Earlier this month the Rhode Island Supreme Court affirmed a decision and order from the Rhode Island Family Court in favor of an ex-wife who was represented in the Family Court by partner Jerry L. McIntyre of McIntyre Tate LLP and in the Supreme Court by partner Robert S. Parker in the appeal brought by her ex-husband.
During the divorce proceedings, the Husband had filed a claim with his employer seeking unpaid compensation he contended was owed to him for work he previously had performed for the company while he was married to the ex-wife. Any financial recovery resulting from such a claim unquestionably is a marital asset under Rhode Island divorce law. The ex-husband told the ex-wife about this claim during the parties’ divorce negotiations. The parties agreed to include a provision in a marital settlement agreement that the ex-wife would be entitled to forty percent of any recovery resulting from that claim. Unbeknownst to the ex-wife, during the divorce negotiations, the ex-husband secretly negotiated a “Departure Agreement” with his employer. In the Departure Agreement, the ex-husband agreed to accept a payment from his former employer in the gross amount of $218,000. Notwithstanding that the Departure Agreement included a release of all claims he had against his employer, the ex-husband later claimed that the settlement exclusively provided him with compensation after his termination from the company for non-marital lost future income. In a letter written just 9 days prior to the parties’ signing of the marital settlement agreement and the Family Court’s hearing on the merits of the divorce, the ex-husband’s divorce counsel wrote the ex-wife’s counsel informing that any settlement between the ex-husband and his employer was “highly speculative. ” The letter selectively ignored that the employer already had provided the ex-husband with a significant settlement offer approximately 30 days earlier. Within a week following the nominal divorce hearing, the ex-husband signed the Departure Agreement with his employer. He never told the ex-wife about the settlement. He also delayed cashing the settlement check from his employer for a few months until shortly after the entry of final judgment of divorce.
The ex-wife did not learn about the ex-husband’s settlement with his employer for an additional sixteen months. It came to light in the process of discovery of the ex- husband’s bank records in an unrelated motion brought by the ex-wife regarding the ex-husband’s failure to provide notification of his having secured a new job. The marital settlement agreement required the ex-husband to do so since due to his recent job loss, he was paying child support on a temporary basis in an amount far below what his earning capacity otherwise would require him to pay.
The Supreme Court affirmed the Family Court’s holding that the ex-husband willfully and in bad faith secretly attempted to recast the terms of the settlement with his employer from one resolving claims for past unpaid compensation, a marital asset, into compensation for future post-divorce lost wages incident to a Departure Agreement upon his termination by the company which the ex-husband contended was a non-marital asset to which the ex-wife had no legal entitlement.
The Family Court found that in negotiating the divorce settlement, the ex-husband along with his counsel had engaged in a practice of sharp dealing and bad faith, intentionally misinforming the ex-wife and her attorney in negotiating the terms of settlement of the divorce as to the imminent status of settlement between the ex-husband and his former employer and by secretly attempting to recast his well-documented demands to his former employer for compensation for prior work he claimed to have performed for it during the marriage into compensation for lost future wages. His failure to disclose to his wife his receipt of the settlement proceeds, which properly should have been added to his gross income at the time of divorce for purposes of calculating his child support obligation, and his delay in cashing the settlement check until after the entry of final judgment of divorce also evidenced his bad faith.
The Supreme Court first upheld the Family Court’s findings that the ex-husband had acted in bad faith. It accordingly upheld the Family Court orders of relief to the ex-wife that she was entitled to an increased fifty percent share of the net proceeds the ex-husband received from his employer rather than the forty percent share she was to have been awarded under the provision of the marital settlement agreement. That increased award was based on another provision of the marital settlement agreement requiring the any marital asset that was not disclosed in the divorce upon discovery be divided equally between the parties. The Supreme Court also upheld the Family Court’s refusal to enforce the provision in Marital Settlement Agreement that also required the ex-wife to share equally in the cost of attorney’s fees that the ex-husband incurred in pursuing his claims against his employer. The Family Court had held that the ex-husband should not profit from both his counsel and his own sharp dealing and trickery in their divorce negotiations with the ex-wife. The Supreme Court also upheld the Family Court’s finding that after the divorce the ex-husband had failed to provide the ex-wife with notice of his having obtained new employment in order to reassess his child support obligation as required under the terms of the Marital Settlement Agreement. Finally it upheld the Family Court ‘s award to the ex-wife of her attorney’s fees that she was forced to incur as a result of the ex-husband’s willful misconduct and failure to provide notification upon securing his new employment.