Barr v. Barr, No. 1 CA-CV 20-0701 FC, 2022 WL ______ (Ariz. App. Feb 3. 2022) (mem.).
Facts and Procedural History
Elizabeth and Dennis Barr were married in 1983. In 1997, Dennis started working for The Kroger Company and continued working there throughout the marriage. He was still working there when Elizabeth filed for divorce in September 2018.
In July 2019, the parties entered into a Rule 69 agreement that resolved all issues, including the division of Dennis’s retirement accounts with Kroger. However, before any settlement documents were submitted to the court, Kroger offered Dennis the choice of either an early retirement package or a severance package. Dennis accepted the severance package which included severance pay, a lump sum payment for COBRA premiums, and payment for unused vacation. By accepting the severance package, Dennis forfeited unvested stock options that he had agreed to split with Elizabeth in the Rule 69 agreement.
Elizabeth moved the trial court to characterize the severance package as community property and make her whole for the loss of the unvested stock options. The court denied her request and she appealed.
Ruling
Elizabeth argued that her case was analogous to Bowser v. Nguyen, where the court held that a severance package paid after the community ended was still community property. 249 Ariz. 454 (App. 2020). But the court of appeals distinguished Bowser because in that case, the employment contract that included the severance package was signed prior to marriage, but performance under contract only occurred during the (short) marriage—it was therefore “acquired” during the marriage. In this case, there was nothing in the record to indicate that Dennis had any right to the severance package before Kroger offered it to him after the community ended.
[This case misstates the facts of Bowser. In Bowser, the husband signed the employment contract prior to marriage, but only worked at the company during the marriage. The court in Barr incorrectly says that the contract was formed during the marriage.]
The court also distinguished Sebestyen v. Sebestyen, where the court held that a disability pension constituted deferred compensation that had been earned during the marriage. 250 Ariz. 537 (App. 2021). In this case, there was no indication that Dennis’s severance package was deferred compensation because it was not offered to Dennis until after the community ended.
Although it determined that the severance package was separate property, the court held that Elizabeth may have a right to the unvested stock options that were forfeited when Dennis accepted the severance package. Citing Brebaugh v. Deane, the court of appeals directed the trial court to determine on remand whether the unvested options were intended to compensate Dennis for work performed during the marriage, or whether they were intended to incentivize future work. 211 Ariz. 95 (App. 2005). If the former, Elizabeth should receive half of their value.