The New Jersey Supreme Court has shed light on the limited circumstances in which principles of equity may supplant the equitable distribution statute for purposes of dividing a spouse’s bonus for work performed before and during the marriage. In Thieme v. Aucoin-Thieme, the ex-husband (Thieme) held a demanding position with a biometrics consulting firm prior to the marriage, since 1999. The parties met in 2000/2001 and began to cohabitate in 2002 upon learning that the ex-wife (Aucoin-Thieme) was pregnant. They had one child together, born in 2003.
Although Thieme was not an owner of his firm, the firm’s principals offered to compensate him for his contributions to the firm’s success in the event that they sold the firm. Due to Thieme’s demanding work schedule, the parties agreed that Aucoin-Thieme would not work, but would be a stay-at-home mother and property manager for their home and rental properties.
The parties did not marry until 2010 and divorced just fourteen months later. On several occasions, Thieme acknowledged that Aucoin-Thieme had given up her career so that he could pursue his and noted that “it is appropriate that I support you fully in recognition of this sacrifice.” While negotiating the terms of their divorce, Thieme reiterated his view that Aucoin-Thieme would be entitled to a portion of any bonus he received upon the sale of the firm.
In April 2012, Thieme and Aucoin-Thieme executed a Property Settlement Agreement, which did not address any anticipated deferred compensation. Merely three months after the entry of their judgment of divorce, Thieme’s firm sold and he received a one-time closing bonus of $2,250,000. Thieme did not inform Aucoin-Thieme of the bonus but deposited $200,000 of the bonus into a bank account that, unbeknownst to Thieme, remained a joint account despite the divorce. Aucoin-Thieme then withdrew the funds and Thieme filed a Complaint.
The trial court determined that Thieme earned the bonus over his entire employment with the firm and that Aucoin-Thieme was entitled to 30% of the post-tax portion of the bonus earned during their fourteen-month marriage. The court awarded $30,288, to Aucoin-Thieme and ordered her to return the remaining amount that she had withdrawn from the joint account, totaling $169,712, to Thieme. Aucoin-Thieme appealed, alleging that she was entitled to a portion of the bonus accrued during their period of cohabitation under both the equitable distribution statute and equitable principles. The Appellate Division affirmed and the New Jersey Supreme Court granted Aucoin-Thieme’s petition for certification.
The Court read the equitable distribution statute as limited to property acquired during the marriage or civil union. The Court noted that from a plain reading of the statute, “it is evident that the Legislature did not intend to treat property acquired during a period of cohabitation prior to a marriage or civil union as the equivalent of property acquired during that marriage or civil union, for purposes of equitable distribution.” Accordingly, any ruling that a portion of Thieme’s bonus earned prior to the marriage was subject to equitable distribution would directly contradict the plain language of the statute.
However, the court did not end the inquiry there, highlighting that the Family Part is a court of equity and that equitable principles could entitle Aucoin-Thieme to a portion of the premarital bonus. Specifically, the court found that Aucoin-Thieme’s claim for unjust enrichment had merit, given the specific facts of this case.
The NJ Supreme Court held that equitable principles warranted the imposition of a constructive trust governing a portion of Thieme’s bonus, noting that the prospect that Thieme would be generously compensated was a significant factor in the parties’ personal and financial planning from the early stages of their relationship. Moreover, the Court found that Thieme and Aucoin-Thieme each relied on the expectation of deferred compensation if the firm was sold as they made important decisions for themselves and their family. The Court seemed heavily persuaded by Thieme’s own admissions that Aucoin-Thieme was entitled to generous support based on her “great sacrifice” for Thieme’s career. Even further, it was undisputed that Thieme’s professional success both prior to and during the marriage was in part due to Aucoin-Thieme’s domestic contributions to their family.
Based on the above, the Court found that Aucoin-Thieme had sufficiently demonstrated that she relied upon the anticipated deferred compensation to her detriment and that allowing Thieme to retain the entire premarital portion of his bonus would unjustly enrich him. The Court remanded the case to the Family Part for a determination of the specifics of the constructive trust to be imposed on some part of the premarital portion of Thieme’s bonus.
At first blush, this decision opens a Pandora’s Box of equitable remedies available in determining the allocation of premarital assets. However, a closer examination of the case demonstrates that the Court’s application of an equitable remedy would only be warranted in limited, similar scenarios. Here, the length of cohabitation (ten years) compared to the length of marriage (fourteen months) is illustrative. Moreover, Thieme admitted that Aucoin-Thieme was entitled to share in the fruits of his professional labor and did not dispute that the bonus began to accrue prior to their marriage. The Court maintained that Aucoin-Thieme’s requested relief is not available under the equitable distribution statute, but that rare and unique circumstances could require that equity come to the rescue to correct a fundamental unfairness. Litigants and practitioners should be aware that raising equitable arguments in such a scenario are not necessarily meritless, but will likely prove unsuccessful absent extraordinary circumstances.