In re the Marriage of: Francis Stephen Gill, petitioner, Respondent,
Gretchen Zwakman Gill, Appellant.
County District Court File No. 27-FA-14-5356
El-Ghazzawy, Basil El-Ghazzawy, El-Ghazzawy Law Offices, LLC,
Minneapolis, Minnesota; and Michael V. Ciresi, Michael A.
Sacchet, Ciresi Conlin LLP, Minneapolis, Minnesota (for
C. Eidsness, Lisa T. Spencer, Henson & Efron, P.A.,
Minneapolis, Minnesota (for appellant)
Considered and decided by Jesson, Presiding Judge; Rodenberg,
Judge; and Bratvold, Judge.
the marital interest in a business entity is sold and
includes, as part of the sale price, a provision for
"earn-out" payments based on future company
performance, the earn-out payments are marital property,
notwithstanding purchaser's employment of one of the
spouses under a separate employment agreement during the
Gretchen Zwakman Gill appeals the district court's award
of "earn-out" payments to respondent-husband
Francis Stephen Gill as his nonmarital property. We reverse
parties married in 1993. There were four children born of the
marriage. Husband is an entrepreneur and, during the
marriage, he helped lead Talenti, a successful gelato
company. In 2008, husband and a business partner purchased a
majority ownership interest in Talenti. Husband set up
Wyndmere LLC to hold his interest in Talenti. Twenty percent
of his interest in Wyndmere LLC was transferred to trusts
created for the parties' children. The remaining 80% of
the LLC was held in husband's name. Between 2008 and
2014, Talenti's value grew significantly. During that
time, David Goliath Group LLC (DGG) was created. By 2014, DGG
was the parent company for Talenti, and Wyndmere LLC held a
membership interest in DGG. In 2014, DGG's members sold
all of their membership units and DGG's assets-including
Talenti-to Unilever N.V. and Conopco Inc. (collectively,
"purchaser"). At the time of that sale, husband
held an 80% interest in Wyndmere LLC, which in turn owned
38.7043% of DGG. DGG in turn owned 100% of Talenti.
proceedings were commenced by husband on August 11, 2014.
While that case was proceeding, husband negotiated a sale of
DGG and the Talenti brand. Purchaser paid DGG and its members
$180 million at closing and agreed to make two earn-out
payments over the next two years, in exchange for all of
DGG's assets and the DGG members' membership units.
The earn-out payments were described in the purchase
agreement as payments to be made to DGG members at the end of
the first and second "earn-out years" (calendar
years 2015 and 2016), according to a formula based on the
amount by which yearly sales exceeded an established
"floor, " times a set multiplier, and minus certain
variable costs. In the written purchase agreement, the
earn-out payments were described as "additional
consideration" for the purchase. Each member of DGG was
to receive a portion of these payments equal to each's
ownership interest in DGG.
addition to the purchase agreement, husband also negotiated
an employment agreement with the purchaser. Under that
employment agreement, husband would continue to work for the
purchaser at an annual salary of $362, 500 for 2015 and $375,
625 for 2016, in addition to other benefits. Members of DGG
who did not continue to work for purchaser after the sale
would receive earn-out payments according to the same formula
husband petitioned for dissolution of the marriage, the
district court set the valuation date for marital property as
September 5, 2014. That valuation date is unchallenged on
appeal. The sale of DGG closed on December 2, 2014. As a
member of DGG, Wyndmere LLC received 38.7043% of the $180
million up-front payment, as well as a right to the
appropriate percentage of any future earn-out payments.
Husband continued to work for purchaser and was paid for that
employment as noted. Husband argues, and the district court
ruled, that the parties' marital interest in the 80%
ownership of Wyndmere LLC as of the valuation date was its
proportionate share of the $180 million paid by purchaser at
closing. It ruled that the earn-out payments were
husband's nonmarital property.
challenges the district court's determination that the
earn-out payments from the sale of DGG are husband's
nonmarital property. The district court characterized the
earn-out payments as nonmarital property because they
"represent compensation for the value added to Talenti
by husband post-valuation date." Wife's motion for
posttrial relief was denied. Wife appealed, and husband filed
no notice of related appeal. We therefore confine our ...