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Archive for the ‘stock options’ Category

Our Supreme Court recently held that, in a dissolution proceeding, a trial court had broad discretion to assess the value of a
couples’ stock options and to assess attorney’s fees.

In Farmer v. Farmer, Washington Supreme Court # 83960-3, the parties agreed to split the husband’s stock options 50 / 50.  However, despite that agreement, the Husband exercised all the options and sold all the stock.  When the wife found out about it, she asked the court to set aside the divorce decree and award her damages.

The issue was how to measure damages.  The mother argued that, per the agreement, she should have been able to exercise the stock options whenever she wanted.  Her accountant calculated that the value of the stock had increased, on average, twenty percent per year.  He then calculated the value of each stock option, based on the annual increase, the day before it was to expire.  He then estimated federal income tax and medicare tax and deducted those amounts.

The Husband argued that the calculation was inappropriate and unreasonable, but did not come up with an alternative method for evaluating the stock options.  The trial court noted that the Husband lied to both the Wife and the court regarding the status of the stock options, adopted the Wife’s valuation methodology, and awarded her attorney’s fees and costs.

Both the Court of Appeals and the Supreme Court affirmed.

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