Basics of Pennsylvania Divorce: Kulko

 Pennsylvania has jurisdiction over its own citizens as well as those who have signficant contacts with our state. The law that extends Pennsylvania’s jurisdiction over non-citizens who have significant contacts is known as the “long-arm” statute (as in “long arm of the law”).

Long-arm jurisdiction over non-residents in divorce actions is limited, as in all actions, by the due process requirements of the Fourteenth Amendment of the U.S. Constitution, which requires that the forum state have personal jurisdiction over the defendant. The residence of a plaintiff in this state is not, by itself, sufficient to constitute “significant contacts” to a defendant who has never resided here under the standards enunciated by the U.S. Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310 (1945). See Kulko v. Superior Court, 436 U.S. 84 (1978).

In Kulko, the husband and wife resided throughout their marriage in New York, although they were married in California during a brief stopover while the husband was en route to overseas military duty. The parties’ children were born in New York, and husband returned to New York after his tour of duty. Upon separation, the wife moved to California, where the parties’ two children eventually joined her. The wife obtained a divorce decree in Haiti and then filed an action in California to register and modify the Haitian divorce decree. Husband contested the California action for lack of personal jurisdiction. The California Supreme Court held that there were sufficient contacts, under the standards enunciated in International Shoe Co. v. Washington, 326 U.S. 310 (1945), to confer personal jurisdiction over the defendant. Specifically, the California Supreme Court looked to the parties’ marriage in California and the husband’s consent to sending the children to live with their mother in California.

On appeal, the U.S. Supreme Court reversed, finding there was no personal jurisdiction over the defendant in California. The Supreme Court held:

            The Due Process Clause of the Fourteenth Amendment operates as a limitation on the jurisdiction of state courts to enter judgments affecting rights or interests of nonresident defendants. See Shaffer v. Heitner, 433 U.S. 186, 198-200, 97 S.Ct. 2569, 2577, 53 L.Ed.2d 683 (1977). It has long been the rule that a valid judgment imposing a personal obligation or duty in favor of the plaintiff may be entered only by a court having jurisdiction over the person of the defendant. Pennoyer v. Neff, 95 U.S. 714, 732-733, 24 L.Ed. 565, 572 (1878); International Shoe Co. v. Washington, 326 U.S., at 316, 66 S.Ct., at 158. The existence of personal jurisdiction, in turn, depends upon the presence of reasonable notice to the defendant that an action has been brought. Mullane v. Central Hanover Trust Co., 339 U.S. 306, 313-314, 70 S.Ct. 652, 656-657, 94 L.Ed. 865 (1950), and a sufficient connection between the defendant and the forum State to make it fair to require defense of the action in the forum. Milliken v. Meyer, 311 U.S. 457, 463-464, 61 S.Ct. 339, 342-343, 85 L.Ed. 278 (1940). . .

            The parties are in agreement that the constitutional standard for determining whether the State may enter a binding judgment against appellant here is that set forth in this Court’s opinion in International Shoe Co. v. Washington, supra: that a defendant “have certain minimum contacts with [the forum State] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial **1697 justice.’ ” 326 U.S., at 316, 66 S.Ct., at 158, quoting Milliken v. Meyer, supra, 311 U.S., at 463, 61 S.Ct., at 342. While the interests of the forum State and of the plaintiff in proceeding with the cause in the plaintiff’s forum of choice are, of course, to be considered, see McGee v. International Life Insurance Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957), an essential criterion in all cases is whether the “quality and nature” of the defendant’s activity is such that it is “reasonable” and “fair” to require him to conduct his defense in that State. International Shoe Co. v. Washington, supra, 326 U.S., at 316-317, 319, 66 S.Ct., at 158, 159. Accord, Shaffer v. Heitner, supra, 433 U.S., at 207-212, 97 S.Ct., at 2581-2584; Perkins v. Benguet Mining Co., 342 U.S. 437, 445, 72 S.Ct. 413, 418, 96 L.Ed. 485 (1952).

            Like any standard that requires a determination of “reasonableness,” the “minimum contacts” test of International Shoe is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite “affiliating circumstances” are present. Hanson v. Denckla, 357 U.S. 235, 246, 78 S.Ct. 1228, 1235, 2 L.Ed.2d 1283 (1958). We recognize that this determination is one in which few answers will be written “in black and white. The greys are dominant and even among them the shades are innumerable.” Estin v. Estin, 334 U.S. 541, 545, 68 S.Ct. 1213, 1216, 92 L.Ed. 1561 (1948). But we believe that the California Supreme Court’s application of the minimum-contacts test in this case represents an unwarranted extension of International Shoe and would, if sustained, sanction a result that is neither fair, just, nor reasonable.

            In reaching its result, the California Supreme Court did not rely on appellant’s glancing presence in the State some 13 *93 years before the events that led to this controversy, nor could it have. Appellant has been in California on only two occasions, once in 1959 for a three-day military stopover on his way to Korea, see supra, at 1694, and again in 1960 for a 24-hour stopover on his return from Korean service. To hold such temporary visits to a State a basis for the assertion of in personam jurisdiction over unrelated actions arising in the future would make a mockery of the limitations on state jurisdiction imposed by the Fourteenth Amendment. Nor did the California court rely on the fact that appellant was actually married in California on one of his two brief visits. We agree that where two New York domiciliaries, for reasons of convenience, marry in the State of California and thereafter spend their entire married life in New York, the fact of their California marriage by itself cannot support a California court’s exercise of jurisdiction over a spouse who remains a New York resident in an action relating to child support.

            Finally, in holding that personal jurisdiction existed, the court below carefully disclaimed reliance on the fact that appellant had agreed at the time of separation to allow his children to live with their mother three months a year and that he had sent them to California each year pursuant to this agreement. As was noted below, 19 Cal.3d, at 523-524, 138 Cal.Rptr., at 590, 564 P.2d, at 357, to find personal jurisdiction in a State on this basis, merely because the mother was residing there, would discourage parents from entering into reasonable visitation agreements. Moreover, it could arbitrarily subject one parent to suit in any State of the Union where the other parent chose to spend time while having custody of their offspring pursuant to a separation agreement.

Kulko, at 92-93.

 

The Kulko decision has been adopted and applied by our courts in Pennsylvania. See, e.g., Wagner v. Wagner, 564 Pa. 448, 768 A.2d 1112 (2001); Scoggins v. Scoggins, 555 A.2d 1314 (Pa.Super. 1989). Pennsylvania’s jurisdiction is limited by the same principles and considerations as described in Kulko.

Double Dipping … again

At the Pennsylvania Bar Association Family Law Section Winter Meeting 2009, which took place at the William Penn Hotel in Pittsburgh this weekend, a panel of judges, lawyers and CPAs discussed hot topics in family law and business valuation. One of the hot topics, presented by Pittsburgh valuation professional Richard F. Brabender, was double dipping. Specifically, this seminar discussed the theoretical/academic argument (which I have advocated in this blog) that a double dip exists where capitalized income which has been divided between the spouses as marital property is also counted as income for child support or alimony purposes.

Clearly, if there is a pension in pay status which is valued on the date of trial, and the pension annuity benefit is counted as income for calculating post-divorce alimony, the court has divided the same stream of income twice – a “double dip.” This same problem exists where business profits have been capitalized as part of the valuation process and also included in the business owner’s net income for child support and alimony purposes.

The twist that Dick Brabender brought to light in his presentation was the double dip that may occur during the separation, where the owner’s compensation substantially exceeds a market salary. For instance, if a business owner is drawing $500,000 per year from the business, but could hired a newly-minted MBA (because we all know how they can improve any business) to do the owner’s job for $70,000 a year, then the owner is receiving excessive compensation of $430,000 per year. Why shouldn’t the business owner’s spouse get 50% of the excess compensation during the separation period as an advance against his or her share of the marital property (assuming the business is entirely marital), subject to re-allocation at the time of trial? (The excess compensation would then be excluded from both spouses’ incomes for support purposes.) This is the likely result if there were a marital pension in pay status, which could be divided 50/50 during the pendency of litigation as an advance of marital property.

In order to accomplish this interim division of the business income stream, the court would have to conduct a hearing to determine that the owner’s compensation were excessive, something the court is unlikely to decide in motions court. Moreover, the excess compensation hearing would have to occur prior to the support or maintenance hearing so that there were no inconsistencies between the support order and the property advance. One of the panelists, eastern Pennsylvania lawyer Mark Ashton, suggested that the court would also have to look at whether the rents being paid by the business to the owner were consistent with market levels, whether the owner were working more than 40 hours a week, etc. Suddenly a simple hearing to determine a property advance has become a multi-day trial with multiple expert witnesses!

Another panelist, Jay Blechman, suggested an alternative: a lookback at the time of the final property division trial. In other words, if it were proven at the end of the case that the owner’s compensation during the pendency of litigation was above-market, then the court could re-designate the excessive income as marital property and award an incremental amount to the owner’s spouse. In Pennsylvania, a business owner’s spouse without children would receive 40% of the income stream as support or maintenance, but if the excess compensation were marital property, the spouse might 50%, 55% or more. So, Jay Blechman suggested that the business owner’s spouse could get 40% during the pendency of the case, and an additional 10%, 15% or more of the excessive compensation at the end of the case.

No case law supports this idea yet.

Now I’ve Heard It All

A recent news item by Jen Chung on Gothamist reports that a New York doctor is demanding that his estranged wife return the kidney he donated to her during their separation…. or pay him its value of $1.5 million.

Newsday reports that Batista married wife Dawnell in 1990 and that he donated the kidney in 2001. According to Batista, their marriage was on the rocks then, but “My first priority was to save her life. The second bonus was to turn the marriage around.” Dawnell Batista filed for divorce in 2005. Dr. Batista told
WCBS 880
, “She had an affair, then would not reconcile, then handed me divorce papers as I was going into surgery trying to save another person’s life.

My question is, how did Dr. Batista determine the value of the kidney?