THOMAS A. WOOTERS vs. JANET S. WOOTERS.

No. 08-P-824

APPEALS COURT OF MASSACHUSETTS

74 Mass. App. Ct. 839; 911 N.E.2d 234

January 9, 2009, Argued
August 18, 2009, Decided

Issues:

• Whether the stock options should be considered as part of gross annual income under a divorce judgment?
• Whether the Appellant failures to pay a portion of alimony constitute civil contempt?

Whether the stock options should be considered as part of gross annual income under a divorce judgment?

The court held that "we are dealing with the definition of "gross annual employment income" which is a broad and flexible term.  As such, the term can plausibly encompass the income obtained from the exercise of stock options, as long as the definition is not limited by the parties.  In fact, here, the judge properly observed that there was ample opportunity for the parties to restrict the definition of "gross annual employment income," and if the parties wished to do so, they should have done that at the time of divorce.

In addition to the supporting case law, common sense dictates that the income realized from the exercise of stock options should be treated as gross employment income: It is commonly defined as part of one's compensation package, and it is listed on W-2 forms and is taxable along with the other income.  Stock options are each customarily calculated with at least some reference to the others. We also note that this determination accords with policy considerations as well -- if 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.  In sum, we conclude that the husband's exercised stock options are part of his "gross annual employment income."

Whether the Appellant failures to pay a portion of alimony constitute civil contempt?

The court finds that "the husband's disagreement or misunderstanding of the issue does not constitute clear and undoubted disobedience of a clear and unequivocal command.  To a reasonable person, it may not be readily apparent that stock option proceeds constitute one's gross annual income, especially if it is not defined as such in the parties' divorce decree. Indeed, prior to our decision here, the question had not been resolved by a published Massachusetts opinion. In light of the totality of the circumstances, we conclude that a finding of contempt was not warranted."

Conclusion:

This court affirmed the Massachusetts divorce judgment that the husband to pay alimony arrearage and reversed the findings in contempt.