Professional Goodwill

WHILE A SALARIED PROFESSIONAL HAS No GOODWILL, A PRACTICING PROFESSIONAL MAY HAVE GOODWILL SUBJECT To VALUATION AND DISTRIBUTION IN A DISSOLUTION. In re Marriage of Hall, 103 Wn. 2d 236, 692 P.2d 175 (1984).

In In re Marriage of Hall, the Washington Supreme Court held a salaried employee has no goodwill which can be distributed in a dissolution proceeding. The court further held a practicing professional may have goodwill. A two-step analysis must be employed with a preliminary inquiry as to whether goodwill in fact exists. Once found, a determination of the value of the professional goodwill must be made in accordance with the Fleege factors.  In addition, one or more of the accepted methods of valuation must be employed.

The Halls had married while both attending medical school. At the time of trial, the husband was a consulting cardiologist and shareholder in a medical clinic while the wife was an untenured salaried professor at the University of  Washington Medical School.

At trial two expert witnesses, using the capitalized excess earning approach, testified the husband had no goodwill. The only other testimony on the subject was from the wife, who testified her husband’s goodwill was at least $100,000 based on other dissolution actions involving physicians. The trial court found the wife, as a salaried physician, had no goodwill, but further found the husband had professional goodwill in the amount of $70,000. In an unpublished opinion, the Washington Court of Appeals affirmed the trial court’s decision.

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Kathleen Jordan, Professional Goodwill, 21 Gonz. L. Rev. 273 (1985).

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