Facts: Pursuant to their divorce, petitioner Daniel Farmer and respondent Teresa Farmer entered into a stipulated agreement dividing their community assets, including stock options that Daniel Farmer had received from his employer. Without notifying Teresa Farmer, Daniel Farmer subsequently exercised all of the stock options and sold the stock prior to the entry of the dissolution decree in the Superior Court for Island County. In response, Teresa Farmer petitioned the superior court to set aside the dissolution decree and award her damages. The superior court awarded Teresa Farmer damages based upon the projected value of the stock at the time of the stock options’ expiration. Daniel Farmer appealed the superior court’s decision, asserting that the value of the stock at the time of its sale is the proper basis for valuation. The Washington Court of Appeals affirmed the superior court’s decision. Daniel Farmer appealed this decision to the Supreme Court of Washington.
Question(s): Did the superior court abuse its discretion in basing its valuation of the stock options upon the projected value of the stock at the time of the stock options’ expiration rather than upon the value of the stock at the time of its sale?
Conclusion: Justice Stephens’ opinion for the Court affirmed the Washington Court of Appeals, concluding that basing the valuation of the stock options upon the projected value of the stock at the time of the stock options’ expiration was not an abuse of discretion. In particular, the Court cited the variety of methods that courts have used to value stock options and the fact that employee stock options are unassignable, thus preventing Teresa Farmer from entering the market to replace them after the stock was sold.
Docket No. 83960-3 (from Court of Appeals Division I Case No. 61638-2)
Petitioner: Daniel Farmer
(Counsel: Catherine Wright Smith, Valerie A. Villacin, and Douglas Allen Saar)
Respondent: Teresa Farmer
(Counsel: Kenneth Allen Manni and Gregory Mann Miller)
Briefs:
Argument: Tuesday, January 11, 2011 9:00am
[Source: TVW, http://tvw.org]
Audio: Washington Supreme Court
Decided: Thursday, September 8th, 2011
Prevailing Party: Teresa Farmer (Respondent)
Vote: 6-3
Citation: Pending
Court: Madsen2 Court (2011-)
Madsen
Johnson
Alexander
Chambers
Owens
Fairhurst
Johnson
Stephens
(Majority)
Wiggins
(Dissent)
Opinion
Dissent
Note: We post only slip opinion(s) as published at the time of the decision. Please consult Washington Reports printed volumes for the opinion(s) in their final form. Each opinion should appear next to the Justice who authored it.