Ohio court explores effect of AR treatment on double dip analysis

Settele v. Settele, 2015 Ohio App. LEXIS 3629 (Sept. 15, 2015)

Is there more to say about double dipping? Over the past year, the Ohio Court of Appeals repeatedly discussed the issue in divorce cases, limiting the double dip rule to the context of income-based valuations and saying that double dipping was permissible. But litigants are loath to give up on the argument.

A recent Ohio divorce case manages to add a new wrinkle to the discussion by contesting the inclusion of accounts receivable in an asset-based valuation.

The parties fought over the valuation of the husband’s dental business. The prevailing expert used the company’s balance sheets and made several adjustments to reach a valuation of nearly $313,300. One of them was adding over $200,000 in accounts receivable to the business value.

To determine income for spousal support purposes, he averaged earnings from the business for three years as a starting point and reduced that figure by the child and spousal support paid. He calculated a pretax monthly spousal support amount of nearly $6,300.

On cross-examination, he maintained that the Court of Appeals’ 2008 Heller decision, prohibiting double dipping, had no bearing on this case because his company valuation was the result of an asset approach.

The trial court adopted his business valuation and his earnings calculation for its spousal support determination.

On appeal, the husband claimed that the wife’s expert dipped into the very accounts receivable he used to value the business when he calculated earnings for spousal support.

The accounts receivable were akin to “future business profits” or a “future stream of income,” as contemplated in Heller and Gallo. Therefore, an asset-based valuation does not preclude the occurrence of a double dip, the husband contended.

The appeals court disagreed and in so doing launched into an extended discussion of the meaning and significance of the term “future income stream.”

Read more about the court’s analysis here.