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Robertson v. Robertson

381 N.J. Super. 199, 885 A.2d 470 (App. Div. 2005)

STOCK OPTIONS; DIVORCE—Where stock options are given to a new employee, they are for the expectation of future services, not as compensation attributable to a couple’s joint marital endeavors and are not subject to equitable distribution if the grant is made near the time a divorce complaint is filed.

A couple was married in 1989 and separated on July 31, 2001. The husband filed for divorce on September 20, 2001 and a dual final judgment of divorce was entered on November 5, 2003. In a trial that took place during the divorce proceedings, the lower court granted equitable distribution of the husband’s stock options to the wife. He received them as a “signing and retention bonus by his present employer on September 17, 2001— three days before the complaint for divorce was filed.” Those options, “granted at the start of the employment, contained a provision that they would vest in one-fourth increments each year over the next four years on the anniversary date of employment.” The husband contended that his wife should have had no interest in those options because they were given after separation and within a week before the divorce complaint was filed. He also contended that at the earliest, they would not vest until twelve months later.

His wife conceded that the options were given to her husband as an incentive for him to accept a new employment position. On the other hand, she contended “that he would not have qualified for the job but for her support during the marriage.” She argued “that a bright-line rule be employed to determine whether [such] options are exempt from distribution, [contending] that since they were granted the final divorce was filed, she [was] entitled to share in that.”

The Appellate Division declined to impose a bright-line rule. It pointed to a 1974 New Jersey Supreme Court case that stated “for purposes of determining what property will be eligible for distribution the period of acquisition should be deemed to terminate the day the [divorce] complaint is filed.” Despite this clear statement, the Appellate Division pointed out that the New Jersey Supreme Court did not intend to set forth a bright-line rule in that decision. In fact, the Supreme Court observed further: “[w]e are under no illusion that what we have said above will provide the certain and ready answers to all questions which may arise as to whether particular property is eligible for distribution. We have sought only to implement the legislative intent, as we discern it, by setting forth what we believe should be the general governing rules. Individual problems must be solved, as they arise, within the context of particular cases.” With that as background, the Appellate Division found the present case to present “such an individual problem.” It felt it needed to understand the “principal purpose of equitable distribution: namely, to recognize and provide compensation for the contribution of each party to the joint marital enterprise, whether as a homemaker ... or salary-earner.” Here, the husband moved from the marital home on July 31, 2001 and filed for divorce on September 20, 2001. At the time of separation, he was dissatisfied with his job and started to search for different employment. He did not begin his new employment until three days before he filed the divorce complaint, which complaint was filed the day after a separation agreement was executed. Although stock options were issued to the husband immediately upon his employment, the Court found that “the conclusion [was] inescapable that they were offered as an inducement to commence employment, not as a recognition for past performance with the company.” It found “no evidence that the vesting of those options over a subsequent period of four years was designed for any purpose other than as a means to insure the husband’s continued employment with the company.” That is why the Court concluded that, “[a]s such, the options in no way represented compensation attributable to the couple’s joint marital endeavors.” Consequently, the Court found that the husband had met his burden in establishing the immunity of the stock options from equitable distribution.

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