Are Professional Licenses Property? : N.Y. Ruling May Raise Issue in California Again

Janet Sullivan had put her highly publicized legal case behind her. She went to court seeking a divorce settlement that would recognize her husband’s medical license as a piece of property to be divided. And she lost.

A year went by. Then in December, a New York woman named Loretta O’Brien succeeded where Sullivan had failed.

And now there’s talk that the issue of whether professional licenses should be considered community property may not be settled in California. According to several prominent family-law attorneys, the recent New York ruling may bring up new challenges in this state.

Janet Sullivan worked as an accountant for 10 years while her husband, Mark, completed his medical training. Soon after Mark received his medical license, just as the Orange County couple were about to reap the economic benefits of a doctor’s salary, they broke up.

Janet Sullivan went to court and for six years her case wound its way through the legal system. It finally reached the California Supreme Court, which had been hearing the case for two years when the Legislature passed the Sullivan Law a year ago.

The Sullivan Law states that if family income was contributed to education that enhanced the earning power of one spouse, the other spouse could be reimbursed for half of the contribution, plus interest, in a divorce action.

Janet Sullivan’s case was sent back to the original Orange County trial court to be decided under the guidelines of the new law. In the end, there was an out-of-court settlement that, according Sullivan, fell far short of what she felt she was entitled to.

Sullivan’s attorney, Patricia Herzog of Corona del Mar, argued that the cost of a college education does not approach the value of a medical license or law degree. If Janet Sullivan had won her case, those who support their spouses through medical or law school could get much larger divorce settlements than they now receive under the Sullivan Law, Herzog said.

New York’s highest state court apparently agrees with Herzog. Last month, the New York Court of Appeals unanimously upheld a trial court’s decision that Loretta O’Brien should receive $188,800--40% of the estimated value of her ex-husband Michael O’Brien’s medical license.

Loretta O’Brien contributed 76% of the family’s income by working as a schoolteacher while her husband was in medical training, according to Walter Mardaumt, a New York Court of Appeals public information officer. Michael O’Brien filed for divorce three months after he received his license to practice medicine, Mardaumt said.

Although still disappointed over her own loss, Sullivan said she was pleased that Loretta O’Brien had won. Patricia Herzog said the New York Court of Appeals justices “must have accepted the concept that we argued . . . that the degree was part of intangible property.”

Herzog said: “When the community (the married couple) invests time and money into getting a professional degree, they do it for the community. It’s like any other investment, like if you invest in a growth stock.”

The seven New York Court of Appeals justices “made a mistake,” said Morris Sorenson, the Costa Mesa-based attorney who represented Mark Sullivan. Sorenson contended that a professional license is “worth about two cents” unless the license-holder uses it. The value of the license depends on the person who holds it, and “a person is just not property,” he said.

Janet Sullivan said she “learned a lot” from her six-year court ordeal, but she feels she received “a Band-Aid answer to the problem” a year ago.

“When two people get married, it is a partnership,” she said. “They are working toward a career goal.” She added that she believed her ex-husband’s license was property and that she had a right to a portion of it. “Maybe now that New York has taken that stance, it will filter down to places that have inequality,” Sullivan said.

Several California family law attorneys disagree on the question of what effect the O’Brien ruling will have in this state. Some say the issue was settled by the Legislature for good with the passage of the Sullivan Law. Others contend that the unanimous decision from the prestigious New York court will set a trend nationwide and that California eventually will adopt the same rule--either by statute or case law.

“This issue (professional licenses as marital property) will come up again in California,” predicted Marvin M. Mitchelson, the Los Angeles attorney who won a 1979 California Supreme Court decision that established palimony, which granted unmarried couples the same community-property rights as married couples. The decision, which granted palimony to Mitchelson’s client, Michelle Triola Marvin, has been adopted by 38 states, Mitchelson said.

Marvin Case Mentioned

“I think the Marvin case was a landmark case,” he continued. “I think this case (the O’Brien case) is going to have the same trip (around the country). I think it’s an extremely big decision. It’s a well-reasoned decision.

“The unanimity of the court is what impresses me,” Mitchelson said, noting that all seven justices ruled for Loretta O’Brien. A decision from the New York Court of Appeals sets trends, he said, because New York is such a big state.

Mitchelson said New York doctors and lawyers, as well as professionals across the county, are probably “shaking” and “quaking” about the O’Brien ruling. “I bet people will delay getting married until after they get their license,” he said. There probably will be more prenuptial agreements because of the decision, he added.

Mitchelson said every divorce lawyer in California who has a client in a situation similar to Janet Sullivan or Loretta O’Brien will bring up the new ruling again and again.

And he said the ruling will be instrumental in the states that have not begun to decide the issue of professional licenses as property.

A study last summer of appellate courts in 28 states showed that only Michigan had determined that professional licenses could be divided as property in a divorce settlement, said Richard Keidel, the New York attorney who represented Michael O’Brien. Many states have not determined--either by statute or case law--what to do in a case like the O’Briens’, according to Keidel, who said he is “studying the possibility” of appealing the O’Brien ruling to the U. S. Supreme Court.

The O’Brien decision will not affect California law “because we have a law on the books,” according to Dennis Wasser, a Los Angeles family law attorney and the immediate past president of the Los Angeles County Bar Assn. Family Law Section. Wasser said that by sending the Sullivan case back to the trial court, “the California Supreme Court did decide the issue. The California Supreme Court in the Sullivan case basically decided it the same way the Legislature did.”

Sorenson, Mark Sullivan’s attorney, said the issue should be decided by the U. S. Supreme Court because it “exceeds the jurisdiction of the state Supreme Court.” There are “deep-seated constitutional issues involved in the (controversy),” he said.

Sorenson predicted that the New York case will have far-reaching effects. The ruling could apply to every licensed occupation, “from beauticians to plumbers,” he said.

He said the New York ruling “constitutes peonage. You can’t contractually bind yourself over to someone to work. That’s unconstitutional.”

An attorney who argued the case before the U. S. Supreme Court would have to “basically challenge whether (a professional degree) is a property right or not,” Mitchelson said. “It’s unconstitutional to deprive someone of a property right.”

Albert J. Emanuelli, attorney for Loretta O’Brien, said: “I analogized in the courtroom that the license (was like) a pension or a wrongful-death action. The judge liked that.”

Both pensions and wrongful-death actions are considered marital property in New York, he said. The same is true in California, according to Herzog, who said she used the same argument in the Sullivan case.

Didn’t Reap Benefits

Emanuelli said he decided to argue that Michael O’Brien’s medical degree was marital property because O’Brien left his wife three months after he received his medical license. Loretta O’Brien did not reap the benefits of her husband’s income as a doctor, Emanuelli said. “What offended me was there was nothing for these kids to divide.”

Gloria Allred, a Los Angeles feminist attorney, said the New York ruling could change the thinking of the California Legislature. “I don’t think anyone can argue (now) that this is some wild-eyed radical concept,” she said. The New York Court of Appeals “is not a radical group,” she said.

California Assemblyman Elihu Harris (D-Oakland), author of the Sullivan Law, said there has been “an ongoing discussion” of the issue of professional licenses as property in the Legislature since the O’Brien ruling. Harris said he expects a legislator to introduce a new bill making a professional license marital property within the next two years.

Harris said the New York ruling may help those who want to change the law in California, but he added that he believes the courts should provide equity through spousal support in a Sullivan situation, since the value of a professional license is “hard to measure.”

“I don’t think it’s community property,” he said. “I think (in a Sullivan situation) there is an interest to be measured.” However, that interest can be measured using the Sullivan Law, Harris said.

Allred contends that the Sullivan Law is unfair and says it should be amended or changed. The law will change “only if women rise up and call their legislators and lobby this,” she said. “I plan to talk to legislators myself. If (women) really lobby hard, I think we can change it.”

Reimbursement of half the cost of the license-holding spouse’s education “is just a drop in the bucket,” Allred said. It does not take into account the money that would have been earned by the student spouse if he or she were not in school, she said. It also does not recognize the non-student spouse’s non-economic support, such as cooking and cleaning, Allred said. She added that “it’s usually the women who put their men through school.”

Allred said spouses who work while their partner attends medical or law school should get a “written agreement to give them a future share of their (the license-holding spouses’) income in case the marriage dissolves.”

Current California law allows one partner to take advantage of the other, she said. “I think consumers have more protection in the marketplace.” Marriage, Allred said, “is not a crapshoot. They are no longer treating each other as strangers with whom they are taking their chances.”

Janet Sullivan said she sought a court decision because, “given the legal environment of that time, I wasn’t entitled to anything.” She was not entitled to spousal support, she said, because “I proved beyond a shadow of a doubt . . . that I could support an entire family.”

The decision to grant spousal support is based on one spouse’s need and the other’s ability to pay, according to family-law attorneys.

“You don’t get a share of the appreciation of the house because you need it,” Allred said. She said that when one spouse puts the other through school, “she is investing in his career” just as one would invest in a house.

In the Sullivan case, the value of Mark Sullivan’s medical license was estimated at $660,000 by economists, Herzog said. The figure was arrived at by subtracting the average college graduate’s lifetime earnings from an average doctor’s lifetime earnings, she said.

The amount was discounted to present-day value, she said. “The actual amount in dollars would have been much more,” Herzog said. Under California community-property law, Janet Sullivan would have received 50% of the $660,000.

Herzog said she was not completely disappointed by the Sullivan Law, which, by ordering recompensation of education costs, did address part of the problem of one spouse sending the other through medical or law school. “I felt that half a loaf was better than none,” she said. “But I did feel it was half a loaf.”

There is a clause in the Sullivan Law that requires the court to consider the contribution of the non-degree-holding spouse when awarding spousal support. Alimony could be “an equitable way to do it, if the courts will do it,” Herzog said. But the law does not require the court to award spousal support, and “the courts in California are very chintzy, very low in their spousal support awards,” she said.

Herzog said she would rather have a law that is clear, like the one now in New York. She reserved judgment on the Sullivan Law, however, because it is new and “we don’t know how it is going to work out in actual decisions.”

But, she said, if spouses in Janet Sullivan’s situation do not feel they are being treated fairly under the Sullivan Law, the challenge will come up again in California. “I think the law eventually gets around to the point of an equitable solution,” she said.