Last week, I blogged on the A.J.V. v. M.M.V. case, specifically, regarding the retroactive application of a savings component. As noted in the post, there was an interesting treatment of deferred compensation in the case.
Specifically, the husband received RSUs as part of his annual compensation which serially vested over 3 years. In this case, the Complaint was filed in 2014. At issue were the RSUs granted in 2012, 2013 and 2014. As is sometimes the case, in recognition for the fact that the husband had to continue to work post-complaint for the RSUs to vest, the parties attempted resolve the issue using a coverture fraction and “agreed” that the wife would receive thirty-nine percent of the net shares in the tranche that vested in 2015, twenty-two percent of the net shares in the tranche that vested in 2016, and six percent of the net shares in the tranche that vested in 2017. What they never could agree on was how to determine the net based upon a disagreement of the tax rate to use.
In his decision, the trial judge came to the conclusion that the parties’ inability to agree on the tax rates meant they had no agreement at all . The judge then went on to make detailed findings as to the sixteen statutory factors in the equitable distribution statute and determined that the wife was “entitled to 50% of all net RSU[s]” granted prior to the date of Complaint.
The Appellate Division affirmed and agreed that in absence of a complete stipulation, he could divide the RSUs and allocate the tax consequences in the way that he found most equitable. The Appellate Division noted that a stipulation of settlement should not be enforced “where there appears to have been an absence of mutuality of accord between the parties or their attorneys in some
substantial particulars, or the stipulated agreement is incomplete in some of its material and essential terms.”
The Appellate Division noted that the trial judge properly considered all of the statutory factors. Moreover, the Court addressed the 2018 M.G. v. S.M. case dealing precisely with this issue that we previously blogged on. The Appellate Division noted that the trial court relied on an quoted that holding, specifically:
(1) “[w]here an award is made [by an employer] during the marriage for work performed during the marriage, but becomes vested after the date of complaint, it too is subject to equitable distribution”; (2) “there is a rebuttable presumption the award is subject to equitable distribution unless there is a material dispute of fact regarding whether the stock, either in whole or in part, is for future performance”; and (3) “[t]he party seeking to exclude such assets . . . bears the burden to prove the stock award was made for services performed outside the marriage.”
The court further noted that:
Applying these principles, the judge found the RSUs at issue were subject to equitable distribution because they were awarded for Alan’s “pre-complaint work performance” as “compensation” during times when he was working and traveling extensively and Martha was supporting those efforts by caring for their home and child. The judge also found that, “[u]nlike the plaintiff in M.G.,” Alan “provided no material, objective or credible testimony or evidence, including stock plan information or testimony from corporate representatives, that the RSUs were compensation for or contingent upon future work performance.” The judge, therefore, found Alan “failed to meet his burden of proof to exclude the RSUs from equitable distribution.” The judge added that he “generally did not find [Alan] to be credible,” and so rejected his “unsupported position that the RSUs are contingent or related to future performance.
This is often the when these issues arise – either the proofs are not put in or the plans are somewhat nebulous because when they claim to reward future performance, there are cases noted in my prior blog post on M.G. where the court disregarded that language because the employee would still get the deferred compensation, even if their was future disability, death, lay offs, etc.
The take away here is that if want to divide these assets on a less than 50-50 basis, you either need to formalize the stipulation regarding the issue and/or prove the necessary requirements of M.G. at trial.