Post-Divorce Division of Year-End Bonus & Fees for Non-Attorney Staff: Opinions, July 19, 2018

The Fourteenth Court of Appeals released a published opinion in Land v. Land, No. 14-17-00013-CV, this morning on post-divorce division of assets, specifically the division of a year-end bonus. Additionally, practitioners may want to pay special attention to the COA’s reversal of an entire fee award (subject to recalculation on remand) because there was insufficient evidence in support of the non-attorney staff fees.

Husband and wife divorced in March 2014. The decree incorporated the parties’ Agreement Incident to Divorce (the “AID”) which was also signed in March 2014. The AID includes a detailed division of the marital estate based on an informal settlement agreement (the “ISA”) signed by the parties at an earlier settlement conference.  The ISA provides that “[a]ll assets” are to be divided 53/47 in favor of wife, including specifically husband’s 2013 year-end bonus: “[Wife] shall receive [a] 53% portion of the 2013 year[-]bonus paid to [husband] in February  2014, if and when paid.” The AID says husband is entitled to receive “[a] 47% interest in the net amount of the 2013 year[-]end bonus from Occidental Petroleum undistributed as of the date of divorce” and the wife is entitled to receive “[a] 53% interest in the net amount after taxes and deductions of the 2013 year[-]end bonus from Occidental Petroleum undistributed as of the date of the divorce.”

Husband’s 2013 year-end bonus was $460,000, gross. The paystub reflected two pre-tax deductions: $75,000 for a deferred annual bonus and $6,000 for personal savings account contribution, leaving $379,000.00. After taxes ($108,711.10), the net amount paid to husband was $270,288.90, of which husband paid wife 53% ($143,253.12).

At issue is whether or not the $81,000 in pre-tax deductions was an undivided asset.  Wife sought an order directing husband to pay 53% of the $81,000 to her. After much procedural wrangling, the trial court granted the relief and awarded wife $30,480.10 in attorney’s fees and costs. Husband filed an MNT and when that was overruled by operation of law, he appealed.

Regarding the division of the bonus, husband argued that the $81,000 was not an undivided asset because the trial court’s judgment impermissibly modified the unambiguous distribution in the AID. That is, he argues the ISA and AID only required him to pay 53% of the “net amount” of the bonus and the AID clearly excepted deductions from the amount to be awarded to wife. The COA found that the $81,000 was excepted but it was not divided by the decree. The trial court was affirmed.

There was also an issue of a ring. Wife asserted a breach of contract claim against husband for holding or converting the ring. The trial court sided with wife and husband challenged the sufficiency of the evidence. The COA reviewed the evidence in support of the trial court’s judgment and affirmed.

But it wasn’t a clean sweep for wife by any means. Husband challenged the award of attorney’s fees awarded to wife because wife “offered no evidence on the qualifications or supervision of the non-attorneys for whom fees were awarded.” Wife’s attorney testified as follows:

“My hourly rate is $350.00 an hour. That is an amount that is customary for a lawyer with my skill and my experience.”

“[M]y associate …. who has been licensed for five years, has charged $250.00 an hour. Additionally, [paralegal] has been a paralegal at $100.00 an hour. Those are both customary rates for [a] paralegal and associate attorney with their skill and experience.”

“My total firm’s attorney’s fees in this matter, with the billable expenses that we’ve had to incur, are $36,080.10.”

The COA sustained husband’s challenge and found that there was “[n]o evidence presented to show the non-attorney staff members’ qualifications to perform the substantive legal work for which they billed” or that the non-attorney staff member performed the substantive legal work under the direction and supervision of an attorney.

Because the COA could not determine how much of the attorney’s fees award was based on work performed by non-attorney staff, they reversed the entire award of $30,480.10 and remanded to trial court with instructions to delete from the award “any amount based on the work of a person who is not an attorney and to make a new award… not based on the work of any such person because the proof regarding this work is legally insufficient.”

Accordingly, the trial court was affirmed on the division of the bonus and the breach of contract finding, but was reversed and remanded based on the attorney fee award.



Summer Supreme Sweep: Opinions, June 29, 2018

The Supreme Court released three opinions on June 29 (it’s been busy here at the ranch), clearing its docket of cases argued in the 2018 term.

Bradshaw v. Bradshaw, No. 16-0328, seems to have bitterly divided the court, as it was decided by a plurality. Justices Hecht, Brown, and Blacklock announced the plurality decision, while Justice Divine filed a concurrence joined by Justice Guzman agreeing in the result, but not the reasoning. Justice Boyd filed a dissent joined by Justices Green, Johnson, and Lehrmann.  And finally, Justice Lerhmann filed her own dissent.

Husband and wife married in November 2010 and lived together in wife’s separate property home, along with wife’s children. In February 2012, the home was destroyed by fire and wife used the insurance proceeds to pay off the mortgage. She then sold the property and bought a new home for the family in June 2012.

Husband sexually abused wife’s teenage daughters. He was arrested, convicted, and sentenced to 60 years in prison without parole.

Wife filed for divorce. At trial husband did not testify and wife testified briefly. The trial court awarded all of the community estate and the home to her as her SP. The Court of Appeals reversed, holding that the evidence did not support the award of all of the CP to her or the characterization of the home as her SP.

On remand, wife presented additional evidence that husband had physically abused her on multiple occasions and the two daughters testified that husband has abused them repeatedly as well. They also testified that the abuse occurred in the marital home. Husband testified by telephone from prison. He claimed an interest in the fire insurance proceeds and the house, claiming he’d made extensive repairs to it. He denied the allegations of abuse, claiming they were concocted to deprive him of his property interests. The trial court found that the home was community property and awarded 80% of it to wife and 20% to husband based on fault in the breakup of the marriage. The trial court awarded the rest of the CP to the party in possession. During the trial, husband’s conviction was upheld on appeal.

Wife appealed, arguing she should have been awarded 100% of the home and that anything less was not just and right. The court of appeals affirmed, noting that although fault may be considered in making a disproportionate distribution of CP, the division should not be a punishment for the spouse at fault.

The Supreme Court framed the issue on appeal this way: In the circumstances presented, can it be just and right, as a matter of law, in dividing a community estate in divorce, to award an interest in the family home to a spouse convicted of using the home to sexually abuse his stepdaughter? Or, put another way, whether it can be just and right to award him an interest in the home he repeatedly used to sexually abuse multiple victims, including his stepdaughters.

“We have little difficulty answering no… [W]e think it virtually beyond argument that awarding [husband] an interest in the very home he used to sexually abuse his stepdaughter, for which he was convicted, and others is unjust and wrong, not as a matter of fact, but as a matter of law. Such an award was thus an abuse of discretion.”

The Court also summarily dealt with husband’s other counterarguments:

[Husband] argues that the award is justified because [wife] took $5,000 from his disability benefits account after filing for divorce, he worked on the home and helped furnish it, [wife] offered no evidence that his criminal conviction affected her financially, and awarding her 100% of the home could be considered punitive. These arguments might be relevant to whether this is an appropriate uneven distribution for fault in the breakup of the marriage. But they miss the point: [husband] should not be awarded an interest in the home he was convicted of using to sexually assault his stepdaughter.

The Court then turned to the dissent authored by Justice Boyd (and joined by three other justices), treating it with more than a faint whiff of disdain:

“Maybe”, JUSTICE BOYD muses, “Texas law should require those who abuse their spouses or children or step-children to forfeit all interests in any property they use to commit those crimes. But the State’s right, in the exercise of its police power, to ‘declare a forfeiture of the property of private individuals’ involves policy decisions best exercised by the Legislature, not by this Court.” In the circumstances of this case, we disagree. The Legislature has already made the policy decision: a division of a community estate must be just and right.

It is interesting to note that the plurality is only three justices, but the Boyd dissent is four.

The Court seemed to limit the holding to this case alone:

To be clear, we limit our opinion today to narrow circumstances where the behavior involves the use of community property, is as egregious as [husband]’s, and results in a criminal conviction. Family violence is, deplorably, all too common. We do not hold that its occurrence alone deprives the guilty spouse of an interest in all or even a specific part of the community estate. The elements that compel our decision are that [husband] sexually abused his stepdaughters and others repeatedly over a protracted period, that he used the family home to commit the abuse, and that he was convicted and severely sentenced for the continuous sexual abuse of a child under the age of 14. One can hypothesize a harder case than this one—a single incident, weak evidence, an enormous home, no criminal conviction. A division of community property can be just and right despite violence directed against the family. The award of an interest in the home to [husband] cannot be. JUSTICE BOYD
complains that this is “unworkable as a legal principle.” We fail to see why it is more unworkable than reasonableness, a standard that pervades the law.

The case was remanded, again, to the trial court for further proceedings. (I have to admit, I’m confused by the “enormous home” part: how would more square footage vitiate the moral clarity of the Court’s ruling?)

Justice Devine authored a concurrence, joined by Justice Guzman. Devine joined in the result, but for different reasons: the record lacked sufficient information about the community estate for the trial court to make an equitable division. The court of appeals’ conclusion that the trial court did not abuse its discretion was based not on the evidence, but on the Supreme Court’s admonition that the fair and just division should not be a punishment and that awarding wife any more than 80% of the property would constitute an improper punishment. Justice Devine disagreed.

Additionally, wife argued there was no evidence to support the 20% awarded to husband. After reviewing the record, Justice Devine agreed that the award was not supported by evidence, especially considering the husband’s fault in the breakup of the marriage.

Justice Devine also responded to Justice Boyd’s dissent which argued that wife never complained about the sufficiency of the evidence in her brief. In response, Justice Devine cited a few phrases and sentences that touch upon the sufficiency of the evidence as acceptable raising of the issue.

Justice Boyd’s dissent is twenty pages long and almost as long as the plurality (10 pages) and Justice Devine’s concurrence (11 pages) together. “We dissenting Justices would affirm the trial court’s judgment because the applicable standard of review and our well-established preservation-of-error requirements permit no other option. ”

Essentially, Justice Boyd argues, the Supreme Court should have held that the division was within the trial court’s discretion and that the Supreme Court cannot substitute its judgment for the trial court’s.  Further, the dissent argued, the principle espoused by the plurality is unworkable in future cases (but the plurality did seem to explicitly limit the holding to the facts of this case). Moreover, even if it was a workable standard, it cannot be applied retroactively to this case.

The dissent is careful to note that it does not necessarily agree with the trial court’s division, but the trial court’s division is entitled to deference.

Turning to Justice Devine’s sufficiency-of-the-evidence-based concurrence, the dissent was rather skeptical:

His conclusion will be a huge surprise to the courts below, but no one will be as shocked as [wife], who repeatedly and consistently asserted the opposite. Throughout the case, [wife] has never once complained about the sufficiency of the evidence. To the contrary, as the party who bore the evidentiary burden to support a disproportionate property division, [wife] has always contended that she submitted sufficient evidence.

The dissent then cited portions of wife’s brief which indicate that she argued the evidence was sufficient and thus she waived any challenges to the sufficiency of the evidence. Additionally, the dissent agreed with wife that the evidence supported the judgment.

Justice Lehrmann, who joined Justice Boyd’s dissent wrote separately “to reiterate that our precedent does not impose any specific limits on the size or percentage of a community property award.” That is, though a trial court cannot punish a spouse in the community property division, “that does not foreclose the possibility that a highly unequal division can be ‘just and right.'”

The Bradshaw opinions show the justices wrestling with bad, awful facts and trying to reconcile them with the law. It is unclear how much authority or weight this decision will have on future cases. One last thought: Far be it from your correspondent to cynically impart improper motives, yet I couldn’t help but notice that 1) it is an election year; and 2) all three of the Texas Supreme Court justices who are standing for reelection this year either joined in the plurality (Justices Blacklock  and Brown) or the concurrence in the judgment (Justice Devine).

After the fractious Bradshaw case, it’s almost soothing to turn to In re I.C., a unanimous decision affirming the trial court’s summary judgment upholding a premarital agreement.

Husband and wife married in 2005. Before marrying, they signed an “Agreement in Contemplation of Marriage” (the “PMA”). Under that agreement, husband would pay a lump sum to wife upon entry of a divorce decree. The agreement also included a “no-contest” or “forfeiture” clause which would cause wife to lose her lump-sum if she challenged the PMA or sought to “recover property in a manner at variance with this Agreement.”

Husband filed for divorce in 2011. Wife couterpetitioned, seeking to enforce the agreement. Because husband had fallen behind in periodic payments required by the PMA, wife petitioned the trial court to compel the payments, which the trial court did. In 2012, wife filed an amended counterpetition, alleging breach of contract, anticipatory breach of contract and breach of fiduciary duty. The amended counterpetition requested rescission of the PMA “in the alternative” because of husband’s failure to pay and because “the agreement was marred with fraud.” Husband sought declaratory judgment that by challenging the PMA, the no-contest clause was triggered and wife thus forfeited her lump-sum payment. There were dueling motions for summary judgment.

A jury trial was held in 2013. The jury found wife sought to invalidate the PMA in violation of the no-contest clause but she was excused because of husband’s material breach. Husband moved for a new trial, which was granted by the trial court in late 2014. In 2015, the trial court granted husband’s MSJ on his declaratory judgment claim, finding wife sought to invalidate the PMA, she sought to recover property at variance with the PMA, and she thus forfeited the lump-sum payment. Wife appealed and the Court of Appeals affirmed. The Supreme Court found that the PMA’s language was clear that the wife’s many attempts to invalidate the PMA triggered the no-contest clause. “If these actions are not an attempt to ‘recover property in a manner at variance with [the] Agreement,’ it is difficult to imagine what is.” The fact that wife requested rescission “in the alternative” did not cure her violation because she went so far as to seek summary judgment on her entitlement to rescission.

Justice Lehrmann wrote separately to examine whether the wife could even be entitled to the relief she sought. That is, she sought to have the PMA set aside as an equitable remedy for husband’ breach. But Chapter 4 of the Texas Family Code, which governs premarital agreements, seems to set forth the exclusive grounds for setting aside a premarital agreement: involuntariness or unconscionability. Thus, section 4.006 “forecloses rescission as a remedy altogether with respect to premarital agreements.”

In Dalton v. Dalton, the Court ruled semi-unanimously to reverse a trial court’s order to enforce an agreed spousal-support obligation. Justice Boyd delivered the opinion of the Court and Justice Lehrmann delivered another concurrence.

An Oklahoma court entered an order approving and incorporating the separation agreement of the husband and wife. The Oklahoma order approved the parties’ agreement regarding child custody and support, the division, spousal support, attorney’s fees and costs. The order required husband to pay wife “support alimony” of $6,060.25/mo until he had paid her a total of $1,309,014.00.

After the entry of the orders, wife moved to Texas and was followed by husband. Husband then filed for divorce in Texas. Wife counterpetitioned and filed the Oklahoma order with the Texas court.

Before entering a final decree, the trial court entered a summary judgment order declaring that the Oklahoma order constituted a final judgment entitled to full faith and credit by Texas courts. It also found husband in arrears and in contempt. The divorce became final in 2011. The decree incorporated the Oklahoma order approving the parties’ agreement.

After the divorce, wife sought to enforce the support provisions. The trial court entered an additional QDRO to enforce the support provisions, assigning wife additional interest in husband’s retirement accounts. It again found husband in contempt and entered judgment awarding wife $269,665.19. It also denied husband’s motion to terminate and vacate the WWO.

Husband appealed, challenging the order finding him in contempt, the final QDRO, and the order dismissing his motion to vacate the WWO.

Oklahoma and Texas’s law regarding spousal-support agreements differ in that Oklahoma treats court-approved agreed spousal support as a judgment, not, as Texas does, a mere contractual obligation. In fact, under Oklahoma law, when the parties agree on spousal support, that agreement is merged into the decree and is extinguished by force of law and the obligation becomes enforceable as a judgment of the court.

Husband argued the trial court erred by ordering his employer to withhold wages to satisfy his spousal support obligations. The Supreme Court agreed because Texas law does not permit wage withholding in this case and that conclusion is not altered by the fact that an Oklahoma court entered the order first. The Texas Constitution prohibits the garnishment of wages except for enforcement of court-ordered child support or “spousal maintenance.” Chapter 8 of the Texas Family Code permits withholding from earnings for spousal maintenance, but the Oklahoma order “neither orders spousal maintenance nor approves an agreement to pay spousal maintenance.” The Supreme Court disagreed with wife’s argument that there was no real difference between the alimony ordered by the Oklahoma court and the meaning of spousal maintenance under the Texas Constitution. The Supreme Court cited precedence that an order for spousal support does not award “spousal maintenance” under Chapter 8 unless it meets that chapter’s fairly narrow requirements of eligibility, duration, and termination. There was no finding or court order in Oklahoma or Texas that wife was eligible for spousal maintenance under Chapter 8. Instead, husband’s obligations constituted voluntary support that was contractual.

The Supreme Court also disagreed with wife’s argument that the Texas court must give full faith and credit to Oklahoma law. Rather, the Texas court was obligated to give full faith and credit to the judgment, but not the law of the judgment’s origin. In other words, the judgment is valid and enforceable in a Texas court, but not under Oklahoma enforcement mechanisms.

Husband also challenged the trial court’s post-divorce order assigning wife an additional interest in his retirement accounts because, under the Family Code, the trial court was required to apply Texas procedures and remedies to enforce his support obligations and no Texas procedure or remedy allowed the court to assign wife more interest in the retirement account than were assigned in the divorce. The Supreme Court agreed.

Wife petitioned for the additional QDRO under a section of ERISA,  29 U.S.C. § 1056(d)(3), and the trial court granted that request. The Supreme Court held, however, that section did not authorize the assignment of the 401(k) to wife. The Court also reviewed other provisions of the Texas Family Code for support for the award (including chapters 8 and 9), but did not find any. Trial courts are “without authority to enter a QDRO altering the terms of the decree” and “cannot change the substantive division of property made in the original decree.”

The Supreme Court reversed the Court of Appeals’ judgment upholding the trial court’s wage-withholding order and the trial court’s QDRO order and rendered both orders void.

Justice Lehrmann wrote separately to address a few issues. First, she argued that the Supreme Court did not address whether the wife should have the opportunity in the enforcement proceedings to show that she and the Oklahoma order qualified (at least partially) as spousal maintenance under chapter 8. Justice Lehrmann would affirmatively recognize that the wife should have that opportunity. (It seems to me like this issue is outside the scope of the appeal because it was not at issue below, but that’s just my two cents)

Justice Lehrmann also wrote to disagree with the majority to the extent that the majority holds that QDROs may be used only to effectuate a property division and may not be used to enforce delinquent spousal maintenance and child support. She also postulates that Texas law allows for enforcement of child support and chapter 8 spousal maintenance obligations via a QDRO that complies with ERISA.