State Case Law Rules on ESOP Governance, Assets in Divorce Case

California Sanctions Husband for Hidden Account. Wisconsin Finds ESOP Was Properly Governed

In White v. Marshall & Isley Corporation, the U.S. District Court for the Eastern District of Wisconsin dismisses a case asserting that employee stock ownership plan (ESOP) fiduciaries violated their duty of prudence. In re: Simmons, tried in the Court of Appeals of California, found the husband subject to additional sanctions for his failure to disclose a separate property savings account.  Find out more.

 In re Simmons
2013 Cal. App. LEXIS 303
April 18, 2013
Judge Haller
Court of Appeals of California 

Appellant former husband challenged a judgment of the Superior Court of San Diego County, California, ordering him to pay substantial sanctions to respondent former wife for his conduct during the litigation of the wife’s marital dissolution petition.

Applying the remedy in Fam. Code, § 1101, subd. (h), for the husband’s fraudulent failure to disclose a separate property savings account, the trial court awarded the wife the value of the account. 

The court held that the sanction awarded under Fam. Code, § 1101, subd. (h), was statutorily unauthorized because that statutory remedy applied only to the nondisclosure of a community property asset and did not apply not to the nondisclosure of a separate property asset.  The court was convinced that the reference to the general fiduciary duty statute was not intended to extend the application of the § 1101, subd. (h), remedy to reach separate property, given the placement of the remedy in a portion of the California Family Code dedicated only to community property, the existence of distinct statutory remedies for failures to disclose separate property, and the fact that separate property was not subject to the one-half interest formula that was altered by the § 1101, subd. (h), remedy. 

The court reversed the portion of the judgment awarding the Fam. Code, § 1101, sanction and remanded the matter for the trial court to determine whether to alter the total sanctions awarded under Fam. Code, §§ 2107 and 271. In all other respects, the court affirmed the judgment.

Peter H. Agrapides, MBA, AVA, is a Principal at Western Valuation Advisors, which has offices in Salt Lake City, Utah, and Las Vegas, Nevada. Mr. Agrapides’ practice focuses primarily on valuations for gift and estate tax reporting. He has experience valuing companies in a diverse array of industries. These engagements have ranged from small, family owned businesses to companies over $1billion.