Dunbar v. Dunbar

Massachusetts Appeals Court · Contracts

ContractsDivorce judgment interpretationAlimonyContemptcivil contemptclear and unequivocal commandclear and convincing evidencebonus income

Facts

The 2004 divorce judgment required Philip to pay Annie $850 per week in alimony and one-third of any gross bonus income within forty-eight hours of receipt; it also separately divided Philip's stock options equally between the parties as of January 29, 2004. In 2008, Philip took a job with Industrial Defender that included stock options, which the company later converted into points under a plan called the Change of Control Bonus Plan, using an identical vesting schedule. When Lockheed Martin acquired Industrial Defender in 2014, Philip received three payments under that plan, including one for $487,145.82, but he did not pay Annie one-third of them. Annie claimed the payments were bonus income, while Philip maintained they were proceeds tied to equity.

Issue

Whether the payments Philip received under Industrial Defender's Change of Control Bonus Plan were bonus income covered by the divorce judgment's alimony provision, or instead proceeds of stock options/equity outside that provision. If they were not bonus income, the further question was whether Philip could be held in contempt or ordered to pay Annie one-third of those amounts.

Rule

In a civil contempt proceeding, contempt must be supported by clear and convincing evidence of disobedience of a clear and unequivocal command. When a divorce judgment distinguishes among salary, bonus income, and stock options, a payment labeled by an employer as a bonus is not treated as bonus income if, in substance, it is the proceeds of stock options or equity rather than compensation for job performance.

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A divorce judgment entered in Oregon requires Noah Price to pay his former spouse, Elena Price, one-third of any gross bonus income within 72 hours of receipt. The same judgment separately states that Noah's stock options are his separate property. After taking a job in Portland, Noah receives a payment labeled a "merger bonus," but the payment is calculated solely by multiplying his vested units in his employer by the acquisition price paid in a company sale and is unrelated to his performance reviews or sales targets.

If Elena files for contempt after Noah keeps the entire payment, how should the court most likely classify the payment?

Explanation. The governing rule is that where a divorce judgment distinguishes bonus income from stock options or equity, a court examines the nature and purpose of the payment, not merely the employer's label. A payment tied to vested units and acquisition value, rather than job performance, is treated as proceeds of equity rather than bonus income. Because the payment here reflects surrendered vested equity in the sale, it is most likely equity proceeds, not bonus income. (Derived from Dunbar v. Dunbar (n.d.).)