December 5, 2018
appeal from Superior Court of New Jersey, Chancery Division,
Family Part, Middlesex County, Docket No. FM-12-0446-15.
E. Console argued the cause for appellant.
Gregory S. Baxter argued the cause for respondent (Caruso
& Baxter, PC, attorneys; Gregory S. Baxter, on the
Judges Alvarez, Reisner, and Mawla.
appeals from a provision of a June 16, 2017 amended final
judgment of divorce and an October 10, 2017 order denying
relief from part of that judgment. The issue is whether the
portion of restricted stock transferred to plaintiff by his
employer, which vests after the date of the complaint, is
subject to equitable distribution if the vesting is
contingent upon plaintiff's post-complaint employment
efforts. The trial judge concluded defendant S.M. was
entitled to fifty percent of all stock awards made before or
near the date of complaint. However, because the judge's
decision is contrary to the evidence and his credibility
findings, and mistaken as a matter of law, we reverse and
remand for further proceedings consistent with this opinion.
following facts are taken from the record. The parties were
married in May 1998. In 2001, plaintiff became employed as a
principal consultant for a large multi-national corporation.
Beginning in August 2003, and every August thereafter until
2010, plaintiff received a stock award from his employer.
According to plaintiff's testimony and a corresponding
summary, the stock awarded would vest in yearly tranches. For
example, plaintiff received 490 shares in 2003. Those shares
began to vest at a rate of 174 shares per year commencing in
2011. A similar vesting schedule was applied to the
subsequent stock transfers, such that the stock awards and
the vesting occurred on a rolling basis.
filed a complaint for divorce on July 28, 2014. By then, he
had been granted eight stock awards. However, only three had
fully vested and the remainder were due to vest
post-complaint, beginning on August 31, 2014, and every
trial, plaintiff also produced an informational document from
his employer entitled "Overview of Stock Awards,"
which plaintiff, on questioning by the trial judge, confirmed
contained the employer's policy. In pertinent part, the
document stated as follows:
Stock-based compensation is a key component of our reward
program . . . because it provides an ownership stake in the
company's success for employees who contribute over the
long term. To preserve this core element of our culture, in
July 2003, [we] decided to grant employees stock awards,
which represent the future right to receive shares of . . .
stock when a vesting requirement is satisfied.
. . . .
At [our company] we believe that employees who become
shareholders maintain a long-term, vested interest in
sustained individual excellence and the overall success of
. . . .
Each eligible employee's annual stock award grant is
based on his or her impact, level, and country.
Furthermore, plaintiff testified the stock plan was the way
[the employer] retain[s] their employees and they want to
make sure that you consistently perform better so if the year
that it vests, if you don't perform well, it gives them
reason to let you go and you don't get those [stocks], so
you have to be consistently performing at a better level to
be able to take advantage of the stocks that they give you.
the judge's questioning, plaintiff's attorney asked
plaintiff: "Now with regard to equitable distribution .
. . do you acknowledge that some of those stocks should be
distributed to [defendant]?" Plaintiff agreed he would
share the stocks "already vested" with defendant as
equitable distribution. Defendant did not refute any of
plaintiff's testimony regarding the stock plan, the
awards he received, the conditions for vesting, or the basis
on which the employer made the awards.
the conclusion of the trial, the judge rendered a thirty-nine
page written decision addressing custody and parenting time,
equitable distribution, alimony, child support, and counsel
fees. In the section of his opinion addressing credibility
the judge opined:
The [c]ourt finds [p]laintiff to be credible. After observing
him during his testimony, the [c]ourt determined that he was
honest and sincere. His description of events was logical and
supported by the facts.
On the other hand, the [c]ourt does not find [d]efendant
credible. Many of her claims were unsupported by facts or
plaintiff's restricted stock units, the judge continued:
The restricted stock units ("RSUs") awarded to
[p]laintiff as part of his compensation package vest over a
five-year vesting schedule. As the stocks vest, they are
reflected in [p]laintiff's W-2 for that year. Plaintiff
concedes that [d]efendant is entitled to share in the [RSUs]
that were vested as of the date of filing.
Plaintiff takes the position that the RSUs awarded on August
31, 2014 are exempt from equitable distribution based upon
the post-[complaint] status of their receipt. This is
incorrect. The 2014 award, not the vesting of that award,
created a marital asset which will vest in five years and
whose value is as of yet uncertain. The 2014 award was made
in recognition of [p]laintiff's past job performance.
Said past performance was during the marriage, making the
units subject to equitable distribution. In Pascale v.
Pascale, [140 N.J. 583 (1995), ] the Court found that
stock options awarded after the marriage has terminated, but
obtained as a result of efforts expended during the marriage
should be subject to equitable distribution. ([See
also] Reinbold v. Reinbold, 311 N.J.Super. 460
(App. Div. 1998) noting that portions of a retirement
incentive package offered after the divorce were based upon
pre-complaint efforts and subject to equitable distribution.)
In the within matter, the [c]ourt finds that the RSUs awarded
to [p]laintiff up to and including the August 2014 award are
the result of pre-filing, marital efforts, and are thus
subject to equitable distribution.
the judge imposed a constructive trust to facilitate
distribution of the unvested stock to defendant.
entry of the divorce, plaintiff filed a motion seeking
various forms of relief, including modification of the
judgment pursuant to Rule 4:50-1, as it pertained to
the restricted stock. In the certification accompanying the
motion, plaintiff stated:
Additionally, I believe the [c]ourt erred and there is a
mistake with regard to my stock options. The [c]ourt analyzed
my . . . stock . . . [in its] decision and cited
[Pascale] . . . specifically finding that RSUs
award[ed] to plaintiff up to and including the August 2014
award are the result of pre-[complaint] marital efforts and
thus subject to equitable distribution. I enclose . . .
literature from . . . my employer regarding options. The
information provided . . . clearly indicates that the
"awardees's rights in the [stock awards] shall be
affected, with regard to both vesting schedule and
termination, by leaves of absence, changes in the number of
hours worked, partial disability, and other changes in
awardee's employment status as provided in the
company's current policies for these matters."
Clearly, [the] stock[s] were performance options and a reward
for staying with my employer and a reward for future
performance. As such, . . . defendant should not share in
these options that have not vested as of the date of filing.
document plaintiff referenced in his certification was his
employer's stock award agreement pursuant to its stock
plan. In addition to the language plaintiff ...