In M.G. v. S.M., the Appellate Division rendered a decision in favor of the plaintiff husband on a provision in an amended final judgment of divorce and a subsequent order denying relief from a portion of that judgment. The question posed was whether the portion of restricted stock awarded to plaintiff by his employer, vesting after the date of the filing of the complaint, is subject to equitable distribution where the vesting is contingent upon plaintiff's post-complaint employment efforts. The Appellate Division found that the trial court's award of 50 percent of all stock awards made before or near the filing of the complaint to the ex-wife did not comport with the evidence, including the judge's specific finding that the ex-husband was credible, and, additionally, did not comport with the law.

The parties were married in 1998. Plaintiff started his employment as a consultant for a large multi-national corporation in 2001. In August 2003, and every year thereafter until 2010, plaintiff received additional stock awards. The plaintiff testified that the award vested in yearly tranches and was dependent upon his performance. At the time plaintiff filed his complaint in mid-July 2014, he was entitled to eight stock awards, three of which were fully vested and the balance of which would vest subsequent to the complaint.

The trial court apparently discounted plaintiff's testimony, although found credible, which was also supported by plan documents, that he had to constantly improve his performance or his position would not continue and he would not secure the stocks. Plaintiff was prepared to submit the vested awards to equitable distribution and share those with his former wife, who offered no refutation of plaintiff's testimony, but he did not want to share the unvested awards.

The trial judge found the award leading up to and including the 2014 award had created a marital asset and that this award would vest in five years although the value was uncertain. The trial judge relied on Pascale v. Pascale, a Supreme Court decision, which had held that stock options awarded after a marriage has terminated, but received as a result of efforts expended during the marriage, are subject to equitable distribution.

In post-judgment proceedings to obtain relief, plaintiff in M.G. v. S.M. had certified to the trial court that his award was subject to his future satisfactory attendance, work schedule, performance, etc. Plan documents supported plaintiff's position. The language included a warning that the awards were issued “provided that Awardee remains continuously employed.” The employer described the stock plans as a “reward program” for those “employees who contribute over the long term.” Nevertheless, Plaintiff's application for relief to the trial court had been denied.

On appeal, the Appellate Division reviewed the goals of equitable distribution and its rationale that marriage is a “shared enterprise.” The court accepted plaintiff's view that Pascale was not on point as that case dealt with stock acquired 10 days after the date of a divorce complaint, but attributable to services during the marriage and whether it was subject to equitable distribution, which the Supreme Court held it was. This matter dealt with the contingency of the awardee's post-complaint employment efforts. The inquiry was not when the stock was received, but rather the requirements for it to vest. The plaintiff was a “high-level corporate employee in a highly competitive industry” and any awards were subject to “consideration of plaintiff's level of proficiency” and not for prior work or mere continued employment.

Going forward, the Appellate Division held that in dealing with unvested stock awards, there would be a rebuttable presumption that such award is subject to equitable distribution unless there is a dispute as to whether the shares are for future performance. The party seeking to exclude the assets from equitable distribution would then have the burden to prove the stock award was made for services outside of the marriage for future services and not as a form of deferred compensation relating back to the award date.

The Appellate Division was then faced with setting a standard for the mechanics of distribution of unvested stock awards. It rejected both developing a coverture fraction and utilizing a “marital momentum” consideration. The court relied on the broad discretion possessed by family court judges pursuant to the factors enunciated in N.J.S.A. 2A:34-23.1 as the standard for distribution. Judge Mawla, writing for the majority, acknowledged that there had been little guidance for the trial judge and remanded for findings consistent with his opinion and pursuant to the equitable distribution statute.

In this mobile society, this decision acknowledges that stock awards are often retention mechanisms that consider both past and future performance and service. The Appellate Division reached the correct result based on the record and an understanding of contemporary employment remuneration. We agree with the decision.