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.

 

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