Chimes v. Michael

• Decision Date: 30 March 2000
• Docket Number: No. 317,317
• Citation: 131 Md. App. 271,748 A.2d 1065
• Parties: Marc Jeffrey CHIMES v. Caroline Fleming MICHAEL.
• Court: Court of Special Appeals of Maryland

748 A.2d 1065

131 Md. App. 271

Marc Jeffrey CHIMES v. Caroline Fleming MICHAEL.

No. 317, Sept. Term, 1999.

Court of Special Appeals of Maryland.

March 30, 2000.

Eric W. Bloom (Carol A. Joffe and Winston & Strawn, on the brief), Washington, DC, for appellant.

Patrick W. Dragga (Kevin G. Hessler, Vincent M. Wills and Dragga, Callahan, Hannon & Hessler, L.L.P., on the brief), Rockville, for appellee.

Argued before HOLLANDER, THIEME and ADKINS, JJ.

THIEME, Judge.

This is an appeal of a Judgment of Absolute Divorce entered on March 11, 1999, after a two-day trial during February in the Circuit Court for Montgomery County. On May 7, 1998, appellant Marc Jeffrey Chimes filed a Complaint for Custody, requesting custody and support of the parties' six-year-old daughter, Meryn. Appellee Caroline Fleming Michael counterclaimed for custody and divorce. Chimes then counterclaimed as well for divorce, a monetary award, future payment of proceeds from stock options when exercised, and legal fees.

Before trial, the parties agreed to joint legal custody, with Chimes having primary physical custody of the child. The issues contested at trial focused on marital property, primarily Michael's America Online employee stock options worth more than $10 million before taxes. The court below granted Chimes the use and possession of the family home and car, child support, a monetary award of $1,493,423.20, and an "if, as and when" order directing the future distribution of stock options that were not yet fully vested. The court divided equally between the parties the marital property other than the stock options, including monetary proceeds resulting from the exercise of more than $1 million in options. As for the options, the court divided vested but unexercised options 75 percent to Michael and 25 percent to Chimes; the value of the vested options was rolled into Chimes's monetary award. The non-vested options will be subject to the same division, but only after application of a coverture fraction similar to the "Bangs formula" used for pension assets.¹ The coverture formula will exclude from division a portion of the options that increases with time. The longer Michael waits to exercise the options, the less money Chimes may receive. The court also set child support, by allocating Meryn's needs equally between parties. The Judgment was amended by an Order entered April 13, 1999, in order to clarify certain matters, including the tax rate and which options would be used to pay Chimes's "if, as and when" award. Michael fully satisfied the monetary award judgment, and Chimes accepted a sum representing the entire award. He nevertheless appeals the judgment and raises the following questions:

1. Did the trial court abuse its discretion when it awarded Chimes 25 percent of the marital stock option rights, while dividing equally all other marital property, including the proceeds of stock options granted and exercised during the marriage?

2. Did the trial court abuse its discretion by applying a coverture fraction or time rule similar to the so-called "Bangs formula" to adjust Chimes's rights in the stock options?[²]

3. Did the trial court err when it admitted and relied upon expert opinion as to the value of non-vested stock options, where the expert testified that it is not possible to value non-vested options within a reasonable degree of professional certainty?

4. Did the trial court abuse its discretion when it split the child's support needs equally between parties and denied accounting from the date of the filing? Michael filed a motion to dismiss this appeal based on the fact that Chimes had been paid and accepted the monetary award before he filed a notice of appeal. We denied without prejudice, and she renewed the motion in her brief. We now grant her motion to dismiss as to the first three issues raised on appeal. We explain herein. As to the fourth issue, child support, we answer "yes, in part, and no, in part" to the question presented and we explain.

Facts

Chimes and Michael were married on October 21, 1989. One child, a daughter named Meryn Michael Chimes, was born of the marriage on July 19, 1992. At the time of trial, Chimes and Michael were, respectively, forty-five and thirty-seven years of age.

When the parties married, Chimes was the primary breadwinner, and he remained so until 1997. Michael worked freelance for over two years following Meryn's birth. In May 1995, she went to work for America Online (AOL), where she is still employed. Chimes lost his consulting job of ten years in December 1997, and he remains unemployed. By his own testimony, his efforts to seek new employment have been quite limited.

During the time they lived together, any money the parties earned went into, and any expenses the parties paid came out of, the joint family account. When Meryn was an infant, the parties hired a full-time care giver and housekeeper, Della Aguilar, who has continued to work for Chimes to date on a part-time basis.

The parties' marriage was troubled for a long time prior to the divorce. They began discussing separation in 1993, and in spring 1996, Chimes gave a neighbor a copy of a draft separation agreement. A month before the separation, Chimes informed Aguilar, and Michael moved out on December 20, 1996.

Michael obtained her employment at AOL through family contacts. When she began work there, she was granted options for 12,000 shares of stock. Three thousand of those options vested after her first anniversary with the company and an additional 3,000 per year vested on May 30 of 1997, 1998, and 1999. Michael was granted 1,000 additional options in October 1997. These options vested at the rate of 250 per year on October 31 of 1997, 1998, and 1999. The final 250 will vest October 31, 2000. Thus, when the parties separated, on December 30, 1996, only 3,000 options of the 13,000 granted had vested, and the market price of AOL stock was $33.25 per share.

On August 29, 1997, AOL granted Michael 1,000 more options, scheduled to vest at the rate of 250 per year on August 29 of 1998, 1999, 2000, and 2001. On September 1, 1998, almost two years after the parties' separation, Michael received another 1,300 options, slated to vest at the rate of 325 per year on September 1 of 1999, 2000, 2001, and 2002. The value of AOL stock fluctuates, but it has "increased wildly," in the chancellor's words, since the grants.³

Chimes's expert acknowledged at trial that the stock options were granted to Michael, in part, as an incentive for her continued employment with AOL. The AOL stock option plan states:

A Participant who ceases to be an employee, director or consultant of the company or of an Affiliate (for any reason other than termination "for cause," disability or death) may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, in accordance with the pertinent Option Agreement.

An option holder who becomes disabled may exercise any options within one year of the date of termination for disability, and an optionee's estate may exercise any options within one year of death. According to the plan, the options are not transferrable by Michael; nor may they be assigned, pledged, or hypothecated in any way; nor are they subject to execution, attachment, or similar process.

The parties stipulated that all options, both vested and non-vested, were marital property. As of the trial date, Michael held 45,000 vested options from the first grant, 1,348 from the second grant, and 1,000 from the third grant. The parties agreed at the trial that these options were worth in excess of $7.2 million before taxes, and $3.9 million after taxes. The parties also stipulated that, on the day of the trial, Michael owned 31,600 non-vested options, including 24,000 from the first grant, 2,000 from the second grant, 3,000 from the third grant, and 2,600 from the fourth grant. The majority of these shares, 24,000, vested about three months after the trial. Chimes's expert valued the non-vested shares at $4,151,499, whereas Michael's expert, Jeffrey Capron, testified "that it is not possible to identify a value for non-vested options within a reasonable degree of professional certainty," and that the "better view" is that valuing non-vested options is "so speculative" that an opinion cannot be rendered. Capron's proposed method of distribution for the "if, as and when" award was to apply a coverture fraction, see supra, note 1, to non-vested options. This methodology effectively dilutes Chimes's share over the long run, if Michael delays in exercising them. The trial court admitted Capron's testimony, over Chimes's objections.

After a two-day trial on the merits, the court below granted the parties a Judgment of Absolute Divorce and entered in favor of Chimes a judgment of $1,493,423.20, representing 50 percent of the marital property, including the proceeds of those options that had been exercised before the date of divorce, and 25 percent of the after-tax value of vested stock options that had not been exercised.⁴ The court also divided the non-vested options 75 percent to Michael and 25 percent to Chimes, to be distributed on an "if, as and when" basis. The non-vested options were subject to the coverture fraction.

The trial court found Meryn's support needs to be $2,250 per month, and it split those costs evenly between Chimes and Michael. Because Chimes is the custodial parent, Michael must pay him $1,000 per month. She also covers the child's health insurance premiums. The court denied Chimes's request for attorneys' fees and costs.

On March 2, 1999, Michael filed a Motion to Alter or Amend the Judgment. An Order amending the Judgment was entered on April 15, 1999. On May 3, following Michael's payment in full, Chimes filed a line indicating that the judgment had been satisfied.

Discussion

I

Chimes's first three questions address the court's...