919 N.W.2d 297
Minn.2018Background
- Stephen Gill bought an interest in Talenti (held through Wyndmere LLC) during marriage; 80% of Wyndmere is marital property.
- A sale to Unilever was negotiated: $180 million upfront plus up to $170 million in contingent earn-out payments based on future Talenti performance; letter of intent July 2014; purchase agreement closed Dec. 2, 2014.
- Parties separated and district court set the valuation date as Sept. 5, 2014 (uncontested). Sale closed after that valuation date but before final dissolution.
- District court treated the $180 million upfront as marital value at the valuation date but classified the contingent earn-outs as nonmarital, reasoning they compensated Stephen’s post-valuation labor.
- Court of appeals reversed, holding the purchase agreement unambiguously treated earn-outs as part of purchase consideration and thus marital; the Supreme Court affirms the court of appeals and remands for division of any earned payments.
Issues
| Issue | Plaintiff's Argument (Gretchen) | Defendant's Argument (Stephen) | Held |
|---|---|---|---|
| Are future contingent earn-out payments marital or nonmarital property under Minn. Stat. § 518.003, subd. 3b? | Earn-outs are proceeds of the pre-dissolution sale of a marital asset and thus marital property subject to division. | Earn-outs were contractual rights acquired after the valuation date and compensate husband’s post-valuation labor, so nonmarital under § 518.003(3b)(d). | Earn-outs are marital: sale of marital asset converted that asset into contractual rights (including earn-outs) received pre-dissolution and so are marital proceeds subject to equitable division. |
Key Cases Cited
- Olsen v. Olsen, 562 N.W.2d 797 (Minn. 1997) (classification of property is a question of law; defer to trial court findings)
- Janssen v. Janssen, 331 N.W.2d 752 (Minn. 1983) (nonvested contractual rights can be more than a mere expectancy and be marital)
- Nardini v. Nardini, 414 N.W.2d 184 (Minn. 1987) (marriage is a partnership; marital property concept interpreted broadly)
- Rogers v. Rogers, 296 N.W.2d 849 (Minn. 1980) (valuation of closely held business must exclude value dependent on owner’s personal services)
- Rohling v. Rohling, 379 N.W.2d 519 (Minn. 1986) (right to receive funds acquired during marriage can be marital)
- Valspar Refinish, Inc. v. Gaylord's Inc., 764 N.W.2d 359 (Minn. 2009) (contract interpretation is de novo when language is unambiguous)
- Dykes v. Sukup Mfg. Co., 781 N.W.2d 578 (Minn. 2010) (clear contractual language must be enforced as written)
- Baker v. Baker, 753 N.W.2d 644 (Minn. 2008) (presumption that both spouses contribute to acquisition of property during marriage)