| D.P. v S.P. |
| 2026 NY Slip Op 50129(U) [88 Misc 3d 1218(A)] |
| Decided on January 28, 2026 |
| Supreme Court, Westchester County |
| Hyer, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| As corrected in part through February 11, 2026; it will not be published in the printed Official Reports. |
D.P., Plaintiff,
against S.P., Defendant. |
This Decision and Order is being entered following a trial held pertaining to the above-captioned matrimonial action.
On October 21, 2022, this matrimonial matter was commenced by Plaintiff with the filing of a summons with notice [FN1] (hereinafter "Summons") and verified complaint [FN2] (hereinafter "Complaint"), asserting that the parties were married on March 2, 2013; that there are two minor issue of the marriage, being: (1) M. P. (D.O.B.: X/XX/XXXX) (hereinafter "M. P."), and J. P. (D.O.B.: XX/XX/XXXX) (hereinafter "J. P.") (hereinafter collectively "Children"); and, seeking the entry of a judgment of divorce on the grounds of irretrievable breakdown of the parties' relationship pursuant to New York State Domestic Relations Law (hereinafter "DRL") § 170(7), [*2]along with other ancillary relief.
Annexed to the Summons was a notice of automatic orders pursuant to DRL § 236 (hereinafter "Notice of Automatic Orders") which included the following:
"NOTICE OF ENTRY OF AUTOMATIC ORDERS (D.R.L. §236) Rev. 1/13
FAILURE TO COMPLY WITH THESE ORDERS MAY BE DEEMED A CONTEMPT OF COURT
PURSUANT to the Uniform Rules of the Trial Courts, and DOMESTIC RELATIONS LAW § 236, Part B, Section 2, both you and your spouse (the parties) are bound by the following AUTOMATIC ORDERS, which have been entered against you and your spouse in your divorce action pursuant to 22 NYCRR §202.16(a) and which shall remain in full force and effect during the pendency of the action unless terminated, modified or amended by further order of the court or upon written agreement between the parties:
(1) ORDERED: Neither party shall sell, transfer, encumber, conceal, assign, remove, or in any way dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties, except in the usual course of business, for customary and usual household expenses or for reasonable attorney's fees in connection with this action.
(2) ORDERED: Neither party shall transfer, encumber, assign, remove, withdraw or in any way dispose of any tax deferred funds, stocks or other assets held in any individual retirement accounts, 401K accounts, profit sharing plans, Keogh accounts, or any other pension or retirement account, and the parties shall further refrain from applying for or requesting the payment of retirement benefits or annuity payments of any kind, without the consent of the other party in writing, or upon further order of the court, except that any party who is already in pay status may continue to receive such payments thereunder.
(3) ORDERED: Neither party shall incur unreasonable debts hereafter, including, but not limited to further borrowing against any credit line secured by the family residence, further encumbrancing any assets, or unreasonably using credit cards or cash advances against credit cards, except in the usual course of business or for customary or usual household expenses, or for reasonable attorney's fees in connection with this action.
(4) ORDERED: Neither party shall cause the other party or the children of the marriage to be removed from any existing medical, hospital and dental insurance coverage, and each party shall maintain the existing medical, hospital and dental insurance coverage in full force and effect.
(5) ORDERED: Neither party shall change the beneficiaries of any existing life insurance policies and each party shall maintain the existing life insurance, automobile insurance, homeowners and renters insurance policies in full force and effect.
(6) ORDERED: These automatic orders shall remain in full force and effect during the pendency of the action unless terminated, modified, or amended by further order of the court or upon written agreement between the parties.
(7) ORDERED: The failure to obey these automatic orders may be deemed a contempt of court.
IMPORTANT NOTE: After service of the Summons with Notice or Summons and Complaint for divorce, if you or your spouse wishes to modify or dissolve the automatic orders, you must ask the court for approval to do so, or enter into a written modification [*3]agreement with your spouse duly signed and acknowledged before a notary public."
On November 9, 2022, Defendant's counsel filed a notice of appearance.[FN3]
On November 22, 2022, Plaintiff filed discovery demands including those seeking expert witness information.[FN4]
On December 9, 2022, Defendant filed an answer with counterclaim [FN5] seeking the dissolution of the parties' marriage pursuant to DRL § 170(7).
On December 27, 2022, a request for judicial intervention was filed,[FN6] after which the Hon. Thomas Quinones, J.S.C., was assigned to preside over this action.
On December 29, 2022, Defendant filed discovery demands including those seeking expert witness information.[FN7]
On February 2, 2023, Plaintiff commenced a family offense proceeding in the New York State Family Court, Westchester County, known as D. P. v. S. P., under file number XXXXXX and docket number X-XXXXX-XX (hereinafter "Family Offense Proceeding"),[FN8] asserting that Defendant herein had committed family offenses against she and/or the Children including harassment in the first or second degree and menacing in the second or third degree, and providing the following description of the incidents she claimed constituted the family offense:
"The Respondent and Petitioner are currently going through a divorce, and living in the same home. On 02/01/2023 at 6:30 am the Respondent had the 4 year old child in the counter. When the Petitioner came down from her bedroom, she saw the child in the counter of their home. The child saw his mom and went towards her, but then went to fall. At this time, the Respondent went towards the child and stopped him from falling. The Respondent then yelled and said to the Petitioner "get away". After the incident, started yelling at the Petitioner blaming her for their son almost falling. The Respondent made the Petitioner feel scared and intimidated, because 2 feet from her her face. The Petitioner is recovering from [Redacted] Surgery, and this abuse is hindering her recovery. The Petitioner's mother is in the home helping the Petitioner with her recovery. The Respondent is hostile with the Petitioner's mom and made it clear to her that she is not there to "parent the children", she is just there to take care of the Petitioner. The Respondent is mentally and emotionally more abusive toward Petitioner now that she is going through [Redacted]. The Petitioner is afraid of the Respondent because of pass incidents of harassment and feels threatened by the Respondent and his presence in the home. The Petitioner is fearful to go home because things are escalating and the [*4]Petitioner is afraid the Respondent will harm her. In the summer there was an incident when the kids did not want to go to bed, and the Respondent yelled so loud, and the kids got so scared, they started crying and holding on to the Petitioner tight. The abuse has been going on for years, and the Petitioner is terrified of the Respondent. The Petitioner is requesting for the Respondent to vacate the residence, and further requesting that he stay away from her and the children."
On February 10, 2023, Plaintiff's statement of net worth [FN9] was filed (hereinafter "Plaintiff's SNW"), as was Defendant's statement of net worth [FN10] (hereinafter "Defendant's SNW"). Defendant's SNW only includes one business interest being T. S. G., LLC, (hereinafter "T. S. G."), asserted to be a Delaware State limited liability company, with Plaintiff having a one hundred percent interest with phantom stock distributions.
On February 28, 2023, an Order [FN11] was entered [Quinones, T.] scheduling a preliminary conference to be held on April 20, 2023, at 9:30 a.m. Thereafter, the undersigned was assigned to preside over this action.
On March 24, 2023, following the Family Offense Proceeding being assigned to the Hon. Arelene A. Gordon-Oliver, J.F.C., a Temporary Order of Protection [FN12] (hereinafter "Temporary Order of Protection") was entered [Gordon-Oliver, A.], for the benefit of Plaintiff against Defendant, directing that Defendant refrain from any conduct that would constitute a family offense against Plaintiff, to remain in effect until June 6, 2023.
On April 4, 2023, a preliminary conference order [FN13] was entered (hereinafter "Preliminary Conference Order & Stipulation"), wherein the parties' stipulated to the grounds for the dissolution of the marriage as DRL § 170(7) with the entry of a judgment of divorce to be granted to Plaintiff with Defendant withdrawing any counterclaims for a dissolution of the parties' marriage, and directing the filing of a note of issue and certificate of readiness for trial by June 30, 2023; an Order [FN14] was entered consolidating with this action the Family Offense Proceeding providing the Temporary Order of Protection to remain in effect; and, an Order [FN15] was entered appointing as attorney for the Children Scott Stone, Esq. (hereinafter the "AFC"), to be paid solely by Defendant subject to reallocation at trial.
The Preliminary Conference Order & Stipulation was signed by the parties and confirmed in section J, the paragraph for which is entirely in bold print, that they had received [*5]and would comply with the Notice of Automatic Orders:
"J. AUTOMATIC STATUTORY RESTRAINTS (D.R.L. §236[B][2]):
Each party acknowledges that he/she has received a copy of the Automatic statutory Restraints/Automatic orders (D.R.L. §236[B][2]). Each party acknowledges that he/she understands that he/she is bound by those Restraints/Orders during the pendency of this action, unless terminated, modified, or amended by order of the Court upon motion of either party or upon written agreement between the parties duly executed and acknowledged."
On April 7, 2023, Defendant's counsel filed an expert witness disclosure advising that he had retained Gary Rosen, CPA. CFF, CFE, CVA, CGMA of Marcum LLP (hereinafter "Mr. Rosen") for "the valuation of S. P.'s business;"[FN16] and, Plaintiff's counsel filed an expert witness disclosure advising that she had retained Michael J. Raymond, CPA, ABV, CFF of BST & Co. CPAs, LLC (hereinafter "Mr. Raymond") for the "valuation of Defendant's business."[FN17]
On April 12, 2023, an Order [FN18] appointing neutral real estate appraiser was entered appointing John Saluto of Hudson Property Appraisals, Inc., to prepare an appraisal report providing the current fair market value of the former marital domicile located at: [Redacted] (hereinafter "Marital Domicile"), with the fee to be paid solely by Defendant subject to reallocation at trial.
On April 14, 2023, the New York State Family Court transferred the file pertaining to the Family Offense Proceeding to this Court.[FN19]
On May 15, 2023, following submission of correspondence by counsel regarding discovery,[FN20] an Order [FN21] was entered directing that all depositions shall be completed by June 30, 2023; note of issue and certificate of readiness for trial shall be filed by July 31, 2023; with all other previously directed discovery deadlines remaining in effect.
On June 8, 2023, an Order [FN22] was entered wherein, inter alia, the Temporary Order of Protection was not extended beyond June 6, 2023; and a settlement conference was scheduled to be held on July 31, 2023, at 9:00 a.m.
On July 19, 2023, following correspondence by Defendant's counsel pertaining to [*6]discovery,[FN23] an Order [FN24] was entered directing a status conference to be held on July 21, 2023, at 11:30 a.m.
On July 21, 2023, an Order [FN25] was entered directing, inter alia, that following completion of remaining discovery as delineated therein, a note of issue and certificate of readiness for trial be filed by August 31, 2023.
On July 24, 2023, a pre-trial conference Order [FN26] was entered directing that a pre-trial conference be held on December 12, 2023, at 9:00 a.m.; and a trial shall commence on January 22, 2024, at 9:00 a.m.
On August 25, 2023, Plaintiff's response to demand pursuant to CPLR § 3101(d)[FN27] was filed, providing that Plaintiff intended to call as expert witnesses the following individuals associated with the NGH Group, Inc., Nicholas G. Himonidis, Simon M. Ragona III, Anselmo Di Fabio; as experts in the field of software engineering, digital technologies and computer forensics; to offer testimony regarding the similarities between the software programs T. S. (hereinafter "T. S.") and Q. S. (hereinafter "Q. S.") and the cost basis of the development of such software programs.
On August 28, 2023, Plaintiff's counsel filed Plaintiff's response to demand pursuant to CPLR § 3101(d),[FN28] providing that Plaintiff intended to call as an expert witness Mr. Raymond as an expert witness in the field of forensic accounting and business valuation; to offer testimony regarding the value of T. S. G. including its assets, including without limitation, its intellectual property and software programs.
On August 31, 2023, Plaintiff's counsel filed a letter [FN29] wherein concerns are raised regarding the need for additional discovery pertaining to Q. S. and T. S. asserting the following:
"Kindly be reminded that this firm represents D. P., the Plaintiff in the above referenced matter. Dina Kaplan, Esq. and Evan Schein, Esq. represent the Defendant, S. P. The Court will recall that we had a discovery-related conference with Your Honor on July 21, 2023. At that time, Plaintiff set forth the remaining outstanding discovery needed, and the Court set a deadline to file the Note of Issue for August 31, 2023.
At the time of the July 21, 2023 conference, given the discovery and deposition testimony up to that point, Plaintiff could not have anticipated that a software program called Q. S. would go live or the extent of the similarities between two software programs, T. S. and Q. S. When we deposed non-party witness D. A., the Chief [*7]Information Officer (CIO) of T. S. G., he testified, inter alia, that (i) the software program Q. S. was developed post-commencement; (ii) that Q. S. and T. S. (a software program that he claimed was developed during the marriage) are 'different' and unrelated; and (iii) that there was not a timeline for Q. S. to be rolled out.
However, upon receipt and review of the discovery Defendant produced on August 25, 2023 (which production we initially requested on May 12, 2023), we learned that D. A.'s testimony concerning the timing and development of Q. S. was not accurate, notwithstanding he is the CIO of T. S. G. and either knew or should have known of these inaccuracies. Specifically, after receiving and reviewing discovery on August 25, 2023, we learned that Q. S. was not developed post-commencement as D. A. testified but was developed during the marriage. Moreover, we learned from the discovery produced on August 25, 2023, that the T. S. and Q. S. software are not 'different,' as D. A. testified, but related. In fact, in emails Defendant produced on August 25, 2023, the two software programs are repeatedly referred to interchangeably as 'T. S./Q. S.' Emails produced on August 25, 2023 also discuss 'converting' T. S. into Q. S. in the months before the commencement of the action of divorce. Finally, a recent internet search has revealed that the Q. S. software program has 'gone live.'
With this information that we received literally six days ago, Plaintiff retained an expert (NGH Group, Inc.) to compare the two software programs and opine upon their similarities. (See NYSCEF Document No. 71). We have served a Third Demand for Discovery and Inspection dated August 25, 2023, which seeks information that NGH Group, Inc. requires to complete its assessment. Defendant's counsel has advised that Defendant will not respond to the demand and asked us to withdraw the same. We are also seeking to retain an expert to assist BST & Co. in valuing the software. We anticipate that the expert will need to request information to complete their valuation.
Finally, there are deficiencies in Defendant's August 25, 2023 document production. Specifically, Defendant has refused to provide T. S. G.'s QuickBooks records, and in his Affidavit, Defendant claims that the requested information may be in 16 banker's boxes that are in his home, but that he does not wish to open such boxes as T. S. G. is involved in a wrongful termination lawsuit with its former CFO, who happens to be Plaintiff's father. We respectfully request that Defendant provide access to T. S. G.'s QuickBooks as BST requested and that he be directed to search the banker's boxes in his home for additional records that may be responsive to our demand.
Therefore, for good cause, specifically that we were given inaccurate information during deposition testimony, and that documents to refute the testimony literally appeared six days ago, we are seeking an extension of the time to file the Note of Issue and for further discovery to be permitted. We will need to submit a motion for expert and legal fees. Not only is Defendant the monied spouse, but this new information should have been produced sooner than six days before the Note of Issue was due to be filed. We are now literally trying to find an expert in this field of software on the eve of having to file a Note of Issue because of the lack of transparency.
We thank the Court for its courtesies and considerations."
On August 31, 2023, Defendant's counsel filed a letter [FN30] in response, indicating, "Extensive questions about Q. S. (which as the evidence will show has little to no value as a marital asset) were posed to all witnesses, including S. P. Plaintiff's Forensic Expert, a representative of BST, was present at each and every deposition."
On August 31, 2023, a note of issue and certificate of readiness for trial [FN31] was filed by Plaintiff's counsel noting, "*Discovery: Awaiting responses to Third Notice for Discovery and Inspection, and deficiency demand. Plaintiff anticipates retaining an expert to value software and additional document demands will be forthcoming"; after which on September 1, 2023, Defendant's counsel filed a letter [FN32] in response asserting that Plaintiff's counsel should file a new note of issue without a discovery carve-out; after which on September 5, 2023, Plaintiff's counsel responded requesting a pre-motion conference seeking the extension of discovery with respect to Q. S. and T. S.;[FN33] after which on September 5, 2023, an Order [FN34] was entered directing a pre-motion conference to be held on September 8, 2023, at 9:00 a.m., which was adjourned September 14, 2023, at 10:00 a.m.[FN35]
On September 14, 2023, an Order [FN36] was entered directing the following:
"1. Plaintiff s request for Post Note of Issue Discovery is granted to the following extent:
a. Responses to Plaintiff's Discovery Demands set forth in the letter of Plaintiff's counsel dated July 21, 2023, marked as Court Exhibit #1, shall be served no later than October 15, 2023.
b. Responses to Plaintiff s Third Demand for Discovery and Inspection, dated August 25, 2023, marked as Court Exhibit #2, shall be served no later than October 15, 2023.
c. Responses to Plaintiff s Fourth Demand for Discovery and Inspection, dated September 13, 2023, marked as Court Exhibit #3, shall be served no later than October 15, 2023.
d. By October 15, 2023, Defendant shall provide the following to Plaintiff's counsel: i. Redacted legal fee and expert witness fee invoices. ii. Quick Books in native format for Defendant's business interests, for a period commencing on January l, 2017 through December 31,2022. iii. E-Mail attachments for the following: 1. SP013446-SP013448; 2. Spreadsheet referenced in SP013469; 3. Bank budget referenced in SP013446-SP013448; 4. Google Document Spreadsheet referenced in SP13265; 5. Projection referenced in [*8]SP013490-SP013491; 6. BBC Report referenced in SPO13494; 7. BBC Report referenced in SP013509; 8. BBC Report referenced in SP013513; 9. Personal Financial Statement referenced in SP013515.
e. By October 15, 2023, Defendant shall provide Plaintiff with a sworn Affidavit indicating that he has provided all documents within his possession, custody and control responsive to all Discovery Demands served upon him in this action.
2. Experts to Be Retained by a Party: Each party shall select his/her own expert to value any assets or address any other issues. The expert shall be identified to the other party by letter with their qualifications and retained no later than October 31, 2023. If a party requires fees to retain an expert and the parties cannot agree upon the source of the funds, an application for fees shall be made in the form of a pre-motion conference request. Any expert retained by a party must represent to the party hiring such expert that he or she is available to proceed promptly with the valuation of other expert services to be provided. Expert reports are to be exchanged 60 days prior to trial or 30 days after receipt of the report of the neutral expert, whichever is later. Reply reports are to be exchanged 30 days after service of an expert report.
3. The Pre-Trial Conference Order and all prior Orders and Decisions of this Court remain in full force and effect, and not modified by this Order except as set forth herein."
On September 22, 2023, Plaintiff's counsel filed a letter seeking a pre-motion conference including the following assertions:
"Kindly be reminded that this firm represents D. P., the Plaintiff in the above-referenced matter. Dina Kaplan, Esq. and Evan Schein, Esq. represent the Defendant, S. P. The Court will recall that we had a pre-motion conference with Your Honor on September 13, 2023. At that time, Plaintiff set forth the remaining outstanding discovery needed, and it was discussed that Defendant's corporate counsel for Defendant's business, T. S. G., was preventing a witness, D. R. (T. S. G.'s former CFO), from turning over documents that Plaintiff requested during D. R.'s deposition. Ms. Kaplan represented that she would speak with S. P. and S. P. would authorize the disclosure of the documents. On Monday, September 18, 2023, I received an email from T. S. G.'s corporate counsel advising that T. S. G. does not consent to the disclosure of any documents or materials by D. R. and further advised that D. R. is obligated to safeguard all confidential, nonpublic information pertaining to T. S. G. pursuant to D. R.'s Employment Agreement with T. S. G. T. S. G.'s corporate counsel was present during D. R.'s deposition and did not object to the documents requested by our office. Respectfully, please be reminded that S. P. is the sole owner of T. S. G. He is instructing his corporate counsel to withhold documents to further prevent Plaintiff from receiving discovery to which she is entitled. As a result of the foregoing, we are kindly requesting permission from the Court to file a motion to compel. We thank the Court for its courtesies and considerations."[FN37]
On September 22, 2023, an Order [FN38] was entered directing that a pre-motion conference be held on September 26, 2023, at 2:00 p.m.
On September 24, 2023, correspondence [FN39] was filed by T. S. G.'s legal counsel asserting that T. S. G. is a New York State limited liability company that is owned by Defendant, requesting an adjournment of the pre-motion conference, and indicated that T. S. G. was not withholding documents, noting:
"Plaintiff's counsel mischaracterized the dispute between T. S. G. and D. R. concerning D. R.'s production of T. S. G. Property that he wrongfully possesses. T. S. G. does not consent to D. R.'s production of T. S. G.'s property or any documents containing confidential T. S. G. information and T. S. G. is not obligated to give this consent. If D. R. is wrongfully in possession of T. S. G.'s property and turns that property over to Plaintiff, whether voluntarily or through an order entered by this Court, T. S. G. intends to hold him liable for any claims and damages that flow from his actions."
On September 25, 2023, an Order [FN40] was entered adjourning the pre-motion conference to September 28, 2023, at 11:00 a.m.
On September 28, 2023, an Order [FN41] was entered providing the following directives, which as reflected in the so-ordered transcript from the conference was reached on consent:[FN42]
"A Status Conference was held before the Hon. James L. Hyer, J.S.C., on September 28, 2023, wherein counsel and parties appeared. It is hereby ORDERED that:
l. D. R. shall provide documents responsive to the demands served upon him by October 6, 2023.
2. By October 6, 2023, Plaintiff shall serve a Subpoena upon T. S. G., LLC ("T. S. G."), ("Subpoena") which upon consent shall be received and accepted for service upon T. S. G. by Stephen E. Turman, Esq., via e-mail to [email protected]. Responses shall be accompanied by an Affidavit of the custodian of the records of T. S. G. that confirm that all documents responsive to the Subpoena include all the records in the custody, possession, and control of T. S. G.
3. T. S. G. shall file on NYSCEF any objections to documents requested in the Subpoena in the form of a pre-motion conference request by October 13, 2023.
4. Parties shall order September 28, 2023 transcript, split the cost and shall be submitted to the Court by October 6, 2023 to be "So Ordered".
On October 13, 2023, T. S. G.'s counsel filed a request for pre-motion conference [*9]pertaining to Plaintiff's subpoena served upon T. S. G.,[FN43] after which an Order [FN44] was entered directing a pre-motion conference to be held on October 20, 2023, at 9:00 a.m., which upon request was adjourned to be held on October 24, 2023 at 2:30 p.m.[FN45]
On October 24, 2023, a conference was held after which an Order [FN46] was entered setting forth a briefing schedule for motion and/or cross motions to be filed.
On October 31, 2023, Defendant's response to Plaintiff's demand for expert witness information [FN47] was filed providing that Defendant intended to call as an expert witness Mr. Rosen as an expert witness in the field of forensic accounting and business valuation, to offer testimony regarding the value of T. S. G. including its assets, including without limitation its intellectual property and software programs.
On October 31, 2023, Defendant filed an additional response to Plaintiff's Demand for expert witness information,[FN48] providing that Defendant intended to call as an expert witness Frank J. Zinghini Jr. of Applied Visions, Inc., as an expert witness in the field of software development and software valuation to offer testimony regarding the T. S. and Q. S. software as part of the valuation of the marital business, T. S. G.
On November 3, 2023, Defendant filed a motion [FN49] by order to show cause (hereinafter "Motion Sequence No. 1") seeking the entry of an order granting the following relief: (1) Pursuant to CPLR § 2304, quashing Item D-2 of Plaintiff's Third Demand for Discovery and Inspection (NGH Group, Inc. Valuation) dated August 25, 2023, and Items E-1(i), E-1(ii) and E-1(iii) of Plaintiff's Fourth Demand for Discovery and Inspection (Software Analysis Group Valuation) dated September 13, 2023, as containing trade secrets; (2) Pursuant to CPLR § 3103, issuing a protective order precluding Plaintiff from any further efforts to enforce Plaintiff's Third Demand for Discovery and Inspection (NGH Group, Inc. Valuation) with respect to Item D-2, and Plaintiff's Fourth Demand for Discovery and Inspection (Software Analysis Group Valuation) with respect to Items E-1(i), E-1(ii) and E-1(iii); and, (3) granting Defendant such other and further relief as this Court deems just and proper.
In support of Defendant's application, Defendant's counsel filed an affidavit of Frank Zinghini, asserting that the source code of the subject software was not needed to prepare a valuation:[FN50]
"I am the President and Chief Executive Officer of Applied Visions Inc., which designs, develops, markets, and launches digital products. I am experienced with the process of assessing the potential market value of new products and services that incorporate computer software. The process of different than assessing the value of a going concern, where there is a history of sales and profitability that help establish the overall enterprise value of the business. The potential value of a software-based product or service is determined by the perceived ability of that product or service to generate profitable revenue from its intended market. This entails assessing the potential size of that market, the product's ability to address the needs of the customers that comprise that market, the willingness of those customers to pay an acceptable price for that product, and the ability of that projected revenue stream to support the business that offers the product. Once the potential market for the product is estimated, one must consider the ability of the business itself to actually reach some subset of that market with its sales and marketing efforts, and then, from that, what subset can actually be turned into paying customers. These analyses have little to do with the product, and everything to do with the team attempting to sell the product. This evaluation process is common, well understood, and well documented. See, https://carta.com/blog/marekt-size/ for an introduction to the concepts and terminology involved. This valuation process is based solely upon the features and capabilities-either existing or anticipated to be developed-of the software product. The focus is on what the product does, and not how it does it. At no time during an evaluation exercise do we need or request to review any existing source code or other technology related to the product. Such review would have no impact on our assessment of the product's value in the marketplace, and would in fact be a distraction: the specific method of implementation of the product is an internal operational concern that does not affect its value to the marketplace in any way." [emphasis added].
The affirmation of Defendant's counsel was also submitted wherein she asserts the position that a protective order is needed to protect T. S. G.'s trade secrets pertaining to Q. S. and T. S., as T. S. G. is intent on obtaining a patent to protect its rights in the software, while simultaneously arguing that the software has no apparent value:
"Item 37 of the Subpoena, Item D-2 of the Third Demand, and Items E-1(i), E-1(ii) and E-1(iii) of the Fourth Demand contain the following duplicate demands:
All source codes (both server side and client side) for each Software Program, including, but not limited to: a) Source code should include both web source code and non-web source code; b) Database source code such as DDL (Database Definition Language) script that describes the creation and details of each Software Program; c) Source code documentation.
* * *
This Court should quash the Source Code Demands contained in the Third Demand and Fourth Demand pursuant to CPLR § 2304 and issue a protective order pursuant to CPLR § 3103 because the Source Code Demands seek information that will not provide insight into the identity and value of the parties' marital property and seeks information that constitute trade secrets of T. S. G. As set forth in the attached Affidavits of T. S. G.'s Chief Information Officer, D. A., S. P.'s retained software expert, Frank [*10]Zinghini, and the Affirmation of Kevin Fritz, T. S. G.'s counsel, the materials requested are superfluous to the determination of equitable distribution in this Matrimonial Action. The trade secrets being demanded have no bearing on the valuation of T. S. G.
T. S. and Q. S. are property of T. S. G., which is the tech staffing firm of which S. P. is the Chief Executive Officer. T. S. never got off the ground and there is no expectation that it will. Q. S. has produced $0 of revenue or profit, and it has had limited beta testing done after commencement of the instant Matrimonial Action. Upon information and belief, Q. S. would require substantial investment of money, testing and time to even stand a chance of becoming profitable.
Producing the material requested in the Source Code Demands would give Plaintiff and her team full and unfettered access to trade secret software, including all elements and material that a person would need to make a full working copy of the software that could be sold and marketed. This level of access would also enable Plaintiff or any person on her team to change, modify, corrupt, erase or otherwise cause damage to the software causing irreparable and immeasurable harm to T. S. G. As more technically set forth in the attached Affidavits of Mr. Zinghini and D. A., as well in the Affirmation of Mr. Fritz, this level of disclosure is not necessary for Plaintiff to complete her valuation of T. S. G. and the harm that could come to S. P. from disseminating T. S. G.'s trade secrets would be irreparable.
* * *
There can be no question that proprietary source code such as Q. S., developed by a business and for which the business intends to apply for a patent, is a trade secret that qualifies for protection from broad disclosure. Every effort has been made by S. P. in this matter to be forthcoming with discovery such that this unnecessary and potentially ruinous disclosure should be quashed.
* * *
The software at issue is property of T. S. G. which is being valued as a business for purposes of equitable distribution. To begin with, any value that the software has is speculative and remote. The core of T. S. G.'s business is IT Staffing. T. S. G.'s unprecedented success in 2021 and 2022 stem from its core in IT Staffing, in particular placing top technology talent. The success was not directly, or even indirectly, related to T. S. or Q. S., as these hiring software platforms are experimental at best" [emphasis added].[FN51]
On November 3, 2023, counsel for T. S. G. filed a motion [FN52] by order to show cause (hereinafter "Motion Sequence No. 2"), seeking the entry of an order granting relief, inter alia, pursuant to CPLR § 2304, quashing, fixing conditions of, and/or modifying the subpoena duces tecum issued by Plaintiff to T. S. G. to the extent the Subpoena seeks documents already produced, or which will be produced, by defendant S. P.; and, pursuant to CPLR § 3103(a), for a protective order with respect to the disclosure of source code and other proprietary information [*11]owned by T. S. G. and unnecessary to a valuation of Defendant's assets.
On November 3, 2023, Plaintiff's counsel filed a motion [FN53] by order to show cause (hereinafter "Motion Sequence No. 3"), seeking the entry of an order granting relief, inter alia, compelling Defendant to comply with Court Order dated July 24, 2023 and Order dated September 14, 2023 to immediately produce the QuickBook back up file (.qbb) for the general ledgers of T. S. G. for the period January 1, 2017 through December 31, 2022; Compelling Defendant to comply with Court Order dated September 14, 2023 and to immediately produce all source codes (both server side and client side) for the software programs T. S. and Q. S.; Compelling T. S. G. to respond to demand numbers 3, 4, and 22 as set forth in the subpoena served upon T. S. G. dated October 6, 2023; and, to immediately produce the following information: a. Email communications, if any, between D. R. and D. A. about T. S. for the period before D. A. joined T. S. G., b. A signed copy of D. A.'s Employment Agreement with T. S. G., and c. Any patent application submitted on behalf of T. S. G. and/or any related or affiliated entity.
On November 6, 2023, Motion Sequence Nos. 1, 2 and 3 were conformed.[FN54]
On November 8, 2023, an Order [FN55] was entered appointing as neutral forensic evaluator Dr. Benna F. Strober, who filed an acceptance of appointment later that day.[FN56]
On November 10, 2023, Defendant's counsel filed an affirmation in opposition to Motion Sequence No. 3 opposing the request for the source code pertaining to T. S. and Q. S., asserting, "As more fully set forth therein, I have been advised that the source code is not required to determine the issues of equitable distribution in this divorce matter and it is protected as trade secret material, the production of which could jeopardize S. P.'s livelihood," noting further that, "T. S. G. is a legal entity independent of S. P."[FN57]
On November 17, 2023, Defendant filed an affirmation wherein he acknowledges that T. S. and Q. S. are marital assets:
"I offer, not as an admission and not to be used by D. P.'s Father in his commercial litigation against me, to stipulate that T. S. and Q. S. are assets held by T. S. G. and thus, marital assets. Since the only reason D. P. seeks to force disclosure of the source codes is to be able to identify the software platforms as marital assets, in order to avoid further discovery escalation and more in legal fees, I agree to capitulate as I state herein.
* * *
T. S. was shelved as a software program as it was not functional. Q. S. was not even in Beta Testing when D. P. filed for divorce.
* * *
While I will not admit, agree, or acknowledge that Q. S. was developed prior to October 21, 2022, or that Q. S. was converted from the T. S. software, I cannot carry on defending this, and I will stipulate, solely for purpose of this divorce action, and solely to identify marital property, that Q. S. is an asset of T. S. G. as of the Date of Commencement. As such, Q. S. and T. S. are both marital property assets."[FN58]
On November 22, 2023, Plaintiff's counsel filed a report [FN59] of BST & Co. CPAs, LLP, pertaining to a valuation of T. S. G. (hereinafter "Plaintiff's T. S. G. Valuation Report"); and a report [FN60] of Steven Kursh, Ph.D., CSDP, CLP (hereinafter "Dr. Kursh") pertaining to a valuation of Q. S. (hereinafter "Plaintiff's Q. S. Valuation Report").
On December 1, 2023, following numerous letters filed by counsel, an Order [FN61] was entered, directing the pre-trial conference to be adjourned to a date to be set by the Court, and that a status conference be held on January 22, 2024, at 9:00 a.m.
On December 14, 2023, a Decision and Order [FN62] pertaining to Motion Sequence No. 3 was entered awarding Plaintiff $3,500.00 in monthly pendente lite spousal support and $4,562.50 in monthly pendente lite child support; directing Defendant to continue to make payments of extracurricular/summer camp, medical insurance and unreimbursed medical expenses; and, awarding Plaintiff from Defendant interim counsel fees of $100,000.00.
On December 22, 2023, Defendant filed an expert rebuttal report [FN63] of Mr. Rosen pertaining to both the valuation of T. S. G. and Q. S. (hereinafter "Defendant Valuation Report").
On January 4, 2024, following receipt of a request for same, an Order [FN64] was entered directing a pre-motion conference to be held on January 11, 2024, at 9:30 a.m.
On January 11, 2024, a pre-motion conference was held after which an Order [FN65] was entered directing that a status conference would be held on May 24, 2024, at 9:00 a.m.; and that Plaintiff's counsel would submit a proposed order on consent setting forth the issues resolved by the end of day on January 12, 2024.
On January 12, 2024, Plaintiff's counsel filed a proposed consent order,[FN66] which was entered [FN67] which provided, inter alia, for Plaintiff to have exclusive use and occupancy of the Marital Domicile until sold; for the sale of the Marital Domicile; for the payment of interim legal fees to Plaintiff's counsel; and, for additional discovery to proceed according to a delineated schedule.
On March 29, 2024, Decision and Order [FN68] was entered pertaining to Motion Sequence Nos. 1 & 2 directing, inter alia, that: the branch of Defendant's motion seeking to quash Item D-2 of Plaintiff's Third Demand for Discovery and Inspection and Items E-1(i), E-1(ii) and E-1(iii) of Plaintiff's Fourth Demand for Discovery and Inspection is granted; the branch of Defendant's motion for a protective order precluding Plaintiff from any further efforts to enforce Plaintiff's Third Demand for Discovery and Inspection with respect to Item D-2, and Plaintiff's Fourth Demand for Discovery and Inspection with respect to Items E-1(i), E-1(ii) and E-1(iii) is granted; that the branch of T. S. G.'s motion seeking to quash, fix conditions of, and/or modify the Subpoena issued by Plaintiff to T. S. G. to the extent the Subpoena seeks documents already produced, is granted on consent of the parties; that the branch of T. S. G.'s motion seeking to quash, fix conditions of, and/or modify the subpoena issued by Plaintiff to T. S. G. to the extent the Subpoena seeks documents which will be produced by Defendant is granted as Defendant has admitted that the software at issue is marital property; and, that the branch of T. S. G.'s motion seeking a protective order with respect to the disclosure of source code and other proprietary information owned by T. S. G. is granted, as Defendant has admitted that the software at issue is marital property.
On May 24, 2024, following a conference being held, an Order [FN69] was entered, directing a note of issue and certificate of readiness for trial to be filed by June 7, 2024; a pre-trial conference to be held on December 9, 2024, at 9:00 a.m.; and a trial to commence on January 3, 2025, at 9:00 a.m.
On May 28, 2024, a pre-trial conference Order [FN70] was entered.
On June 7, 2024, a note of issue and certificate of readiness for trial [FN71] was filed.
On July 3, 2024, Defendant's counsel filed a letter [FN72] requesting that the Court so-order seven proposed subpoena duces tecum pertaining to Plaintiff's medical and mental health [*12]records, which were so-ordered,[FN73] after which the parties' entered into a stipulation pertaining to production of confidential information which was so-ordered [FN74] by this Court.
On September 19, 2024, Defendant filed an additional response [FN75] to Plaintiff's demand for expert witness information, providing that Defendant intended to call as an expert witness Dr. Chris Mulchay of Asheville Testing as an expert witness in the field of forensic psychology, as it pertains to both parties and the report produced by the Court's appointed neutral forensic evaluator, and to offer testimony with respect to the report issued by the neutral forensic evaluator.
On October 29, 2024, following a request seeking a pre-motion conference pertaining to the subpoenas served upon two mental health professionals pertaining to Plaintiff, an Order [FN76] was entered scheduling a pre-motion conference for November 1, 2024, at 9:00 a.m.
On November 4, 2024, Plaintiff's counsel filed a report of Daniel B. Pickar, Ph.D.[FN77]
On November 13, 2024, Plaintiff filed a motion [FN78] seeking the entry of an order permitting judicial trial subpoenas duces tecum to be so ordered, which was granted by the proposed subpoenas being so-ordered.[FN79]
On November 20, 2024, Defendant's counsel filed a motion [FN80] by order to show cause (hereinafter "Motion Sequence No. 5"), seeking the entry of an order directing, inter alia, Plaintiff to execute authorizations for the release of psychotherapy notes for specified providers and that the specified providers produce their psychotherapy notes along with the remainder of their files; after which Plaintiff filed a cross-motion [FN81] (hereinafter "Motion Sequence No. 6") seeking the entry of an order, inter alia, denying the relief sought in Motion Sequence No. 5, or in the alternative, issuing a protective order and limiting the duration of disclosure to the past five years, and requiring psychotherapy notes to be reviewed in camera prior to release to Defendant.
On December 3, 2024, Defendant's counsel filed a report of Chris Mulchay, Ph.D.[FN82]
On December 6, 2024 through December 9, 2024, Plaintiff's counsel filed proposed exhibits 1-430;[FN83] marked pleadings,[FN84] psychoeducational evaluation of Judith T. Moskowitz, Ph.D.;[FN85] witness list [FN86] enumerating as potential witnesses: (1) Plaintiff, (2) Defendant, (3) Dr. Daniel B. Pickar, Ph.D., ABPP, (hereinafter "Dr Pickar"), (4) M. M., (5) E. W., (6) L. G., (7) A. M. D., (8) Mr. Raymond, (9) Dr. Kursh, (10) D. R. (hereinafter "D. R."), and (11) Ir. Pr. (hereinafter "Ir. Pr."); exhibit list [FN87] enumerating proposed exhibits 1-430; Plaintiff's updated statement of net worth, as of December 5, 2024,[FN88] (hereinafter "Plaintiff's #2 SNW"), which was re-filed and updated further with supporting documentation as of December 7, 2024,[FN89] (hereinafter "Plaintiff's #3 SNW"), and further corrected solely as to title on December 9, 2024;[FN90] and, support worksheets.[FN91]
On December 7, 2024 through December 9, 2024, Defendant's counsel filed proposed exhibits A-X7;[FN92] exhibit list enumerating proposed exhibits A-X7;[FN93] support worksheet;[FN94] witness list [FN95] enumerating as potential witnesses: (1) Plaintiff, (2) Defendant, (3) Benna Strober, LSCW, (4) Dr. Christopher Mulchay, (5) Dr. Joanna Ball, (6) Dr. Ilene Rabinowitz, (7) Mr. Rosen, (8) Ir. Pr., (9) M. H. (hereinafter "M. H."), (10) J. B., (11) F. Z., and (12) L. R.; Defendant's updated statement of net worth, as of November 26, 2024;[FN96] and, a joint stipulation of facts not in [*13]dispute.[FN97]
On December 9, 2024, a joint stipulation of agreed-upon facts was filed (hereinafter "Stipulation of Agreed Facts")[FN98] and a pre-trial conference was held during which the following were marked and filed as Court exhibits: (1) stipulation as to Plaintiff's trial exhibits in evidence;[FN99] and (2) stipulation as to Defendant's trial exhibits in evidence.[FN100]
On December 17, 2024, a decision was entered pertaining to Motion Sequence Nos. 5 and 6,[FN101] denying the relief sought in Motion Sequence No. 5 and granting the relief sought in Motion Sequence No. 6 to the extent Motion Sequence No. 5 was denied.
On December 19, 2024 through December 27, 2024, Plaintiff's counsel filed additional exhibits, to wit: 41, 55,[FN102] 40, 54, 263, 44, 56, 263, 426 and 39.[FN103]
On December 30, 2024, Defendant's counsel filed an amended exhibit list [FN104] enumerating potential exhibits A-X7(XXXXXXX); and amended witness list [FN105] removing three previously disclosed potential witnesses: (1) J. B., (2) F. Z., and (3) L. R.
On January 2, 2025 through January 6, 2025, Plaintiff's counsel filed the following exhibits: 59, 57, 295, 312, and 427;[FN106] and, Plaintiff's amended exhibit list,[FN107] enumerating potential exhibits 1-430b.
On January 7, 2025 through January 10, 2025, Plaintiff's counsel filed the following proposed exhibits: 60, 61, 59, 263, 56, 427.[FN108]
On January 15, 2025, a custody stipulation [FN109] pertaining to the Children was submitted, [*14]which was so-ordered [FN110] on January 16, 2025 (hereinafter "Custody Stipulation"). Article 2 of the Custody Stipulation provided the parties with joint legal custody of the Children with Plaintiff having final decision making pertaining to all major decisions pertaining to the Children, with Article 3 providing shared physical custody of the Children.
On January 23, 2025, Plaintiff's counsel filed the following proposed exhibits: 340 and 341;[FN111] and, from January 26, 2025 to January 27, 2025, filed the following proposed exhibits: 318 & 378.[FN112]
On January 29, 2025, an amendment to joint stipulation of undisputed facts was filed (hereinafter "Stipulation of Undisputed Facts");[FN113] Plaintiff's counsel filed proposed exhibit 432;[FN114] a stipulation was filed pertaining to separate property claims related to the Marital Domicile (hereinafter "Marital Domicile Stipulation");[FN115] an Order [FN116] was entered setting a briefing schedule pertaining to relief associated with the parties' health insurance; and, Defendant's counsel filed proposed exhibit Z7.[FN117] The Marital Domicile Stipulation provides for $400,584.54 to remain in escrow with Defendant's counsel until further stipulation of the parties or order of this Court (hereinafter "Escrow Funds").
On February 3, 2025, Plaintiff's counsel filed the following proposed exhibits: 433, 434 and 435;[FN118] Defendant's counsel filed proposed exhibit A8;[FN119] and, Plaintiff's counsel filed a motion [FN120] by order to show cause (hereinafter "Motion Sequence No. 7") seeking the entry of an order granting relief, inter alia, finding Defendant in contempt for violation of the automatic orders due to his asserted reduction in the health coverage of the parties' and the Children following commencement of this action, and for associated relief.
On February 4, 2025, Motion Sequence No. 7 was conformed,[FN121] directing: (1) that pending a determination of the application Defendant immediately reinstate the health insurance of the parties' and Children to coverage comparable to that which existed at the time of commencement of this action retroactive to December 31, 2024; (2) setting a briefing schedule; and, (3) setting the return date for the application as February 13, 2025.
On February 7, 2025, Defendant's counsel filed proposed exhibit B8.[FN122]
On February 14, 2025, following full submission of briefs, a decision [FN123] was entered pertaining to Motion Sequence No. 7 determining Defendant to be in civil contempt for failing to comply with the Automatic Orders by altering the health insurance coverage of the parties and Children during the course of this action, without party stipulation or Court approval, directing Defendant to reinstate comparative insurance coverage of the parties and Children with proof filed by a New York State licensed health insurance broker, and directing Defendant to be responsible for all out-of-pocket medical costs of Plaintiff.
On February 20, 2025, a decision [FN124] was entered pertaining to the oral application made directing that pursuant to the stipulation of the parties, and until further agreement of the parties, order of this Court or conclusion of this action, neither shall utilize e-mail tracking technology for any e-mails sent to the other party; and, Plaintiff's request for the testimony of Defendant pertaining to e-mail tracking was denied.
On March 7, 2025, Defendant's counsel filed an affidavit [FN125] pertaining to the health insurance coverage of the parties and Children as directed in the Decision and Order pertaining to Motion Sequence No. 7.
On March 7, 2025, Plaintiff's counsel filed proposed exhibits 418 and 378.[FN126]
On March 20, 2025 through March 21, 2025, Defendant's counsel filed proposed exhibits Y7 and Z7.[FN127]
On March 21, 2025, through March 26, 2025, Plaintiff's counsel filed proposed exhibits 417, 63, 62.[FN128]
On March 26, 2025 through March 28, 2025, Defendant's counsel filed proposed exhibits [*15]F7, G7, I7, L7, C8, G7.[FN129]
On May 13, 2025, a stipulation [FN130] pertaining to the division of financial accounts was filed, which was so-ordered [FN131] (hereinafter "Financial Account Stipulation").
On May 15, 2025, a trial exhibit list was jointly submitted by counsel enumerating all exhibits indicating those moved into evidence;[FN132] Plaintiff's counsel filed a post-trial submission (hereinafter "Plaintiff's Post-Trial Submission");[FN133] and, Defendant's counsel filed a post-trial submission (hereinafter "Defendant's Post-Trial Submission").[FN134] Plaintiff's Post Trial Submission provides the following statement as to the remaining issues to be decided by this Court:
"Issues for the Court to determine are (1) distribution of Escrow Account per the terms of the January 29, 2025 Stipulation (NYSCEF No. 1264) and additional credits; (2) equitable distribution of T. S. G., LLC ("T. S. G."); (3) equitable distribution of Q. S. software; (4) spousal support; (4) basic child support and add-on expenses; (5) legal/expert fees.[FN135]
Defendant's Post Trial Submission provides the following statement as to the remaining issues to be decided by this Court:
"For the Court's determination, the following issues remain: (i) distribution of T. S. G.; (ii) distribution of the software platform, Q. S., owned by T. S. G.; (iii) spousal maintenance; (iv) basic child support and add-on expenses; (v) counsel and expert fees; and (vi) reallocation of expenses."[FN136]
This Court held a twenty-six-day trial on January 7, 2025-January 9, 2025; January 13, 2025-January 16, 2025; January 21, 2025-January 23, 2025; January 27, 2025-January 31, 2025; February 3, 2025, February 4, 2025, February 6, 2025, February 7, 2025; February 10, 2025-February 14, 2025; March 24, 2025, March 26, 2025 and March 28, 2025.
Transcripts for the trial were filed [FN137] (collectively "Trial Transcript").
The Trial Transcripts reflect the exhibits moved into evidence and that the following witnesses provided testimony: (1) Plaintiff, (2) Defendant, (3) Dr. Pickar, (4) D. R., (5) Mr. Raymond, (6) Ir. Pr., (7) Dr. Kursh, (8) Mr. Rosen, and (9) M. H.
A. Witness Credibility
Determinations of credibility depend in large part on the court's assessments of the character, temperament, and sincerity of the parties, the trial court's determination should be accorded deference, and its determination should not be disturbed unless it lacks a sound and substantial basis in the record (Sanchez v. Rexhepi, 30 N.Y.S.3d 170 [2d Dept 2016]). "In matters of this character 'the findings of the nisi prius court must be accorded the greatest respect'" (Eschbach v. Eschbach, 56 NY2d 167 [1982], quoting, Matter of Irene O., 381 N.Y.S.2d 865 [1975]).
"The memory, motive, mental capacity, accuracy of observation and statement, truthfulness and other tests of the reliability of witnesses can be passed upon with greater safety by a trial judge who sees and hears the witnesses than by appellate judges who simply read the printed record" (Barnet v. Cannizzaro, 3 AD2d 745 [2d Dept 1957]).
"Where a witness has given testimony that is demonstrably false, we may, in accordance with the maxim falsus in uno falsus in omnibus, choose to discredit or disbelieve other testimony given by that witness" (see DiPalma v. State of New York, 90 AD3d 1659 [4th Dept 2011]; Accardi v. City of New York, 121 AD2d 489 [2d Dept 1986]; see generally People v. Becker, 215 NY 126 [1915]). Where a witness has provided testimony before a Court which contains material facts which conflict with material facts set forth by that witness in a sworn affidavit, even if such compromised testimony did not result in bad faith, that witness may not be deemed credible (Medina v. Essex Estates, 72 Misc 3d 1225(A) [Civ. Ct. New York City 2021]).
While this Court will address the credibility of the expert witnesses separately herein, with respect to the following fact witnesses this Court found same to be credible: (1) Plaintiff, (2) D. R., (3) Ir. Pr., and (4) M. H. This Court has made this determination having found that these witnesses each responded to questions presented to them during trial in a clear and direct manner, during which time each appeared sincere.
After having considered the character, temperament, and sincerity of Defendant, the Court determines Defendant to lack credibility and while not discrediting his testimony entirely, has provided that testimony with the appropriate weight. In making this determination, the Court took into consideration Defendant's violation of Court orders and Defendant's providing conflicting and/or evasive testimony regarding material matters to the Court. For clarity of the record, the Court will review these concerns herein.
[1] Violations of Court Orders
The automatic orders set forth within New York State Domestic Relations Law (hereinafter "DRL") § 236(B)(2)(b) and Uniform Rules for Trial Courts 22 NYCRR § 202.16-a have been determined to "constitute unequivocal mandates of the court" a violation of which [*16]may lead to a finding of civil contempt (Spencer v. Spencer, 159 AD3d 174 [2d Dept 2018]). Despite having been served with the Automatic Orders and acknowledging receipt of the Automatic Orders in the Preliminary Conference Order and Stipulation, Defendant violated the directives contained therein on two occasions.
- Violation of Automatic Orders Provision 4 that neither party shall cause the other party or the children of the marriage to be removed from any existing medical, hospital and dental insurance coverage, and each party shall maintain the existing medical, hospital and dental insurance coverage in full force and effect.
First, as the sole owner and chief financial officer of T. S. G., being the source of health insurance for the parties and Children, Defendant unilaterally without leave of this Court or consent of Plaintiff, changed the health insurance coverage of the parties and Children during the pendency of this litigation. While such conduct, without Court approval or consent of the other party, would have constituted a violation of the Automatic Orders in any pending matrimonial action, in this instance the conduct is even more troubling due to the medical and mental health needs of Plaintiff and the Children. Specifically, during the pendency of this action Defendant has been aware of Plaintiff's [Redacted] diagnosis and treatment, as well as the many mental and medical health providers of the Children, and nonetheless altered the health insurance coverage for the family without seeking Court approval or consent of Plaintiff. As noted above, Defendant was found to be in civil contempt of court for this conduct by the decision pertaining to Motion Sequence No. 7, entered on February 14, 2025.
- Violation of Automatic Orders Provision 1 that neither party shall sell, transfer, encumber, conceal, assign, remove, or in any way dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties, except in the usual course of business, for customary and usual household expenses or for reasonable attorney's fees in connection with this action.
Second, while his counsel has asserted throughout this litigation the parties' lack of liquid assets pointing to the business assets as the major issue of equitable distribution to be addressed by this Court,[FN138] during the pendency of this action Defendant testified that he transferred part ownership in Q. S. without approval of this Court or Plaintiff to Ir. Pr. (hereinafter "Ir. Pr. Q. S. Transfer") as part of his employment agreement (hereinafter "Ir. Pr. Employment Agreement")[FN139] :
"Q. Ir. Pr. got 5 percent of Q. S., didn't he, in his agreement?
A. After the date of commencement, yes, he did.
Q. So you gave away 5 percent of actually Q. S. after the date of commencement to Ir. Pr., correct?
A. That is correct.
Q. And did you ask actually permission of this Court prior to giving away part of an asset [*17]to Ir. Pr.?
A. I did not.
Q. Did you ask permission of your wife in writing prior to giving away an asset to the Ir. Pr.?
A. I did not.[FN140]
* * *
Q. Now, Ir. Pr. was hired as a contractor in 2022, correct?
A. Yes.
Q. And that was before D. R. left, correct?
A. Yes.
Q. Then he was hired as a full-time employee in 2023, correct?
A Yes.
Q. And when he was hired as a full-time employee, is that when you gave away part of Q. S. to him?
A. I — you are using that term, give away, but it the word give away, I would not use was part of the agreement, yes.
Q. It was part of the agreement that you made, giving him 5 percent of the Q. S. asset?
A. I believe so, yes."[FN141]
As Defendant confirmed that he did not receive consent of Plaintiff to complete the subject transfer, nor was same permitted by court order, the Ir. Pr. Q. S. Transfer would constitute a violation unless it was made in the usual course of business, and this Court rejects such notion as none of the fact witnesses who testified at trial stated that such transfers of percentages of business interests were made in the ordinary course of Defendant's business interests and which, pursuant to his own counsel, constituted the majority of the marital assets. Accordingly, this transfer is Defendant's second known violation of the Automatic Orders.
[2] Defendant's False Representations To This Court
Throughout this action, including during trial, Defendant has directly and indirectly made false and evasive statements pertaining to material issues involved in this action, examples of which are set forth herein.
- False Statements Made Pertaining to the Ir. Pr. Q. S. Transfer
As referenced above, Defendant testified that he completed the Ir. Pr. Q. S. Transfer and a plain reading of the Ir. Pr. Employment Agreement confirms that, at the very least, a five percent interest in Q. S., Inc. (hereinafter "Q. S. Entity") was transferred to Ir. Pr. as section "3" pertaining to compensation reads as follows:
"(c) Stock Compensation: The employee shall receive 5% equity ownership in Q. S. Inc. with full voting rights in the same percentage. This ownership issuance shall be subject to an anti-dilution policy that prevents Employee's equity percentage from being reduced by reason of any future stock issuances. This ownership percentage will vest on a monthly basis, beginning April 1st, 2023 at the rate of 1/36 each month, for a total of 5% thru [*18]March 31, 2026. The 5% interest will, however, vest immediately and in full if any of the following events occur: (i) a merger or consolidation of the Companies in which its voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or (ii) a sale of substantially all of the assets of the Companies or a liquidation or dissolution of the Companies; or (iii) the termination of this Agreement, other than for cause under Paragraph '2(c)' hereof."
Despite the Ir. Pr. Employment Agreement being dated March 12, 2023, providing for vesting of this interest to begin on April 1, 2023, several months later on November 3, 2023, Defendant's counsel filed an affirmation with this Court asserting "T. S. and Q. S. are property of T. S. G."[FN142] asserting that, "All factual information set forth herein is made upon information and belief, the source of such information and belief being conversations with the Defendant and review of the attached Exhibits."[FN143]
While it is entirely arguable to assert that no material misrepresentations were made, in that the Ir. Pr. Q. S. Transfer referenced a transfer of interest in the Q. S. Entity and the subject affirmation referenced the Q. S. software, this Court does not agree to that interpretation of the statements made to this Court. To the contrary, this Court finds that in the context of the greater testimony of Defendant, it was clearly his intent that the Ir. Pr. Q. S. Transfer pertain to both the Q. S. Entity and the Q. S. software. Accordingly, as Defendant's counsel indicates that the statements made within her affirmation were based upon discussions with Defendant and review of the submission with Defendant, this Court finds that the statement made in the subject affirmation was materially false as it represented to this Court the position that T. S. G. was the sole owner of the Q. S. software when Defendant was aware that an interest in same had been transferred to Ir. Pr. months before.
- Evasive Statements Made Pertaining to Bank Accounts of Q. S. Entity
Despite being the chief executive officer and President of the Q. S. Entity, one of only two entities which this Court is aware Defendant had an ownership interest in at the time of his testimony made to this Court, Defendant testified that he was unaware of the existence of any bank accounts for the Q. S. Entity, later confirming their existence:
"Q. With regard to Ir. Pr. — withdrawn. Now, today, you testified that Q. S. was never a company, correct?
A. No.
Q. Q. S. is a company, isn't it?
A. Yes.
Q. And, in fact, Q. S. became a company, right, at some point, correct?
A. That is correct.
Q. You testified that Q. S. did not have any bank accounts, do you recall that?
A. I believe I said, I don't believe it. does.
Q. Well, you — aren't you the CEO of Q. S.?
A. Yes.
Q. You are the president, in fact, of Q. S., right?
A. Yes.
Q. You would know if there were bank accounts, right?
A. I — if we do have them, I would approved them, yes.
Q. In fact, you would have signed something with them?
A. Certainly.
Q. Do you recall- signing something, now that I am reminding you about it?
A. I do not recall it. I don't recall it.
MS. ZEIDERMAN: There is a certification, second page in for the J.P. Morgan Chase, these are updated records I believe. It is certification.
(Whereupon, Plaintiff's Exhibit 312 was marked for identification.)
MS. ZEIDERMAN: I would like to move it into evidence.
MS. KAPLAN: No objection.
The Court: Please mark that into evidence.
(Whereupon, Plaintiff's Exhibit 312 was marked in evidence.)
Q. Now, we agree, don't we, that Q. S. is a company, correct?
A. Yes.
Q. And Q. S. was incorporated in Delaware, correct?
A. Yes.
Q. And you are the president of Q. S., correct?
A. Yes.
Q. Today you testified that there were no bank accounts for Q. S., can we agree that was not accurate?
A. Can you repeat that?
Q. Today you testified, I think you said I don't think there are any bank accounts with Q. S. but now we know there are?
A. No.
Q. Go to NYSCEF page 94, please.
A. That's what you just gave me.
Q. I am sorry, Bates stamp 94.
A. (Witness complies.)
Q. Do you see that, sir.
A. I can see it.
Q. What is that?
A. It looks like there is a bank account for Q. S. that I signed in August 22, 2023.
Q. You signed for that bank account, right?
A. Yes.
Q. There is a checking and a savings account, right, for Q. S.?
A. I lost the page, but I will take your word for it.
Q. There is a taxpayer ID number?
A. There should be, yes."[FN144]
- Evasive Statements Regarding Plaintiff's Assistance In Obtaining His First Employment in Staffing Industry
When presented with questions pertaining to Plaintiff's assistance in Defendant finding his first employment in the staffing industry, during his deposition and then at trial, Defendant's responses were evasive in an apparent effort to deflect from the significant impact that Plaintiff's efforts had on his entry into his current field of employment:
"Q. And BW was a staffing company, correct?
A. They did offer three conclusions, one of which was staffing.
Q. And this was your very first time that you got to work in staffing, correct?
A. That is correct.
Q. And D. P. actually sent your resume to BW, do you recall that?
A. Yes, I do.
Q. You remember that she did that, right?
A. Yeah, we had kind of just started dating and I mentioned that I wasn't super happy at selling copiers, I did not see a long future it, I wanted to get into a change. She interviewed at BW, they asked her if she knew anyone that was in sales, and she didn't tell me right away because we had just started dating, she didn't want to overstep, and then eventually she told me, and it worked out. I got that job at BW.
Q. Do you remember me asking you basically the same question about the resume, during your deposition?
A. What was the question that you asked me?
Q. Well, I asked you specifically (Reading:) She didn't send the resume in the first instance to BW for you? That was my question. Do you remember me asking you that?
A. I don't recall you asking me that but, again, if you are saying you did, I am not going to dispute it.
Q. Page 74 of the EBT transcript deposition May 8, 2023. "Do you remember at the time instead of saying she did send it, you said — ''ANSWER: She might have. I don't remember that. I don't remember that. It's possible." Do you recall that?
A. Yes, I agree with that, when I say sending the resume, she may have said my name, she might have messaged me LinkedIn. She might have given my phone number. And have given the resume. I don't remember exactly what it was, but she certainly introduced my candidacy to BW for the job through K. B., [Redacted]. She was the recruiter for BW at the time.
Q. But, sir, a few minutes ago I specifically asked you if she sent your resume to BW and you specifically said yes. Do you recall that? Yes or no?
A. Yes.
Q. You understood that you were under oath when you testified now, correct?
A. Yes.
Q. And you understood that you were under oath when you testified in your deposition, [*19]correct?
A. Well, since I am in staffing, saying sending your resume is equivalent to sending your application, so, I could see why it could be heard as differently. So I will not disagree with the selective words that I chose, but I meant the same thing, certainly."[FN145]
B. Equitable Distribution, Separate Property Claims & Allocation of Debts.
The Appellate Division, Second Department has noted the manner in which a trial court is to make a determination as to equitable distribution in the context of a matrimonial action:
"The Equitable Distribution Law mandates that, whenever a marriage is terminated, absent an agreement of the parties, the court must determine the rights of the parties in their separate and marital property and provide for the disposition of the property in the final judgment (Domestic Relations Law § 236[B][5][a]).
* * *
The court is obligated to render a decision in which it sets forth the factors it considered and the reasons for its decision, a requirement that cannot be waived. In the absence of express findings of fact and of a detailed discussion of the enumerated factors, meaningful appellate review is precluded and a remittal for further fact finding may be required. Facts must be sufficiently developed at trial to enable a reasoned determination of the issues of equitable distribution and, if not, a new trial may be ordered." (Kaufman v. Kaufman, 189 AD3d 31, 52 [2d Dept 2020] [internal citations omitted]).
DRL § 236[B][5] notes, in part, that:
"b. Separate property shall remain such.
c. Marital property shall be distributed equitably between the parties, considering the circumstances of the case and of the respective parties.
d. In determining an equitable disposition of property under paragraph c, the court shall consider:
(1) the income and property of each party at the time of marriage, and at the time of the commencement of the action;
(2) the duration of the marriage and the age and health of both parties;
(3) the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
(4) the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
(5) the loss of health insurance benefits upon dissolution of the marriage;
(6) any award of maintenance under subdivision six of this part;
(7) any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party. The court shall not consider as marital property subject to distribution the value of a spouse's enhanced earning capacity arising from a license, degree, celebrity goodwill, or career [*20]enhancement. However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;
(8) the liquid or non-liquid character of all marital property;
(9) the probable future financial circumstances of each party;
(10) the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;
(11) the tax consequences to each party;
(12) the wasteful dissipation of assets by either spouse;
(13) any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
(14) whether either party has committed an act or acts of domestic violence, as described in subdivision one of section four hundred fifty-nine-a of the social services law, against the other party and the nature, extent, duration and impact of such act or acts;
(15) in awarding the possession of a companion animal, the court shall consider the best interest of such animal. "Companion animal", as used in this subparagraph, shall have the same meaning as in subdivision five of section three hundred fifty of the agriculture and markets law; and
(16) any other factor which the court shall expressly find to be just and proper.
e. In any action in which the court shall determine that an equitable distribution is appropriate but would be impractical or burdensome or where the distribution of an interest in a business, corporation or profession would be contrary to law, the court in lieu of such equitable distribution shall make a distributive award in order to achieve equity between the parties. The court in its discretion, also may make a distributive award to supplement, facilitate or effectuate a distribution of marital property.
f. In addition to the disposition of property as set forth above, the court may make such order regarding the use and occupancy of the marital home and its household effects as provided in section two hundred thirty-four of this chapter, without regard to the form of ownership of such property.
g. In any decision made pursuant to this subdivision, the court shall set forth the factors it considered and the reasons for its decision and such may not be waived by either party or counsel."
Initially, the court must first determine what they are (Fields v Fields, 15 NY3d 158, 161 [2010] ["the initial determination of whether a particular asset is marital or separate property is a question of law, subject to plenary review on appeal"]). Marital property is defined to include, "all property acquired by either or both spouses during the marriage and before...the commencement of the matrimonial action, regardless of the form in which title is held" (DRL § 236[B][1][c]). Alternatively, "property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse" is defined as separate property (DRL § 236(B)[1](d)[1]). Importantly, relevant case law dictates that the term "marital property" is to be broadly construed, while "separate property" is to be narrowly construed (see Judson v. Judson, 255 AD2d 656 [3d Dept 1988] citing Price v. Price, 69 NY2d 8 [1986]; see also Farag v. Farag, 4 AD3d 502 [2d Dept 2004]).
"Hence, the law favors the inclusion of property within the marital estate . . . and, accordingly, the party seeking to establish that a particular item is indeed separate property bears the burden of proof" (see A.C. v. J.O., 40 Misc 3d 1236(A) [Sup. Ct. Kings Cnty 2013]; compare DRL § 236[B][1][c] and [d]; see Burns v. Burns, 84 NY2d 369 [1994]; Majauskas v. Majauskas, 61 NY2d 481 [1984]; LeRoy v. LeRoy, 274 AD2d 362 [1st Dept 2000], citing Seidman v. Seidman, 226 AD2d 1011 [3d Dept 1996]; Heine v. Heine, 176 AD2d 77 [1st Dept 1992]).
"Although in a marriage of long duration where both parties have made significant contributions to the marriage, a division of marital assets should be made as equal as possible, there is no requirement distribution of each item of marital property be made on an equal basis" (Chalif v. Chalif, 298 AD2d 348, 349 [2d Dept 2002]; Repetti v. Repetti, 147 AD3d 1094, 1098 [2d Dept 2017]). "Courts have discretion to value 'active assets' such as a professional practice on the commencement date [of the action], while 'passive assets' such as securities, which could change in value suddenly based on market fluctuations, may be valued at the date of trial but such formulation should be treated as helpful guideposts and not immutable rules" (Lieberman-Massoni v. Massoni, 215 AD3d 656 [2d Dept 2023]; Daniel v. Friedman, 22 AD3d 707, 708 [2d Dept 2005]; Grunfeld v. Grunfeld, 94 NY2d 696, 707 [2000]).
The Appellate Division, Second Department has noted:
" 'A trial court is vested with broad discretion in making an equitable distribution of marital property, and unless it can be shown that the court improvidently exercised that discretion, its determination should not be disturbed' (Aloi v. Simoni, 82 AD3d 683, 685, 918 N.Y.S.2d 506 [internal quotation marks omitted]). ' 'Equitable distribution is based on the premise that a marriage is, among other things, an economic partnership to which both parties contribute as spouse, parent, wage earner or homemaker' ' (Repetti v. Repetti, 147 AD3d 1094, 1098, 47 N.Y.S.3d 447, quoting K. v. B., 13 AD3d 12, 17, 784 N.Y.S.2d 76 *998 [internal quotation marks omitted]). ' 'The distribution of marital assets depends not only on the financial contribution of the parties but also on a wide range of nonremunerated services to the joint enterprise, such as homemaking, raising children and providing the emotional and moral support necessary to sustain the other spouse in coping with the vicissitudes of life outside the home' ' (Repetti v. Repetti, 147 AD3d at 1098, 47 N.Y.S.3d 447, quoting K. v. B., 13 AD3d at 17, 784 N.Y.S.2d 76 [internal quotation marks omitted])" (Novick v. Novick, 214 AD3d 995 [2d Dept 2023]).
When making a determination as to equitable distribution of marital property, a court must first determine the value of such property (Niles v. Niles, 126 AD2d 874 [3d Dept 1987]). The court has discretion in determining the date of valuation of an active business interest, which may include the date of the trial (Domino v. Domino, 115 AD3d 906 [2d Dept 2014]; Giallo-Uvino v. Uvino, 165 AD3d 894 [2d Dept 2018]; Cotton v. Roedelbronn, 170 AD3d 595 [1st Dept 2019]).
Where a spouse is seeking an interest in business interests of the other, the non-titled spouse must identify the business interests and provide proof of value of those business interests (Post v. Post, 68 AD3d 471 [2d Dept 2009]). As to the manner in which a trial court should value a marital business interest, the Appellate Division, Second Department has directed:
"The valuation of a marital asset must be founded in economic reality (see Douglas v. [*21]Douglas, 281 AD2d 709, 711, 722 N.Y.S.2d 87; Iwahara v. Iwahara, 226 AD2d 346, 348, 640 N.Y.S.2d 217). However, '[t]here is no uniform rule for fixing the value of a business for the purpose of equitable distribution. Valuation is an exercise properly within the fact-finding power of the trial court, guided by expert testimony. The determination of the factfinder as to the value of a business, if within the range of the testimony presented, will be accorded deference on appeal if it rests primarily on the credibility of expert witnesses and their valuation techniques' (Wasserman v. Wasserman, 66 AD3d 880, 882, 888 N.Y.S.2d 90 [citations omitted]; see Burns v. Burns, 84 NY2d 369, 375, 618 N.Y.S.2d 761, 643 N.E.2d 80; Greisman v. Greisman, 98 AD3d 1079, 1081, 951 N.Y.S.2d 219; Bricker v. Bricker, 69 AD3d 546, 547, 893 N.Y.S.2d 128; Nissen v. Nissen, 17 AD3d 819, 821, 793 N.Y.S.2d 248)" (Sheehan v. Sheehan, 161 AD3d 912 [2d Dept 2018]).
"The matter of valuation of a business for purposes of equitable distribution is not dependent upon its form; the same principles and techniques apply whether the practice is conducted as a partnership or as a professional corporation" (Stolowitz v. Stolowitz, 106 Misc 2d 853 [Sup. Ct. Nassau Cnty. 1980]). In valuing such property the Court must take into consideration encumbrances on such property (Gallagher v. Gallagher, 93 AD3d 1311 [4th Dept 2012]), as well as "inhibitions on the transfer of the corporate interest resulting from a limited market or contractual provisions" which may include lack of marketability (Nadasi v. Nadel-Nadasi, 153 AD3d 1346 [2d Dept 2017]; Cooper v. Cooper, 84 AD3d 854 [2d Dept 2011]; Davenport v. Davenport, 199 AD3d 116 [2d Dept 2021]), and may take into consideration an expert-recommended capitalization rate (Novick v. Novick, 214 AD3d 995 [2d Dept 2023]).
Speaking to the process of valuation of closely-held entities, the Appellate Division, Second Department noted:
"The process of evaluating a closely-held corporation where such corporation or a **328 part thereof is a marital asset, necessarily complicates the court's task even further. Due to the inherent nature of such corporations, in which *687 ownership is generally vested in a small group of stockholders and in which the shares are not usually salable, the value of the shares therein often cannot be measured by objective evidence of fair market value, i.e., 'the price for which the property would sell if there was a willing buyer who was under no compulsion to buy and a willing seller under no compulsion to sell' (see Keator v. State of New York, 23 NY2d 337, 339, 296 N.Y.S.2d 767, 244 N.E.2d 248). One commentator on the problem has noted that '[w]hen the property is not freely exchanged, as is the usual case with stock of closely held corporations, valuation not only demands considerable judgement [sic] but also invites dispute' (Foster, NY Equitable Distribution Divorce Law, p. 376). The methods of making an evaluation in these circumstances are not exact since neither book value, nor sales of stock when they occur, may prove to be reliable indicators of real worth (see Welch, Discovery and Valuation in a Divorce Division Involving a Closely-Held Business or Professional Practice, 7 Comm.Prop.J. 103, 114—115; Perocchi and Walsh, Putting A Value On: Closely Held Corporations, 2 ABA Fam.Advoc. 32, 33).
* * *
It is obvious, therefore, that the requirements of a meaningful evaluation mandate a fairly [*22]extensive audit of the financial affairs of the corporation and that a spouse's status as a majority or minority shareholder is irrelevant to that process" (Kaye v. Kaye, 102 AD2d 682 [2d Dept 1984]).
In Kaye, Id, the Second Department noted that, "One of the most widely accepted and comprehensive approaches to the valuation of closely held and professional corporations is that recommended by the Internal Revenue Service's Revenue Ruling 59—60," modified by Revenue Ruling 65-193,[FN146] which provides:
"It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the fair market value, should be considered. The following factors, although not all-inclusive are fundamental and require careful analysis in each case:
(a) The nature of the business and the history of the enterprise from its inception.
(b) The economic outlook in general and the condition and outlook of the specific industry in particular.
(c) The book value of the stock and the financial condition of the business.
(d) The earning capacity of the company.
(e) The dividend-paying capacity.
(f) Whether or not the enterprise has goodwill or other intangible value.
(g) Sales of the stock and the size of the block of stock to be valued.
(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter."[FN147]
In the context of a matrimonial action, both parties may present alternative methods of valuation to the Court but waives any valuation theories not presented at trial as the appellate court may not adopt such new valuation theories on appeal (Davis v. Davis, 128 AD2d 470 [1st Dept 1987]). When presented with competing experts, the Court may properly make credibility determinations between such experts and accept one expert opinion over another (Diaco v. Diaco, 278 AD2d 358 [2d Dept 2000]; Gaglio v. Molnar-Gaglio, 300 AD2d 934 [3d Dept 2002]; Hiatt v. Hiatt, 6 AD3d 1014 [3d Dept 2004]; Alexander v. Alexander, 116 AD3d 472 [1st Dept 2014]; Weidman v. Weidman, 162 AD3d 720 [2d Dept 2018]); and, it is insufficient for one party [*23]to assert that their expert has engaged in valuations of a type of business entity more than the other party's expert (Ritz v. Ritz, 166 AD2d 568 [2d Dept 1990]). The determination of the fact-finder as to the value of a business, if within the range of the testimony presented, will not be disturbed on appeal if it rests primarily on the credibility of expert witnesses and their valuation techniques (Ivani v. Ivani, 303 AD2d 639 [2d Dept 2003]). The court may also disregard an expert valuation, "[h]ere, the trial court did not improvidently exercise its discretion in finding the valuation of the plaintiff wife's expert too speculative and in making its own determination instead" (Tayer v. Tayer, 250 AD2d 757 [2d Dept 1998]). In the event the Court makes its own determination as to valuation, its rationale must be set forth (Keil v. Keil, 85 AD3d 1233 [3d Dept 2011]).
Following valuation of the business interest of a spouse, the court must make a determination as to an appropriate equitable distribution of that interest, which may include a distributive award. The appellate division has upheld a distributive award equal to a 20%-25% interest, upon a finding by the trial court of the non-titled spouse's lack of direct contributions to business and the indirect contributions that spouse has provided in their role as stay-at-home parent and homemaker (see, Rigas v. Rigas, 227 AD3d 1017 [2d Dept 2024]; see also, Wagner v. Dunetz, 299 AD2d 347 [2d Dept 2002]; Grande-Bastuck v. Bastuck, 249 AD2d 444 [2d Dept 1998]).
However, upon a finding that the contributions of the non-titled spouse warranted a higher percentage of the value of the other's business interests, awards of 40%-50% have been upheld (see, L'Esperance v. L'Esperance, 243 AD2d 446 [2d Dept 1997] ["The husband further contends that the court improperly awarded the wife 40% of the value of his interest in Century Elevator. Inasmuch as the parties were married for 19 years as of the date of commencement of the action, and given the wife's contributions as spouse, parent, temporary wage earner, and homemaker, the court's award was appropriate"]; see also, Wasserman v. Wasserman, 66 AD3d 880 [2d Dept 2009] ["Considering the circumstances of the case, the Supreme Court providently exercised its discretion in awarding the defendant 50% of the value of the plaintiff's businesses (see Domestic Relations Law § 236[B][5] [d][6], [13] ). The fact that the plaintiff may have made greater economic contributions to the marriage than the defendant does not necessarily mean that he was entitled to a greater percentage of the marital property (see Price v. Price, 69 NY2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684; Rose v. Rose, 18 AD3d 852, 795 N.Y.S.2d 472)]").
When making a distributive award, a trial court must take into consideration the nonliquid nature of assets, and amount of the award, and may require payment of the award by installment payments over designated period of time at a statutory interest rate of 9% (see, Spinner v. Spinner, 188 AD3d 748 [2d Dept 2020]; see also, Schussler v. Schussler, 109 AD2d 875 [2d Dept 1985]); Gold v. Gold, 276 AD2d 587 [2d Dept 2000]); Miklos v. Miklos, 9 AD3d 397 [2d Dept 2004]).
[1] T. S. G.
- Court Determination To Address T. S. G. and Intellectual Property Separately
For purposes of clarity, this Court has elected to make determinations as to equitable distribution of T. S. G. separate from any other intellectual property-related assets of the parties, including Q. S., T. S., the Q. S. Entity and Q. S. trademark (hereinafter collectively "Intellectual Property") which will be addressed individually herein. It is not in dispute that T. S. G. is a [*24]staffing company.[FN148]
- Requested Equitable Distribution As To T. S. G.
In Plaintiff's Post-Trial Submission, Plaintiff requests that this Court adopt a value of $5,992,000.00 for T. S. G.,[FN149] grant Plaintiff a distributive award of $2,396,800.00 representing 40% of the value sought to be adopted,[FN150] to be paid from Defendant's share in an escrow account of $200,292.27 with the remaining balance to be made in 60 monthly installment payments with a principal plus balance at a rate of 9% from the date of entry of this Decision, with Defendant's ability to prepay without penalty.[FN151]
In Defendant's Post-Trial Submission, Defendant requests that this Court adopt a value of $3,692,000.00 for T. S. G., grant Plaintiff a distributive award of $553,800.00 representing 15% of the value sought to be adopted,[FN152] to be paid by Defendant over the course of 10 years.[FN153]
- T. S. G. Valuation
At trial, this Court was presented with testimony of Mr. Raymond with respect to the valuation of the Defendant's interest in T. S. G. and Plaintiff's T. S. G. Valuation Report was admitted into evidence as Plaintiff's Exhibit 42.[FN154] This Court was further presented with the testimony of Mr. Rosen with respect to the parties' interest in T. S. G. and Defendant's Valuation Report was admitted into evidence as Defendant's Exhibit N5 (NNNNN).[FN155]
Based upon an assessment of credibility of the expert witnesses who testified at trial regarding the value of T. S. G., and their valuation techniques, this Court determined the testimony and valuation techniques of Mr. Raymond more credible than that of Mr. Rosen. Mr. Raymond and Plaintiff's T. S. G. Valuation Report provided a clear and persuasive presentation as to the valuation techniques employed, including in the introduction a description of the assignment, standard of value, valuation factors, sources of information utilized, a review of the history and background of the company, a financial analysis including results of operations, financial position and normalization adjustments, valuation approach including valuation concepts, approaches and methodology, and an ultimate conclusion of the value of the Defendant's interest in T. S. G. being $5,992,000.00.
Therefore, this Court determines the Defendant's interest in T. S. G. to be $5,992,000.00.
- T. S. G. Equitable Distribution & Distributive Award
This Court determines Plaintiff to be entitled to a distributive award arising from T. S. G. in the amount of $2,396,800.00, equating to 40% of $5,992,000.00 being the value of T. S. G.
In making a determination of the distributive award to be made to Plaintiff arising out of Defendant's interest in T. S. G., this Court has examined both the direct and indirect contributions made by Plaintiff, which this Court has found to be substantial, to be reviewed in turn herein.
[1] Contribution as Spouse and Primary Caregiver to Parties' Children
Initially, this Court determines that based upon the testimony provided at trial and evidence received, that during the course of the parties' marriage, including during the formation and growth of T. S. G., Plaintiff was the primary caregiver for the parties' Children who have special needs. Defendant testified that prior to J. P. attending preschool he was working twelve hours per day returning from 7:00 p.m.-8:00 p.m., with additional work on the weekends,[FN156] and when asked about how much time he spent working when the company began, responded: "[w]hen you are starting something from scratch, I mean, I am working, thinking about work almost all of the time."[FN157] Defendant later clarified that he was working approximately eighty hours per week.[FN158] This testimony was corroborated by D. R., who testified to the burden faced by Plaintiff in managing the parties' household in the absence of Defendant when T. S. G. was established, which caused him to hire a housekeeper on occasion:
"The only other thing was, from time to time, I would pay for a housekeeper. I wouldn't say that was for the children, but it was the children that made all of the mess. And, again, for the same reason. S. P. was starting a company, didn't have a lot of time to participate in household chores, which left a hundred percent of the burden on D. P. And I discussed that with my wife and we agreed that D. P. — that we wanted to give D. P. some help in that regard."[FN159]
Plaintiff testified that M. P. has an individualized education plan (hereinafter "IEP"); is [Redacted].[FN160] With respect to J. P., [Redacted].[FN161]
When asked to describe M. P., Plaintiff described her as a "challenging" and a "very intense child",[FN162] and provided the following testimony:
"And, you know, along with all of these great qualities that I mentioned, she—she can be unkind to her brother and she can be unkind to her peers. She is impulsive. She can be reactive. She can have meltdowns, fewer now now that she's on medication, but they still happen. And she is, you know, having issues with, you know, empathy and remorse and, you know, she's really struggling with that and struggling with her social group and being able to interact with peers in an appropriate way and it's causing her, in those situations, distress and the peer group distress. And she struggles with significant learning disabilities which make it hard for her to learn and make it very hard for her to express herself and her feelings. It's one of the major areas with —you know, has been targeted in therapy to be able to say I feel this way or I identify the feeling and to be able to express it verbally and to—and also to just process language that she's hearing also. So, that makes—it just kind of plays into not just her learning difficulties but her—her emotional and her behavioral state of mind, emotional state of mind."[FN163]
Plaintiff also provided a description of J. P. and the challenges he faces:
"J. P., he has his own challenges. He has an IEP. Individual education plan. He is in an integrated co-teaching classroom which means that some of the students have IEPs and others don't, and there's two teachers and so the kids that have the IEP have more one-on-one with the second teacher. He can cry easily. He can become dysregulated quickly. That has shown some improvement. He most recently, during a parent-teacher conference, there was a lot of things, a lot of growth that he's had, but I did find out, and I shared with S. P., that he's been —he's been breaking pencils in his desk and sucking and chewing on the pencils and sucking on his shirt. ***He continues to need support with speech and occupational therapy, and I think I mentioned earlier, he's —he's being observed and —-with Dr. Jacobson with a focus on looking at his attention and his fine motor skills. And, you know, he doesn't have a diagnosis of [Redacted] but it's something that we're monitoring with Dr. Jacobson."[FN164]
Defendant confirmed that he did not speak to the professionals working with the Children as Plaintiff would give him the details about the medical procedures, medical treatment, therapy and dental care.[FN165] Defendant testified that Plaintiff would gather information from a professional regarding options for the Children, present him with a proposal, and he would trust her to proceed with the proposal.[FN166] Plaintiff testified that without Defendant's assistance, she located a doctor to treat M. P.'s ear infections;[FN167] without Defendant's assistance she obtained a private [*25]speech therapist for J. P.;[FN168] and, with limited involvement of Defendant obtained an occupational therapist for J. P.[FN169]
While Plaintiff testified that prior to commencement Defendant never attended medical appointments of the Children,[FN170] Defendant testified that he was likely working when the Children had medical appointments prior to the date of commencement,[FN171] and later testified that Plaintiff would take the Children to their medical appointments.[FN172] Defendant's testimony further reflected a lack of knowledge about the medical care of the Children, in that he could not recall if J. P. received speech therapy prior to commencement,[FN173] if J. P. received any services prior to pre-school,[FN174] was unaware of his son's dentist and did not recall attending any dental appointments prior to commencement,[FN175] was unaware of the name of the Children's pediatrician,[FN176] could not recall any medical appointments he attended for his son prior to commencement,[FN177] could not recall if J. P. received services in pre-school for his fine motor skills,[FN178] could recall that his son received therapeutic services at home prior to pre-school, but could not recall the type of services or provider,[FN179] and confirmed that his son was hospitalized but was unable to recall for how many nights.[FN180]
Plaintiff was also the primary parent involved in the education of the Children, [*26]volunteering at the schools of the Children,[FN181] attending prayer events without Defendant,[FN182] and touring and registering J. P. for one school without significant involvement of Defendant.[FN183] At trial Defendant testified to Plaintiff's significant contribution to the management of the family household and as the primary caregiver for the Children confirming that she would take the Children to their extracurricular activities,[FN184] purchase clothing for the Children,[FN185] maintain the family vehicles,[FN186] maintain the family insurance policies,[FN187] and organize play dates for the Children.[FN188]
Defendant confirmed that Plaintiff provided additional assistance to him in the growth of T. S. G. through her efforts as his spouse. In addition to Plaintiff's efforts referenced herein, Plaintiff further testified that she accompanied him on a trip to Las Vegas with an individual who was then the hiring manager for a company which T. S. G. did business with at the time,[FN189] and attended company holiday parties.[FN190]
[2] Contribution as Founder
In evaluating Plaintiff's contribution as a founder of T. S. G., Defendant asserts that it was minimal, testifying:
"Q. When T. S. G. was formed, how many founders, on paper at least were there?
A. Four.
Q. And who were they or are they?
A. Myself, D. P., D. R., and M. H.
Q. What was D. P.'s role as a founder of T. S. G.
A. Her main role as being a founder was being the daughter of the CFO, and the spouse of the CEO.
Q. Why was she named a founder?
A. D. R. thought it was important to have her on there. He was saying, if I am going to do [*27]this, I want to make sure she has a stake in it as well.
Q. Did you have conversations with D. R. about that topic, that D. P. needed to have a stake into it too?
A. We did, and I didn't object to it. Because you know we were happily married. I don't think many people think they are going to be in two and a half year trial or delay of finalizing the marriage, so to me it will didn't matter if it was on my name or her name or whatever. Because we were going to be married forever. That was my assumption at the time.[FN191]
* * *
. . . when I said that pie chart about in D. P.'s contribution, she definitely did that, but there are hundreds of thousands of phone calls, that I made, D. R. and M. H. made, so if we are isolating like one or two phone calls, it is not point one percent of the percent of the impact that got T. S. G. to anywhere that it was. So, that's why I just want to clarify that."[FN192]However, upon review of the testimony and evidence offered at trial, Plaintiff's contribution as a founder was significant.
Plaintiff testified that she has a bachelor's degree in business management and a master's degree in social work,[FN193] having had employment in the fields of staffing and recruiting.[FN194] Plaintiff testified that she had assisted Defendant in obtaining his first job in the staffing industry as he wanted to leave his position as a copy machine salesman,[FN195] which Defendant confirmed at trial:
"Q. So the very first person who actually helped you on your road to T. S. G. in learning how to staff technology companies or technology people was D. P., right?
A. Yes. Absolutely. She got me — yes. I would agree with that while we were dating."[FN196]
As noted above, Defendant confirmed at trial that Plaintiff had assisted him in
obtaining his first position within the staffing industry, and that she had supported him in starting
T. S. G.[FN197]
With respect to the formation of T. S. G., D. R. testified that Plaintiff was involved in the process, "D. P. was certainly involved in discussions relating to is this business going to be [*28]successful."[FN198] Plaintiff testified that during the business formation process she reviewed multiple drafts of the business plan, offered her feedback and finally brought the final draft to her godfather, attorney R. H., for his input.[FN199]
Plaintiff testified that upon the formation of T. S. G. she was designated as the head of human resources, which assisted the company looking larger to potential clients and more reputable due to her education and experience.[FN200] This testimony was corroborated by Defendant who provided the following response to why Plaintiff was made an employee of T. S. G.:
"A. T. S. G. was founded by myself and D. R. and M. H. and when we were putting everything together, D. R. thought it made sense to have an employee for a few different reasons. One reason was it made us look bigger. I mean, it is funny because I have obviously been listening to the trial, been sitting here, even the verbiage is kind of funny to mean because if we were a four-person company, if we were a four-person company, and that would be our size. We would not say, we are adding D. P. to make us look bigger, we would say we are a four-person company. If we were a three-person company and in an effort to make us look bigger, we had D. P. as an employee on LinkedIn, and when we talk to people, we could say we had a larger team. Because when we are breaking into big clients like Sumitomo and Disney, they would rather know there is more people at the firm, give them more — puts them more at ease, and gives them more comfort in partnering with a really small firm. So that was one of the reasons.
* * *
Q. What was D. P.'s title, if she was given one, in 2017?
A. It was probably the head of HR or it was senior recruiter, one of these two, I don't want to say the wrong thing. One of those two."[FN201]
Defendant confirmed that the use of Plaintiff's name, reputation and likeness was not limited to providing her a title to make the company look larger, it extended to the use of her LinkedIn account.[FN202] M. H. testified that Plaintiff's LinkedIn profile was used for the benefit of T. S. G. as he used it as a "ghost recruiter."[FN203] Providing further explanation as to the use of Plaintiff's profile and the term "ghost recruiter", M. H. provided the following testimony:
"Q. Okay. With regard to D. P.'s LinkedIn credentials, you used those LinkedIn [*29]credentials to recruit, correct?
A. I used her LinkedIn, yes.
Q. To recruit, correct?
A. Yeah, I mean, I used her profile but, I mean, I could have — I could have made any profile, we used another one of M. Z. which was another ghost profile. It was a ghost profile. We could have used anyone.
Q. Did you mean M. P., sir?
A. Yes.
Q. So it was not M. Z., it was M. P. that you used the profile of, correct?
A. No, his profile we used was M. Z. That was the formal name.
Q. So, let's just go back.
A. Yes.
Q. You could have used anyone's, but you did use D. P.'s, yes or no?
A. Yes, we used D. P.'s profile.
Q. Thank you. You used D. P.'s T. S. G. e-mail address as well to recruit, correct?
A. Her e-mail was forwarded. I never used it for recruiting, it was just there because of the LinkedIn, in case someone e-mailed. I wasn't sending e-mails as her. It was just LinkedIn I was using."[FN204]
Defendant's testimony confirms that T. S. G. further benefited from Plaintiff's additional direct contribution, as Defendant testified that Plaintiff read employment contracts for T. S. G.,[FN205] contacted payroll companies for T. S. G.,[FN206] confirmed that she may have assisted with background checks for T. S. G.,[FN207] that she assisted with the T. S. G. website,[FN208] that she would review staffing articles he had drafted,[FN209] that she would deposit T. S. G. checks,[FN210] and that her e-mail address was used to register T. S. G. domain names.[FN211] M. H. confirmed that Plaintiff had registered the domain name for T. S. G.[FN212] Plaintiff testified to additional direct contributions to the company including assisting with a recruitment of a job candidate, assisting with a sexual [*30]harassment employment issue and review of vaccination policies.[FN213] D. R.'s testimony corroborated many of the efforts engaged in by Plaintiff to directly assist T. S. G.[FN214]
[3] Contribution Through Plaintiff's Father
Based on the testimony provided at trial, this Court finds that Plaintiff provided a very significant contribution to the formation and development of T. S. G. through her facilitating the involvement of her father, D. R. This Court further finds that without D. R.'s involvement, T. S. G. may not have ever been formed; and, even if formed, may not have achieved the growth it was able to accomplish with his involvement.
When asked if there would have been a T. S. G. without him, he responded no and testified:
"I don't believe T. S. G. could have started up without me. Even if they had the financial support, it is enormously difficult to start a company up from scratch, from nothing. And I think there were very few people that had the business background that I had, working in financial services, doing acquisitions, jumping into businesses that I didn't know and running them. I think that there were very few people that could put something like that together. From M. H.'s perspective, he became a recruiter from one firm into another firm and he had all of the infrastructure behind him. To a lesser extent, S. P. was a salesperson going from one firm to another firm. And that is not totally accurate because S. P. built the website and he did other important things. But really, building an accounting system, getting the insurance for a company like this, at $10,000,000, to allow T. S. G. to market Fortune 100 companies where they would accept a full indemnification from T. S. G. against any liability that may emerge because of T. S. G., I think there are very few people in the country that could have put together an insurance package like that. So I—you know, I am not trying to brag. I originally didn't expect to play such a large role, but it evolved into that and I was very pleased to do it."[FN215]
Initially, Defendant confirmed that prior to T. S. G. and the involvement of D. R. he had sought to develop a business plan for a staffing company during the period between 2016 and 2017 with K. S. but never moved forward,[FN216] and noted that he had never started a business from scratch before.[FN217] He then confirmed that D. R. would not have become involved in the formation and development of T. S. G. but for his being Plaintiff's father:
"Q. In 2017, when you were unhappy with your job at [redacted], you discussed that with [*31]D. P., right?
A. Definitely, yes.
Q. And you discussed the fact that you wanted to start your own company?
A. Yes.
Q. And it was D. P. who suggested that you speak with her father, D. R., right?
A. I am not sure whose idea it was to bring D. R. into it, but it would have been — we certainly would have talked about it, yeah.
Q. And D. R. had extensive experience in the business world, right?
A. Yes.
Q. And if D. R. wasn't D. P.'s father, he would not have been involved in T. S. G., right?
A. No way.
Q. No way, exactly?
A. No way.
Q. But for D. P., you would have had no D. R. at the company, correct?
A. That is for sure, correct.
Q. That was a huge contribution, wasn't it?
A. Indirectly, yes, that's a contribution, yes sure, absolutely.
Q. It is not just a contribution, D. R. helped you run your entire company, correct?
A. Most of it, yes, I would agree.
Q. Yes. It was, in fact, a probably the make it or break it contribution of your company at some point, correct?
A. I would not say that it was make or break for him. Again, we could have done it without him, but we certainly would not have had the success at the rate that we did if he wasn't there, no question.
Q. And he would not have been there but for D. P.?
A. That is true."[FN218]
Defendant testified that during his discussions with Plaintiff about forming T. S. G. that she had asked her father for assistance:
"So she gave me her full support. She was very supportive of me starting the company. And she knew that we had talked about, asked her father to help us out with doing the back of the house, the CFO stuff that he had done."[FN219]
Plaintiff's testimony corroborates this as she provided the following testimony about the inception of her father's involvement in T. S. G.:
"Q. And in terms of T. S. G., going back to T. S. G., when did it actually get formed?
A. It was some time in August of either August of 2017.
Q. Okay. After S. P. had the idea and he came to you, what then happened?
A. I told S. P. that if we were going to do this, we would need a really solid business plan, that was like the first thing that we would need. I remember that from an entrepreneurial class I took when I was getting my bachelors in management. And I said well, neither of us have really done this or run a business or have this experience, so, I said I think maybe we should talk to my dad.
Q. Okay. And then what happened?
A. I had a conversation with my dad and telling him about S. P.'s idea to do this, and asked if he would help.
Q. As a result of that conversation, what then happened?
A. My dad, you know, talked to S. P., talked to me and talked to us together and he started helping us."[FN220]
However, while Defendant described D. R.'s involvement as "helping" with the "CFO stuff" a closer review of the testimony from the parties and D. R. reflects that his contribution was instrumental with respect to almost every aspect of the development of the infrastructure of T. S. G. At trial, D. R. testified that he has a background in the financial services industry having spent many years working for what is now known as Citigroup, after which he worked as senior officer of finance for priceline.com, after which he worked for a large insurance broker as chief financial officer, and then started his own management consulting firm which he stopped in 2018 to assist the parties with their start up.[FN221]
He testified that T. S. G. was formed in 2017 and assisted in that process after being asked by Plaintiff.[FN222] When asked why he helped the parties he testified:
"I did it because of two things. The business needed capital, which I was going to provide and I wanted to oversee the capital. And during the time I got to know S. P. and work with S. P., I had a tremendous amount of confidence in his ability to build a business. I thought we worked very well together. And, frankly, I saw a much greater financial opportunity for my family in T. S. G. than I did with my consulting practice, which was doing well". [FN223]D. R. further testified that with respect to his reference to "family" he was referring to the parties.[FN224]
He testified that he worked with Defendant to prepare a business plan, with [*32]approximately 20 business plans evolving over time, addressing their shared vision which included the building of an infrastructure including setting up accounting systems, obtaining insurance, generating contracts for clients, and establishing a human resource system and manner of making payments to contractors and employees.[FN225] When the company was being established he testified that he did "everything in the back office including setting up an accounting system, secure a payroll system, obtained a federal tax identification number, qualified the company to hire employees in other states, obtained insurance, opened bank accounts, and consulted with Plaintiff."[FN226]
During his testimony, D. R. testified that when T. S. G. was founded there were four founders including Plaintiff, Defendant, M. H. and himself,[FN227] describing the allocation of responsibilities between he, M. H. and Defendant as follows:
"M. H. is a colleague and friend of S. P. They worked together for many years. When D. P., S. P. and I were thinking about starting T. S. G., I was covering the business end. S. P. was covering what I call sales, which is going to a client to get a requisition to fill with a person. And the business needed someone who was a matchmaker, who could find the individual out there that could fill the role. And M. H. was someone that S. P. wanted to bring into the company. He wanted to bring M. H. into the company as a founder."[FN228]Defendant's testimony corroborated this dynamic and in particular that his role was focused primarily on sales, describing T. S. G. as having a "split deck system" meaning that he does the sales, obtaining requirements from the clients regarding staffing needs, while M. H. then works as the recruiter to identify the candidates to fill the requirement,[FN229] and then D. R. was responsible for all of the back-office work including payroll, establishing a 401(k) plan, and other financial duties.[FN230]
Defendant confirmed that while he has held the title of CEO since the formation of T. S. G., at least initially, his primary scope of responsibility was limited to sales:
"I am not sure I will do that anymore anyway, so I think, you know, my role when T. S. G. was founded, my title has always been CEO, but I was a salesperson. As the company has matured, I have grown into more of a CEO role where sales is just a part of what I do, it doesn't define what I do. So having an idea, software, great idea, right, I thought, we tried it. Changing the website, I don't know if you have seen the website. I thought it was [*33]pretty cool. We did this comic book theme idea that I had. We tried lots of things that work and did not work. I feel like my role and maybe this divorce action forced my hand to be more of a CEO than a salesperson."[FN231]
Defendant confirmed that in his role as CEO his practice is to delegate as he acknowledged limited knowledge in finance and relies upon his staff:
"As I testified to yesterday, the way that my management style is, I trust my team to do the things that they need to do that's in the best interest. And I am not an expert in insurance or finance and to me, Ir. Pr. is, so he handles that."[FN232]However, Defendant's own testimony addressing why Ir. Pr. was hired confirms that beyond mere delegation of responsibilities to his staff and specifically the chief financial officer, he would be unable to operate T. S. G. without such assistance:
"And then secondly, I guess, naively at the time, I felt, what happens after the divorce D. R. doesn't want to do with me with any more. If he all of a sudden quit, we would go out of business for sure. Because no one knew how to do what he did. His job was very valuable, it is that role for T. S. G. You can see by these spreadsheets."[FN233]
A closer examination as to the role D. R. played in the formation and growth of T. S. G. reveals that beyond the duties customarily engaged in by an individual as CFO, he became personally involved in the finances of the company as a lender providing a loan of $875,000.00 [FN234] when the company sought to expand but could not obtain the funds from an institutional lender.[FN235] Following T. S. G.'s further growth, D. R. utilized his own relationship with a lender to secure institutional financing for the company:
"Through a personal connection, I reached out to a firm that had a very good representation for funding staffing companies and my friend was close with that organization. He introduced me to that organization. I then spent probably two months with the head credit officer of that organization through their underwriting process of the company and we ultimately were able to get a million dollar line of credit from [redacted]."[FN236]
D. R. utilized other personal connections for the benefit of T. S. G. including his personal accountant who Defendant testified became the company accountant.[FN237] Defendant further testified to D. R. providing an introduction to D. A. who assisted in his development of the Intellectual Property also served as a mentor in developing Defendant's abilities as a CEO:
"Yeah, D. R. introduced me to D. A., D. R. and I had obviously have many conversations about differentiating T. S. G., and D. A. was and is a brilliant technologist. He introduced me to D. A., and we started talking about it and, and he knew of a developer. He said he knew a good one in India.[FN238]
* * *
It was some were for internal for us to figure out how we wanted to make the program. Again, I never worked with software before so this was my first time doing it. D. A. had a lot of experience in this software, I took his lead, he was mentoring, teaching me how to I — I guess, to be CEO of the software company. That was the goal. I am not technical."[FN239]
- T. S. G. Distributive Award Payment
Plaintiff's distributive award pertaining to T. S. G. of $2,396,800.00 shall be paid from Defendant's share in the Escrow Account of $200,292.27 with the remaining balance to be made in 96 monthly installment payments with a principal plus balance at a rate of 9% from the date of entry of this Decision, with Defendant's ability to prepay without penalty, in addition to the other determinations made herein with respect to Q. S., T. S. and Q. S. Trademark.
[2] Q. S. & T. S.
- Requested Equitable Distribution As To Q. S. & T. S.
In Plaintiff's Post-Trial Submission, Plaintiff's counsel asserts the following as to the requested equitable distribution of Q. S.:
"For Q. S., Plaintiff seeks a distributive award of $11,737,720.40. Defendant should pay that balance in 180 monthly installments, with principal plus interest at a rate of 9%. The payments for the Q. S. distributive award will be begin in the month following the last monthly payment for the T. S. G. distributive award, and interest will not accrue until the first payment is due. Defendant shall prepay without penalty.[FN240]
* * *
If this Court is not inclined to award Plaintiff a distributive award equal to 40% of the value of Q. S. per Kursch (i.e., $11,737,742,40), Plaintiff respectfully requests that the Court appoint a receiver to sell Q. S. and its Code, with the net proceeds after the sale to [*34]be divided equally between the parties. To the extent that there are upfront costs associated with the sale and/or receiver, Defendant should advance such costs and be reimbursed after the sale. Defendant to be directed to cooperate with the receiver and to supply all intellectual property for the software, including, without limitation, the source code."[FN241]
In Defendant's Post-Trial Submission, Defendant's counsel asserts the following as to the nature of both Q. S. and T. S., as well as her understanding that both were valued together:
"An obstacle in equitable distribution is the inflated and fantasy driven valuation of Q. S. by D. P.'s expert. Q. S. is a Saas-based software program developed and owned by T. S. G. Testimony evidenced that the platform was originally designed to assist hiring companies in the recruitment process for T. S. G.'s clients.
* * *
T. S. was a platform to be used internally for existing T. S. G. clients only, as a means to speed up the hiring process. Q. S., on the other hand, is a SaaS software, independent from T. S. G. entirely. Q. S. was designed to be "sold" to outside clients for their use as hiring mangers. The sole reason that Q. S. and T. S. were valued together was because S. P. stipulated that they were the same in order to not disclose the source code."[FN242]
As to the requested equitable distribution pertaining to Q. S., Defendant's counsel asserts:
"In the event this Court deems Q. S.' value to be $23,352,356, S. P. proposes relinquishing his ownership rights to Q. S., transferring same to D. P. and in return he will receive 15% of the value of Q. S. in the form of a cash payment from D. P. Alternatively, in the event this Court deems the value of Q. S. to be $608,000, S. P. proposes giving D. P. 15% of same. S. P. respectfully requests that this Court allow him to make any equitable distribution payment awarded to D. P. over the course of ten years."[FN243]
- Background, Development & Ownership of T. S. and Q. S.
Defendant provided the following testimony as to his recollection as to the manner within which T. S. was developed and the objective of the software:
"Well, T. S. was a platform that would help differentiate T. S. G. from other staffing firms in a crowded market that is staffing firms. It was set up to allow our team to get feedback quicker, which is a big variable when you are doing staffing against other firms, getting instant feedback. It was a —it would be where interviews would take place, and [*35]feedback was put in in realtime. A lot of —one of the reasons I thought of it was because right now to get feedback after an interview takes a lot of time. Managers don't have a lot of time to do interviews, let alone want to talk about their salesperson from a staffing firm. So T. S. was to give instant feedback. It would be used primarily by the T. S. G.'s staff, the account manager on the account, and they would have access to all of the information and the details of the interview that would normally be put into an e-mail."[FN244]
He then described the process in which the development of Q. S. grew out of T. S. indicating that both had the same programmatic services, with T. S. developed for use solely within T. S. G., while Q. S. was to be sold to other users for their own internal use, being unable to provide any technical differences in the coding between the two:
"A. Well, we made a pivot to change our focus from the platform to be used by the T. S. G. employees, to help clients hire better, to a standalone product we called Q. S., where we would sell that as a separate service to our clients that would not have to use only T. S. G.'s candidates. That was like a really big deal because in order to use T. S., if there was a competitor, I worked at Mondo and Mitchell Martin. If they were working with Disney, they would not be able to use T. S. because they would be owned and run by the sales people and the recruiters from T. S. G. Another firm would never want to put their candidates in the system because we can call them, right, or they would fear we could do that. With Q. S., it is a standalone, it wasn't run by anyone internally, we would train the end user, the end client, like Disney, on how to use the platform. They could choose not to use T. S. G.'s candidates or use Mondo's candidate or Mitchell Martin's candidates. It is a completely different interface, setup, thought process than before.
Q. So from a development standpoint, if you know, what's the difference between T. S. and Q. S.?
A. I mean, I don't know the technical differences for the coding but from being a user and helping build it strategically, the interface has to be something that is so easy to use, like if you remember we had old cell phones and we would have to like push all the buttons to figure out where to go. Then the iPhone teaches you how to do it, you don't need someone to teach you how to use your iPhone, you can give someone that never use it before and they can figure it out. So T. S. would need someone to teach them how to do it. The idea behind Q. S. is be able to go to the website and you can figure it out on your own."[FN245]
When asked about the development of the T. S. and Q. S. software, Plaintiff's testimony was similar to that of Defendant as she also testified that both programs would provide a similar service to the user, be it solely for T. S. G. through T. S. or by a paying user through Q. S.:
"Sure, T. S. and Q. S. are really the same thing they just have a different end user. So, T. [*36]S. was an idea that my dad and D. A. his long time friend D. A. came up with. They would meet regularly during the week at a local restaurant and talk about business. ***D. A. was not being compensated for it. It was an idea, it was a group decision making software. It was to help make hiring faster, more efficient, more streamlined. T. S. was initially it was something that they would give to current clients or prospective clients for free. And it was like an incentive or bonus from working with T. S. G., it would hopefully make people want to work with T. S. G. because they were getting this nice thing for free or for existing clients, to want to do more business with us. That idea then Q. S. was basically the same thing but it was going to be like for a profit. It was going to be something that companies would purchase, either on a subscription basis, you know, a monthly fee. And so, one of the things that Q. S. did is that it had like a grading system for interviewing and so that each interviewer had a different area that they would concentrate on and you could, you know, basically like scale the interviews. And then it was like a central place where the whole hiring team could look at and then hopefully make, you know, the decision, the hiring decision more efficient."[FN246]
D. R.'s testimony echoed that of both Plaintiff and Defendant with respect to the development of T. S. and Q. S.:
"It was in the software business and the idea behind T. S. or Q. S. — it is really one in the same — was to have a piece of software that a company could use that would speed up the hiring process and allow hiring managers to be more effective at bringing on their new hires. And this was particularly important for the technology space because many of the client employees that were responsible for interviewing were actually line workers. So it was very expensive for a company to spend a lot of time through the interviewing process. T. S. was a way in which all of the information about a position and a candidate and an interview could be put in one place. There would be a hiring team where a — the hiring manager, the person responsible for bringing the person on, would appoint several people in their department or in their company to interview the candidates. And the candidates would provide feedback. And the hiring manager would be able to look at this software on an ongoing basis, see the feedback that he was getting and hopefully short circuit the hiring cycle by moving quicker or slower on someone if the hiring manager didn't want a particular person or someone who was just fantastic. And it also gave metrics to the hiring manager so that candidates could be compared with a numerical score and there were various algorithms that were deployed to come up with a score."[FN247]
When asked to differentiate T. S. from Q. S., D. R. provided the following response, that their difference largely was as to who the intended end user would be:
"T. S. was designed to be used by existing clients of T. S. G. Following COVID, D. A. [*37]and I realized that what we had developed was really a group decision-making tool that could be used by any company anywhere. And with COVID, more people were working remotely and there was more of a need to coordinate a consensus and a team structuring with a computer platform. So pretty early on, we started referring to T. S. as T. S. or Q. S. where Q. S. was the moniker for going to a client that was not a client of T. S. G. and using that software in many different ways, but both for the growth of T. S. G., as well as in fields totally outside of T. S. G.[FN248]
* * *
The logic between the two were the same. For Q. S., there was a special module that provided for payment processing because the idea was to potentially charge a non-T. S. G. client. By, other than that, the difference was really who would be operating the software and where the software would reside. In the case of T. S. G., it would—in the case of T. S., it would possibly be in T. S. G.'s computers and in the case of Q. S., it would be out in the cloud as an SAS application." [FN249]He then noted that SAS stood for software as service, "whenever you download something, an app, and use it, that would be an SAS-type application."[FN250]
Plaintiff's above testimony pertaining to the significant involvement of D. A. in the development of the software, was corroborated by Defendant as he provided the following testimony when asked who wrote the code for T. S. and Q. S.:
"Q. You might have answered it, who wrote the code for T. S.?
A. Write the code? Well, it wasn't me. It was a — D. A. was like the — it is not his title. But he was the project manager, in addition to his other duties of the software. And Raj and I think — he had some people on his team that would write the code. I am not sure if D. A. writes code or not. But he is in charge of the code's creation, which was typed out by Raj, and his team in India.
Q. Who paid Raj again for T. S.?
A. T. S. G. would have done that, Yup.
Q. Was Raj also the developer on Q. S.?
A. Yes.
Q. Who paid Raj in India for Q. S.?
A. T. S. G."[FN251]
When asked about the employment of D. A. at T. S. G., D. R. testified that D. A. was [*38]hired by T. S. G. following the alpha testing of the T. S. software due, in part, to a concern that a "co-developer" of the software was not connected to T. S. G.:
"Well, there were really two things. Probably the most important thing is that D. A. was not an employee of T. S. G. and on Labor Day —or by Labor Day of 2021, I was convinced that T. S. G. would be a real success. It had a lot of potential. As CFO, I was very nervous that the co-developer had no ties to T. S. G. And it was really D. A.'s contacts that did the programming of the software. And I was very nervous from a risk-management perspective because T. S. G.'s insurance policies would not cover D. A. He was just a guy that I knew. And we had finished doing the testing of the software, what was called the alpha testing of the software. And the alpha testing of the software means you prove to yourself that the software works. And we were ready to embark on what's called the beta testing of the software, which means you give it to your clients and see what clients think. And T. S. G. didn't have any insurance to cover a software company. They had what was called a package deal for staffing companies. So cyber risk and fraud was a real big thing at the time and I was very, very uncomfortable. Notwithstanding the fact that we had a $10,000,000 cyber insurance policy, that if D. A. did something wrong and the software did some damage to a client, that we would get sued and that would create a huge, huge risk for the company. So I made the decision or the recommendation that we hire D. A."[FN252]
He then testified that the beta testing of T. S. occurred just after T. S. G. hired D. A. which permitted the testing to proceed:
"Q. I believe that you testified — and if I am wrong, please tell me — that T. S. was beta tested in early 2022?
A. Yes.
Q. Before but not too much before. The same year as the start of this divorce action, right?
A. The event that allowed the beta test to commence was the hiring of D. A., which was in January of 2022."[FN253]
D. R. then testified to a plan for the creation of an entity separate from T. S. G. for the software wherein he, D. A. and Defendant would receive ownership interest:
" . . . there was a plan in place, never executed, to spin off the software business into a separate entity and there was a plan in place for me to receive 20 percent of the equity on day one of that spinoff and that's what is addressed in my lawsuit.***But my baseline was that I was promised 20 percent for the work that I did on my own time with D. A. D. A. was also promised that 20 percent and I felt that by stopping the spinoff and terminating me, I was deprived of something that I had developed and earned for the [*39]company outside my role as CFO."[FN254]
He then provided the following testimony as to his belief as to the interests that he and D. A. would receive:
"Q. Where is that in writing that you believe where you were offered 20 percent?
A. There is no contract between S. P. and I, but there is communications with our insurance carriers as to how the spinoff would work. There is communications without accountants as to how the spinoff would work. S. P. and I spent a fair amount of money talking with a specialist on the spinoff and we talked about the equity, but a deal was never commenced. We hired an attorney to do the spinoff and there was communications to the attorney, certainly verbally—I don't know if it was in writing—about how the T. S. / Q. S. equity plan would work and those documents were supposed to be drafted. They never were, because, following commencement, S. P. said to stop all work on this.
Q. Okay. So there is no writing or contract that D. A. or that you had, right, no equity contract?
A. I can't speak for D. A.
Q. As the CFO as of the date of commencement—and if you don't know, that's fine—there was no written-form contact for either you or D. A. for Q. S. spinoff as you call it?
A. I really can't speak for what S. P. and D. A. agreed to. I can only speak for me and from my perspective, what I knew and what I was working on. There was a lot of detail established on how it would work. There was an estimate on how much it would cost to put all of the contracts together. But to the best of my knowledge, they were never written or executed."[FN255]
This testimony is corroborated by the creation of the Q. S. Entity which, upon review of all testimony and evidence presented to this Court at trial, appears to have been the entity for which Q. S. would be marketed, and even if in name only, was used to market the software. D. R. testified that following his termination from T. S. G. following the commencement of this action he is in litigation with Defendant and T. S. G.,[FN256] which Defendant confirmed advising that the relief sought by D. R. in that litigation included a percentage of Q. S.[FN257] The complaint which was verified by D. R. and filed in that separate litigation was marked as Defendant's Exhibit XX and moved into evidence on consent (hereinafter "D. R. Complaint").[FN258]
The D. R. Complaint asserts D. R.'s position with respect to sought after relief pertaining [*40]to Q. S., "[p]laintiff also seeks to recover remuneration for his co-creation and development of valuable intellectual property ("IP") and innovative processes, including game-changing software, which was misappropriated by Defendants in conjunction with their wrongful termination of Plaintiff,"[FN259] and includes as a prayer for relief that the court declare the parties' rights, interests and obligations in and to the Software.[FN260] D. R. again asserts he and D. A. were co-developers of Q. S. with understanding they would receive a share of the equity in same:
"In addition, Plaintiff was a co-creator and developer, with D. A. ("[redacted]") and S. P., of unique and valuable proprietary IP encompassing group decision making software and processes, known alternatively as T. S. or Q. S. (the "Software"), designed to speed up and enhance the hiring process for client and/or third-party organizations. The Software is novel and a game-changer in the marketplace, both with respect to the hiring process specifically, and group decision-making in general, with the potential to earn millions of dollars through licensing the Software as a software-as-a-service ("SaaS") application, and/or in a spin-off. Shortly before D. P.'s commencement of the divorce proceeding, initial steps were taken to develop a marketing plan for the Software and spin it off into a separate LLC for sale to an outside buyer, with the understanding that Plaintiff would receive a share of the equity and profits generated by the Software.
* * *
Following Plaintiff's termination, S. P. and T. S. G. have also misappropriated the Software and refused to compensate Plaintiff for it, resulting in Plaintiff being deprived of potentially millions of dollars from its future income-generating potential and/or sale. S. P.'s and T. S. G.'s actions towards Plaintiff in breaching the Employment Agreement and misappropriating the Software are blatantly unlawful and grossly inequitable. Plaintiff brings this action to correct those grievous wrongs."[FN261]
The D. R. Complaint further asserts that the role of D. R. in the development of Q. S. was separate from his position with T. S. G., with he and D. A. conceiving the concept, and later pitching it to Defendant:
"In addition to his duties as CFO of T. S. G., Plaintiff was a co-creator, along with S. P. and D. A., of the Software, a group decision-making application directed at speeding up and enhancing the hiring process for organizations.*** The name T. S. was used to refer to the Software's application as a marketing tool and differentiator from the competition, to be made available to T. S. G. clients at no cost. The name Q. S. was used to refer to the Software as a "software as a service" (SaaS) to be made available to third parties for a fee, and initially marketed without any reference to "T. S. G." or the Company.*** Plaintiff and his longtime friend, D. A., conceived the concept for the Software beginning [*41]in 2018. D. A. and Plaintiff worked collaboratively to develop the concept for the Software, brainstorming and building upon and enhancing each other's ideas. In approximately 2019, Plaintiff pitched the idea for the Software to S. P. S. P. thought it was a great idea with significant potential and agreed that Plaintiff and D. A. should continue to push it forward. Over a period of several years, D. A., Plaintiff and S. P. continued to invest their time in the design of the application."[FN262]
The D. R. Complaint then sets forth the timeline by which the development of the software moved forward, including steps taken to formalize the alleged plan pertaining to the ownership of the software including creation of a spin-off company:
"It was planned among Plaintiff, D. A., and S. P. that they would each hold an equity position in the spin-off of the Software. T. S. G.'s attorney was instructed to prepare documentation of ownership for the spin-off company and also to adjust T. S. G.'s existing Phantom Stock Plan to eliminate the inequities in the Plan for the Founders other than S. P. In January 2022, S. P. brought D. A. into the Company, employing him as T. S. G.'s Chief Information Officer, with D. A.'s primary role as overseeing the development of the Software with Plaintiff, S. P. and Company staff. In May 2022, the Software was completed and moved into Beta testing. In June 2022, D. A. completed a website for the Software. In approximately Q4 of 2022, Plaintiff and S. P. conferred with a lawyer and an accountant to discuss options for spinning off the Software into a separate legal entity. On October 3, 2022, Plaintiff received a quote from an attorney to develop documentation for a spin-off and transfer of the Software. Plaintiff expected that the spin-off would take place following completion of the documentation and transfer of IP from the Company to the new spin-off company. Plaintiff, D. A., and S. P. were all in agreement to move forward on the proposal, pending final sign-off from S. P."[FN263]
Finally, the D. R. Complaint asserts that all efforts to develop the pending spin-off company regarding the software halted due to the commencement of this action:
"Moreover, after it became known that D. P. would be seeking a divorce from S. P., S. P. dramatically deviated from the parties' plans and expectations with respect to the Software and its pending spin-off. On October 14, 2022-just two weeks after Plaintiff received a quote from an attorney to develop documentation for a spin-off and transfer of the Software - S. P. instructed Plaintiff to pause any further work on a potential spin-off and transfer. At the same time, S. P. also took steps to ensure that he-through T. S. G. would be the sole beneficiary of the monetization of the Software. On or about October 22, 2022, T. S. G. retained a patent attorney to register trademarks for the Software. On or about November 1, 2022, T. S. G. retained a patent attorney to patent the Software. On or about December 1, 2022, S. P., Plaintiff and D. A. met with the patent attorney to [*42]review the information to draft the patent. Thus, S. P. used the diminishment of Plaintiff's role to ensure that S. P. would be the sole beneficiary of the monetization of the Software.***Upon information and belief, shortly after Plaintiff's termination, S. P. effectuated the spin-off of Q. S. and began promoting Q. S. to the public, including by causing the public website and LinkedIn page of Q. S. to go live."[FN264]
D. R.'s testimony regarding the intention of obtaining a patent for the software was corroborated by Defendant who indicated that T. S. G. hired an intellectual property attorney.[FN265] However, Defendant further testified that he did not believe a patent was obtained for T. S.,[FN266] and did not believe there is a patent for Q. S.[FN267] At trial, there was no evidence submitted to this Court that any individual or entity obtained patents or copyrights pertaining to the ownership of T. S. and its source code or Q. S. and its source code. This Court was only presented with evidence of a trademark for the mark "[Redacted]" having been obtained with the owner being identified as T. S. G., which was entered into evidence on consent as Plaintiff's Exhibit 436.[FN268] Accordingly, despite Defendant's testimony that both T. S. and Q. S. are marital property,[FN269] and that T. S. G. is the owner of the software,[FN270] this Court must turn to the applicable law to evaluate ownership of the subject software and source code.
17 United States Code Annotated (hereinafter "U.S.C.A.") § 102, sets forth the subject matter of a copyright:
"(a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known o later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories: (1) Literary works; (2) musical works, including any accompanying words; (3) dramatic works, including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works. (b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such [*43]work."
It has been held that the source code and object code of a computer program falls within the subject matter of a copyright:
"It is well established that copyright protection can extend to both literal and non-literal elements of a computer program. The literal elements of a computer program are the source code and object code. See Johnson Controls, Inc. v. Phoenix Control Sys., Inc., 886 F.2d 1173, 1175 (9th Cir.1989). Courts have defined source code as 'the spelled-out program commands that humans can read.' Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 522, 533 (6th Cir.2004). Object code refers to 'the binary language comprised of zeros and ones through which the computer directly receives its instructions.' Altai, 982 F.2d at 698. Both source and object code 'are consistently held protected by a copyright on the program.' Johnson Controls, 886 F.2d at 1175; see also Altai, 982 F.2d at 702 ('It is now well settled that the literal elements of computer programs, i.e., their source and object codes, are the subject of copyright protection.'). Google nowhere disputes that premise" (see Oracle America, Inc. v. Google Inc., 750 F.3d 1339 [U.S. Ct. App. FedCir. 2014]; see also CSS, Inc., v. Herrington, 306 F.Supp.3d 857 [U.S.D.C., West Virginia 2018]).
Two different forms of copyright exist, the first of which is established at creation of the copyright material being common law copyright which is defined as "an author's proprietary interest in his creation before it has been published," (Roy Export Co. Establishment of Vaduz Liechtenstein, Black Inc. v. Columbia Broadcasting System Inc., 503 F.Supp. 1137 [S.D.NY 1980] citing Estate of Hemingway v. Random House, Inc., 23 NY2d 341 [1968] ["Common-law copyright is the term applied to an author's proprietary interest in his literary or artistic creations before they have been made generally available to the public. It enables the author to exercise control over the first publication of his work or to prevent publication entirely—hence, its other name, the 'right of first publication' "]). The second, being a statutory copyright obtained through application with the United States Copyright Office (17 U.S.C.A. § 409; 701).
With respect to a statutory copyright, a certificate of registration from the United States Register of Copyrights constitutes prima facia evidence of the valid ownership of a copyright (see 17 U.S.C.A. § 410(c) ["In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate. The evidentiary weight to be accorded the certificate of a registration made thereafter shall be within the discretion of the court"]).
17 U.S.C.A. § 201 addresses ownership of a common law copyright:
"(a) Initial Ownership.—Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.
(b) Works Made for Hire.—In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument [*44]signed by them, owns all of the rights comprised in the copyright.
(c) Contributions to Collective Works.—Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series."
Accordingly, upon review of who has ownership of a common law copyright, it is imperative to determine who the author or co-authors of the copyrighted material is/are and with respect to works made for hire, "[a]bsent an express contractual reservation of copyright in an artist, title to the copyright is presumed to be in the employer, the person at whose instance and expense the work was done," regardless of if the artist was an employee or independent contractor (see Samet & Wells, Inc. v. Shalom Toy Co., Inc., 429 F.Supp. 895 [U.S. District Ct. E.D.N.Y 1977]). "In analyzing whether a creation constitutes work made for hire, the Court examines three factors. As expressed in Section 228 of the Restatement, the key principle is that a servant's conduct is within the scope of employment "only if: (a) it is of the kind he is employed to perform; (b) it occurs substantially within the authorized time and space limits; [and] (c) it is actuated, at least in part, by a purpose to serve the master" (see Rouse v. Walter & Assocates, L.L.C., 513 F.Supp.2d 1041 [U.S.D.C. S.D. Iowa 2007] quoting Avtec Systems, Inc., v. Peiffer, 21 F.3d 568 [U.S. Court of Appeals, 4th Cir. 1994]).
In the event an author is not an employee of the entity asserting ownership of common law copyright during the time the copyright material was created, it has been held that the author is the owner of the copyright, even if they later are employed by that entity (see Martha Graham School and Dance Foundation, Inc. v. Martha Gram Center of Contemporary Dance, Inc., 380 F.3d 624 [U.S. Court of Appels, 2nd Cir. 2004]). An entity will not be provided copyright protection under "works for hire" doctrine for computer code where it assisted with the development process but agreed that the software designed by an author would remain under the author's ownership (see Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc., 609 F.Supp. 1307 [U.S.D.C. E.D. Pennsylvania 1985]). In Whelan Associates, Inc., the Court dismissed the claims of "joint work" by multiple authors creating copyright interest as it found that the designer was the true author, with the entity business owner suggestions provided during development to have been de mimimus in value in the development process:
"I have concluded and found from all of the evidence that it was Elaine Whelan and her own staff at Strohl Systems who alone designed the system. She alone was the author. It was her expertise and creativeness that designed the methods by which the raw information would be stored, held in memory, collated, assembled, updated, incorporated and added to the visual screens or included in print-outs, subject to recall. She designed the flow of the system, establishing communication and coordination among the various functions, and in general, made the system operate as a successful and useful business tool. Although there may have been others who could have designed an equally satisfactory system, given the information provided by Rand Jaslow, it was nevertheless Strohl Systems through Elaine Whelan alone that was the author of the source and object [*45]codes and the designer of the system.
Rand Jaslow did little more than explain the operations of the dental laboratory business and define the information he wanted to be able to obtain from the computer. The information and advice which Rand Jaslow provided was little more than one would expect from the operator of any business who seeks to have a computer system designed for him. Such general assistance and contributions to the fund of knowledge of the author did not make Rand Jaslow a creator of any original work, nor even the co-author. It is similar *1319 to an owner explaining to an architect the type and functions of a building the architect is to design for the owner. The architectural drawings are not co-authored by the owner, no matter how detailed the ideas and limitations expressed by the owner. See Aitken, Hazen, Hoffman, Miller, P.C. v. Empire Construction Co., 542 F.Supp. 252 (D.Neb.1982).
In 17 U.S.C. § 101 the definition of a "joint work" is a "work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary work." There is not a scintilla of evidence that the parties ever intended that Rand Jaslow's contributions, whatever they may have been, should merge into the final computer design and system. The only suggested merger into the whole might be the wording and the abbreviations contained on some of the visual screens. His contributions were not of sufficient significance to constitute him a co-author of the system. Compare Meltzer v. Zoller, 520 F.Supp. 847 (D.N.J.1981)."
Following confirmation of ownership, an assignment of copyright interest must be effectuated in writing for a statutory copyright, while an assignment of a common law copyright interest need not be in writing (see TCA Television Corp. v. McColum, 151 F. Supp.3d 419 [U.S.D.C., S.D.NY 2015]; see also Jerry Vogel Music Co. v. Warner Bros., Inc., 535 F.Supp. 172 [U.S.D.C. S.D.NY 1982]; see also Flo & Eddie, Inc. v. Sirius XM Radio Inc., 80 F.Supp.3d 535 [U.S.D.C. S.D.NY 2015]; TufAMerica, Inc. v. Codigo Music LLC, 162 F.Supp.3d [S.D.NY 2016]).
Here, T. S., Q. S. and the source code for each is clearly copyrightable material for which this Court has been presented with no proof of any statutory copyright having been obtained, nor any patent to the extent same would be applicable. To the contrary, the testimony of the Defendant, confirmed that he did not believe one was obtained. The Court now turns to the identity of the author to determine who would then have ownership of the subject material through common law copyright, and unfortunately cannot make such a determination herein, as this Court was not presented with sufficient information to do so.
While it is without question that both Defendant and Ir. Pr. testified that a percentage of Q. S. was transferred to Ir. Pr., to the extent that this transfer pertained to the Q. S. software and source code (and not merely the Q. S. Entity), that transfer occurred following the commencement of this action. However, D. R.'s testimony raises questions as to if both he and D. A. are co-authors, with or without S. P. and/or T. S. G., of T. S., Q. S. and the related source code. With respect to D. R., he credibly testified to working on development of this material for a significant period with D. A., only pitching it to Defendant after the concept had been conceived. D. R. further testified that his work on this development fell outside his scope of duties for T. S. G. in his employment. Finally, D. R.'s testimony, corroborated by Defendant, confirmed that D. A. was only employed by T. S. G. after the creation of both T. S. and Q. S., [*46]following Q. S. having been alpha tested, with beta testing occurring immediately following his commencing employment at T. S. G. Meaning, during the majority of the development of T. S. and Q. S., D. A. was not employed by T. S. G. and this Court has not been presented with any agreement signed by D. A. waiving his rights to the subject material.
Accordingly, both D. A. and D. R. may be determined to be a co-author, with or without S. P. and/or T. S. G., through joint work performed to develop T. S., Q. S. and the related source code. As the D. R. Complaint reflects, D. R. is asserting that very claim in his separate civil litigation commenced against both T. S. G. and Defendant. Notably, the significant contribution of D. A. in the development of Q. S. and likely also T. S., was noted by Plaintiff's expert who testified that, "[t]he most important part of that software is S. P. and his partner D. A. and the knowledge they had got translated into the software, knowing what to do and knowing what not to do, not how much he paid the developer,"[FN271] and noted in the Plaintiff Q. S. Valuation Report that:
"We note, however, that based on the materials provided to us that the T. S. and Q. S. software were developed by [redacted] under the management of D. A., indicating that the Q. S. software was not developed in a clean room. This indicates that even if the code between the two applications is completely different (which we expect is not true given that [redacted]'s invoices indicates that he likely drew from the T. S. software since many of his billing entries indicate work with an existing code set) that the "DNA," i.e., the intellectual property including, but not limited to the trade secrets and confidential information of the T. S. software is in the Q. S. software and at a minimum provided a 'headstart' in the development of the Q. S. software."[FN272]
Therefore, while this Court will not render a determination as to who the author(s) and/or owner(s) are of T. S., Q. S. and the source code, as it would be improper to do so in the context of this matrimonial action, as the ownership of the subject material is in question this Court will only address in its determination made herein, the manner in which the marital portion, if any, of the subject material will be determined.
- Valuation
With respect to valuation of Q. S., Plaintiff presented this Court with Plaintiff's T. S. G. Valuation Report prepared by Dr. Kursh finding the value of Q. S. to be $23,352,356.00 [FN273] and Defendant presented this Court with Defendant's Valuation Report prepared by Mr. Rosen finding the value of T. S. and Q. S. to be $608,000.00.[FN274] For the reasons set forth herein, this Court finds both to lack credibility and therefore, will not adopt the valuation of either.
Initially, neither report addresses the question of ownership of Q. S., with each retained [*47]expert apparently engaging in no due diligence to determine if the valuation of the parties' interest in the subject material was for the entire interest, or a fraction thereof. Mr. Rosen acknowledged no patent had been obtained for Q. S.[FN275] and provided the following testimony:
"Q. Now, at the time of the report, and during your valuation period, who owned Q. S.?
A. I believe it was a hundred percent owned by T. S. G. technically.
Q. So, what was the value that you ascribed to Q. S.?
A. $608,000. Although Q. S. at the time we did it, I don't believe was even incorporated at the time, that's why I said T. S. G. owned it. They were the one that outlaid the money for Q. S. It had never been incorporated to my knowledge."[FN276]
Similarly, Dr. Kursh's testimony reflected a lack of knowledge of the owners of Q. S. and T. S., while acknowledging that D. A. was a "major player":
"Q. Hold on one second before we go there. Who are the founders of Q. S.?
A. I understand S. P. is a founder and D. A. was a major player. This is based on their own website.
Q. What about D. R.?
A. I know of the name D. R. I don't know of his direct role or process. I might have seen his name in some documents. That's all I know of him as I sit here now.
Q. Do you know perhaps — and you probably might not — that he authored these projections that you're referencing with the 400,000, possible?
A. Sounds like that was his designated role.
Q. Okay. So you may or may not be aware of this again, but D. R. is D. P.'s father. Do you know that?
A. I think I vaguely recall that, and I — I assume based on your questions he was a business partner in some way with S. P. But I don't — again, that's beyond the scope of what I was asked to look at.
* * *
Q. Who is funding Q. S., if you know?
A. I assume the founders.
Q. The founders that you referenced before, D. A., but you weren't sure if he was a founder, right?
A. I have not seen the corporate founding documents...
* * *
Q. Okay. And in 2022, Q. S. wasn't a business, it wasn't a startup, it wasn't anything. Do [*48]you know that?
A. I don't know the dates on that as I sit here. I may have seen some documents. I do know that the software had been developed for similar functionality software, what I call the DNA of Q. S. software had been developed in a different company. That I know.
Q. What prior company are you referring to?
A. The software that was developed for the prior company, the software that was offered to users to try.
Q. So T. S., is that what you're talking?
A. T. S.
Q So T. S. was never a company, certainly not in October 2022. Do you know that?
A. I assume people working together. Perhaps it wasn't incorporated. I don't know the details of the filings.
* * *
Q. There was no business entity named Q. S. in 2022 right?
MS. ZEIDERMAN: Objection.
COURT: Overruled.
A. I don't know if there was. I guess I could look. I may have done this. There's a site called The Way Back Machine. I could look at the Q. S. website using Way Back and see when it was first posted. I could do that. I can let you know, but I didn't follow the dates, I don't recall that."[FN278]
Therefore, both valuation experts assumed that the parties were entitled to one hundred percent interest in the software and code, with equitable distribution to be made by this Court in that context of a division of the entire asset or distributive award corresponding with a percentage of the value of the entire asset. However, as this Court is unable to determine if the parties are entitled to all or a fractional interest in the common law copyright for T. S., Q. S. and the related source code, this Court is unable to utilize either valuation to determine what an equitable distributive award would be, in the event this Court sought to address the intellectual property in that manner. To the extent the parties were determined to have less than the entire ownership interest in the subject material, it is likely that a discount would have needed to be utilized (e.g., discount for lack of marketability, discount for lack of control, discount for lack of liquidity, etc.), or at least considered by the experts when preparing a valuation of the fractional interest (see DeMatteo v. DeMatteo Salvage Co., Inc., 90 AD3d 981 [2d Dept 2011]; see also Davenport v. Davenport, 199 AD3d 637 [2d Dept 2021]).
In addition, both Mr. Rosen and Dr. Kursh, while qualified as experts in their respective fields by this Court, were not credible in their testimony provided to this Court with respect to the valuations conducted regarding T. S. and Q. S. Tuning first to Mr. Rosen, he was qualified as an expert in the field of financial valuation, business valuation, forensic accounting and income [*49]determination and analysis.[FN279] However, he acknowledged that he is not a software expert,[FN280] that he cannot speak to the intricacies of the software industry,[FN281] and that he does not have the experience in the software industry that Dr. Kursh does.[FN282] Therefore, as Mr. Rosen has established his general knowledge as to valuations, being recognized by this Court as an expert in the parameters set forth above, and as he has acknowledged that he is not a specialist in software valuations, this lack of expertise will go to the weight of his opinion (see Texter v. Middlletown Dialysis Center, Inc., 22 AD3d 831 [2d Dept 2005]; see also Taines v. Gene Barry One Hour Photo Process, Inc., 123 Misc 2d 529 [Sup. Ct. NY Cnty 1983]).
With respect to Dr. Kursh, while he was recognized on consent as an expert in the valuation of companies within the software as a service industry,[FN283] this Court found his testimony to lack credibility for numerous reasons, including those listed herein. He testified that he provided Q. S. with a value of $23,352,256.00 [FN284] utilizing the venture capital valuation method,[FN285] which utilizes an examination of four factors including: (1) assessment of the market; (2) evaluation of the experience of the people involved in managing the company; (3) determination if the software can scale, user experience, and the basic architecture of how it is built; and, (4) financial analysis.[FN286] However, Dr. Kursh's testimony reflects that he made determinations pertaining to these factors in his valuation of Q. S. that were erroneous due to both lack of information, and due to unreasonable assumptions made.
With respect to an evaluation of the experience of the people involved in managing the company, Dr. Kursh confirms that the management team is really important.[FN287] However, his testimony reflects a confusion as to key aspects of this case, referring to Defendant working for "Q. S." and selling "T. S." despite the evidence presented at trial being that this software was never monetized:
"Q. Before we go back to that, I want to clarify. So the fact—what impact, if at all, does it have in the terms of jockeys and horses that S. P. is in the staffing business, tech staffing business? Does that have any impact in T. S. G.?
A. It has a huge impact.
Q. How?
A. The reason it has a huge impact is because—and I understand he's been instrumental in the sales of T. S. When you're out selling software to—in the talent acquisitions market, you understand—and I hate to use this term, old political term. You understand their pain. You understand what they're talking about. By contrast, a bunch of 25 year olds who are smart as whips with computer software, they'll look at these people in the industry and say, "What are they talking about? What are they talking about?" When you go in there as a salesperson and you listen and you understand and ask the right questions, they can do that, these horses. The horses know this industry. And it gets built into—-it's already built into their software, but it will continue to get built. The more they're out there, the more they learn, the better it gets. Again, I personally can attest to that. I've also done it in terms of looking at my valuation model.
Q. Okay. Just so I'm clear, when you're saying that he has the experience, the staffing agency T. S. G., he has the experience in T. S. G. correct?
A. Correct.
Q. In placing people?
A. Correct?
Q. Correct. Is that what your talking about in terms of the impact? I'm not talking about T. S. which is the software. But T. S. G., is that what you're talking about? I just want to clarify?
A. Correct. He has a — based on his own statements and the success of the companies, he has a deep understanding of the talent acquisition market.
Q. Okay.
A. By the way, my hat is off to him. It's a pretty competent company Q. S."[FN288]
Beyond this confusion, the further testimony of Dr. Kursh reflects that while he continues to assert both the importance of a strong management team in the valuation process, and that Defendant affords Q. S. strong management, Dr. Kursh knew very little about Defendant to credibly assess if he was a strong manager. Instead, his testimony confirms that Dr. Kursh never examined Defendant's financial statements, never reviewed Defendant's resume, was unaware of how long Defendant had been in business, and again appeared to be confused about the underlying facts as he referred to Defendant's company as "[redacted — misspelled]":
"Q. Do you know what S. P.'s background is, professional background that is?
A. All I know is that he was very very successful in the human resources management business in placing people in tech companies, for example, and other placement businesses.
Q. So how do you quantify very successful? How do you know — if you didn't talk to him or read his deposition transcripts, how do you know?
A. I guess I've never looked at his financial statements, but I assume that he has done [*50]well. I can't — again, I do not mean this, sir, as an insult. It's certainly not like some of those people, Mr. Musk or Zuckerberg or anything like that, but he's got a nice business and he had a really good idea too with Q. S.
Q. He has nice business in Q. S.?
A. No. He had — Q. S. I think, and again I've testified to, is a solid great company potentially and the — the work. But I understand he was in the human resource talent management space. I think what his words were on the [redacted - misspelled] site, he knows — he has the insights in the talent management industry, something like that.
Q. You mean T. S. G.?
A. T. S. G., yes.
Q. You haven't looked at his CV or resume?
A. I Googled him. I think I looked at your LinkedIn. I don't recall specifically.
Q. But you didn't specifically look at what his credentials are, you looked at — as you said, you Googled what was on the internet?
A. Well, I guess you might find this strange coming from somebody who is probably overeducated, but the reality is that there are a lot of really really successful people in the software tech industry who never even went to college.
Q. Bill Gates?
A. So I don't even look for that kind of stuff. And, in fact, if anything, a lot of the business school graduates are horrible with this stuff because they haven't really sweated to build a business as I understand S. P. has.
Q. You have no idea though how long T. S. G. has been in business or what — I'm not talking about his educational background because I agree with you, not everybody needs the education. It helps. But you don't know what his actual professional background is?
A. That's correct, I don't.
Q. And you don't know what T. S. G. — how long T. S. G. has been in business, you don't know that, right?
A. I don't. But what I do know is that this is a gentleman who has a great idea, this is a gentleman who built a business, and that takes a lot of blood, sweat, and tears. Not software. But it takes time. I understand he was the primary salesperson. It takes time, takes energy. It's hard. It's really hard, and he's already done it.
Q. I would agree it's really hard. I'm sure he would as well. But you made a comment that he was really successful, but you really don't know. You just know what you Googled of T. S. G. and what was put on their website. He's not going to say, "I'm really not that successful," on this website, he's going to pump himself up, right, as a founder?
A. I can't — I think generally people are going to be positive on their websites. And again, by "really successful," I think that doesn't — we're not talking about Google money or Facebook money. I'm not talking about that. I'm not talking about extremes. "Really successful" is building a business and you're adding value to your employees, you're adding value to your customers, you're enjoying what you're doing. There are a lot of measures of success, your family. All of that is important to people to me. I can't speak to what drives each individual.
Q. Family. I agree with everything you just said.
A. Okay.
Q. You don't know the finances of this family?
A. I do not."[FN289]
Dr. Kursh testified that as of the valuation date of Q. S. there was need to initiate a sales effort.[FN290] In response to inquiry as to how the management of Q. S. would obtain their first client, Dr. Kursh responded that it was his belief that the process was not "brain surgery" and at one point indicated that a recent graduate could be employed:
"Q. So what you need, right, in order to get that one vendor for the license or the enterprise partners—paraphrasing probably poorly — you need a really good salesperson?
A. I would say you need to have — I would say you need to have luck so you get that first enterprise early and you need to have persistence because you're never comfortable. And you push and you push, you'll eventually get it.
Q. And that could be done by an experienced salesperson, to push and push?
A. It depends on who the salesperson is. Many times it could be someone young who wants to prove his or herself. A lot of people out there. You'd be amazed.
Q. A lot of people who could pitch software like this to a vendor like ADP?
A. Well, talent management software, you can hire people from places like Oracle, Paypal, someone coming out of school, a lot of places. It's not brain surgery.
* * *
A. Subject to the responses I gave you to the questions you asked earlier. So my responses are not exactly how you have just defined them. Subject to my responses, I absolutely stand behind the work I did looking at the value of this company as of October 2022.
Q. Which requires my client or sales team or somebody, or a team I think you said, to actually go out and do the work to see that value?
MS. ZEIDERMAN: Objection.
THE COURT: Overruled.
A. As I testified, you will have to hire people. It's in the projected budgets. It's not simply revenue. It's your expenses. As I testified, it will be up and down. As I testified, yes, you need a team and you need to learn and you need to grow. It's part of growing a business. But this is not brain surgery. It is done every day by hundreds of companies if not thousands. You learn, you grow, and you succeed."[FN291]
When testifying as to the strength of the Q. S. management team, Dr. Kursh further asserts that it is a strong team based upon their record of success with T. S., which is contrary to all testimony and evidence received by this Court that T. S. was never monetized or was otherwise successful:
"But they have, the people at Q. S., again, those big four factors, large market, very talented management team, record of success, and an understanding of the business, so critical when you're selling in this kind of marketplace, the software and the risk factors.
* * *
This one is different because the founders of Q. S. did this already at T. S. They built a large part of the software at T. S.*** So this is a pretty talented team. So it's not just what they say. You can see it in their success with T. S. and then how that get's built, that knowledge, into the software."[FN292]
Dr. Kursh's testimony was contradictory as to the impact or lack thereof on his valuation of Q. S., after not having reviewed the Q. S. source code. While he confirmed that he requested it and did not receive it,[FN293] he testified that the lack of the code did not affect the valuation.[FN294] However, he also testified to the contrary, "if I had received the code, I would have been able to upload it and I would have been able to run potentially, if I received the supporting information how to run the application," and continued, "[s]o that would have given me a more thorough opportunity to see the application."[FN295] He then acknowledged that due to his lack of review of the code there could be some quality issues which could impact his valuation:
"Q. That's okay. I just want to be clear. Now, I know you didn't look at the code. You have no idea then if the quality of the code is good or not good?
A. I discussed the raw quality of the code based on my review, and certainly my assessment of quality is determined by the materials I received. There may be some quality issues in the software that I wouldn't know until I actually reviewed the code.
* * *
Q. Now, I just want to circle back to the code. If the code is bad and doesn't work, then the value — it would affect the value that you put in your report at 23 million plus?
A. If the code is so bad that it has to be substantially redone, then that would affect the third element in the model when we look at code. And by the way, you can do venture model capital without looking at code. The software company is particularly important. But, yes, you would have to pull that back and that would affect the projections if the code was absolutely horrendous and could not be fixed in a relatively short period of time."[FN296]
After confirming that he had not reviewed the Q. S. code and without providing any compelling basis, Dr. Kursh then asserted that while a "show stopper bug" can present [*51]significant issues, he didn't think that any existed as of the valuation date, and further testified that he doesn't know if the software program even works:
"Q. Now, circling back to Q. S. the software, you don't know if there were any bugs in it, right, as of October of 2022? We'll start with that.
A. I'll tell you there were bugs in it. There are bugs in every piece of software there is. It's mathematically impossible to have any enterprise software that doesn't have b[u]gs.
Q. If there are bugs, as you say, then that's an evolution of process, right? There needs to be some computer technology software person who is more savvy than to actually actively work on this product, on this software, to fix the bugs as it goes along?
A. I'll respond to that in two ways. First, you need to have developers. That's in my projections. And the second is, it depends on the bugs. In software we consider there to be sort of four stages of bugs. There are irritating bugs at one end and at the high end they have what we call show-stopper bugs. People often use a scale of four to one or one to four with that. If you have a show-stopper bug, you're gonna fix it real fast. I don't think they had that at that time in 2022. But I guarantee you, the more people who use your software, the more you're going to find Type 1 and Type 2, the easy bugs, misspellings, slow downs in some ways, and you have to fix it. It's all part of the refinement process.
* * *
Q. Okay. So you didn't do that. So you don't know if the software actually works?
A. I don't know the extent of — it's not a binary work. So I don't know the extent of what works within the software, what doesn't work and can be easily fixed, and what doesn't work and would require a tremendous amount of effort. I will say based on what I reviewed, given the present functionality of the software, I don't see any severe issues. But, again, functionality is changing. So we'll have to wait and see."[FN297]
For these reasons, this Court will not adopt either valuation provided by Mr. Rosen or Dr. Kursh.
- Equitable Distribution Award
As this Court has determined that any rights to T. S., Q. S. and the related source code for the software programs would be in the form of a common law copyright, this Court is limited to the manner within which it may address an equitable distribution of same by federal law, which permits the author-spouse to retain exclusive managerial control of the copyright, while recognizing that the economic benefits of the copyright are a marital asset which the former spouse is entitled to recover through applicable state law (see, Rodrigue v. Rodrigue, 218 F.3d 432 [U.S. Ct. of Appeals, 5th Cir. 2000] ["We acknowledge that it is for the state court that has jurisdiction over judicial partition and settlement of the Rodrigue community to determine both the proper method for establishing the value of Veronica's share of these net economic benefits and the proper procedure for delivery of that share to her, whether that be, for example, by (1) an accounting based on the present value of the appraised fair market value of the fully exploited copyrights and derivatives during their expected lifetimes, (2) periodic accountings and [*52]payments to Veronica as the copyrights and derivatives are exploited and proceeds are derived from them, or (3) some other altogether different procedure. It follows, of course, that Veronica may continue to pursue judicial partition of former community property in that forum"] see also Berry v. Berry, 127 Haw. 243, 277 [2012] ["With respect to the equitable division of ownership interests in a copyright, instead of creating the legal presumptions required to uphold Worth's approach, we adopt the approach taken by Rodrigue that any distribution by the court must result in the authoring-spouse retaining the exclusive rights set forth under 17 U.S.C. § 106, but that the non-authoring spouse is entitled to an economic interest in the copyrights"]; In Re Marriage of Perkel, 963 S.W.2d 445 (Mo. Ct. App. S.D. 1998] [awarding non-author spouse a distributive award for software created during parties marriage]).
In the State of New York, little case law exists pertaining to the equitable distribution of the economic benefit derived from copyrighted material, but in one such case the trial court provided the following analysis when faced with a similar situation where the court was provided with no proof of valuation:
"Concerning the husband's copyrights, during trial, defendant acknowledged he has copyrighted four scripts which are not listed in his Statement of Net Worth: "Home," "The Other Ones," "Brooklyn Psych, (a/k/a Once Upon a Time)" and "The Window." One of these, Brooklyn Psych, has been optioned to CBS, and is in "re-write." Another is for a screenplay that has already been filmed; the film has been sold. The others are both unproduced and unsold. In addition, "The Window" was made into a short film, which is a fifth copyrighted work. It was shown at several film festivals, including Sundance. Plaintiff's Exhibit 56 is a printout of the copyright registrations.
*37 Regarding the value of the defendant husband's copyrights, no proof was adduced at trial regarding their value and, as such, as the plaintiff admits in her Statement of Proposed Disposition, there can be no distributive award in this decision to her, or any credit or offset. However, plaintiff is entitled to receive half of such sums paid to defendant for the sale or use of these works, as they were created entirely during the marriage. However, if defendant is required to adapt, modify, revise or otherwise spend time changing the scripts, plaintiff is not entitled to any compensation he earns for any future modification to the works. It is expressly noted that the film "Home" was made by defendant after the date of commencement, and while also a copyrighted work owned by defendant, the film is not included in the five copyrights determined to be marital property described above.
Plaintiff is hereby awarded 25% of any fees or royalties defendant earns from the four copyrighted scripts, as well as 25% of any sums earned from the sale of all or any part of the copyrights, or any sums paid for the right to make any derivative works from the scripts, or any sums earned from distribution of the short film "The Window," as and when such sums are received by defendant" (see A.C. v. J.O., 40 Misc. 1236(A) [Sup. Ct. NY Cnty 2013]).
As this Court cannot determine what portion of T. S., Q. S. or the source code pertaining to this software is marital property, even if it had adopted one of the valuations provided by the parties' experts, it would be improper to award either party a distributive award as such an award would need to correspond with the desired percentage to be awarded. Accordingly, this Court [*53]must turn to other means of equitably dividing the parties' marital interest in the economic benefit of the copyrighted material, and in doing so this Court awards Plaintiff with 40% of any economic benefit derived from T. S. and its source code (other than for use in T. S. G.) and Q. S. and its source code (hereinafter "IP"). While this Court recognizes that Plaintiff did not specifically request equitable distribution as to T. S. and its source code, this award is being made as part of the equitable distribution of T. S. G. Unlike A.C. v. J.O., if Defendant is required to adapt, modify, revise or otherwise spend time changing the IP, Plaintiff remains entitled to any economic benefit she earns for any future modification to the IP. The Court determines this appropriate as Defendant has prevented disclosure of the source code for the IP, T. S. and Q. S., asserting that same is proprietary information thereby thwarting this Court and Plaintiff from being able to determine the current state of the IP in order to assess the nature and extent of any future modification to the IP.
In order to effectuate this award, Defendant shall provide accountings for any economic benefit obtained from the IP, which shall include expenses to obtain the economic benefit from the IP, income received from the IP, and net income received from the IP, accompanied by a check payable to Plaintiff in an amount equivalent to 40% of the net income received from the IP. These accountings and corresponding payments shall be made via certified mail to Plaintiff's residence, and shall be made on each of the following dates of each year after the entry of this Decision: (1) January 1, April 1, July 1, and October 1.
- Request for the Appointment of Receiver
While Plaintiff's request for the appointment of a receiver was sought in the event a sale of the IP was directed, this Court will not appoint a receiver with respect to the equitable determination made herein and the corresponding obligations of Defendant pertaining to the IP, as doing so would be a drastic remedy and inappropriate, as Defendant has not demonstrated failure to comply with this Court's directives which are only now being imposed upon him (see Manno v. Manno, 224 AD2d 395 [2d Dept 1996] ["The court erred in sequestering the defendant's Individual Retirement Account until such time as $75,000 from that account is transferred to the plaintiff's attorneys, as receivers therefor. Domestic Relations Law § 243 permits sequestration of property where the obligated spouse fails to make any payment required by the terms of a matrimonial judgment or order. However, the remedy of sequestration is a drastic one and is invoked only when the record establishes that such remedy is necessary and appropriate (see, Matter of Brennan v. Brennan, 109 AD2d 960, 486 N.Y.S.2d 452), such as where the person obligated to make the payments repeatedly fails to pay and refuses to comply with court orders"]).
C. Spousal Maintenance.
[1] Requests as to Spousal Maintenance
Within Plaintiff's Post-Trial Submission, she requests that this Court impute Plaintiff's annual income as $27,000.00 and Defendant's annual income as $1,679,260.00, finding the presumptively correct amount of spousal maintenance from Defendant to Plaintiff in the amount of $3,280.53 monthly, deviating from that presumptively correct amount to $8,000.00 monthly, and setting the duration for such payments to be 2 years and 10.5 months.[FN298]
Within Defendant's Post Trial Submission, Defendant's counsel asserts, "S. P. believes he has no further spousal maintenance obligation to D. P."[FN299]
[2] Applicable Law & Analysis of Statutory Factors
The Appellate Division, Second Department has noted that:
"The amount and duration of a maintenance award are a matter within the sound discretion of [the] Supreme Court, and the award will not be disturbed so long as the statutory factors and the parties' predivorce standard of living were properly considered. The court need not articulate every factor it considers, but it must provide a reasoned analysis of the factors it ultimately relies upon in awarding maintenance" (see Kiani v. Kiani, 197 AD3d 1168 [2d Dept 2021]; see also Beyel v. Beyel, 173 AD3d 1129 [2d Dept 2019]).
New York State Domestic Relations Law § 236(B)(6)(e) sets forth the statutory factors to be considered in awarding spousal maintenance, which the Court has considered as noted below:
"(1) The court shall order the post-divorce maintenance guideline obligation up to the income cap in accordance with paragraph c of this subdivision, unless the court finds that the post-divorce maintenance guideline obligation is unjust or inappropriate, which finding shall be based upon consideration of any one or more of the following factors, and adjusts the post-divorce maintenance guideline obligation accordingly based upon such consideration:
(a) the age and health of the parties;
As per the Stipulation of Agreed Facts Plaintiff was born on XX/XX/XXXX and Defendant was born on XX/XX/XXXX.
Defendant testified that his wife was diagnosed with severe personality disorder and has seen physicians for much of her adolescence and adult years, and that his wife relied upon her parents until married and upon marriage that reliance was transferred to him.[FN300] Plaintiff confirmed that she has been diagnosed with [Redacted] in April of 2023,[FN301] with [Redacted] surgery in September of 2023.[FN302]
Plaintiff testified that Defendant is [Redacted].[FN303]
(b) the present or future earning capacity of the parties, including a history of [*54]limited participation in the workforce;
While Plaintiff has a higher degree of education than Defendant, Plaintiff's employment history is limited, while Defendant has held consistent employment with continued upward growth. Plaintiff testified that she has a bachelor's degree in business management and a master's degree in social work, while Defendant testified that he has a bachelor's degree in marketing.[FN304]
Plaintiff testified that her work history after graduation with her undergraduate degree includes, an administrative assistant position at a synagogue after college, followed by a client services position at [redacted] for two years, after which she obtained her graduate degree and upon graduation worked for a few months as a per diem float social worker at [redacted], followed by a recruiter position for a technology staffing firm, followed by an in-house recruiter position for [redacted], then as a recruiter consultant, then for a financial firm that worked with hedge funds, then returning to [redacted] where she worked just prior to the birth of M. P. During the parties' marriage, she worked for T. S. G. and part-time for approximately one-year at a non-fungible token start-up, [redacted], where she was laid off, and after the commencement of this action she worked at a jewelry store. At that time, she testified that pursuant to her employment agreement with T. S. G. she was required to obtain permission from Defendant, as chief executive officer of T. S. G., to obtain outside employment, which she sought from him, which was not given, after which she was terminated from T. S. G. She testified that in September of 2024 she obtained part-time employment, which she currently maintains at [redacted], where she works between 20 and 25 hours per week earning $26.00 per hour, estimating her annual salary for her continued part-time employment at $27,000.00, indicating that due to child care needs she would only be able to work on a part-time basis.[FN305] Defendant confirmed that pursuant to the terms of the employment agreement his wife requested, via e-mails sent to him as CEO of the company, permission to obtain outside employment and he did not approve her requests.[FN306] When questioned about Plaintiff's employment history Defendant testified that she had a hard time holding on to a job, it was his belief that she had not held a position for more than one year, and that he did not believe she would earn in excess of $60,000.00 per year through employment outside T. S. G.[FN307]
Defendant has many years of experience in sales following his attaining his undergraduate degree having worked as an account executive at a copy machine/fax [*55]machine company [redacted] for 7-8 years; then as a senior account executive at another copy machine company [redacted]; then as an account executive at staffing agency BW for approximately 4 years, earning approximately $400,000.00 in his last year; then as executive vice president at staffing agency [redacted]; and, then working as chief executive officer of T. S. G. where his 2022 earnings were approximately $2,426,000.[FN308]
(c) the need of one party to incur education or training expenses;
To the extent applicable, this Court has taken into consideration the need of either party to incur education or training expenses.
(d) the termination of a child support award before the termination of the maintenance award when the calculation of maintenance was based upon child support being awarded which resulted in a maintenance award lower than it would have been had child support not been awarded;
Any spousal maintenance award will terminate prior to child support awarded as children will not emancipate before that date.
(e) the wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;
This Court has taken into consideration claims of wasteful dissipation made by the parties.
(f) the existence and duration of a pre-marital joint household or a pre-divorce separate household;
Prior to the parties' marriage they lived in an apartment located in Manhattan, New York; when first married they lived in a house located in Hartsdale, New York; and, thereafter lived in a home in Harrison, New York, which was sold in April of 2024.[FN309] Prior to the Harrison home being sold, Plaintiff voluntarily left the residence,[FN310] relocating into a rental with a monthly rent of $5,975.00 in Harrison, New York.[FN311] Defendant likewise relocated into a monthly rental with a monthly rent of $6,500.00 in Harrison, New York.[FN312]
(g) acts by one party against another that have inhibited or continue to inhibit a party's earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section four hundred fifty-nine-a of the social services law;
As noted herein, Defendant acknowledged that as chief executive officer of T. S. G. he [*56]first denied Plaintiff's request to secure employment outside T. S. G. and then terminated her from her employment at T. S. G.
(h) the availability and cost of medical insurance for the parties;
The record reflects that the parties and Children have health insurance benefits through Defendant's employment, which will not be available to Plaintiff following entry of a judgment of divorce and that her current employer does not provide health insurance.[FN313]
(i) the care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party's earning capacity;
As set forth herein, the Children each have significant medical and mental health challenges. During the parties' marriage Plaintiff was the primary caregiver of the Children attending to all of their medical, mental health and general needs, permitting Defendant to focus on his career working eighty hours per week. During the course of this litigation, Defendant refused to provide her with approval to obtain employment outside T. S. G. and then terminated Plaintiff from her position at T. S. G.
(j) the tax consequences to each party;
To the extent applicable, this Court has taken into consideration the tax consequences to each party.
(k) the standard of living of the parties established during the marriage;
During the course of the parties' marriage, they enjoyed a high standard of living with their first home being sold for approximately $1 million,[FN314] followed by their last home of approximately 5,500 square feet, which was sold for approximately $2,405,000.00;[FN315] employed household help;[FN316] ate out on the weekends, went to the movies and would celebrate anniversaries by staying at hotels with extravagant dinners;[FN317] Defendant spent approximately $8,000.00 per year on his personal trainer;[FN318] Defendant has allocated thousands of dollars towards activities with his brother;[FN319] the Children attended private [*57]school, summer camp and extracurricular activities;[FN320] and, monthly payment of approximately $1,400.00 was made for out-of-network expenses for therapy sessions of M. P.[FN321]
(l) the reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage;
See (i) herein.
(m) the equitable distribution of marital property and the income or imputed income on the assets so distributed;
The majority of the equitable distribution of assets to Plaintiff shall be in the form of a distributive award made in installment payments to be made by Defendant over time.
(n) the contributions and services of the payee as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party; and
See (i) herein. Moreover, as set forth herein, Plaintiff made significant contributions to the formation and development of T. S. G.
(o) any other factor which the court shall expressly find to be just and proper."
[3] Imputation of Income
For purposes of calculation of support obligations herein, this Court has imputed an annual income to Plaintiff of $27,000.00 and to Defendant of $1,679,260.00.
In arriving at 27,000.00 as the imputed income of Plaintiff, this Court has considered the education background, work history and health of Plaintiff. While Plaintiff has a master's degree, her work history reflects an inability to retain long-term employment, which was confirmed by Defendant who testified that she has difficulty holding down a job and he did not believe that her annual income would ever exceed $60,000.00. This Court accepts Plaintiff's position that following entry of the judgement of divorce she will only be able to work part-time, earning $27,000.00 and therefore imputes that figure as her annual income (see Spano v. Spano, 168 AD3d 857, 860 [2d Dept 2019]).
In arriving at $1,679,260.00 as the imputed income of Defendant, this Court has taken into account the education background, work history, prior earnings capacity and current business activity of the Defendant, the financial submissions related to Defendant's recent gross yearly income by both parties, including but not limited to W2s, K-1s, federal tax returns, income statements, and others, as well as the testimony of the parties as it relates to Defendant's earning capacity (see DeSouza-Brown v. Brown, 71 AD3d 946 [2d Dept 2010]; see also Bragar v. Bragar, 277 AD2d 136, 137 [1st Dept 2000]; Weinheimer v. Weinheimer, 100 AD3d 1565, 1566 [4th Dept 2012; Liepman v. Liepman, 279 AD2d 686, 688-689 [3d Dept 2001]).
[4] Spousal Maintenance Award & Calculation
The statutory guidelines calculation for spousal maintenance is as follows:
Plaintiff:
$27,000.00 Income
-$2,064.50 FICA Taxes
$24,934.50 Net CSSA Income
Defendant:
$1,679,260.00 Income
$20,931.00 Self Employment Social Security Taxes (12.4% up to $168,000)
$48,698.54 Self-Employment Medicare Taxes (2.9% on all income)
$1,609.630.00 Net CSSA Income
Net Combined Parental Income: $1,634,564.96
Applying the statutory cap of $228,000.00 for Defendant's income and the formular when Payor is also paying child support:
A. 1-Multiply Maintenance Payors Income by 20% ($228,000 x 20% = $45,600)
2-Multiply Maintenance Payee's Income by 25% (24,934.50 x 25% = $6,233.63)
Subtract Line 2 from Line 1: $39,366.37
B. Subtract Maintenance Payee's Income from 40% of Combined Income:
$228,000 Payor's Income
+ $24,934.50 Payee's Income
$252,934.50 Combined Income
x 40% &nb sp; &nbs p;
$101,173.80
-$24,934.50 Payee's Income
$76,239.30
The lesser of the formulas A and B provides the presumptively correct amount of spousal maintenance requiring Defendant to pay Plaintiff $39,366.37 annually, equating to $3,280.53 monthly. As the parties have been married for 9.7 years (115 months), application of DRL § 236(B)(6)(f) as to the duration of the spousal maintenance would require an award between 15% and 30% of the parties' marriage, being 17.25 months to 34.5 months.
The Appellate Division has set forth the manner within which a trial court may award post-judgment spousal maintenance that deviates from the presumptively correct amount calculated utilizing the statutory formula:
" '[I]n any matrimonial action, the court, upon application by a party, shall make its award for post-divorce maintenance pursuant to the provisions' set forth in the statute (Domestic Relations Law § 236 [B] [6] [a]; see Hughes v. Hughes, 198 AD3d 1170, 1173, 156 N.Y.S.3d 444 [3d Dept. 2021]). In setting the amount of the award, the provisions of Domestic Relations Law § 236 (B) (6) require that the court first determine the presumptive amount of maintenance pursuant to the statutory formulas in paragraph (c) and, second, determine whether other factors under paragraphs (d) and (e) support [*58]deviating from the presumptive amount (see Mahoney v. Mahoney, 197 AD3d 638, 639, 152 N.Y.S.3d 727 [2d Dept. 2021]; Iannazzo v. Iannazzo [appeal No. 2], 197 AD3d 959, 961-962, 152 N.Y.S.3d 756 [4th Dept. 2021]). Where there is a deviation from the presumptive amount reached by application of the relevant formula, the court should explain the reasons for that deviation (see generally Severny v. Severny, 210 AD3d 419, 419, 175 N.Y.S.3d 729 [1st Dept. 2022]). '[T]he court need not analyze and apply each and every factor set forth in the statute,' but it 'must provide a reasoned analysis of the factors it ultimately relies upon in awarding maintenance' (Gordon-Medley v. Medley, 160 AD3d 1146, 1147, 74 N.Y.S.3d 412 [3d Dept. 2018]; see Gutierrez v. Gutierrez, 193 AD3d 1363, 1364, 143 N.Y.S.3d 275 [4th Dept. 2021]; Johnston v. Johnston, 156 AD3d 1181, 1184, 68 N.Y.S.3d 178 [3d Dept. 2017], appeal dismissed 31 NY3d 1126, 81 N.Y.S.3d 350, 106 N.E.3d 733 [2018], lv denied 32 NY3d 1053, 88 N.Y.S.3d 408, 113 N.E.3d 464 [2018])" (Renzi v. Renzi, 217 AD3d 1336 [4th Dept 2023]).
Here, this Court awards Plaintiff from Defendant, spousal support in the monthly amount of $8,000.00 per month for 34.5 months, with payments to commence on the first day of each month following the date of entry of this Decision, with payments being made by electronic transfer in a method to be directed by Plaintiff to Defendant for which Plaintiff's counsel shall file instruction on NYSCEF within five (5) days of entry of this Decision. In making this determination, this Court has reviewed the presumptively correct spousal maintenance award and determines that amount to be insufficient requiring a substantial upward modification based upon the review of the statutory factors set forth hereinabove.
D. Child Support
[1] Requests as to Child Support
Plaintiff requests that this Court utilize the previously imputed annual incomes of the parties with a cap of $500,000.00 of combined parental income to calculate Defendant's monthly child support obligation to Plaintiff of $9,687.50 until spousal support ends, and then pay a monthly amount of $10,208.33, retroactive to the date of commencement of this action and reduced by the amounts he has paid to date; with statutory add-on expenses being paid 7% by Plaintiff and 93% by Defendant until spousal support ends, and then pay 2% by Plaintiff and 98% by Defendant; with the parties alternating claiming the Children as dependents for income tax purposes unless Defendant is unable to take advantage of the tax exemption, and in such case Plaintiff may claim the then unemancipated Children as dependents; and, with Defendant being required to maintain life insurance for Plaintiff's benefit in an amount to cover his remaining child support obligation, spousal support obligation and equitable distribution obligation.[FN322]
Defendant's counsel provides the following position regarding child support: S. P. offers to pay $3,760.25 per month in basic child support based upon a combined parental income cap of $250,000 in light of the add-on pro rata shares set forth below," and with respect to add-on expenses, "S. P. offers to be responsible for 100% of the children's add-on expenses with a cap of $2,000 per month (or $24,000 annually). Any add-on expenses over $2,000 in any given [*59]month shall be shared by the parties 50% S. P. and 50% D. P.[FN323]
[2] Applicable Law & Analysis of Statutory Factors
The Appellate Division, Second Department has provided instruction as to the manner within which a child support award shall be made by a trial court, by either using the combined parental income up to the then statutory cap, or using discretion in exceeding that amount:
"The Child Support Standards Act (see Domestic Relations Law § 240[1—b] ) sets forth a formula for calculating child support by applying a designated statutory percentage, based upon the number of children to be supported, to combined parental income up to the statutory cap that is in effect at the time of the judgment (see Holterman v. Holterman, 3 NY3d 1, 11, 781 N.Y.S.2d 458, 814 N.E.2d 765; Matter of Cassano v. Cassano, 85 NY2d 649, 653—654, 628 N.Y.S.2d 10, 651 N.E.2d 878), here, $130,000 (see Social Services Law § 111—i[2][b] ). With respect to combined parental income exceeding that amount, the court has the discretion to apply the statutory child support percentage, or to apply the factors set forth in Domestic Relations Law § 240(1—b)(f) (see Matter of Cassano v. Cassano, 85 NY2d at 654, 628 N.Y.S.2d 10, 651 N.E.2d 878; Matter of Byrne v. Byrne, 46 AD3d 812, 814, 848 N.Y.S.2d 319), or to utilize 'some combination of th[ose] two' methods (Poli v. Poli, 286 AD2d 720, 723, 730 N.Y.S.2d 168; see Jordan v. Jordan, 8 AD3d 444, 445, 779 N.Y.S.2d 121). The hearing court must ' 'articulate its reason or reasons for [that determination], which should reflect a careful consideration of the stated basis for its exercise of discretion, the parties' circumstances, and its reasoning why there [should or] should not be a departure from the prescribed percentage' ' (Wagner v. Dunetz, 299 AD2d 347, 350—351, 749 N.Y.S.2d 545, quoting Matter of Schmitt v. Berwitz, 228 AD2d 604, 605, 644 N.Y.S.2d 760; see Matter of Cassano v. Cassano, 85 NY2d at 655, 628 N.Y.S.2d 10, 651 N.E.2d 878; Matter of Wienands v. Hedlund, 305 AD2d 692, 693, 762 N.Y.S.2d 90). Inasmuch as the record before us does not reveal the Supreme Court's reasons for its choice not to include income above the statutory cap, it is appropriate to remit the matter to enable the Supreme Court to set forth the factors it considered and the reasons for its determination (see Hohlweck v. Hohlweck, 271 AD2d 571, 707 N.Y.S.2d 461; Zaremba v. Zaremba, 222 AD2d 500, 635 N.Y.S.2d 532; Jones v. Reese, 217 AD2d 783, 629 N.Y.S.2d 311)" (see McCoy v. McCoy, 107 AD3d 857 [2d Dept 2013]).
As this Court has determined that an amount above the statutory cap of combined parental income should be applied to the statutory child support calculation in this matter, this Court has evaluated the following factors set forth in DRL § 240[1-b][f] as noted below:
"The court shall calculate the basic child support obligation, and the non-custodial parent's pro rata share of the basic child support obligation. Unless the court finds that the non-custodial parents' pro-rata share of the basic child support obligation is unjust or inappropriate, which finding shall be based upon consideration of the following factors:
(1) The financial resources of the custodial and non-custodial parent, and those of [*60]the child;
As set forth above, while the Defendant is the chief executive officer of a successful company, Plaintiff is employed part-time and has limited ability to obtain significant additional earnings through employment. Moreover, while Defendant will receive equitable distribution, it will largely be in the form of a distributive award and not immediately available.
(2) The physical and emotional health of the child and his/her special needs and aptitudes;
As set forth above, both Children face significant medical and mental health issues that require intervention by medical and mental health providers, some of whom are out-of-network. Both children have significant educational challenges.
(3) The standard of living the child would have enjoyed had the marriage or household not been dissolved;
As set forth above, during the parties' marriage the Children enjoyed a high standard of living, residing in a 5,500 square foot home, attending summer camps, participating in a wide-range of extra-curricular activities and attending private schools.
(4) The tax consequences to the parties;
To the extent applicable, this Court has taken into consideration the tax consequences to each party.
(5) The non-monetary contributions that the parents will make toward the care and well-being of the child;
As set forth above, during the parties' marriage Plaintiff was the primary caregiver of the Children attending to all of their medical, mental health and general needs, permitting Defendant to focus on his career working eighty hours per week.
(6) The educational needs of either parent;
To the extent applicable, this Court has taken into consideration the educational needs of either parent.
(7) A determination that the gross income of one parent is substantially less than the other parent's gross income;
As noted above, the gross income of Plaintiff is substantially less than the gross income of Defendant.
(8) The needs of the children of the non-custodial parent for whom the non-custodial parent is providing support who are not subject to the instant action and whose support has not been deducted from income pursuant to subclause (D) of clause (vii) of subparagraph five of paragraph (b) of this subdivision, and the financial resources of any person obligated to support such children, provided, however, that this factor may apply only if the resources available to support such children are less than the resources available to support the children who are subject to the instant action;
This factor is not applicable.
(9) Provided that the child is not on public assistance (i) extraordinary expenses incurred by the non-custodial parent in exercising visitation, or (ii) expenses incurred by the non-custodial parent in extended visitation provided that the custodial parent's expenses are substantially reduced as a result thereof; and
This factor is not applicable.
(10) Any other factors the court determines are relevant in each case, the court shall order the non-custodial parent to pay his or her pro rata share of the basic child support obligation, and may order the non-custodial parent to pay an amount pursuant to paragraph (e) of this subdivision."
[3] Child Support Award & Calculation
As this Court has determined that an amount above the statutory cap of $500,000 be used for the combined parental income, and same should be applied to the statutory child support calculation in this matter, it proceeds with the following calculations based on that determination:
Plaintiff's Annual Income: & nbsp; $27,000.00
Minus FICA Taxes: & nbsp; &n bsp; &nb sp; -$2,064.50
Plus Annual Spousal Maintenance: & nbsp; +$96,000.00
Plaintiff's Net CSSA Income: $120,935.50
Defendant's Annual Income: & nbsp; $1,679,260.00
Minus Self-Employment Social Security Tax -$20,832 [12.4% up to $168,000]
Minus Self-Employment Medicare Tax -$48,698.54 [2.9% of $1,679,260.00]
Minus Annual Spousal Maintenance: & nbsp; -$96,000.00
Defendant's Net CSSA Income: $1,513,729.46
Net Combined Parental Income: $1,634,664.96
Pro Rata Split [Including Spousal Support]:
Plaintiff's Pro Rata Share of Combined Income: $120,935.50 / $1,634,664.96
7.3% > 7% (rounded)
Defendant's Pro Rata Share of Combined Income: $1,513,729.46 / $1,634,664.96
92.6% > 93% (rounded)
Pro Rata Split [Without Spousal Support]:
Plaintiff's Pro Rata Share of Combined Income: $24,935.50 / $1,634,664.96
1.5% > 2% (rounded)
Defendant's Pro Rata Share of Combined Income: $1,609,729.46 / $1,634,664.96
98.4% > 98% (rounded)
Child Support Calculations Using Cap of $500,000 For Combined Parental Income:
Combined Parental Income: $500,000
x 25% [Being Two Unemancipated Children] = $125,000
$125,000 / 12 months = $10,416.67/month - Presumptive Child Support Amount
Defendant's Pro Rated Share Being 93% (rounded) [During Period of Spousal Support]:
93% x $10,416.67 =
Defendant's Support Obligation [During Spousal Support]: $9,687.50
Defendant's Pro Rated Share Being 98% (rounded) [After Period of Spousal Support]:
98% x $10,416.67 =
Defendant's Support Obligation [After Spousal Support]: $10,208.33
- Child Support Award
During the time period within which Defendant is paying spousal maintenance to Plaintiff, Defendant shall pay basic child support to Plaintiff in the amount of $9,687.50, and the parties shall share the payment of statutory child support add-on expenses in the following pro rata manner: Plaintiff: 7%; Defendant: 93%. These payments shall be retroactive to the date of commencement of this action with Defendant receiving a credit for any payments previously made.
When Defendant is no longer providing spousal support to Plaintiff, Defendant shall pay basic child support to Plaintiff in the amount of $10,208.33, and the parties shall share the payment of statutory child support add-on expenses in the following pro rata manner: Plaintiff: 2%; Defendant: 98%.
The payments directed herein have been calculated utilizing the previously imputed annual incomes of the parties with a combined parental income cap of $500,000.00, upon this Court's review of the factors set forth above.
Basic child support payments shall be made monthly, on or before the first day of each month following the entry of this Decision to the date of emancipation of the Children, by electronic payment in a manner directed by Plaintiff, whose counsel shall file instructions within five (5) days of entry of this Decision.
With respect to statutory child support add-on expenses incurred in the preceding thirty day period, both parties shall on or before the first day of each month following the entry of this Decision to the date of emancipation of the Children, send via e-mail to the other an itemized list of add-on expenses incurred with proofs of payment and request for reimbursement, and by the fifteenth day of that month both parties shall make reimbursement by electronic funds transfer.
- Tax Credits
The Appellate Division, Second Department has held it appropriate in certain circumstances for a trial court to direct that divorcing parents alternate claiming their children as dependents in their respective income tax returns:
"Contrary to the defendant's contention, the Supreme Court properly determined that the plaintiff was entitled to claim federal and state tax dependency exemptions for the parties' older child in odd years and their younger child in even years. Where a noncustodial parent meets all or a substantial part of a child's financial needs, a court may determine that the noncustodial parent is entitled to declare the child as a dependent (see Popelaski v. Popelaski, 22 AD3d 735, 803 N.Y.S.2d 108; Junkins v. Junkins, 238 AD2d 480, 656 N.Y.S.2d 650; Burns v. Burns, 193 AD2d 1104, 598 N.Y.S.2d 888, affd. 84 NY2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80). Here, both parents are wage earners, and each contribute toward the support of their two children. Accordingly, under the circumstances of this case, the plaintiff may claim their older child in odd years and their younger child in even years, while the defendant may claim their older child as a dependent in even years and their younger child in odd years (see Popelaski v. Popelaski, supra; Junkins v. Junkins, supra)" (see Pachomski v. Pachomski, 32 AD3d 1005 [2d Dept 2006]).
Therefore, this Court directs that in any tax year following the date of entry of this Decision the parties shall be entitled to claim as a dependent one of the Children, until the date [*61]of emancipation of one of the Children and at that time the parties shall alternate taking the remaining child as an exemption. Notwithstanding this directive, in the event either party will not benefit from taking one of the Children as an exemption, they shall notify the other via certified mail at least two weeks prior to the deadline for filing income tax returns, and the other shall have the right to claim both Children or the remaining unemancipated child.
- Life Insurance
A trial court may direct a party to obtain life insurance in the other's favor in an amount sufficient to secure payment of the insured party's spousal maintenance and child support obligations (see Strohli v. Stohli, 174 AD3d 938 [2d Dept 2019]; see also DRL § 236[B][8][a] ["In any matrimonial action the court may order a party to purchase, maintain or assign a policy of insurance providing benefits for health and hospital care and related services for either spouse or children of the marriage not to exceed such period of time as such party shall be obligated to provide maintenance, child support or make payments of a distributive award. The court may also order a party to purchase, maintain or assign a policy of accident insurance or insurance on the life of either spouse, and to designate in the case of life insurance, either spouse or children of the marriage, or in the case of accident insurance, the insured spouse as irrevocable beneficiaries during a period of time fixed by the court. The obligation to provide such insurance shall cease upon the termination of the spouse's duty to provide maintenance, child support or a distributive award"]).
Defendant shall, by March 1, 2026, obtain a life insurance policy on Defendant's life naming the Children is irrevocable beneficiaries and Plaintiff as trustee, in an amount equal to his outstanding obligations for child support payments, spousal support payments and equitable distribution to remain in effect until the date when all aforementioned obligations have been fully satisfied (hereinafter "Termination Date"). Defendant shall, within sixty (60) days of the entry of this Decision, file proof of compliance with this directive by filing the following documents: (1) insurance declarations page providing proof of coverage as directive herein; (2) proof of payment of any required insurance premium; and, (3) proof of receipt by the life insurance provider of a copy of New York State Insurance Law § 3113 and confirmation that they shall comply with same (hereinafter "Proof of Insurance"). On the first day of March, for each year following entry of this Decision until the Termination Date, Defendant shall file and serve on Plaintiff via certified mail Proof of Insurance.
E. Attorneys' Fees, Costs & Reallocation.
[1] Parties' Requests As To Reimbursement Of Attorneys' Fees.
Plaintiff requests that this Court enter an Order directing Defendant to reimburse her for $750,000 in legal fees associated with litigating this matter, based on the fact that Defendant is the monied spouse, that he took "untenable" positions which required Plaintiff to oppose and drove up the incurred fees, and that Defendant's own legal tactics to delay or otherwise complicate the process caused further incurring of unnecessary fees to Plaintiff.[FN324] In support, Plaintiff submitted two retainer agreements for legal services (hereinafter "Plaintiff's Retainer [*62]Agreements"),[FN325] and legal invoices which claim to support a total amount of legal fees incurred, being $1,176,452.72 (hereinafter "Plaintiff's Invoices"),[FN326] also taking into consideration Defendant's prior payment of $100,000 in interim legal fees [FN327] pursuant to the Court's December 14, 2023 Decision and Order. Consequently, Plaintiff seeks $750,000 in legal fees, in addition to the $100,000 previously paid by Defendant, totaling $850,000 in legal fees to be paid,[FN328] being a 72% reimbursement of fees by Defendant.[FN329]
Alternatively, Defendant requests that this Court enter an Order which grants Plaintiff no further award of counsel and/or expert fees,[FN330] claiming that it was Plaintiff who caused protracted litigation by supporting untenable positions, citing to the $100,000 in interim counsel fees previously paid by Defendant to Plaintiff, and further citing to the Defendant's 100% payment of fees for: (1) the AFC; (2) court-ordered mediation with John Pappalardo, Esq.; (3) a neuropsychological evaluation of M. P. by Dr. Judith Moskowitz; and, (4) a forensic custody evaluation by Dr. Benna Strober, all subject to reallocation at the time of trial. Affirmatively, Defendant seeks the Court, "in its discretion" award Defendant "some recoupment of his counsel fees" without providing a specific amount requested for said recoupment, or a total amount of fees allegedly incurred, again citing Plaintiff's litigation tactics as a basis for same.[FN331] In support of this request, Defendant submitted a retainer agreement (hereinafter "Defendant's Retainer Agreement"),[FN332] and invoices for legal services (hereinafter "Defendant's Invoices").[FN333]
[2] Parties' Requests As To Reallocation Of Fees.
Plaintiff seeks an Order directing Defendant reimburse her for an additional $81,000 of [*63]her expert fees,[FN334] confirming Defendant had previously paid $100,000 pendente lite toward said expert fees pursuant to this Court's December 14, 2023 Decision and Order, and based such claim on the same alleged litigation tactics, delays and behaviors of the Defendant as set forth within her request for attorneys fees.
Defendant seeks 50% reimbursement from Plaintiff of the total fees [FN335] paid by Defendant for the following: (1) Scott Stone, Esq., as AFC; (2) Dr. Benna Strober; (3) Hudson Property Appraisers Fee; (4) Interim Expert Fee [$100,000]; (5) John Pappalardo, Esq., as Mediator; (6) Stunning Spaces [staging costs for sale of Marital Domicile]; and, (7) Dr. Judith Moskowitz [psychologist for M. P.'s evaluation]. Likewise, Defendant cites to Plaintiff's obstructive behavior during the course of the litigation, and the cause of such being related to the need for both court-appointed and privately retained experts.[FN336]
[3] Applicable Law & Analysis.
The Appellate Division Second Department has noted how trial court should determine if an award of attorneys' fees is warranted in a matrimonial action:
"In a matrimonial action, an award of attorney's fees is a matter committed to the sound discretion of the trial court, and the issue is controlled by the equities and circumstances of each particular case (see Prochilo v. Prochilo, 165 AD3d 1304, 84 N.Y.S.3d 786; Patete v Rodriguez, 109 AD3d 595, 599, 971 N.Y.S.2d 109). The purpose of Domestic Relations Law § 237(a) is to redress the economic disparity between the monied spouse and the nonmonied spouse by ensuring that the latter will be able to litigate the action on equal footing with the former (see Chesner v. Chesner, 95 AD3d 1252, 1253, 945 N.Y.S.2d 409; Finnan v. Finnan, 95 AD3d 821, 943 N.Y.S.2d 559; Prichep v. Prichep, 52 AD3d 61, 64—65, 858 N.Y.S.2d 667).
In determining whether to award attorney's fees, the court should review the financial circumstances of both parties, together with all of the other circumstances of the case, including, inter alia, the relative merit of the parties' positions, and whether either party has engaged in conduct or taken positions resulting in a delay of the proceedings or unnecessary litigation (see Prochilo v. Prochilo, 165 AD3d 1304, 84 N.Y.S.3d 786; Chesner v. Chesner, 95 AD3d 1252, 945 N.Y.S.2d 409; Prichep v. Prichep, 52 AD3d at 64—65, 858 N.Y.S.2d 667)." (Brockner v Brockner, 174 AD3d 567 [2d Dept 2019]).
Moreover, the Appellate Division, Second Department has been consistently clear in confirming a trial Court's discretion to award fees based on the economic disparity of each party, while also including a review of all relevant factors to determine reasonableness of the litigation between both the monied and non-monied spouse: "[a] less-monied spouse should not be expected to exhaust or spend down a prospective or actual distributive award in order to pay [*64]counsel fees as the result of unreasonable or excessive litigation conduct by the adverse party. On the other hand, the more affluent spouse should not be treated as an open-ended checkbook expected to pay for exorbitant legal fees incurred by the less affluent spouse through excessive litigation or the assertion of unreasonable positions. Where a party has asserted unreasonable positions or failed to cooperate in discovery, and thereby increased the cost of the litigation, the court may make a counsel fee award in favor of the offended party or not make, or make a lesser award, in favor of the offending party" (Kaufman v. Kaufman, 189 AD3d 31 [2d Dept 2020] [internal citations omitted]).
When seeking an award of attorneys' fees, parties are required to submit itemized billing statements as proof of the attorneys' fees incurred, both to demonstrate substantial compliance with 22 NYCRR § 1400.2 and § 1400.3 and to establish the "extent and value of [the] services" rendered (Yakobowitz v. Yakobowicz, 217 AD3d 733 [2d Dept 2023] [internal citations omitted]).
Here, this Court has reviewed Plaintiff's Retainer Agreements and Plaintiff's Invoices, as well as Defendant's Retainer Agreement and Defendant's Invoices, all being entered into evidence at the time of trial and notes further that Plaintiff and Defendant have incurred an extensive amount of legal fees, both incurring well over $1.1 Million respectively in litigating this matter. Moreover, this Court has taken into consideration the extensive procedural history of this matter, including motion practice by and between the parties, and finds that both Plaintiff and Defendant have engaged in unreasonable or excessive litigation conduct at times, being the cause of continued litigation and the incurring of further legal fees. However, in reviewing the fee applications in this matter, taking into account and balancing all equities, this Court hereby determines that Plaintiff as the less-monied spouse is entitled to receive an award of legal fees due to the continued protracted litigation and overt delay tactics of the Defendant, at times appearing unnecessary, and as such awards Plaintiff $500,000.00 in reimbursement of legal fees to be paid by Defendant, which shall be made in 96 monthly installment payments with a principal plus balance at a rate of 9% from the date of entry of this Decision, with Defendant's ability to prepay without penalty.
Furthermore, for the reasons set forth herein-above, any request by Plaintiff or Defendant to reallocate fees previously paid in this matter is hereby denied, and both parties are responsible to pay their own expert fees incurred, without further contribution from the opposing party.
F. Escrow Disbursement.
As set forth herein-above, the Marital Domicile Stipulation provides for $400,584.54, being the parties' Escrow Funds, to remain in escrow with Defendant's counsel until further stipulation of the parties or order of this Court. This Court hereby determines that distribution of the Escrow Funds shall be made 50% to Plaintiff and 50% to Defendant, being a distribution of $200,292.27 to each party, with 100 % of Defendant's portion of the Escrow Funds to be paid to Plaintiff by the escrow agent, as the first installment of the distributive award pertaining to the equitable distribution of T. S. G., as set forth herein-above.
G. Request for Other Relief.
Any relief sought by either party, pertaining to the subject trial in this matter, specifically not granted or otherwise addressed herein is denied.
* * *
Based upon the foregoing, it is hereby
ORDERED that all remaining issues arising out of the requested dissolution of the parties' marriage have been addressed and resolved as stated herein-above, and the parties are directed to comply with the directives set forth; and it is further
ORDERED that the terms set forth in the following stipulations shall be incorporated by reference, but not merged, into a judgment of divorce to be entered by this Court: (1) Grounds Stipulation, dated April 4, 2023, filed as NYSCEF Doc. No. 35; (2) Custody Stipulation, dated January 16, 2025, filed as NYSCEF Doc. No. 1247; (3) Marital Domicile Stipulation, dated January 29, 2025, filed as NYSCEF Doc. No. 1264; (4) Financial Account Stipulation, dated March 13, 2025, filed as NYSCEF Doc. No. 1341; and, (5) this Decision And Order After Trial, dated January 28, 2026; and it is further
ORDERED that by February 6, 2026, Plaintiff's counsel shall file with the Court, either on consent of Defendant, or with notice of settlement served on Defendant, via e-mail and NYSCEF filing with proof of service filed the same day, the following documents: (1) a proposed findings of fact and conclusions of law; (2) a proposed judgment of divorce; and, (3) all other ancillary documents needed for this Court to enter a judgment of divorce; and it is further
ORDERED that Plaintiff shall serve Defendant, via e-mail and NYSCEF filing, this Decision And Order After Trial with Notice of Entry by January 28, 2026, and shall file an Affidavit of Service on NYSCEF by that date; and it is further
ORDERED that to the extent any relief sought has not been granted, it is expressly denied.
The foregoing constitutes the Decision and Order of the Court.
Dated: January 28, 2026