In re Tucker
The relevant facts are undisputed. The parties married in 1995. In 1999, husband began working for Turtle Mountain, Inc. (TMI). At some point, TMI adopted an Incentive Compensation Plan, under which it established deferred compensation accounts for eligible employees, including husband. The plan provided for annual deferred compensation awards. It also provided for special deferred compensation awards in certain circumstances.
In 2007, husband and wife divorced. They agreed how to divide some assets and disagreed as to others. Of relevance here, they had already agreed to divide equally the $35,000 lump sum payment that husband had received in 2005 in connection with the deferred compensation amendment-and-release agreement, and it is undisputed that wife received half of that amount. They also stipulated to divide equally any "deferred compensation" that husband received in the future. That agreement was effectuated in paragraph 5.1 of the dissolution judgment:
"5.1 Husband's Turtle Mountain, LLC Deferred Compensation. The net balance (after payment of all taxes by Husband that result from this distribution) shall be divided equally between the parties. If Revenue Ruling 2002-22 applies, each party will pay his or her own taxes on the distribution. If necessary to prepare a QDRO, the costs of retaining an expert to divide this account will be shared equally by each party. The parties have agreed to retain Dave Gault at Jones and Roth for this purpose. The date of distribution is subject to the terms of the Deferred Compensation agreement which requires a triggering event."1
By contrast, the parties disagreed about the division of husband's TMLLC profits interest units. Husband argued that he should be awarded that asset solely, while wife advocated for equal division. Both parties put on evidence at the dissolution trial regarding the TMLLC profits interest units. After hearing both parties' arguments and evidence, the trial court ultimately awarded the profits interest units solely to husband. Section 5.5 of the dissolution judgment provides that "Husband shall retain all interest in the Turtle Mountain, LLC PIUs which the Court finds to have no present value and depend wholly upon his efforts
The divorce was finalized in 2007. Husband continued to work for TMLLC for another six years. In 2012, there was an unsuccessful effort to sell TMLLC. A year later, husband, who was president at the time, resigned. His employment at TMLLC terminated on May 14, 2013. Husband then assumed the role of Chief Executive Officer at another company.
On September 17, 2014, 16 months after husband's termination, TMLLC was sold. As a result of that event, husband received approximately $2 million for the TMLLC profits interest units that he owned at that time.
Wife then moved to show cause for an order and judgment requiring husband to pay her "one-half (1/2) of [Husband's] Turtle Mountain Deferred Compensation as provided by the Judgment, paragraph 5.1," and "the equivalent of her equity interest in the Turtle Mountain Deferred Compensation." Husband opposed the motion, asserting that,
The trial court rejected wife's argument. The court agreed with husband that, under the dissolution judgment, wife had no interest in husband's TMLLC profits interest units. The court also agreed with husband that, under the operative agreements, husband was entitled to receive a deferred compensation award upon the sale of TMLLC only if husband was still employed at TMLLC or his employment had terminated less than one year prior to the sale. The court entered a supplemental judgment in which it denied wife her requested relief and ruled that husband was in
On appeal, wife assigns error to the trial court's denial of her request for an order and judgment requiring husband to pay her half of his "deferred compensation," which she interprets as including half of what he received for the TMLLC profits interest units that he acquired in 2005. As in the trial court, wife maintains that she is entitled to "her half" of husband's TMLLC profits interest units or a "sum equal to her 1/2 of the PIUs." The parties' dispute turns on interpretation of the dissolution judgment, which references the TMI Incentive Compensation Plan. As such, we review the trial court's decision for legal error. Neal and Neal ,
We conclude that the dissolution judgment is unambiguous and does not support wife's position. Under paragraphs 5.1 and 5.5 of the dissolution judgment, wife is entitled to receive half of any Turtle Mountain deferred compensation distribution that husband receives, but she is not entitled to receive anything from husband's TMLLC profits interest units. Wife is attempting to circumvent the trial court's 2007 ruling on the latter issue by arguing that the "deferred compensation" subject to division under paragraph 5.1 includes not only any post-divorce distributions made to husband under the TMI Incentive Compensation Plan but also any payments that husband receives for the 205,454 TMLLC profits interest units that he acquired in 2005.
During the dissolution proceeding in 2007, wife specifically requested that she be awarded half of husband's TMLLC profits interest units. The court rejected that request and awarded the TMLLC profit interest units solely to husband. No matter how compelling an argument wife may make about the relationship between the TMI deferred compensation rights that husband released in 2005 and the TMLLC profits interest units that he received in 2005, that
Paragraph 4.2 of the plan document provides that, subject to certain conditions, a participant is deemed fully vested in all amounts in the participant's deferred compensation account "in the event of a Sale of the Company on or before the first anniversary of the Participant's Termination of Employment ." (Emphasis added.) Further, the 2005 amendment-and-release agreement provides, in relevant part, that husband is entitled to a special deferred compensation award in the event of the sale of TMLLC if the sale "occurs prior to [his] Termination of Employment (as such term is defined in the Plan) or prior to the first anniversary of the
When the parties divorced in 2007, they may or may not have considered the possibility of husband leaving his employment at TMLLC and, if he did, its effect on his deferred compensation. Nonetheless, when the dissolution judgment was entered, any future payout of deferred compensation to husband was necessarily governed by the terms of the deferred compensation plan, as referenced in paragraph 5.1 of the dissolution judgment.
In sum, husband received $35,000 and 205,454 TMLLC profits interest units in 2005, in connection with the corporate restructuring of his employer and related changes to the incentive compensation program. The parties voluntarily divided the cash payment, and it is not in dispute.
Affirmed.
Notes
Both parties agree that the "Deferred Compensation agreement" referenced in paragraph 5.1 of the dissolution judgment is the TMI Incentive Compensation Plan. They disagree as to the significance of the TMLLC reference in the first line of paragraph 5.1-husband contends that it is a typographical error, while wife contends that it supports her argument that husband's "deferred compensation" includes TMLLC profit interest units-but, ultimately, there is no dispute as to the "agreement" referenced in paragraph 5.1.
The failure of that argument also defeat's wife's second assignment of error, in which she contends that the trial court erred in not awarding her relief for a "breach of duty" by husband. Essentially, she argues that husband failed to protect her interest in his TMLLC profits interest units when he executed amendments to the PIU Agreement in 2008 and 2010. Because wife has no interest in husband's TMLLC profits interest units under the terms of the dissolution judgment, we reject the second assignment of error without further written discussion.
Wife emphasizes the fact that the value of husband's deferred compensation under the TMI Incentive Compensation Plan was "frozen" at $593,321 in 2005, which represented 5% of the book value of the company at that time, less the $35,000 payment. Wife appears to believe that that means that husband was entitled to a guaranteed deferred compensation payment of $593,321 in the future. However, that is inconsistent with the plan document and the 2005 agreement. After 2005, husband's only guaranteed payment was the immediate $35,000 lump sum; any future deferred compensation payment was contingent on future events. Indeed, in the dissolution proceeding, one of the parties' attorneys stated on the record that, although the estimated value of the deferred compensation plan was $593,321, "it must be understood though, Your Honor, that deferred compensation can only come to the parties upon certain contingencies occurring." TMI's founder also testified at the dissolution trial that, in order to fund the deferred compensation, TMLLC would have to sell in the future for approximately $28 million, a significant premium over its then-present value. As such, everyone apparently understood in 2007 that, if the company did not sell, or if it sold below a certain price, husband would not receive any future deferred compensation payment. It is less clear whether anyone paid attention to the fact that, even if the company sold and did so at a sufficient price, husband would not receive a deferred compensation payment if he had left employment more than one year prior to the sale. Whether the parties realized that at the time, however, does not affect the outcome.