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NEW JERSEY LAW JOURNAL THURSDAY, MAY 11, 1989
Distribution of Asset Upheld in Divorce Case.
For Piscopo, Celebrity Goodwill Has Its Price
By Ronald J. Fleury
Joe Piscopo agrees that he is a celebrity, but his hubris stops there. There is no guarantee, he says, that his future earnings will
exceed those of the average entertainer.
Yet a state appeals court said, in effect, that he shouldn't worry. His career will do just fine. The only problem for Piscopo is
that the court's optimism on his behalf is going to cost him in his divorce suit.
Last week, Appellate Division Judge Julia Ashbey, in an opinion joined in by Michael Patrick King and Warren Brody, upheld the principle that
celebrity goodwill is a marital asset subject to equitable distribution, marking the first time in New Jersey that star quality has been treated as marital property. As part of her ruling, Judge Ashbey
accepted a novel method of evaluating the goodwill: Piscopo, no ordinary Joe, has a reputation that will produce earnings greater than a typical entertainer.
In its May 1 ruling, Piscopo v. Piscopo, No. A-35-88-T5F, the three judge panel ruled that Piscopo's former wife, Nancy Hayes, is entitled to
48 percent of the goodwill value that attaches to Piscopo Productions, Inc., above and beyond its book value. Hayes owned 48 percent of the corporation's stock. The goodwill award brings her an extra
$49,000 in her divorce from the comedian.
The idea that an entertainment enterprise can generate goodwill like other businesses is not new. But attorneys for Piscopo and Hayes
believe it is the first time that celebrity goodwill has been found to rest with an individual. not a corporation.
New Jersey has recognized, in Dugan v. Dugan, 92 N.J. 423 (1983), that a professional corporation's future earnings may be enhanced by the
reputation of the individual license-holder, increasing the corporation's goodwill.In the same way, the appeals court accepted the argument by Hayes' attorney - Charles Abut of Lowen & Abut in Fort Lee
- that an entertainer's celebrity status is a reputation that may generate future business. Although Piscopo drew all his compensation from
Piscopo Productions, Abut believes that the corporation's book value did not fully reflect Piscopo's reputation and ability to generate earnings.
The case pitted Abut, who has represented a string of celebrities, against
Piscopo's attorney, Francis W. Donahue, a partner in Skoloff & Wolfe in Livingston, which has handled a host of major family law cases, including
William Stem's successful effort to win custody of Baby M, the girl he fathered with surrogate mother Mary Beth Whitehead Gould.
The dispute, at first, centered on child custody. Hayes had requested
permission to take their 10-year-old son to live with her in Florida; Piscopo said that would defeat his visitation rights. Donahue says that
the court would not have been faced with the celebrity status issue if the custody issue had been settled.
But when it became clear that a settlement could not be reached, Abut
started focusing on the financial aspects of the divorce. "It occurred to me that Piscopo Productions, Inc., like any other business, had a goodwill
value," he says. He noted that Piscopo had established a track record of large earnings, and that some value should be assigned to his future
earning ability. But Abut's research turned up no cases involving celebrity goodwill.
Abut is no stranger to celebrities, having represented Billy Martin and
Sparky Lyle in book publication deals and advertising contracts, and Phil Rizzuto in television and radio appearances.
He also represented Barbara Reynolds, a Jacqueline Onassis look-alike,
in a suit by Onassis over Reynolds' appearance in an advertisement as a "celebrity" guest at Christian Dior's wedding. Onassis v. Dior et al., 472
N.Y.S.2d 254 (N.Y.County, 1984). Onassis won the case, forcing Abut to wrestle with the problem of how to place a value on celebrity status
In Piscopo, Abut felt that Skoloff & Wolfe never took the
celebrity-goodwill issue seriously, leading him to self-doubt. "I kept asking myself, 'What am I missing?' and 'What do they know that I don't?' "
Then, about a month before the trial in August 1988, the New York Supreme Court decided Golub v. Golub 527 N.Y.S.2d 946 (Sup.Ct.1988),
holding that actress and model Marisa Berenson had an ability to be an exceptional wage earner, which generates a value similar to corporate goodwill. Golub was the extra push Abut needed.
Golub was cited with approval by the trial and appeals courts in Piscipo.
But the New York court while accepting that the value of celbrity status is marital property to the extent it increased during the marriage, did not establish a method of valuation.
Assessing Goodwill
In Piscopo, the appeals court relied on a method submitted by a CPA with
Touche Ross & Company in Teaneck who has represented entertainers such as Duke Ellington, Cab Calloway, Kate Smith, and Jackie Gleason. The CPA, Irwin Marks, was selected before the trial when Abut asked
that an expert be appointed to assess the value of Piscopo's then-hypothetical celebrity goodwill. Marks was chosen by Superior Court Judge Harvey Sorkow, sitting as the Bergen County assignment
judge. Marks says that this was the first time he had been asked to assessthe goodwill value of a show-business personality.
Judge Stark ruled that celebrity goodwill was an asset of the corporation and this subject to equitable distribution
The method he used called for him to determine the usual reasonable compensation for an actor/comedian of Piscopo's sort, and then to compute
the amount by which his average yearly gross income exceeded that compensation rate. Marks found that excess to be 25 percent of Piscopo's average gross income.
Marks says that unlike in other professions there are no surveys or
statistics on entertainers' earnings. Not even the American Federation of Television and Radio Artists or the Screen Actors' Guild could provide
such figures. "So, the determination had to be somewhat subjective. "
In deriving average gross income, Marks considered Piscopo's draw from Piscopo Productions for three of the five years before trial. He
disregarded two years which showed dramatically lower income because entertainers' incomes often fluctuate, and because he considered the three years more representative of Piscopo’s earnings capacity. Marks
then applied the 25 percent discount, leaving a goodwill value of $158,863.
Predicting the Judge's Decision
Donahue, Piscopo's lawyer, did not see Marks' report until a month before
the trial. Because of time pressures, he decided not to retain an expert but to rely on his expertise in cross-examining accountants. He also
predicted that the trial judge, Isabel Stark, would not award Hayes more than 50 percent of the goodwill value, and that the amount in question would only be a small piece of the total award, which involves several
significant real estate assets.
Judge Stark ruled that celebrity goodwill was an asset of the corporation
and thus subject to equitable distribution. She included all five years of Piscopo's earnings, arriving at a goodwill value of $98,708, and awarded
Hayes 48 percent of it. But Judge Stark said she still was not satisfied with the methods used to arrive at the figure, and wanted to take more testimony.
Both parties, however, wanted a prompt decision on custody, and because the difference between the amounts reached by Marks and Judge Stark
was not substantial, the two sides stipulated that the lower figure of $98,708 was an accurate valuation if and only if celebrity goodwill was
found on appeal to exist as an asset. Even so, Judge Stark reserved the right to take further testimony on the valuation issue.
Although Donahue conceded to the appeals court that that celebrity goodwill is an asset, he argued that it is too speculative to measure in
light the unpredictability of future earnings for entertainers. But the judges found the issue moot because the attorneys had stipulated at trial
that Judge Stark's valuation was correct. "The stipulation might possibly have worked against us,” says Donahue.
Linking Publicity, Goodwill
Donahue felt that Judge Stark had improperly equated the right of
publicity with celebrity goodwill. According to him, individuals have the right of publicity, while businesses have goodwill. With celebrities,
though, the line often blurs. In Piscopo, both sides relied heavily on Estate of Elvis Presley v. Russen, 513 F.Supp. 1339 (D.N.J. 1981). In that
case, the court ruled that the right of publicity - manifested by the use of Presley's name or likeness- is a protectable property interest separate
from the individual and transferable by that individual for commercial purposes.
Piscopo has until May 22 to ask the Supreme Court to hear his case, on
both the equitable distribution and child custody issues. Hayes, who retains custody, was permitted to apply for additional counsel fees.
Abut says that Piscopo has been caught in a dilemma and will continue to
be if he petitions for certification:” He has consistently taken the position that he is not a big earner, but when he's negotiating with those who want
his services, he must necessarily argue that he's a major celebrity and deserves big money."
Donahue sees some contradiction but finds consistency overall. "Joe has
never denied that he's a celebrity," he adds. "He's simply pointing out that there's no guarantee of success in the future. "Rather than
centering on Piscopo's future earning capacity, the court should have looked at the corporation's long-term contracts, residuals, royalties and
other dependable sources of income, Donahue says. He adds: "If the Piscopo holding is taken to its logical conclusion, it will eliminate entirely
the need for a business enterprise, and therefore any individual who earns more than an average salary in his field will be assigned a goodwill value
In Piscopo, the court relied on a valuation method submitted by a CPA who has worked with entertainers such as Duke
Ellington and Jackie Gleason.
We could have executive goodwill, lawyer goodwill, even judicial goodwill."
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