Wednesday, January 08, 2014

In Re Marriage of Finby (Cal. Ct. App. - Jan. 7, 2014)

Ah, the difficulties of getting divorced as a high-income couple in Orange County.

The trial court was wrong, and Justice Rylaarsdam (and the rest of the panel) is right.  Wife got paid a boatload of money for bringing her "book of business" from UBS to Wachovia.  She got the boatload up front despite the fact it was (understandably) conditional on her staying at Wachovia for nine years or so.  Similar thing for various "bonuses".  This is how people are paid in the modern era.

The trial court says all this money is Wife's separate property.  Nope.  She built up the book of business during the marriage.  It's true that her "entitlement" to the resulting money doesn't "vest" until after the separation date, because she's got to continue to work at Wachovia in order to be "entitled" to the money.  But that doesn't mean that Husband's not entitled to any of that money.  Much of which is simply payment for the book of business that Wife brought over.  A book that she generated during the marriage.

The Court of Appeal doesn't use the term "option", but that's exactly what this is.  Wife was granted an option during the marriage -- based upon her work during the marriage -- to earn a lot of money.  How much she'll obtain upon exercise of that option may depend upon future (post-separation) events; e.g., if she continues to productively work for Wachoiva.  But that doesn't mean the option has no value.  It does.  In spades.  That option value is community property.  It gets split fifty-fifty.

It's true that the option is hard to value.  But so are lots of things.  Including but not limited to options in the financial world.  For example, if Wife really thinks the option is so "speculative" that it has no value, I'm more than willing to buy 70% of her expectancy for $500.  I'd make a killing.  The fact that there's no way in the world she'd sell at this price proves that the option (1) has value, and (2) can be determined.  We just have to find the right number so that Wife's indifferent about a potential sale.  Since she's the one with superior knowledge and control about the value of the option, she's the best one to value it.  So we get to a number that makes sense.  Then split it down the middle.