Travis v. Travis
795 P.2d 96, 61 O.B.A.J. 1778, 1990 OK 57 (1990)
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Rule of Law:
The professional good will of a sole practitioner's law practice is not a divisible marital asset. Instead, the professional's earning capacity, which reflects that good will, is a proper consideration for determining modifiable support alimony.
Facts:
- The parties, Husband and Wife, were married in 1960 and separated in 1985.
- Husband, a lawyer since 1962, operated a sole proprietorship law practice focused on contingent fee personal injury claims.
- Approximately 95% of Husband's cases were referred to him by other attorneys.
- During the divorce proceedings, the physical assets of the law practice were valued at $41,150.80, while its total debt was $414,894.39.
- Wife's expert witness testified that the law practice had a good will value of $750,000 based on its projected income.
- Husband and his expert witness testified that the practice had no value beyond its physical assets.
Procedural Posture:
- Wife and Husband were parties to a divorce action in an Oklahoma trial court.
- The trial court ruled that the Husband's law practice had no value beyond its physical assets, thereby refusing to divide its good will.
- Wife, as appellant, appealed the trial court's property division to the Oklahoma Court of Appeals, Division 2.
- The Court of Appeals affirmed the judgment of the trial court.
- The Supreme Court of Oklahoma granted certiorari because the case presented an issue of first impression.
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Issue:
Does the professional good will of a sole practitioner's law practice constitute a divisible marital asset in a divorce proceeding?
Opinions:
Majority - Wilson, J.
No, the professional good will of a sole practitioner's law practice is not a divisible marital asset. The court reasoned that good will in a sole legal practice is personal to the individual practitioner and is not a marketable asset that can be sold or transferred. Unlike commercial good will, a lawyer's reputation and client base cannot be sold due to professional conduct rules prohibiting the acquisition of a proprietary interest in lawsuits. The court found that valuing such personal good will is highly speculative and that treating it as a divisible asset would result in 'double counting,' as the professional's future earning capacity, which is a product of this good will, is already considered when setting support alimony. Therefore, the more equitable approach is to account for earning capacity through modifiable support alimony rather than a fixed, and potentially unfair, property division.
Concurring - Simms, J.
This opinion concurs in the judgment but offers a slightly different rationale. The author would hold that the good will of a law practice, if it exists, should at most be only a factor used in determining the overall value of the law practice as a marital asset, rather than being excluded entirely as a divisible asset.
Analysis:
This decision establishes a key precedent in Oklahoma family law, aligning the state with others that distinguish between marketable commercial good will and non-marketable personal professional good will. It directs lower courts to address the value generated by a professional's reputation through modifiable support alimony rather than a fixed property division award. This approach provides flexibility for future changes in the professional's income but may prevent the non-professional spouse from receiving a large, immediate lump-sum payment for the intangible value of the practice. The ruling emphasizes the unique, non-transferable nature of a sole legal practitioner's practice due to ethical constraints.
