The Tennessee Court of Appeals recently reaffirmed and restated that it is well within a trial court’s discretion to find a party willfully and voluntarily underemployed even after an involuntary loss of one’s job. The trial court is then “required to use that parent’s potential income, rather than actual income, in setting the child support obligation.”¹

In Pallekonda v. Pallekonda, the Tennessee Court of Appeals affirmed a Madison County trial court’s finding that a husband was underemployed, as well as its division of the marital estate and alimony awards to the wife.²

After 20 years of marriage, the parties divorced. During the marriage, the husband worked as a physician and in various executive roles at hospitals. Per the husband’s curriculum vitae, he had “board certifications in anesthesiology, internal medicine and critical care medicine” during his lucrative medical career.³ Unlike her spouse, the wife left the workforce in 2007, shortly prior to the birth of the parties’ first child, and was a “homemaker and caregiver for the parties’ children” during the majority of the marriage.⁴

The wife filed for divorce in April 2021. The husband was a high-wage earner. “During certain periods of his career, [he] engaged in moonlighting adjacent to his primary work, and of further note, during certain stints of his employment, he had specifically served as a medical executive while also doing clinical work.”⁵ In the three years leading up to the wife’s divorce filing, the husband earned over $700,000 in 2020 and over $600,000 in both 2018 and 2019. The husband also earned approximately $600,000 per year between 2015 and 2017.⁶

At trial, the husband testified that, during the marriage he had accepted employment for an executive position at one point, even though it paid less than the $600,000 he was making prior thereto. However, the husband further testified that he pursued additional clinical work to make up the difference. In 2020, after the parties decided to relocate to Tennessee, the husband entered into an executive contract as the chief medical officer at a West Tennessee hospital with an annual salary of $425,000 with a separate contract to do clinical work for another $200,000 per year.⁷ In addition to his work in West Tennessee, the husband moonlighted in Michigan, “often going on weekends.”⁸

Less than a year into his employment at the West Tennessee hospital and during the divorce proceedings, the husband was asked to leave his position.⁹ Thereafter, the husband “accepted employment as the chief medical officer for a hospital in Florida” earning “$320,000 annually” with eligibility for a bonus through “the company’s incentive plan . . . at an annual target of 25% of his annual base salary.”¹⁰

The trial court entered a final decree of divorce, which found that the husband “could likely earn more than he is presently earning whether he work[ed] in an executive capacity or clinical capacity” and set the husband’s earning capacity at $36,000 per month.¹¹ Prior to finding that the husband’s earning capacity was $36,000 per month, “the trial court considered what he had previously earned over the course of a prior defined decade and noted that this ‘10-year average’ resulted in a monthly income of $40,996.50.” The trial court also cited the husband’s own testimony regarding his historical average earnings of “$32,500 per month” solely as a chief medical officer.¹²

In the final decree, the trial court also awarded the wife transitional alimony in the amount of $9,000 per month for 72 months then $7,000 per month thereafter, $7,000 as alimony in futuro.¹³

On appeal, the Tennessee Court of Appeals, reviewed the record and after oral argument, determined that the evidence did not preponderate against the trial court’s finding that the husband was willfully and voluntarily underemployed.¹⁴ In its opinion, the appellate court noted the husband’s testimony surrounding his lack of desire to work “like [he] was working before” and “the concomitant reductions in his earnings . . . , his past work history and long track record of high prior earnings, [his] allowance of certain credentials and certifications to lapse, . . . [and being] in his early 50s.” The Appellate Court further noted “the trial court’s apparent rejection of [the] [h]usband’s testimony that he could not work clinical hours and had limited opportunities following his employment in Jackson, [Tennessee].”¹⁵

In affirming the Pallekonda decision, the appellate court notably did not take issue with the trial court’s consideration of the husband’s earnings over a 10-year period in conjunction with his average fixed earnings as an executive medical officer alone. In practice, it would be relatively unordinary to consider average earnings over such an extensive period of time without giving weight to other factors like the court did here regarding the husband’s fixed salary.¹⁶ There are many Tennessee cases with issues similar to those in Pallekonda, the most analogous arguably being Andrews v. Andrews.¹⁷ In Andrews v. Andrews, the Tennessee Court of Appeals affirmed a trial court’s decision to impute income to a 49-year-old physician over a four-year period, which, like the husband in Pallekonda, included income attributable to moonlighting.¹⁸ If the husband’s income in the Pallekonda matter was imputed based on his past earnings averaged over a three, or even four year period, the imputed amount of $36,000 per month could have been substantially more.

Tennessee case law is clear that trial courts in this state continue to have broad discretion within the bounds of the Tennessee Child Support Guidelines and Tenn. Code Ann. § 36-5-121 to determine each party’s income for child support and alimony purposes. The Child Support Guidelines provide a non-exhaustive list of factors to be considered when determining if a parent is willfully under- or unemployed.¹⁹ Further, as emphasized by the Tennessee Supreme Court, Tennessee trial courts have “wide discretion in determining matters of spousal support” as well as to “the nature, amount and duration of” the same.²⁰

While courts are “more inclined to find willful and voluntary unemployment or underemployment” present when a party or parent “voluntarily leaves the employment or business activity which provided the resources,” such fact alone “does not, however, end the inquiry as to whether that parent is willfully and voluntarily underemployed.”²¹

“The complete factual background of the obligor’s situation is relevant.”²² As noted in the Tennessee Child Support Guidelines whether a party is willfully or voluntarily underemployed “is not limited to choices motivated by an intent to avoid or reduce the payment of child support” and more importantly, “may be based on any intentional choice or act that adversely affects a parent’s income.”²³ There is no presumption under the Child Support Guidelines that a parent is willfully underemployed or unemployed, as “[t]he purpose of the determination is to ascertain the reasons for the parent’s occupational choices, to assess the reasonableness of these choices in light of the parent’s obligation to support his or her child(ren), and to determine whether such choices benefit the children.”²⁴ |||

MARLENE ESKIND MOSES is a partner at Gullett Sanford Robinson & Martin, and formerly was manager and founder of MTR Family Law PLLC, a family and divorce law firm in Nashville. She is a past president of the American Academy of Matrimonial Lawyers. She has held prior presidencies with the Tennessee Board of Law Examiners, the Lawyers’ Association for Women and the Tennessee Supreme Court Historical Society. She is the immediate past president of the International Academy of Matrimonial Lawyers and is on the executive committee of the American College of Family Trial Lawyers. The National Board of Trial Advocacy has designated Moses as a Family Law Trial Specialist.

ANSLEY OWENS TILLETT practices law in Middle Tennessee and is a graduate of Belmont University College of Law. Tillett is part of the family law practice at Gullett Sanford Robinson and Martin PLLC in Nashville and co-chair of the NBA Domestic Committee.

NOTES

1.  Ralston v. Ralston, 1999 Tenn. App. LEXIS 529, *16.2. Pallekonda v. Pallekonda, No. W2023-00574-COA-R3-CV, 2024 Tenn. App. LEXIS 103 *1, 2024 WL 983162 (Tenn. Ct. App. March 7, 2024).
3. Id. at *2.
4. Id. at *2.
5. Id. at *2.
6. Id. at *2.
7. Id. at *3.
8. Id. at *4.
9. Id. at *4.
10. Id. at *4. (internal quotations omitted).
11. Id. at *5.
12. Id. at *7-8.
13. Id. at *5.
14. Pallekonda Oral Argument Jan. 10, 2024: www.youtube.com/watch?v=PSROcAXehvg.
15. Id. at *12.
16. The Child Support Guidelines also provide that “variable income . . . shall be averaged over a reasonable period of time consistent with the circumstances of the case and added to . . . fixed salary or wages.”
17. Andrews v. Susie Heasook Cho Andrews, 344 S.W.3d 321, 341 (Tenn. Ct. App. August 31, 2010).
18. Id. at 341.
19. Tenn. Comp. R. & Regs. 1240-02-04-.04(3)(a)(2)(ii).
20. Gonsewski v. Gonsewski, 350 S.W.3d 99, 105 (Tenn. 2011).
21. State ex rel. Ledbetter v. Godsey, 2000 Tenn. App. LEXIS 406, *14-15 (internal citations omitted).
22. Griffith v. Griffith, 2019 Tenn. App. LEXIS 199, *9 (Tenn. Ct. App. April 29, 2019) (citing Goodrich v. Goodrich, No. M2017-00792-COA-R3-CV, 2018 Tenn. App. LEXIS 224, 2018 WL 1976108, at *3 (Tenn. Ct. App. Apr. 26, 2018) (internal quotes omitted).
23. Tenn. Comp. R. & Regs. 1240-02-04-.04(3)(a)(2)(ii)(I).
24. Tenn. Comp. R. & Regs. R. 1240-02-04-.04(3)(a)(2)(ii).