Hennepin County District Court File No. DW 273986.
Considered and decided by Halbrooks, Presiding Judge; Toussaint, Chief Judge; and Hudson, Judge.
In a marital dissolution, the portion of a contingency fee earned by an attorney spouse that is attributable to the attorney's work during the marriage is marital property, subject to equitable distribution under Minn. Stat. § 518.58, subd. 1 (2004).
The opinion of the court was delivered by: Hudson, Judge
Affirmed in part, reversed in part, remanded; motion granted
On appeal from a judgment dissolving the marriage of appellant-wife Jane Stageberg and respondent-husband Mark Stageberg, husband challenges the determination that certain contingency fees his law practice was earning when the marriage was dissolved should be treated as marital property. Wife argues that the district court undervalued these interests. In addition, wife argues that the district court abused its discretion by treating her non-marital interest in certain property as marital, and she moves to strike portions of husband's brief and appendix. Husband argues that the record does not support the determination that wife has a non-marital interest in the home and that the district court overvalued the parties' golf-club membership. We reverse the district court's valuation of the marital interest in the contingent fees and the treatment of wife's non-marital interest in the property distribution and remand for revaluation of the contingency fees and any necessary adjustment of the property distribution. We otherwise affirm the district court and grant wife's motion to strike.
The parties married in September 1990 and separated in June 2002. The marriage produced no children. Wife has been in the private practice of psychology for twenty-two years, having obtained her Ph.D. in psychology in 1982. Wife's clients pay her upon services rendered. Husband is self-employed as an attorney and has practiced almost exclusively in the area of plaintiff's personal-injury cases since 1994.
Wife petitioned to dissolve the marriage, and the district court entered a December 2002 judgment dissolving the parties' marriage but reserving all other issues for settlement or trial. The parties stipulated to the value of most of their assets and the division of their debts. The parties appeared for trial in December 2002 on remaining issues.
At trial, husband produced an exhibit detailing the cases he was handling on a contingency-fee basis as of the July 2002 stipulated valuation date. Wife's expert, Charles T. Hvass, Jr., testified that the exhibit included cases that had settled either before the valuation date with fees received or due to be received by husband at the time of trial, as well as cases that were relatively new and would require considerable post-marital effort. Wife argued that any portion of a contingency fee received after the valuation date as a result of work husband did before the valuation date was a marital asset and that she was entitled to half the recovery.
The district court issued its amended findings and conclusions in January 2004. Wife subsequently moved for amended findings and/or a new trial.
In May 2004, the district court issued a second set of amended findings in which it found that neither party required maintenance from the other but that husband's business was becoming more difficult due to the loss of several key referrals, changing attitudes of juries and insurance companies, and a diminished case volume because of increased competition. Regarding the property settlement, the district court ruled, in relevant part, that (a) while wife traced a non-marital interest to the parties' homestead, husband would be awarded half of wife's non-marital interest because not doing so would work an unfair hardship on husband, who had used non-marital assets to pay off marital debt that had not resulted in acquisition of an asset; (b) while the homestead was purchased before the parties' marriage, the parties purchased it jointly and used marital funds to pay the mortgage and make improvements, creating a marital interest in the homestead and the increase in its value; (c) the parties' golf club membership was worth $35,000--the cost of a new membership.
In its amended findings, the district court acknowledged that the majority of jurisdictions view contingency fee contracts as having "marital value," but determined that the best way to determine that value is to apply what it called "The Historical Average Income Approach." In this approach, the district court assumed a 40% tax rate and calculated husband's average annual net profit over the past five years (excluding costs). Because husband would resolve some cases each year and take on additional cases, the court then reduced husband's net profit by 50% to reflect the average declining percent of marital effort in the cases that are concluded during the course of a year. The court found that wife was entitled to one-half of the remaining after-tax marital share.*fn1 The district court entered judgment on May 12, 2004. This appeal follows.
I. Are portions of husband's brief and appendix referring to a matter that the parties agreed would "have no impact" on the district court's valuation ...