Crater v. Oliver

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 17-FM-871
JEFFREY CRATER, APPELLANT,
V.
MARTHA OLIVER, APPELLEE.
Appeal from the Superior Court
of the District of Columbia
(DRB-3364-09)
(Hon. Michael O’Keefe, Trial Judge)
(Argued January 9, 2019 Decided February 14, 2019)
Edouard J.P. Bouquet, with whom Shuaa Tajammul, was on the brief, for
appellant.
Martha Oliver, pro se.
Before GLICKMAN, THOMPSON, and EASTERLY, Associate Judges.
THOMPSON, Associate Judge: The parties in this case, Jeffrey Crater and
Martha Oliver, were divorced in 2011, with the Superior Court merging into the
divorce decree a Term Sheet negotiated by the parties. In 2015, after Mr. Crater
was involuntarily terminated from his job as a lobbyist, he moved in March of that
year to modify the alimony amount ($5,000 per month) that the divorce decree
2
required him to pay Ms. Oliver in accordance with the Term Sheet.1 See Crater v.
Oliver, No. 16-FM-1256, Mem. Op. & J. at 2 (D.C. May 22, 2018) (the “May 2018
MOJ”). Ruling on the motion to modify and citing Mr. Crater’s greatly reduced
income beginning in 2015, the Superior Court ordered that Mr. Crater would be
required to pay Ms. Oliver eleven percent of his gross income each year as
alimony.2 In a separate appeal resolved by the May 2018 MOJ, Mr. Crater
successfully challenged the Superior Court’s reliance solely on the eleven percent
formula, which this court held failed to take into account “both parties’ current
circumstances . . . .”
In the instant appeal, Mr. Crater appeals from a July 26, 2017, judgment of
the Superior Court, entered before the May 2018 MOJ was issued, in which the
Superior Court applied the eleven percent formula to what the court determined to
be Mr. Crater’s 2016 gross income, to establish the amount of alimony Mr. Crater
1
The Term Sheet states that “[t]he amount of alimony is non-modifiable
except in the event [Mr. Crater] suffers an involuntary substantial and material
change in circumstances[;] in that event the amount may be modifiable but the
length of alimony shall not be subject to modification.”
2
The Superior Court reasoned that the $60,000 per year (12 months times
$5,000 per month) that the Term Sheet specified Mr. Crater was to pay amounted
to 10.88% of Mr. Crater’s 2010 income of $551,260, a percentage the court
rounded to 11%. The court determined that eleven percent of annual gross income
was the appropriate amount of spousal support going forward.
3
was obligated to pay Ms. Oliver for 2016. There is no dispute that the Superior
Court was required, pursuant to the May 2018 MOJ, to revisit its ruling on the
amount of alimony; the Superior Court did so, and its modified ruling is the subject
of a separate appeal now pending in this court in consolidated Appeal Nos. 17-FM-
1426, 17-FM-1456, and 18-FM-0726. But the instant appeal requires us to address
a narrow issue that is independent of the issues that must be decided in those
consolidated appeals. Specifically, the question before us is whether, as Mr. Crater
argues, the Superior Court abused its discretion in ruling, with respect to the gains
Mr. Crater realized in 2016 from the exercise of stock options3 granted to him by
his (former) employer, that the gains must be included in calculating Mr. Crater’s
gross income for 2016 for purposes of determining the amount of spousal support
he was required to pay for that year. For the following reasons, we conclude that
the Superior Court did not abuse its discretion in that regard.
I.
3
Our understanding, confirmed by counsel for Mr. Crater during oral
argument, is that the parties’ reference to gains from the “exercise of stock
options” is shorthand for monies realized after Mr. Crater (1) exercised his option
to purchase his (former) employer’s stock at a fixed discounted price, and then (2)
sold the stock for a profit. The amounts realized are reported on Schedule D of
Mr. Crater’s 2016 federal income tax return.
4
On May 1, 2017, and July 21, 2017, the Superior Court held hearings on the
alimony issue. Following the July 21 hearing, the court issued its order that is the
subject of this appeal, ruling that for purposes of alimony, Mr. Crater’s 2016 gross
income for alimony concerns was $317,545, an amount that the court found
resulted in required alimony of $34,930 (11% of $317,545) for 2016. The court
arrived at that amount by including in Mr. Crater’s 2016 gross income
approximately $63,000 Mr. Crater realized from exercise of his stock options.
“There are no fixed rules for determining . . . in what amount alimony
should be awarded.” Leftwich v. Leftwich, 442 A.2d 139, 142 (D.C. 1982).
Rather, “[a] trial court has a considerable measure of discretion in determining the
appropriate amount of alimony[,]” and “that determination will not be disturbed on
appeal unless the court clearly abused its discretion.” Ford v. Castillo, 98 A.3d
962, 965 (D.C. 2014) (quoting Araya v. Keleta, 65 A.3d 40, 48 (D.C.
2013)) (internal quotation marks omitted). In reviewing an alimony award (like
any other judgment) for abuse of discretion, we “must determine whether the
decision maker failed to consider a relevant factor, whether he relied upon an
improper factor, and whether the reasons given reasonably support the
conclusion.” Johnson v. United States, 398 A.2d 354, 365 (D.C. 1979) (internal
quotation marks omitted).
5
Neither the divorce statute nor this court’s case law has set firm parameters
for what may be treated as income for purposes of alimony. Here, in exercising its
discretion, the Superior Court was advised about and properly looked to a number
of factors in arriving at its decision to treat Mr. Crater’s gains from the exercise of
stock options in 2016 as part of his gross income for that year.
First, the court looked to the District of Columbia Child Support Guideline,
See D.C. Code § 16-916.01 (2012 Repl.). The parties agree that the Guideline
provisions are a helpful reference.4 Mr. Crater emphasizes that § 16-916.01
(d)(1)(P) includes “[c]apital gains from a real or personal property transaction” in
“gross income” only “if the capital gains represent a regular source of income”
(emphasis added). See also Lasche v. Levin, 977 A.2d 361, 370 (D.C. 2009) (“[I]n
the case of investment capital, . . . payouts, if to be included in gross income, must
be made on a regular basis so as to be the equivalent of income payouts.”).
However, the Guideline also declares that “[f]or the purposes of this section, the
term “gross income” means income from any source, including,” for example,
severance pay, bonuses, lottery or gambling winnings that are received in a lump
4
This is notwithstanding the fact that the parties’ total income has
exceeded the $240,000 that is the maximum income to which the Guideline
applies. See D.C. Code § 16-916.01 (h).
6
sum, and prizes or awards. See id., §§ 16-916.01 (d)(1)(C), (E), (U), and (V)
(emphasis added); see also, e.g., Slaughter v. Slaughter, 867 A.2d 976, 976 (D.C.
2005) (concluding that the trial court did not abuse its discretion in ruling that a
portion of a settlement amount paid to the wife “should be included in [her] gross
income for the purpose of calculating the parties’ respective support obligations”).
These examples, most of which typically are not regular sources of income,
afforded the Superior Court a reasonable basis for concluding that it was not
required to exclude from Mr. Crater’s 2016 income his gains from his exercise of
stock options in that year.
Moreover, the Superior Court had before it evidence that permitted it to infer
that, for Mr. Crater, gains from the exercise of stock options were a regular source
of income. The court took “judicial notice of all the evidence” it had heard in
earlier proceedings in the matter, and recalled that Mr. Crater had exercised stock
options in 2013 and 2014.5 In addition, Ms. Oliver told the court that Mr. Crater
had regularly “over the years” received stock options as part of his compensation
from his (former) employer; that “every year[,] when [Mr. Crater] received three
different types of stock,” he received for each one a statement explaining that he
5
The court had also, in an earlier ruling, referred in its findings to Mr.
Crater’s “periodic ability to dispose of non-monetary income[.]”
7
would “recognize income upon the exercise . . . in accordance with the tax laws of
the [relevant] jurisdiction”; that Mr. Crater’s (former) employer considered the
stock options income and issued W-2 earnings statements reflecting that income;
that Mr. Crater once rejected the offer of a salaried job “because it didn’t have
stock options”; that Mr. Crater did not make “a onetime sale of stock” in 2016 but
(having exercised no stock options in 2015, the year he sought a reduction in
alimony)6 “started selling on the first business day of 2016,” and sold stock “on
multiple occasions.”7 Ms. Oliver also told the court that if the gain from Mr.
Crater’s exercise of stock options in 2016 was not to be treated as income, the
court and the parties would have to “go back and start at . . . the very beginning[,]
because [Mr. Crater] certainly considered [gain from the exercise of stock options]
when he was talking about the point from which [his earlier] income fell.” The
6
Through this testimony, Ms. Oliver appears to have suggested that Mr.
Crater carefully managed his stock options, which had an accelerated vesting date,
in order to reduce his 2016 alimony obligation. Cf. Wooters v. Wooters, 911
N.E.2d 234, 238 (Mass. App. Ct. 2009), further appellate review denied, 916
N.E.2d 767 (Mass. 2009) (“[I]f the exercised stock options were not deemed
income for alimony purposes, a person could potentially avoid his or her
obligations merely by choosing to be compensated in stock options instead of by a
salary.”).
7
We think it is appropriate to treat Ms. Oliver’s statements during the
proceedings on May 1 and July 21, 2017, as evidence because the court swore in
both parties at the outset of the hearings. While Mr. Crater’s counsel was the only
person who spoke on Mr. Crater’s behalf, Ms. Oliver was pro se.
8
foregoing evidence gave the court a further reasonable basis for including in Mr.
Crater’s 2016 gross income the gains he realized from the exercise of stock
options. See Butts v. Butts, 192 A.2d 294, 295 (D.C. 1963) (“[I]t is only necessary
that [an alimony] award have a reasonable basis in the evidence.”).
Mr. Crater notes that “[t]he brokerage account containing the stock options
. . . was specifically assigned to [him] during the parties’ divorce pursuant to the
Term Sheet[,]” and argues that the Superior Court abused its discretion by
requiring him to “exhaust assets awarded to him[.]” This argument is unavailing
for at least two reasons. First, Mr. Crater’s counsel told the court that he could not
“state to a certainty what year in particular . . . the stock options that were
exercised in 2016 represented.” Given that Mr. Crater has not shown or even
represented that the stock options involved here were awarded to him at the time of
the divorce rather than in a later year or years, we see no basis for concluding that
the Superior Court abused its discretion in calculating Mr. Crater’s 2016 income.
Cf. Lasche, 977 A.2d at 373 (“Given Lasche’s statements that he could not ‘speak
with specifics about where the losses come from’ . . . , the trial court did not abuse
its discretion in refusing to deduct investment losses of Lasche’s online business
venture.”); Seither v. Seither, 779 So. 2d 331, 333-34 (Fla. Dist. Ct. App. 1999)
(“[I]t would be impossible to hold that the trial court erred in treating [the stock
9
options] as income” where “Mr. Seither failed to present any evidence challenging
the testimony of the accountant.”).
Second, with respect to Mr. Crater’s argument that “a court may not force a
paying spouse to liquidate assets . . . in order to make a maintenance payment,” the
short answer is that the Superior Court did not require Mr. Crater to exercise his
stock options in order to make alimony payments. Rather, the court calculated
appellant’s 2016 gross income based in part on the gains he realized from stock
options he had already exercised.
Finally, the Superior Court’s inclusion of gains from the exercise of stock
options in Mr. Crater’s 2016 gross income is consistent with rulings in a number of
other jurisdictions. See, e.g., Wooters, 911 N.E.2d at 238 (“[C]ommon sense
dictates that the income realized from the exercise of stock options should be
treated as gross employment income[.]”); Hiett v. Hiett, 158 S.W.3d 720, 724 (Ark.
Ct. App. 2004) (“It was not error for the trial court to include stock options that
may be exercised by James in the future as a part of his net income for alimony
purposes, given that all sources of income must be considered in determining
alimony.” (emphasis in original)); In re Dolan, 786 A.2d 820, 823 (N.H. 2001)
(stating that exercised stock options “are also included within the phrase ‘all
10
income from any source[,]’” contained in the relevant child support statute, and
reasoning that income from the exercise of stock options is “analogous to a
‘bonus’”); Seither, 779 So. 2d at 333-34 (stating that stock options “can be
considered as income”).
II.
For all the foregoing reasons, “we cannot say that the findings [about Mr.
Crater’s 2016 income] upon which the judgment was based were plainly wrong
and without support in substantial evidence.” Cefaratti v. Cefaratti, 315 A.2d 142,
145 (D.C. 1974). The decision of the Superior Court, that the gains Mr. Crater
realized in 2016 from the exercise of stock options must be included in calculating
Mr. Crater’s gross income for 2016, is
Affirmed.