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In Case You Hadn’t Heard…To Dip or Double Dip, That Is The Question

July 11th, 2016 by mmohler

The Tenth District Court of Appeals recently upheld a trial court’s decision that found that double dipping was not inequitable under the facts and circumstances. This case, Gallo v. Gallo, 10th Dist. No. 15AP-442, 2016-Ohio-3530 (“Gallo II”), had been previously appealed based on the argument that the trial court improperly “double dipped” in awarding spousal support based, in part, on the income stream from a business whose value was included (and divided) as part of the division of marital property. In that appeal, the Tenth District Court of Appeals clarified that its decision in Heller v. Heller, 10th Dist. No. 10AP-312, 2010-Ohio-6124, that appeared to completely prohibit double dipping, did not, in fact, outright prohibit double dipping; to the extent it did, it was overturned. Instead, the Court found that, “in the interest of equity, trial courts should factor the impact of double dipping into their property division and spousal support decisions.” Gallo v. Gallo, 10th Dist. No. 14AP-179, 2015-Ohio-982 (“Gallo I”). The Court stated that the trial court has “discretion regarding if and how to remedy the double dip, and such decisions will turn upon the facts and circumstances of each particular case.”

In the trial court, the valuation expert valued the company by normalizing the earnings of the business and then applying a risk-adjusted discount rate to arrive at the present value of the 39.5% interest and then discounted for lack of control and lack of marketability (the Court later describes this as the capitalization of earnings method). In Gallo I, the Court found that double dipping had occurred and while the trial court has discretion regarding “if and how to remedy the double dip” which will turn on the “facts and circumstances of each particular case,” here the trial court “did not consider the double dip”. Accordingly, the case was remanded for the trial court to consider the fairness of allowing the double dip. On remand, the trial court held that double dipping was equitable under the particular facts and circumstances. The trial court’s decision was appealed again, arguing abuse of discretion. In Gallo II, the Court held that “[t]he factors relied on by the trial court provide a sound basis to conclude that equity does not require a double-dipping offset on these facts.”

Click here to read Gallo I and Gallo II.

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