Posted by Nydia Streets of Streets Law in Florida Divorce
In Florida the personal goodwill of a spouse who runs a business is a non-marital asset which is not subject to equitable distribution. What about the collective personal good will of a multi-owned business? Would the goodwill of other members be considered in determining the value of the business that is to be awarded to a spouse in a divorce? This was an issue in the case Rosenberg v. Rosenberg, 5D2023-1079 (Fla. 5th DCA June 21, 2024).
In this divorce case, the parties entered an agreement which divided all of their property to their satisfaction. However, the wife became aware after entry of the consent judgment, that the husband did not disclose the sale of a medical practice of which he was a member that he knew was imminent at the time the parties entered their agreement. Accordingly, the wife filed a motion to re-open the judgment to have this issue considered, and her motion was granted. Each party hired experts to testify at trial as to the value of the husband’s portion of the business which would be subject to equitable distribution. The husband’s expert opined that the personal goodwill of the other members of the medical practice should be excluded, while the wife’s expert opined that the good will of the other members should be included. The trial court sided with the husband, and the wife appealed.
The appellate court noted this was an issue of first impression - other Florida case law on this issue deals only with business owned and operated solely by one person. The law is silent as to goodwill in a multi-member entity. The court noted “What is evident in the caselaw, and what decides this case, is that personal goodwill of a professional is simply not a marital asset in Florida. Personal goodwill, whether it be that of a divorcing spouse or any one of thirty-four physician/shareholders in a medical practice, is “not a marketable asset distinct from the individual” who performs services.”
The court held “Because personal goodwill cannot be considered in the division of marital assets, and is not a part of enterprise goodwill, it must ipso facto be excluded in calculating the value of a purported marital asset in a dissolution proceeding. Applied here, this principle requires that the personal goodwill of the thirty-five physicians must be excluded; it is collectively a non-marital asset of each of the respective physicians. Just as [the husband’s] personal goodwill is his own non-marital asset, the personal goodwill of the other thirty-four physicians is their own non-marital asset; it thereby must be excluded from the consideration of the market value of the transaction at issue, as [the husband’s expert] did.”
In affirming the trial court’s decision, the appellate court certified the following question to the Supreme Court as one of great public importance: “IN A MARRIAGE DISSOLUTION CASE, MUST THE VALUE OF THE PERSONAL GOODWILL OF ALL PHYSICIANSHAREHOLDERS IN A MULTI-MEMBER MEDICAL PRACTICE BE EXCLUDED FROM THE NET VALUE OF THE SALE OF THE PRACTICE IN DETERMINING THE MARITAL VALUE OF THE PRACTICE?”
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