Ludwig v Ludwig, 15-P-1177 (slip opinion) (2017).
Massachusetts Appeals Court case in which husband appealed a Probate Court’s alimony decision to include unvested stock options as income that had not been included in the parties’ equitable division after the implementation of the time rule laid out in Baccanti v Morton, 434 Mass. 787 (2001). At the probate court level, the Judge rejected the husband’s argument that inclusion of these stock options amounted to “double-dipping”, which occurs when one spouse’s property of one spouse is considered both during equitable distribution of marital assets and is then considered as a source of income when calculating a support obligation. The Appeals Court affirmed the Probate Court’s decision on the issue of double-dipping, stating that, “Here, there is no such injustice because the contested shares were not part of the equitable distribution of assets; by operation of the time rule, they were assigned to and retained by the husband outright.” In other words, precisely because the shares were not part of the division of marital assets, they could then be considered a source of income when calculating alimony. The Appeals Court further pointed out that the income for the source of the property assignment was distinguishable from the source of the alimony obligation.
The husband also contested the Probate Court’s ruling as to what date to use under the time rule when determining the value of the unvested stock options. The basic idea is that the later the date used to determine the value translates into a greater number of shares available for distribution. The Probate Court ruled that the date to be used was the date closest to the when the hearing was actually held on the parties’ contested issues because the court found that neither party had acted in any way to drag out the case. The husband argued that the Probate Court should have used the date closest to the date that the parties separated, which was about a year and half prior, arguing that the Probate Court did not make any findings on the wife’s “contribution to the maintenance of the unvested options” subsequent to the parties separation because the parties did not provide evidence or testimony as to the wife’s contribution during that period. The Appeals Court affirmed the Probate Court’s decision as to which date to use under the time rule, stating that the judge was not limited to only considering financial contribution to the acquisition of assets and referenced the language of M.G.L. c. 208 § 34 that identifies the different types of contributions that parties may make to a marriage.
The court discussed situations in which property has been divided, and nonetheless, income earned from the part of the property retained by a husband was part of the income subject to alimony. The court cited two specific cases: In Adams v Adams, 459 Mass. 361 (2011) the SJC supported the ruling of the trial court to identify a husband’s partnership interest as a marital asset to be divided and valued, and to also include any expected future income from this interest when calculating child support. In Champion v Champion, 54 Mass. App. Ct. 215 (2002), the Appeals Court affirmed the ruling of the trial court that assigned a value for husband’s interest in his business for the purposes of division of marital assets, and then considered any future earnings from this business when determining husband’s support obligations.