Courts Tell Divorced Stockbroker to Try A Little Bit Harder

June 7, 2019

In recent divorce proceedings, a Wall Street employee sought the modification of his alimony and child-support payments because he had lost his jobs and the new job wasn't firing on all cylinders yet and, well, you know, things are tough and he's doing his best but, your honor, help me out here, please. Two courts heard his plea. Both courts essentially told him to try a little bit harder. 

2016 District Court Divorce Decree

In June 2016, the Douglas County District Court entered a decree dissolving the marriage of Richard and Christina Miller, and, pursuant to the divorce, Richard agreed to pay $400 a month alimony for 60 months as of July 1, 2016, and the couple's minor children were subject to joint custody with Christina receiving physical custody. Richard D. Miller, Appellant, v. Christina A. Miller, Appellee (Opinion and Judgment, Nebraska Court of Appeals, No. A-18-368 / June 4, 2019) 

In calculating Richard's child support payments, the following was considered:

One worksheet showed Richard's total monthly gross income was $8,333 and Christina's total monthly gross income was $2,000; Richard's share of monthly support for four children was $1,882. The other worksheet showed Richard's total monthly gross income was $17,567 and Christina's total monthly gross income was $1,400; Richard's share of monthly support for four children was $3,124. The decree, which reflects the parties' agreement, ordered Richard to pay child support of $2,400 per month, beginning July 1, 2016, for the parties' four minor children (reducing to $2,200 for three children, $1,800 for two children, and $1,300 for one child). Despite the child support amount ordered not matching the figures contained on either of the attached worksheets, there was no explanation in the decree as to how the ordered child support amount was determined or why the amount deviated from the attached worksheets.

Page 2 of the Opinion

July 2017 Complaint for Modification of Child Support/Alimony

About a year after the entry of the divorce decree, Richard filed a Complaint for Modification on July 12, 2017 (contested by Christina), asserting that his income had decreased to such a degree that the District Court should:

(1) modify his child support obligation according to the Nebraska Child Support Guidelines; (2) order his child support guideline percentage of all uninsured and unreimbursed medical expenses incurred for the parties' minor children; (3) terminate his alimony obligation; and (4) grant him an award of attorney fees plus costs for the action.

Page 2 of the Opinion

June 2017 Termination for No Cause

How did Richard arrive at this point in his life and career where he was financially unable to shoulder his alimony and child support obligations? As explained in part in the Opinion:

In 2015 and 2016, Richard was self-employed but working for "Questar Capital" (Questar) in securities sales and for "American Senior Benefits" (American Senior) in insurance sales. He identified exhibit 2 as the 1099's from those companies for 2016. That exhibit reflects income from American Senior ($64,098.96), Questar Asset Management ($62,018.41) (Richard described this as "residual" and "recurring revenue" that "left with" a colleague's departure from the company in January 2017), and Questar ($31,902.01); total income of $158,019.38 in 2016. Richard agreed that his "[g]ross" earnings that year were almost $150,000 and that he did "a lot better" that year. He explained that a colleague in his office was referring him clientele because the colleague "didn't have the licenses to handle what they needed at the time" and was trying to help Richard. Near year's end, the colleague "decided to go to a different firm." Richard "also attempted to go there, but was declined to go with him." Richard claimed "most of this 2016 income left when [his colleague] left" because the colleague took his client base with him when he left Questar. 

Richard continued working for the same two companies in January 2017, but was unable to generate the same type of income as he had the prior year because "the referral base stopped and the recurring revenue stopped," and in July he was informed that Questar was terminating his contract. Richard testified that Questar "randomly pull[s] credit reports on financial advisors," and Questar pulled his credit report (in 2017) and "didn't like what they saw." He received a letter from Questar in June, notifying him that Questar was terminating his association "for no cause" effective July 14 and that the same applied to Richard's association with "Questar Asset Management." Richard said he resigned July 13. A July 20 letter informed Richard that his "FINRA registration and Registered Representative Agreement with [Questar were] terminated" July 13. For securities sales work, Richard had to have securities licenses ("licenses" and "license" were used interchangeably during testimony; for consistency, we will use the plural form of the word). According to Richard, the regulating organization for financial advisors is "FINRA" and "you have to then take your license[s] and be affiliated with a firm." Richard had "Series 6" licenses for about 18 to 20 years and "Series 7" licenses for about 5 to 6 years. Although his Questar association ended, Richard still had his securities licenses but they were inactive since he could not use them unless he was associated with a broker-dealer, like Questar. According to Richard, "You can't just work out of your basement or hang a shingle up." 

Richard explained that his business had two parts, "insurance and investments . . . security sales, investment-type of products," and the majority of his income had been from Questar rather than American Senior because of his securities licenses. Exhibit 3 contains Richard's monthly bank records from January 14 to October 13, 2017, along with a cover "Deposit Summary" sheet. Although Richard had a credit union for servicing a loan, he claimed he had only this one bank account. The deposit summary sheet shows that of $62,763.81 in total deposits to this bank account for the 9-month period covered, deposits from "Income" totaled $39,323.81. Richard claimed the rest of the deposits came from family (mostly his parents) and some friends. The summary also shows that deposits from income excluding Questar totaled $28,465.10, meaning that Questar income only accounted for $10,858.71 of the total deposits, while American Senior or other "Income" totaled $28,465.10 (our review of the exhibit shows $28,263.76 in deposits from American Senior, and $201.34 in deposits from "Raiser LLC" from July 24 through October 11). Exhibit 4 (Richard's American Senior commission statement) reflects commission earnings of $29,674.95 as of September 28; Richard acknowledged that number did not exactly match what he claimed for the year as income from American Senior. 

When Richard received the letter from Questar terminating his association with the company, he "probably applied for 15 jobs in the last several months" before trial. He applied for seven or eight securities-related jobs but "as soon as they saw [his] credit reports, it was pretty much over with." At the time of trial, no firm would accept him with his credit history and his chances of finding a broker-dealer were "pretty much zero until [his] situation improves." 

Richard indicated that only an insurance license was required to do insurance work. However, at the time of trial, Richard was no longer working with American Senior. He testified that he was currently working for a new software company, and was also "soliciting insurance on a very part-time basis" for Bankers Life. He had "tried to apply for [his] securities license[s]" at Bankers Life; exhibit 6 includes an October 4, 2017, email from Bankers Life stating that "Bankers Life Securities" decided not to approve Richard's request for registration after a review of his application and background verification reports. 

Richard testified the Bankers Life "thing wasn't working out," so he met with the software company and "came to an agreement about a week and a half, two weeks ago" (before trial) and was "in the process of starting there full time." He believed his income from the job would be "commission driven" but with a "draw of $5,000 a month to start with." There would be no benefits. Richard hoped to sell enough to make more than $60,000 per year. A written contract was "being prepared" because it was "so new." 

The "CEO" of a software company that owns the new software company that just hired Richard, testified that he was "life-long friends with both" Richard and Christina. The parent company had been in operation since 2014, but the new "start-up" had just begun within the "last two months or so." The start-up company "is a behavior-based risk management company" created for the financial industry; its target audience initially would be financial professionals and firms. He had "brought on" Richard within "the last week or so" to help with sales. The CEO indicated a contract was not finalized. Richard would be "an independent-contracted employee" with "a commission-based draw starting [at] $5,000 per month"; the CEO envisioned the company might hire Richard as an employee in the future. Payment details, including Richard's commission, were not finalized. Richard was not receiving any other benefits. 

Christina testified that while married, Richard sold financial and life insurance products, would occasionally network to find his own clients, and did not rely on just one person to refer business to him. Christina was employed as a sonographer and made around "[$]23 and some change, 46, maybe" an hour and worked about 30 hours "max" per week. On whether she thought there were any opportunities to make more than the $23 an hour she currently made, Christina answered, "[w]ith my education as a sonographer, that pay scale is about there. Maybe [$]28 an hour, possibly." Exhibit 15 contains Christina's paystub from September 29, 2017, along with a cover sheet breaking down her year-to-date earnings and deductions over a 9-month period. According to her summary, her average net monthly income over that 9-month period was $1,855.04. Exhibit 16 is Christina's tax return from 2015; her gross income for that year was $5,096, but as noted earlier, a gross monthly income of $2,000 was attributed to her in one child support worksheet attached to the 2016 decree, and $1,400 per month in the other worksheet.

Pages 3 - 5 of the Opinion

2018 District Court Cites Richard's "Mismanagement of his Finances"

On January 31, 2018, the District Court demonstrated a less-than sympathetic response to Richard's professed financial extremis:

[T]he district court noted that, for the years leading up to the stipulated decree, Richard's income "seemed to vary significantly" and that his income "continues to be the subject of significant uncertainty and variance." It found "no substantial and material change in circumstances justifying a change to child support and alimony, because [Richard] has not proved that his current income is less now than it was at the time he agreed to the $8,333 figure for his income." 

Alternatively, the district court concluded that even if Richard proved his income had decreased since the time of the decree, a decrease did not justify a change to child support or alimony because Richard "admitted at trial that his own mismanagement of his finances caused him to lose his licensure for selling securities." (We note that Richard did not lose his securities licensure; rather, he was unable to find a brokerage house willing to associate with him and thus his licenses were "inactive.") The court pointed out that Richard agreed to the alimony award under the original decree and the evidence did not suggest that a change to that award was warranted. The district court ordered no change to child support or alimony, and ordered Richard to pay $3,494 in attorney fees for Christina's benefit.

Page 5 of the Opinion

2019 Court of Appeals

On appeal, the Court of Appeals characterized the bases for Richard's appeal as arguing that the District Court committed reversible error by:

(1) finding no material change in circumstances justifying a change to child support and not reducing that obligation in accordance with the Nebraska Child Support Guidelines, (2) finding no good cause justifying a change in alimony, and (3) ordering him to pay Christina's attorney fees.

Page 6 of the Opinion

Immaterial, Ongoing "Fluctuation"

In addressing Richard's argument that there had been a material change justifying modification of his child support, the Court of Appeals noted in part that:

In determining that no material change in circumstances had occurred in this case, the district court pointed out that Richard agreed at the time of the decree to attribute $8,333 per month in gross income to himself even though his 2015 tax return showed only an annual income of $48,118 (this reflects only business income; Richard's total income was $51,495 when adding "Gambling Winnings" of $3,377; his adjusted gross income was $48,095). Notably, the order stated, "For the years leading up to the stipulated Decree, [Richard's] income seemed to vary significantly. [Richard's] income continues to be the subject of significant uncertainty and variance." The court thereafter concluded there was no "substantial and material change in circumstances justifying a change to child support and alimony, because [Richard] has not proved that his income is less now than it was when he agreed to the $8,333 figure for his income." This statement is true when considering that Richard's business income in 2015 was only $48,118 when he agreed to attribute to himself a monthly gross income of at least $8,333 in June 2016; his alleged 2017 "income" to date was $62,763.81, which is higher than it was when Richard agreed to the child support ordered in the decree. We acknowledge, however, that Richard testified he agreed to the higher amount in the decree because he was forecasting higher earnings in 2016, whereas currently, he is forecasting lesser earnings. Nevertheless, it is evident that the district court was persuaded that Richard's income had varied significantly in the years before the decree, and that same kind of income fluctuation merely continued; hence, no material change in circumstances.

Page 7 of the Opinion

Voluntary Wastage or Dissipation of Talents and Assets

In a fairly scathing manner, the Court of Appeals shines a harsh light on Richard's conduct:

Therefore, regardless of whether a material change in circumstances could be established based on Richard's earning capacity being diminished by his current inability to use his securities licenses, we agree with the district court's alternative determination that even if Richard proved his income had decreased, it did not justify a modification. It is invariably concluded that a reduction in child support is not warranted when an obligor parent's financial position diminishes due to his or her own voluntary wastage or dissipation of his or her talents and assets and a reduction in child support would seriously impair the needs of the children. See Fetherkile v. Fetherkile, 299 Neb. 76, 907 N.W.2d 275 (2018). 

Voluntary wastage or dissipation of talents and assets could be imparted from evidence of Richard's mismanagement of finances as the true cause of his decrease in income since the entry of the decree. Richard concedes in his appellate brief that Christina still makes the same amount of income she made at the time the decree was entered, and at trial Christina indicated that her parents had to help her accommodate the times when Richard had not provided any support. Richard did not show evidence to refute that a reduction of child support would seriously impair the children's needs. After a de novo review of the record and considering the circumstances of this case, we conclude the district court did not abuse its discretion by declining Richard's request to modify child support.

Page 10 of the Opinion

Continuing with its line of reasoning for denying Richard a modification of his child support payments, the Court of Appeals applies the same rationale to his request for a reduction or termination of his alimony payments:

We previously concluded that while Richard's financial position has changed, it was due to his own fault by his voluntary wastage and dissipation of his talents and assets. Thus, any decrease in his income cannot be attributed to good cause. See Pope v. Pope, supra (petition to modify or terminate alimony will be denied if change in financial condition is due to fault or voluntary wastage or dissipation of one's talents and assets). Whether Christina's income substantially increased is not in dispute. Given the foregoing, a reduction or termination of Richard's alimony obligation was not warranted. The district court did not abuse its discretion in concluding the same.

Page 11 of the Opinion

Bill Singer's Comment

In the eyes of two courts, Richard D. Miller's tale of woe was not that sympathetic. In part, the courts placed the blame for his predicament on him. In part, the courts seemed to believe that "this too shall pass," and that Richard needed to cut his expenses and make further sacrifices. 

It wasn't all that long ago when we had to deal with the Tech Wreck or the aftermath of 9/11 or the Great Recession. Imagine all the men and women who came home at night thinking (hoping) that they would retain their jobs in the morning, only to arrive at work the next day to locked doors. Imagine the plight of those associated persons who spent a career at Lehman Brothers or Bear Stearns, or other once stellar names in the Wall Street constellation. Imagine, for example, in 2009, a former CMO trader at Lehman Brothers was desperately, diligently looking for work, but, unfortunately, no one was hiring any CMO traders, there was no CMO trading to speak of, and even if there was some job-opening, no one wanted anyone from Lehman Brothers. In such dire times, folks often wound up driving limos, delivering pizza, or re-inventing themselves and their careers; and, yes, many found a way to weather the storm and are now back in the saddle.

Regardless of where you stand on the continuum of sympathy to anger with Richard, today's case serves as a sober warning for similarly situated Wall Street professionals. In times when we have a robust economy and Wall Street is humming, the Richards of Wall Street may find it easier to jump from one brokerage firm to another without much, if any, financial detriment. You'd sort of think that 2019 is just such a time of "feast" rather than "famine," but according to Richard, he's having a tough time getting a brokerage job with his credit report. Maybe that software job will pan out.

As with many things in our lives, some of us manage to find a way to deal with adversity, but many of us are victims of circumstances that make it impossible, no matter how hard we try, to overcome our set-backs. We often live lives of quiet desperation. In my law practice, I have heard many oh-so clever ideas about how a spouse plans to screw another spouse by moving assets, hiding income, and hunkering down until after the alimony/child-support arrangements are made. In reality, such brilliant plans aren't brilliant, and, in reality, are often illegal and fraudulent.  In such situations, the courts are likely to see through all the bull-shit and summon up the brilliant advice of former Wall Street regulator Janis Joplin: Try -- just a little bit harder!