Wednesday, December 13, 2006

Case Law Development: Kentucky Rejects Distinction between Enterprise and Personal Goodwill

In a case in which the value of wife's solo medical practice was the subject of considerable dispute, the Kentucky Court of Appeals refuses the invitation to join the majority of state that distinguish between enterprise goodwill and personal goodwill in valuing a business upon dissolution.  The court reviewed a number of cases from other jurisdicitons on either side of the issue and concluded that "After considering the issue and the facts of this case, we are not inclined to deviate from long-standing precedent by creating a wholesale change of law holding that "personal" and "enterprise" goodwill should be distinguished for purposes of property valuation in a divorce proceeding - even given that [Wife's] practice is a sole proprietorship. Issues of stare decisis aside, we believe that "[i]t would be inequitable to hold that the form of the business enterprise can defeat the community's interest in the professional goodwill. Such a result ignores the contribution made by the non-professional spouse to the success of the professional ...."  The court noted that the husband made a number of contributions directly to the wife's medical practice, including "training a number of administrative personnel and handling a number of financial aspects of the practice."

A dissenting judge found the arguments in favor of distinguishing between the two forms of goodwill, but agreed with the majority that that matter was for the Kentucky Supreme Court.

Gaskill v. Robbins, 2006 Ky. App. LEXIS 364 (December 8, 2006)
Opinion on the web (last visited December 13, 2006 bgf)

http://lawprofessors.typepad.com/family_law/2006/12/case_law_develo_10.html

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Comments

This certainly is against the tide. Many other courts have gone the other way.

TO

Posted by: tom oldham | Jan 2, 2007 1:43:19 PM

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