasted
. fees estimated at $2 million.
3. Kimberly engaged in a sustained pattern and practice of over-litigating this
case, and on that basis she incurred excessive and unnecessary fees;
as the so-called savings component of the marriage - a "Hail Mary" claim for sure. That claim was devoid of any merit, yet Kimberly spent a lot of time on it. Even today, Kimberly's request that Ted pay all her attorney fees and costs is another instance of over-litigation. Having reviewed the width and breadth of this very large record, Kimberly did indeed over-litigate this case by a lot, and racked up $2 million over what was reasonable and necessary.
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a. Ted should not have to pay for the fees Kimberly racked up over-
litigating this case.
4. While Kimberly is free to retain counsel of her choice and negotiate and pay
for services rendered by the Kolodny Law Group, she alone should bear
fees and expenses that go beyond reasonable and necessary, either by
billing rate or by services rendered as and for over-litigation tactics, and fees
not wisely used for the expeditious resolution of material and relevant
issues.
5. In globally assessing the amount of fees incurred by Kimberly ($9.5 million),
a substantial portion of Kimberly's fees and expenditures were not
necessary, e.g., investing in analysis and experts not called, pursing claims
having little or no merit, and over-litigating the case especially when:
i. The California issues were not complex;
ii. The California issues were routine.
6. The court estimates that approximately $2 million of Kimberly's total fees of
$9.5 million were not wisely devoted to the expeditious resolution of issues
and resulted in the direct or indirect over-litigation of this case.
a. It is fair and reasonable to allocate to Kimberly the fees characterized
as unnecessary and unreasonable, estimated at $2 million.
7. Out of Kimberly's $9.5 million in attorney fees and costs, based on the
totality of circumstances, $1.7 million is allocated to Kimberly, plus any other
outstanding fees in the California action.
a. Kimberly has the ability to pay for all fees allocated to Kimberly.
8. Summary:
a. $5.8 million of Kimberly's fees are allocated to Ted.
i. $5.4 million has already been allocated and paid by Ted;
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ii. Now, $400,000 is added today.
b. $2 million, characterized as over-ligation, is allocated to Kimberly.
c. $1.7 million (and any balance) is allocated to Kimberly pursuant to
FC §§ 2032 et seq.
i. From her own wealth, Kimberly has the ability to pay $1.7
million of her own fees, and under the circumstances of this
case, it is so ordered.
9 SO ORDERED:
10 1 DATED: November 1a 2015 If 1.. •. . ~ III~ 11 til?' --.;.
[James L. Waltz 12 j Family Law Judge 13 Dept. L-611, Lamoreaux Justice Center
County of Orange, State of California 14
Clerk to give notice as follows: 15
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Kolodny Law Group 9100 Wilshire Boulevard Ninth Floor, West Tower Beverly Hills, 90212-3425
Attn: Stephen A. Kolodny, Esq. Heidi L. Madzar, Esq. Alexa S. Wolff, Esq.
Law Offices of Steven E. Briggs 2700 Newport Blvd., Suite 172 Newport Beach, California 92663
Attn: Steven E. Briggs, Esq.
Seastrom & Seastrom, ALC 4695 Macarthur Court, Suite 1450 Newport Beach, California 92660
Attn: Philip G. Seastrom, Esq. Emily J. Nickles, Esq.
Wasser, Cooperman & Carter 2029 Century Park East, Suite 1200 Los Angeles, California 90067
Attn: Bruce E. Cooperman, Esq.
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CERTIFICATE OF MAILING
Clerk's certificate of mailing (CCP 1 013A) - I certify that I am not a party to this cause, that I am over the age of 18, and that a copy of this document was mailed first class postage prepaid in a sealed envelope addressed as shown above. Mailing and execution of this certificate occkred on Novembe( 19, 2015 at Orange, California. Alan Carlson, Executive Officer/Clerk, by Diane Ruizf\1 , Deputy Clerk, Department L611. t>I
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ATTORNEY (NAME AND ADDRESS;: TELEPHONE NO:
ATTORNEY Fat,;
DISSOMASTER REPORT CASE NUMBER:
2015, Monthly
Input Data Fletcher Kimberly Guideline (2015) Fletcher Kimberly Number of children 0 3 Nets (adjusted) % time with NCP 25% 0% Fletcher 1,756,1 Payment (cost)/benefit (395,970) 395,970 Filing status Single HH/MLA Kimberly 91 Net spendable income 1,360,138 404,561 # Federal exemptions l' 4' Total % combined spendable 77.1% 22.9% Wages + salary 0 0 Support Total taxes 0 2,187 401 (k) emp. contribution 0 0 CS Payor Fletcher # withholding 0 0 Self-employment income 0 0 395,970 allowances
Other taxable income 0 10,778 395,970 Net wage paycheck/mo 0 0
TANF plus CS received 0 0 0 Proposed
Other nontaxable income 1,756,108 0 Payment (cost)/benefit (395,970) 395,970
New-spouse income 0 79,186 Net spendable income 1,360,138 404,561
Wages + salary 0 118,790 NSI change from gdl 0 0
Self-employment income 0 197,994 % combined spendable 77.1% 22.9%
SS paid other marriage 0 Spousal blocked % of saving over gdl 0% 0%
Retirement contrib if ATI 0 support Total taxes 0 2,187
Required union dues 0 Total 395,970 # withholding 0 0
Nec job-related expo '0 0 Proposed, tactic 9 allowances
Adj. to income (ATI) 0 CS Payor Fletcher Net wage paycheck/mo 0 0
SS paid other marriage 0 Presumed 395,970 Default Case Settings
CS paid other relationship 0 Basic CS 395,970
Health insurance 0 Add-ons 0
Itemized deductions 0 Per Kid · \tt( Other medical expenses 0 0 Child 1 79,186
Property tax expenses 0 0 Child 2 118,790
Oed. interest expense 0 0 Child 3 197,994 Ul\ r Charitable contribution 0 0 Spousal blocked
Miscellaneous itemiz 0 0 support
"''': X ~'rP Required union dues 0 0 Total
Mandatory retire me 0 0 Combined Savings
Hardship deductio 0' D· No releases Other gdl. deduct' ns 0 0 AMT info (IRS Fi rm 6251) 0 0 Child support 0 0
fii (R' . J,"",~ 1,2009) D!ssoMaster Report (Monthly) C_, • DlssoMastarH
•t2015-1
JUDGE JAMES L. WALTZ