Window into the costs of family court litigation

“Mel Gibson’s ex sued for $108K over child support fight” (Page Six) provides an interesting window into just how much Americans spend on transaction costs in family court:

Court documents obtained by The Blast reveal the forensic accounting firm that Grigorieva, 47, hired to investigate baby daddy Mel Gibson’s finances in her child support fight, is suing the singer for $108,000 for unpaid fees.

Grigorieva hired White, Zuckerman, Warsavsky, Luna & Hunt following her 2015 bankruptcy filing, and the company claims they aided Grigorieva in getting her child support payments increased to $22,500 per month for daughter Lucia.

In their filing, the firm noted that Gibson, 61, paid the bulk of their charges with the exception of the unpaid balance of $108,887.24.

I.e., the accounting fees were in excess of $218,000 for this child support modification action (Gibson paid at least 50 percent if it was “the bulk of the charges”). Just imagine the legal fees!

Note that, despite the fees, litigation should have been a rational strategy for the plaintiff. Her daughter is now yielding tax-free revenue of $270,000 per year. That’s nearly $5 million over the 18 years during which a child can yield a profit under California family law. Legal and expert fees might be pretty close to the $5 million number, but her defendant will pay most of them.

[The defendant in this case is famous, which is why the lawsuit is in the news, but this scale of fees is consistent with what is spent when ordinary high-income Americans are sued.]

Young readers: Remember that going to accounting school doesn’t mean being stuck filing 1040 returns!

Related:

38 Comments

  1. Neal

    January 5, 2018 @ 1:08 pm

    1

    “ordinary high-income Americans”

    I think you mean “high-income Americans who are not famous”. These figures are representative of what fraction of child support cases, by number?

  2. philg

    January 5, 2018 @ 1:32 pm

    2

    Neal: For a young person planning to become a $600/hour litigator or a $500/hour forensic accountant, by definition 100 percent of the cases handled would involve people with sufficient income and assets to pay these fees. (There does not seem to be any shortage of such cases here in Massachusetts as the typical competent litigator earns $1 million or more per year. California also has unlimited child support revenue potential and therefore also seems to offer great opportunities in the divorce industry (the litigators we interviewed there earned between $525 and $900 per hour back in 2014). Obviously there could be be a problem finding customers in Minnesota, Nevada, and other states where child support profits are capped.)

  3. Neal

    January 5, 2018 @ 1:58 pm

    3

    philg: It’s expensive to be rich. I get it, but you responded to my direct question with an evasion, not an answer.

  4. philg

    January 5, 2018 @ 2:06 pm

    4

    I am not sure that you do get it, Neal. The point of the posting is to highlight the opportunity for young people to make money in this industry. So it doesn’t matter what percentage of all family court litigation involves high-income defendants as long as there is enough demand for the services offered.

    (To your precise question, I don’t think that there is an easy way to get those statistics because courts don’t gather them. We did our own research in http://www.realworlddivorce.com/MiddlesexMay2011 and it seems that 100 percent of the cases that went to trial, and therefore provided a minimum of roughly $500,000 in revenue (per case) to the divorce industry, involved people coded as “upper middle class” or “rich”. From our limited data set it would seem that the bulk of the industry’s revenue comes from Americans who are at least “upper middle class” even if such people are not a majority of the population.)

  5. Neal

    January 5, 2018 @ 2:40 pm

    5

    philg: There is money to be made in every industry that services the rich, especially in high income occupations like lawyering. The thing is that only a tiny fraction of young people who go into in any given occupation (including lawyering) will end up working for people like Mr. Gibson. It’s hard to see why it’s helpful to “highlight the opportunity” without providing some guidance about the likelihood of making it and how a person goes about becoming one of those lucky few. I suggest not offering young people an analysis weakened by survivorship bias, especially regarding an occupation which (as I understand it) is currently oversaturated.

  6. philg

    January 5, 2018 @ 2:51 pm

    6

    Neal: Since you’re sure that the market for competent divorce litigators and forensic accountants is “oversaturated”, why don’t you become infinitely wealthy by hiring these surplus folks at $25 per hour and then re-selling their services for $300 per hour? You’ll be undercutting prevailing prices in Boston or Los Angeles by roughly 50 percent so you should have plenty of customers.

  7. philg

    January 5, 2018 @ 2:57 pm

    7

    Separately, Neal, I don’t know why you keep asserting that it is only “rich” people that pay enough to make this career worthwhile. A case here in Massachusetts that we were just following recently wound up (just before trial, as is often the case). The defendant had an income of about $80,000 per year. The plaintiff was not working at any time during the litigation (though she had a final job interview scheduled for the day after the last day of trial!). There was about $400,000 of home equity that was the main asset to fight about following a 6-year marriage. The defendant accepted that the plaintiff was guaranteed to win “primary parent” status and therefore child support profits. Legal fees on the two sides combined were approximately $250,000 over the 3 years of litigation that followed the 6-year marriage. The defendant’s lawyer was a junior partner in a small Boston-based family law firm and billed close to $600 per hour. Would you characterize someone who earns $80k (or who is married to someone who earns $80k) as “rich”? Or do you not think it is worth getting out of bed to pocket $250k at $600/hour? (the lawyers did virtually nothing for this price)

  8. Neal

    January 5, 2018 @ 2:58 pm

    8

    “You’ll be undercutting prevailing prices in Boston or Los Angeles by roughly 50 percent so you should have plenty of customers”

    I’m pretty sure that people like Mr. Gibson don’t choose their litigators based on price, so I doubt your plan would work.

  9. Neal

    January 5, 2018 @ 3:05 pm

    9

    “I don’t know why you keep asserting that it is only “rich” people that pay enough to make this career worthwhile.”

    I made no such assertion.

  10. philg

    January 5, 2018 @ 3:54 pm

    10

    Neal: Well, if you think that the market for forensic accountants and divorce litigators is too saturated for a young person to enter, maybe you can call up a few in your local area and report back to us on how much they charge. Attach to each one of these quotes (a) the ZIP code where they are based, (b) the number of years of experience that the person has, (c) whether the person says he or she is “busy” and/or has as much work as desired. Then a young person can decide for him or herself whether this career choice makes sense. I have supplied what I think are good numbers for the Boston and LA areas. http://www.realworlddivorce.com/ provides hourly rates in a lot of other parts of the U.S. You can add to this if you want to help young folks evaluate their alternatives.

  11. Neal

    January 5, 2018 @ 4:18 pm

    11

    philg: You are pursuing a point I conceded “There is money to be made in every industry that services the rich, especially in high income occupations like lawyering.” in order to side step the argument I actually made “The thing is that only a tiny fraction of young people who go into in any given occupation (including lawyering) will end up working for people like Mr. Gibson. It’s hard to see why it’s helpful to “highlight the opportunity” without providing some guidance about the likelihood of making it and how a person goes about becoming one of those lucky few.”

  12. Neal

    January 5, 2018 @ 4:28 pm

    12

    philg: Also, the data gathering approach you suggest in #10 is vulnerable to survivorship bias.

  13. philg

    January 5, 2018 @ 4:31 pm

    13

    You missed the point in my comment above and also in the original posting. The Mel Gibson numbers are not unusual and don’t require finding a “rich” defendant (the situation of forensic accountants and lawyers being paid $millions is so common that it wouldn’t have been worth reporting if Gibson hadn’t been a star). The lawyers working for a plaintiff who earned $0 and a defendant earning $80,000 were able to bill $250k at a rate of approximately $600 per hour. If the dispute involves a dentist or a physician, the fees can approach the numbers that a Hollywood star would pay. There are roughly a million people in the U.S. who are either dentists or physicians. Maybe they qualify as “rich” in your view, but they are certainly not rare! (and, thanks to Medicare and Medicaid, physicians and dentists in even the poorest areas of the U.S. can earn enough to feed a pair of divorce litigators)

    It is a lot easier to get into and through law school than through medical or dental school/training!

  14. philg

    January 5, 2018 @ 4:41 pm

    14

    Neal: Right now you have no data at all! You simply assert that a divorce industry vendor cannot make decent money without finding a rare “rich” defendant to sue or defend. And then you say that you don’t want to collect any data because you can’t get perfect data (you don’t have a single anecdote of a person who had to quit the divorce litigation business due to a lack of customers, but you simply assert “survivorship bias”). We interviewed roughly 200 divorce litigators. About the lowest billing rate that we ever learned about was $200/hour. That was for an associate who’d passed the bar just a few years earlier and was practicing in a state where child support revenue is capped at $25,000/year (see http://www.realworlddivorce.com/NorthDakota ). She seems now to be a partner in her own firm (see http://www.stebbinsmulloylaw.com/jackie-m-stebbins-attorney-at-law/ ).

    What do you think young people interested in earning a good living should do instead? Get a PhD in science? The $250,000 billed by the two lawyers in the fight over $400k in assets and $80k/year in income is roughly 5X what a science post-doc earns and 3X what a PhD Biochemist/Biophysicist earns: https://www.bls.gov/ooh/life-physical-and-social-science/biochemists-and-biophysicists.htm

  15. Neal

    January 5, 2018 @ 4:45 pm

    15

    philg: What fraction of recent law school graduates will succeed as the kind of expensive divorce litigators you are talking about?

  16. Neal

    January 5, 2018 @ 4:49 pm

    16

    “You simply assert that a divorce industry vendor cannot make decent money without finding a rare “rich” defendant to sue or defend.”

    Perhaps I am not being clear. Would you provide the quote where you perceive I made this assertion.

  17. Manxane

    January 5, 2018 @ 5:05 pm

    17

    Just to support Phil with some non-famous examples:

    Friend (PhD Scientist…) got served a divorce, after more than a year of litigation he estimates the total costs are nearing $100K (both sides), and that is because it was settled in a short amount of time according to him….custody battles may still be in his future. I really hate asking him about it all. I found out those court psychologists really get paid a lot of money!

  18. philg

    January 5, 2018 @ 5:42 pm

    18

    Neal: “What fraction of recent law school graduates will succeed as the kind of expensive divorce litigators you are talking about?”

    It depends on your definition of “expensive,” but in states that are litigation-oriented, close to 100 percent. This isn’t like corporate law where big companies will hire only big law firms and the associate who doesn’t make partner at a big firm is essentially out of the business. We never heard of anyone who wanted to stay in divorce litigation being unable to do so and, as noted above, we never heard of anyone billing less than $200 per hour anywhere in the U.S. (or less than about $300 per hour here in Massachusetts). A divorce litigator associate who doesn’t make partner can simply become a solo practitioner or start a new small firm. In a state where a brief marriage or out-of-wedlock pregnancy is more lucrative than working at the median wage, there is never a shortage of customers!

    As Manxane notes, being a forensic psychologist in family court is vastly more lucrative than billing insurance companies for providing therapy. I think that the forensic accountants get paid more per hour, though.

  19. George A.

    January 5, 2018 @ 7:49 pm

    19

    If the plaintiff cares about the future of their children(s), they would opt for a mediation to settle – especially in a 50/50 State divorce. If not, then the plaintiff is imply trying to screw the defendant in all ways possible. Period.

    @Neal: I do know of a case where the combined income of the family was $100K and the plaintiff opted for arbitration that ended up costing over $150K. At the end, that money came from the equity that they had which went into the cost of the divorce processing. I.e.: the plaintiff, the defendant and the children lost $150K that could have been divided equally or place in a fund for the children collage.

  20. superMike

    January 5, 2018 @ 8:11 pm

    20

    Talk about a prisoners’ dilemma. Wipe out hundreds of thousands of wealth to get some marginal benefit (versus maybe getting the shaft in some way in a lawyerless 50/50 split) I wonder what Mel would have been willing to offer without the forensic accountants (what’s the marginal gain there?)

  21. Neal

    January 5, 2018 @ 8:15 pm

    21

    “but in states that are litigation-oriented, close to 100 percent”

    This seems optimistic given that fewer than 60% of recent law school grads are even working as lawyers outside of a law school.

    https://biglawbusiness.com/law-grads-still-face-a-tough-job-market/

  22. toucan sam

    January 5, 2018 @ 8:38 pm

    22

    Neal I think you are very stupid and just challenging our host for attention. Therefore I think you are nothing but a troll, same as me.

  23. Pjay

    January 5, 2018 @ 8:42 pm

    23

    A more pressing question is what is the NPV of a nubile’s vagina?

  24. philg

    January 5, 2018 @ 9:07 pm

    24

    Neal: A lot of people go to law school without any intention of practicing law. And certainly when I have talked to law students locally it seems that hardly any say that “family law” or “divorce law” or “divorce litigation” is their area of choice. It is much more common for a law student to say “human rights” or “civil rights” than “divorce”, though I would be willing to bet that there are a lot more jobs in the divorce industry!

    Anyway, if you want to tell people that divorce litigation and/or accounting for divorce litigation are terrible careers and there is no opportunity for a young person, that’s fine. (Assuming that young people listen to you) the result will simply be a slightly larger paycheck for those who don’t heed your advice.

  25. GermanL

    January 5, 2018 @ 9:22 pm

    25

    The recorded phone calls of Mel Gibson yelling at Oksana were just epic. As Bill Burr said that is the sound of a man being taken for everything that he’s got! “I had to give up my Laker tickets!!!” Wow, total Mad Max on those tapes. I’ve never heard someone so pissed off before.

  26. Neal

    January 5, 2018 @ 10:10 pm

    26

    “if you want to tell people that divorce litigation and/or accounting for divorce litigation are terrible careers and there is no opportunity for a young person, that’s fine.”

    That isn’t what I’ve said here, nor is it what I would advise a young person. What I said was that just describing how rich people spend a lot of money on divorce and thus the people they hire when they divorce make a lot of money isn’t by itself particularly useful career advice. These expensive litigators aren’t expensive because there is broad society wide demand for these expensive services. They are expensive because all of the divorcing people who can afford such services want to use the same successful litigators. Anyone pursuing this career particular goal needs to understand that (1) they better have what it takes to be a successful litigator and (2) it would be best if that have a way in to the in group. Career advice without those caveats is so incomplete I didn’t even recognize it as career advice.

  27. philg

    January 5, 2018 @ 11:04 pm

    27

    Neal: You haven’t presented any data to support your theory that every city has two divorce litigators charging high hourly fees to the rich and hundreds of litigators working for $25/hour for the rabble.

    A quick Google search finds the lawyers chatting amongst themselves in 2014 discussing forensic accountants: https://www.avvo.com/legal-answers/i-meant-how-much-does-a-forensic-accountant-cost—1594012.html

    ” I don’t know any forensic accountants who charge less than $300 per hour” and “anywhere from $300 per hour on up (and up and up) ”

    As forensic accountants are commonly hired when a defendant runs a small business or has assets that are not publicly traded (and therefore that need to be valued), their $300/hour MINIMUM fee does not support your idea that high fees are obtainable only by forensic accountants hired when a rich defendant is sued.

    Back in 1997, a divorce lawsuit between ordinary New Yorkers with $7.6 million at stake (an amount that a successful dermatologist could have accumulated) generated accounting fees of nearly $500,000 (legal fees were over $1 million). Adjusted for inflation, the accounting fees would be over $750,000 today. See http://www.nytimes.com/1997/04/04/nyregion/the-experts-of-divorce-get-a-sizable-piece-of-the-action.html (the accountant’s quoted hourly rate works out to $400/hour in today’s money; the top of the forensic psychiatrist fee range is $540/hour in today’s mini-Dollars)

  28. Socrates

    January 6, 2018 @ 1:20 pm

    28

    philg, thanks for all the extensive research you have done on the issue of divorce and child support. You are unquestionably a leading authority on these matters. Moreover, with commendable public spiritedness, you have freely shared a tremendous amount of your knowledge. This is just amazing work:
    http://realworlddivorce.com/

    You should get a Nobel Prize in Economics. Your work is far better and more important than that of many recipients.

  29. Senorpablo

    January 6, 2018 @ 2:08 pm

    29

    Phil: you spend a great deal of time and energy illustrating how costly divorce can be. It seems to be a hopelessly complex and entrenched institution. I wonder if it would be more productive to attack this from the opposite end. Have you explored the potentially much simpler question: why are individuals motivated to get married in the first place? Those problems, while not insignificant, seem less entrenched and thus potentially easier to solve and drive change. Instead of going on about how much it hurts when we hit ourselves in the head with a hammer, why not talk about why we hit ourselves in the head with a hammer? One is inevitable, the other isn’t.

  30. philg

    January 6, 2018 @ 2:19 pm

    30

    Senorpablo: Litigated divorce is an “entrenched’ institution in the litigation-oriented U.S. But that’s not “hopeless” from the point of view of a 35-year-old divorce litigator billing $300-600 per hour or a 30-year-old accountant billing $350/hour. Nor is it hopeless from the point of view of successful plaintiffs who will never have to work again!

    Why do Americans keep getting married and then suing each other? https://www.theatlantic.com/business/archive/2017/08/marriage-rates-education/536913/ sheds some light on this: “America, Home of the Transactional Marriage” (short answer: we do it for the cash)

  31. Mark

    January 7, 2018 @ 10:39 am

    31

    About 50 years ago, while watching my father and uncle “band” male Angus calves, another of my uncles walked up to the action and half-jokingly grabbed me by the arm and led me over to where the banding pliers were laying. He said: “Mark, if you let us do this it will save you untold heartache and a lotta money in the long run!”
    Truer words have never been spoken. I was too you to grasp the entire meaning of my uncle’s words, but had I been, I may have allowed the procedure to occur.

  32. Mark

    January 7, 2018 @ 10:40 am

    32

    Phil,
    How did the 80 grand a year guy find the money to pay the 250K legal tab he and his darling ex-wife ran up?

  33. philg

    January 7, 2018 @ 12:00 pm

    33

    Mark: he had purchased a house in the 1990s, before first encountering his plaintiff. So there was enough home equity to make the lawsuit worthwhile for both plaintiff and lawyers.

    (I think that this is conventional for the US states where real estate has run up in value. It is common story in California, for example, for the litigators ultimately to split all of
    the home equity. Don’t forget retirement funds. The shift from defined benefit to 401k has created a lot of ready fuel for the divorce litigation fire. People withdraw their 401k funds, pay a penalty to the Feds, and give the rest to the divorce industry.)

  34. Neal

    January 7, 2018 @ 12:57 pm

    34

    “You haven’t presented any data to support your theory that every city has two divorce litigators charging high hourly fees to the rich and hundreds of litigators working for $25/hour for the rabble.”

    Of course not, I haven’t proposed any such theory nor do I think that theory describes reality.

    “though I would be willing to bet that there are a lot more jobs in the divorce industry!”

    This is speculation, not data.

    “but you simply assert “survivorship bias”). We interviewed roughly 200 divorce litigators.”

    The number of litigators interviewed is irrelevant. Even if the 200 divorce litigators were selected at random (which isn’t specified) the results can only be applied to the population of divorce litigators from which they were selected. Those data cannot be extrapolated to the population of recent law school graduates (which is who my question was about) in part because of the potential for survivorship bias.

    “In a state where a brief marriage or out-of-wedlock pregnancy is more lucrative than working at the median wage”

    Using the word “is” in this sentence is misleading. You have presented evidence in the post that a brief marriage or out-of-wedlock pregnancy *can be* more lucrative than working at the median wage. The word “is” implies that this is true in *every* case. I haven’t seen data (in previous posts or your book) suggesting this is true even in the median case, much less in every case.

    “ordinary New Yorkers with $7.6 million at stake”

    Ordinary New Yorkers who happen to have a higher net worth than 99% of other Americans.

    philg: The persistent refutation of things I haven’t said makes me think I am not being clear. Let me say clearly what I am not claiming. I am not claiming that some people like Mel Gibson or some successful professionals don’t spend a lot of money on divorce. I am not claiming that divorce isn’t expensive for “ordinary” Americans. I am not claiming that there is not a lot of money to be made in the divorce industry. I am not claiming that their aren’t states which have made design choices in their divorce systems which tend to increase conflict, drive up costs, and end up harming the children whose welfare is purportedly the highest priority. Furthermore, when I say “not claiming” I am not simply trying to limit the scope of my arguments. I am not claiming any of these things because I think they are not true.

  35. Anon

    January 7, 2018 @ 2:57 pm

    35

    @Neal If there is no gold in them there hills why are there golddiggers?

  36. Neal

    January 7, 2018 @ 3:05 pm

    36

    @Anon: I don’t think I said “there is no gold in them there hills” anywhere in this thread. Please quote back my words which you think state this so that I can (1) clarify what I meant in that instance, and (2) figure out how to better select my words to avoid this kind of misunderstanding in future.

  37. Bill Burr Fan

    January 7, 2018 @ 3:10 pm

    37

    Someone said golddiggers https://youtu.be/9onauqdci_g

  38. Been There

    January 7, 2018 @ 4:35 pm

    38

    Married for 11 years. Dumbest decision ever. Wife did not start out as a gold digger but the divorce process turned her into one. I got 10%. She got 30%. Lawyers and camp followers got 60%. Divorced females on Tinder are usually bitter that they didn’t get paid enough. Same story over and over. The “asshole” didn’t roll over immediately and give them everything. Lawyers chipped away at the pie until there wasn’t much left to fight about. Child support checks and kid-free weekends enable them to enjoy casual hookups.

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