Business Law News
The Three Pony Rule: Measuring Child Support by the
Reasonable Needs of the Child of a High Income Earner
Madeline Marzano-Lesnevich, Esq.
Every child deserves a pony, but no child needs more than three ponies!
In January 2007, the New Jersey Superior Court, Chancery Division, Family Part ordered New York Giant Michael Strahan to pay child support to his former spouse in the amount of $17,896.00 per month, or $214,745.00 per year, on behalf of their five year old twin children.In 1994, screen actor Emelio Estevez was required to pay child support of $14,000.00 per month for his two children.Professional basketball player Larry Johnson was more fortunate: he was only required to pay $8,850.00 per month or $106,200.00 per year in child support, plus an additional $2,500.00 per month for a nanny.
These cases represent what are commonly referred to as the above the guideline cases.In such cases, the combined income of the parties is so great that child support guidelines the predetermined formulas utilized by each state for calculating child support based upon tangible figures are inapplicable.Child support guidelines, which are adopted by each state, are premised on statistics.The guidelines calculate the combined income of the parties in question, and determine from that figure how much an intact family with a comparable combined income would spend on their child.The reason that child support guidelines are inapplicable in high income cases, such as in the cases of Michael Strahan, Larry Johnson, and Emelio Estevez, is that their income is so great that the statistics cannot accurately determine how much an intact family with comparable income spends on its child.Therefore, in such cases, a formulaic numbers in equals numbers out approach will not work.Rather, a determination of the appropriate child support in the cases of the professional athlete or the box office superstar will require an assessment of the specific needs of the children in that particular case.
Income itself is not the controlling, or even prevailing, factor in these high income child support cases.Rather, the focus is on the needs of the child, and determining what is reasonable and what is not.Accordingly, when the mother of Philadelphia Eagle Antonio Michael Freemans child filed an application for an increase in child support premised upon Freemans increase in income (his income increased from approximately $1.2 million to $3.2 million), the Court denied this application after finding that the childs reasonable needs were already being met by the award that was established under Freemans lower salary.
Defining the Childs Needs
Courts throughout the United States have varied on the approach for determining what is or is not reasonable when dealing with the child of a high income earner.Most Courts have agreed that the starting point is the custodial parents preparation of a budget that reflects the needs and expenses of the child, and separates these needs and expenses from the needs and expenses of the custodial parent.Consistent with this approach, Courts have generally adhered to the principle that the law is not offended if the custodial parent in high income cases recognizes incidental benefits as a result of the child support award tailored to meet the childs needs; after all, specific needs of a child will often overlap with specific needs of the custodial parent.
For example, child support will often include a shelter component or an automobile component the rational being that a place to live and a means to be transported is a reasonable need of the child.Such components will inevitably bestow upon the custodial parent an incidental benefit, and Courts have regularly held that such ancillary benefits are expected and reasonable.However, Courts have also cautioned that while an incidental benefit is not offensive, overreaching in the names of benefiting a child is.
When reviewing these budgets, the Courts will look to supporting documents to assure that these needs are not inflated, and are consistent with the actual lifestyle maintained by the parties.The rational employed by many Courts is that the best evidence that a particular need or expense of a child is reasonable is that it was historically incurred on behalf of the child when the parties were intact.This rationale works in matters of divorce, such as in the case of Michael Strahan, where the Court heavily relied upon the budget prepared by the mother, evidencing prior spending patterns, as reflective of the childrens needs.
However, the Courts have also made clear that in cases where the parties were never married and never lived together, the non-custodial parent is the high income earner, the amount actually spent on the child by the custodial parent is not necessarily indicative of the childs needs.Such was the case of professional football player Tyoka Jackson, whose child support dispute was the subject of a 2000 opinion of the Court of Special Appeals of Maryland.The parties were never married.Jacksons income exceeded $500,000.00 per year.The income of the childs mother was $16,000.00.The crux of the opinion was that, in determining child support in accordance with the childs reasonable needs, the focus must not be on what the less financially able mother had actually spent on the child, but on what Jackson, as the high income earner, was able to spend on the child.
Protective Orders Regarding Income
In the case of celebrities, athletes, entertainers, or any public figures, the ability to keep his or her finances out of documents that would otherwise constitute public records is of immeasurable worth, and an issue often arises where that party seeks to limit or altogether eliminate the obligation to produce discovery related to that partys income or lifestyle.The argument advanced by the party seeking to avoid disclosure is that if he or she stipulates to a certain level of income and an ability to pay any child support figure that is premised upon the childs reasonable needs, the focus should be on the childs needs, and not the payers income.Actor Emelio Estevez successfully advanced this argument when he stipulated to annual income in excess of $1 million: he was able to avoid the need to furnish further discovery, and the determination of his child support obligation ultimately fell upon the reasonable needs of his children.
However, nondisclosure does not come without a price, and that price includes a judicial inference that is least favorable to the party seeking to avoid disclosure.Accordingly, in the case involving basketball superstar Larry Johnson, he sought to advance the same argument that Emelio Estevez had previously advanced: he acknowledged that his annual income exceeded $1 million and that he had an ability to pay any reasonable child support award.However, the childs mother subsequently countered that she had information that Johnsons annual income was closer to $12 million, and argued that the difference between the $12 million and the $1 million stipulated to by Johnson would be significant in determining the childs reasonable needs.The Court noted the conflict between the Estevez rule (of relieving the payor of discovery upon a stipulation to pay any reasonable support award) and the general rule that support should be set at an amount that enables the child to share in the standard of living of the more affluent parent.The Court reconciled this conflict by granting Johnsons request for a protective order in part, and limiting the discovery to documents related to his lifestyle, but not his income and assets.
Turning from the mechanism for identifying the needs of the child to ascertaining whether or not said needs are reasonable, Courts are afforded a great deal of discretion in deciding reasonableness.In the case of Freeman, the Court, in assessing the budget propounded by the mother, noted:
I have no problem with utilities, the telephone, the
food.I do have a question about clothing.Nine
hundred dollars per month for clothing is an amazing
amount of clothing for a four-year old child.It is
an amazing amount for a grown-up unless the
grown-up is someone who either walks over hot
coals and has their clothes burned off them daily,
or unless it is someone whose whole job relates
to fashion and constantly being well dressed.
The court in Freemans matter further found alleged recreation expenses of $750.00 per month unreasonable and childcare costs of $500.00 per month, to be unreasonable, where the mother was not employed.
While the Court is afforded great discretion in determining what is and is not reasonable, various principles have been established to provide guidelines and to assure that reasonableness is not defined without limits.First, Courts are encouraged to determine the reasonableness of identified needs within the context of the childs age, and more than one Court has clarified that the needs of an infant are distinctly different from the needs of a teenager.Second, Courts have recognized the requirement to strike a balance between the reasonable needs that reflect the lifestyle opportunities afforded by the income of the parties, and against the importance of precluding an inappropriate windfall to a child, or infringing upon the legitimate right of either parent to determine an appropriate lifestyle of a child.However, it is significant to note the language of the Court in Strahma case, that, A divorce does not limit the appropriate lifestyle of children under the guise of setting values or overindulging the children.Again, this is a discretionary call that requires a fact sensitive inquiry, and in the case of assessment of this particular principle, it will require the Court to make a finding of fact as to whether the payor is genuine in his or her value-based opposition to a particular need, or whether such opposition is a guise for avoiding increased support.
With regard to the principle that a child support award should not overindulge the child, Courts have expressed concerns in various ways.One Court expressed that, the child of a multimillionaire should not be awarded enough support to be driven to school each day in a chauffeured limousine.Another Court expressed this principle in terms of the three pony rule that every child deserves a pony, but no matter how wealthy the parents, no child needs more than three ponies!