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O'Brien v. O'Brien

Supreme Court of Connecticut

June 27, 2017

MICHAEL J. O'BRIEN
v.
KATHLEEN E. O'BRIEN

          Argued December 14, 2016

         Procedural History

         Action for the dissolution of marriage, and for other relief, brought to the Superior Court in the judicial district of Fairfield, where the defendant filed a cross complaint; thereafter, the case was tried to the court, Hon. Howard T. Owens, Jr., judge trial referee; judgment dissolving the marriage and granting certain other relief, from which the plaintiff appealed to the Appellate Court; subsequently, the court, Hon. Howard T. Owens, Jr., judge trial referee, granted the defendant's motion for attorney's fees, and the plaintiff filed an amended appeal; thereafter, the Appellate Court, Sheldon and West, Js., with Lavine, J., dissenting, reversed in part the trial court's judgment and remanded the case for a new trial on all financial issues; on remand, the court, Pinkus, J., rendered certain financial orders, and the plaintiff appealed to the Appellate Court, Beach, Prescott and Bear, Js., which reversed the trial court's judgment and remanded the case for a new trial on all financial issues, and the defendant, on the granting of certification, appealed to this court. Reversed; judgment directed.

          Daniel J. Krisch, with whom was Aidan R. Welsh, for the appellant (defendant).

          Daniel J. Klau, for the appellee (plaintiff).

          Rogers, C.J., and Palmer, McDonald, Espinosa, Robinson and Vertefeuille, Js.

         Syllabus

         The plaintiff, whose marriage to the defendant previously had been dissolved, appealed to the Appellate Court from certain financial orders that the trial court had entered on remand from a previous appeal from the judgment of dissolution. During the pendency of the dissolution action and the previous appeal, while certain automatic court orders prohibiting the sale, exchange, or transfer of any property without the consent of the other party or an order of the court were in effect, the plaintiff executed three stock transactions without the defendant's consent or a court order. The transactions consisted of the sale of vested shares of stock after the dissolution action was filed but before the divorce decree was entered, and the exercise of certain stock options that the plaintiff received after the dissolution action was filed and before the divorce decree was entered, but that vested and were exercised during the pendency of the previous appeal. The plaintiff executed these transactions in light of his concerns about the volatility of the stock market at the time of the transactions and the need to preserve, in the party's best interest, the current value of the stocks, and he placed the proceeds in a bank account and subsequently disclosed the transactions to the defendant. On remand from the previous appeal, the defendant filed a motion to hold the plaintiff in contempt for his purported violation of the automatic orders. At the remand trial, the defendant presented expert testimony indicating that the value of the stocks and options at the time of the transactions was approximately $2.5 million, that they would have had a value of approximately $6 million at the time of the remand trial, and that the transactions thus had caused a loss to the estate of approximately $3.5 million. The trial court found that, although the plaintiff had violated the automatic orders, the violations were not wilful and, therefore, declined to hold the plaintiff in contempt. Because the transactions had caused a significant loss to the marital estate, however, the trial court considered the violations in awarding the defendant approximately two thirds of the value of the marital property. On appeal, the Appellate Court concluded, inter alia, that the trial court improperly had considered the violations in making its financial awards because it lacked authority to punish the plaintiff pursuant to its civil contempt power by reducing the plaintiff's share of the marital estate, as his actions did not rise to the level of contempt or a dissipation of marital assets. The Appellate Court therefore reversed the trial court's judgment with respect to the financial orders and remanded the case for a new hearing on all financial matters. On the granting of certification, the defendant appealed to this court, claiming that the Appellate Court incorrectly concluded that the trial court lacked authority to afford her a remedy for the plaintiff's violations of the automatic orders in the absence of a contempt finding. Held:

         1. The trial court, having possessed inherent authority to make a party whole for harm caused by another party's violation of a court order, even when the court does not find the offending party in contempt, the Appellate Court incorrectly concluded that the trial court improperly had considered, in making its financial orders, the plaintiff's violations of the automatic orders stemming from his decision to conduct the stock transactions without the defendant's consent or the trial court's permission; a trial court may remedy any harm caused by a party's violation of a court order by compensating the harmed individual for losses sustained as a result of the violation, regardless of whether the court finds that party in contempt, prior decisions of the Appellate Court have upheld compensatory awards imposed in contempt proceedings for the violation of a court order, even in the absence of a contempt finding, and, accordingly, the trial court in the present case properly exercised its discretion by adjusting the property distribution to account for the loss caused by the plaintiff's violation of the automatic orders.

         2. The plaintiff could not prevail on his claim that the trial court's financial award was erroneous be cause it was excessive and based on an improper method for valuing the loss to the marital estate; the trial court fairly determined the loss to the marital estate, the court's adjustment of the property distribution in favor of the defendant did not exceed the defendant's reasonable share of the loss resulting from the plaintiff's transactions, and, because the court's remedial award in adjusting the property distribution was made pursuant to its inherent authority to make a party whole for the violation of a court order rather than pursuant to the statute (§ 46b-81) governing equitable distribution of marital property, it was within the court's discretion to consider the value that the stocks and options would have had at the time of the trial on remand from the previous appeal rather than their value as of the date of dissolution or as of the dates that the violations of the automatic orders occurred, as the court was entitled to put the defendant in the position in which she would have been in the absence of the plaintiff's violation of the automatic orders.

         3. The plaintiff could not prevail on his claims, as alternative grounds for affirming the Appellate Court's judgment, that the plaintiff's transactions did not violate the automatic orders because those transactions were made in the usual course of business and that the trial court ignored the usual course of business exception to the provision in the automatic orders prohibiting the sale, transfer or exchange of property during the pendency of the dissolution proceeding: although the trial court did not expressly consider, in its memorandum of decision, the application of the usual course of business exception to the plaintiff's transactions, the trial court expressly found that the plaintiff had violated the automatic orders, which necessarily implied that the court also made the subsidiary finding that the plaintiff's conduct did not fall within any exception; moreover, this court declined to adopt a rule, urged by the plaintiff, that stock transactions during a dissolution proceeding are always made in the usual course of business or are presumed to fall within that exception, such a rule not having been supported by the text of the automatic orders or having been consistent with their purpose.

         4. The trial court's conclusion that the stock options the plaintiff had exercised were marital property subject to distribution between the parties was not clearly erroneous; although the plaintiff's options did not vest and were not exercised until after the dissolution of the parties' marriage, the plaintiff received them during the marriage, and the court reasonably credited the portion of the plaintiff's testimony that the options represented payment for past services.

         5. The plaintiff could not prevail on his claim, as an alternative ground for affirming the Appellate Court's judgment, that the trial court's award of retroactive alimony was improper because it purportedly required the plaintiff to pay the arrearage out his share of the marital assets, thereby effectively reducing his share of the property distribution; trial courts are vested with broad discretion to award alimony and are free to consider the marital assets distributed to the party paying the alimony as a potential source of alimony payments, and the court's property distribution award in combination with the retroactive alimony award were not inequitable, as they together were not excessive and reflected the unequal earnings potential of the parties, the alimony award was to diminish over time, justifying a greater upfront distribution, and a significant component of the distribution to the defendant was the trial court's remedial award for the plaintiff's violation of the automatic orders.

          OPINION

          PALMER, J.

         In this certified appeal arising from a marital dissolution action, we must determine whether a trial court properly may consider a party's violation of a court order when distributing marital property, even if the trial court finds that the violation is not contemptuous. The plaintiff, Michael J. O'Brien, filed this action to dissolve his marriage to the defendant, Kathleen E. O'Brien. During the pendency of the action, the plaintiff sold shares of stock and exercised certain stock options without first receiving permission from either the defendant or the trial court, as required by Practice Book § 25-5, [1] which also provides that a party who fails to obey the orders automatically entered thereunder may be held in contempt of court. The trial court found that the plaintiff's transactions violated those orders but did not hold the plaintiff in contempt because the court concluded the violations were not wilful. Nevertheless, because the transactions had caused a significant loss to the marital estate, the court considered that loss when it distributed the marital property between the parties, awarding a greater than even distribution to the defendant. On appeal, the Appellate Court concluded that, in the absence of a finding of contempt, the trial court lacked the authority to afford the defendant a remedy for the plaintiff's violation of the automatic orders. See O'Brien v. O'Brien, 161 Conn.App. 575, 591, 128 A.3d 595 (2015). We thereafter granted the defendant's petition for certification to appeal, limited to the following issue: ‘‘Did the Appellate Court correctly determine that the trial court abused its discretion when it considered the plaintiff's purported violations of the automatic orders in its decision dividing marital assets [even though the court did not hold the plaintiff in contempt of court for those violations]?'' O'Brien v. O'Brien, 320 Conn. 916, 131 A.3d 751 (2016). We agree with the defendant that the trial court properly exercised its discretion in considering the plaintiff's violations of the automatic orders in its division of the marital assets, and, therefore, we reverse the judgment of the Appellate Court.

         The Appellate Court's opinion and the record contain the following undisputed facts and procedural history relevant to this appeal. The parties were married in 1985 and had three children together, all of whom were under the age of eighteen when the trial court rendered the dissolution judgment. See O'Brien v. O'Brien, supra, 161 Conn.App. 578. The parties are each well educated and have had lucrative careers. See id. The plaintiff holds a law degree and is employed as senior vice president, general counsel, and secretary of Omnicom Group, Inc. (Omnicom). Id. His base salary is $700, 000 per year, and his compensation has also included a cash bonus of varying amounts and noncash compensation, usually in the form of stock or stock options. Id. In the years leading up to the dissolution, the plaintiff's annual cash compensation averaged at least $1.2 million, along with additional noncash compensation. See id. The defendant holds a college degree and was previously employed as a managing director for Credit Suisse, earning more than $1 million annually. Id. She left her employment in 2003 to devote her time to raising the parties' children. Id. The defendant later participated in a ‘‘returnship'' program with JP Morgan Chase, earning about $143, 000 annually. Id.

         At the time of the dissolution action, the parties' assets consisted principally of numerous bank and investment accounts, their principal residence in the town of Greenwich, a second home, and personal property. The plaintiff also held vested shares of Omnicom stock and unvested Omnicom stock options.

         The plaintiff filed the present action in 2008, alleging that the marriage had irretrievably broken down. See id., 579 and n.3. He sought a judgment dissolving the marriage, an equitable division of the marital estate, and orders regarding child custody and support.

         Attached to the plaintiff's complaint was a copy of the automatic orders required by Practice Book § 25-5 (d). In accordance with the requirement of § 25-5 (b) (1), that attachment included the admonition that the parties were not permitted to ‘‘sell, transfer, exchange, assign, remove, or in any way dispose of . . . any property'' while the dissolution action was pending without the prior consent of the other party or the court.

         The trial court rendered judgment dissolving the parties' marriage in September, 2009. The court also entered custody orders regarding the minor children and financial orders distributing the marital property between the parties. In its financial orders, the trial court effectively awarded 55 percent of the marital assets to the defendant and 45 percent to the plaintiff. O'Brien v. O'Brien, supra, 161 Conn.App. 580. These marital assets included all of the plaintiff's vested and unvested Omnicom stock shares and options. See id., 580 n.4. The trial court also ordered the plaintiff to pay unallocated alimony and child support to the defendant. See O'Brien v. O'Brien, 138 Conn.App. 544, 545-46, 53 A.3d 1039 (2012), cert. denied, 308 Conn. 937, 938, 66 A.3d 500 (2013).

         The plaintiff appealed from the trial court's financial orders, challenging, inter alia, its unallocated alimony and child support award. Id., 545. The Appellate Court agreed with the plaintiff's claim concerning the alimony and child support award and reversed the trial court's judgment as to its financial orders, but did not disturb the decree dissolving the marriage. See id., 546, 557. The Appellate Court remanded the case to the trial court for a new trial on all financial issues. Id., 557. The parties do not dispute that the appeal stayed the trial court's financial orders and that the automatic orders remained in effect during the pendency of the appeal.

         While the dissolution action or the appeal from the judgment of dissolution was pending-and while the automatic orders thus remained in effect-the plaintiff executed three stock transactions that are the subject of the present appeal. See O'Brien v. O'Brien, supra, 161 Conn.App. 579, 581. The plaintiff made the first transaction in February, 2009, one year after filing the dissolution action but before the dissolution decree entered in September, 2009. See id., 579. In the first transaction, the plaintiff sold all of his 28, 127 vested Omnicom shares. Id. He did so without first seeking the consent of the defendant or the approval of the trial court. Id. According to the plaintiff, he was concerned about volatility in the stock market following a market decline in 2008 and thought that preserving the current value of the shares through a sale was in the parties' best, immediate interest. See id. The plaintiff placed the proceeds from the sale into a bank account and disclosed the sale to the defendant approximately two months later when he submitted an updated financial affidavit.

         The plaintiff executed the second and third transactions in 2010 and 2012, respectively, after the original trial and while the first appeal was pending. See id., 581. In these two transactions, the plaintiff exercised a total of 75, 000 Omnicom stock options that he had received as part of his noncash compensation while the dissolution action was still pending and before the trial court rendered judgment dissolving the marriage. Id. The options had vested after the trial court's dissolution judgment was rendered but before the Appellate Court reversed the trial court's financial orders. See id., 581- 82. He exercised 22, 500 options in the first transaction and 52, 500 options in the second transaction. Each time, the plaintiff immediately converted the options to cash and retained the cash proceeds in a bank account. As with his earlier stock sale, the plaintiff did not seek consent from the defendant or approval from any judicial authority before exercising the options. Id.

         On remand, the defendant filed a motion for contempt with respect to the plaintiff's transactions. Id., 582. The defendant asserted that the plaintiff's transactions violated the automatic orders because he had sold, exchanged or disposed of property without prior permission, as required by Practice Book § 25-5 (b) (1). See id. In her motion, the defendant requested that the court find the plaintiff in contempt, order the plaintiff to pay legal fees and costs in connection with the contempt motion, and award any other relief that the court deemed appropriate. Id.

         At the remand trial in February, 2014, the defendant presented expert testimony to establish the economic loss resulting from the plaintiff's transactions. See id. The defendant's expert testified that the stock shares and options were worth approximately $2.5 million at the time the plaintiff sold and exercised them, respectively. The expert further testified that, if the plaintiff had not sold or exercised the shares and options but instead had retained them, they would have had a value, as of the date of the retrial, of about $6 million. See id. Thus, according to the defendant's expert, the plaintiff's decision to sell the shares of stock and exercise his stock options had caused a net loss to the marital estate of about $3.5 million. Id.

         For his part, the plaintiff admitted that he had not sought permission to engage in the transactions. He nevertheless testified that he had consulted with attorneys concerning the transactions before executing them and that he did not believe that he otherwise needed permission to execute the transactions. The plaintiff further testified that he thought converting the shares to cash would best preserve their value in the face of ongoing market volatility. Id., 579.

         After trial following the remand, the trial court issued a memorandum of decision and new financial orders. The court first explained that, in crafting its financial orders, it had considered the testimony and exhibits presented, along with the required statutory criteria, set forth in General Statutes § 46b-81, [2] governing the trial court's distribution of marital property. The court then turned to its findings of fact. After setting forth the history of the parties' marriage and careers, the court determined that the plaintiff's earning capacity exceeded the defendant's, finding that the plaintiff had earned at least $1.2 million annually in the years leading up to the dissolution, compared to $143, 000 that the defendant earned annually. With respect to the marital assets, the court explained that it had valued them as of the original date of dissolution. Id., 583. The parties had agreed to the value of most of the marital assets in a pretrial stipulation, which the court incorporated by reference. Id.

         With respect to the transactions, the trial court found that the plaintiff had sold 28, 127 shares of Omnicom stock and exercised 75, 000 Omnicom stock options while the automatic orders were in effect and without the defendant's consent or the court's permission. Id., 579, 581. Although concluding that the plaintiff's transactions ‘‘did in fact violate the automatic orders, '' the court did not hold the plaintiff in contempt because it found that the plaintiff had sought the advice of counsel concerning the transactions, and, consequently, his violations were not wilful. Nevertheless, the court explained that the transactions caused ‘‘a significant loss to the marital estate'' and that the court had ‘‘taken into account these transactions in making [its financial] awards.''

         The trial court then turned to property distribution. The assets in the marital estate had a value of approximately $6.5 million.[3] The trial court awarded the defendant the principal residence and permitted her to keep a pension from Credit Suisse, as well as portions of the parties' bank and retirement accounts, among other assets. The total value of the award to the defendant was approximately $4.4 million. The trial court awarded the plaintiff portions of the parties' bank and retirement accounts, among other assets. The total value of the award to the plaintiff was approximately $2.1 million. According to the plaintiff's accounting, the award amounted to a 68 percent distribution of the marital estate to the defendant and a 32 percent distribution to the plaintiff. The trial court also ordered the plaintiff to pay the defendant child support and alimony for a period of twenty-one years, with a reduction in the amount of alimony every seven years.[4]

         After the trial court issued its new financial orders, the plaintiff filed a motion for articulation, asking the court to explain the effect of the plaintiff's transactions on the court's property distribution and how the trial court had valued the loss that the transactions caused to the marital estate. In an articulation, the trial court explained that ‘‘financial orders in dissolution proceedings often have been described as a mosaic, in which all of the various financial components are carefully interwoven with one another. . . . Therefore, it is impossible to say, with great specificity, exactly how the court ‘took into account' the [sale] of the shares and the exercise of the stock options by the plaintiff. However, these transactions by the plaintiff were taken into account when the defendant was awarded the family home and her pension from Credit Suisse, as well as the equitable division of all of the other assets of the parties.'' (Citation omitted.) As for the loss to the estate, the trial court explained that it had credited the testimony of the defendant's expert. The court thus determined that, if the plaintiff had not sold the shares and exercised the stock options when he did but, instead, had retained them as contemplated by the automatic orders, they would have been worth about $3.5 million more at the time of the trial following remand when compared to their value at the time that the plaintiff actually sold or exercised them.

         The plaintiff appealed to the Appellate Court, which reversed the trial court's financial orders. See O'Brien v. O'Brien, supra, 161 Conn.App. 577, 593. Among other claims, the plaintiff asserted that the trial court improperly had considered the transactions when fashioning its orders. See id., 587-88. The plaintiff argued that, even if his actions technically violated the automatic orders, the trial court improperly held his actions against him when distributing the property because he had not been found in contempt and did not otherwise intentionally dissipate the assets or cause any legally cognizable harm. See id., 588-89.

         The Appellate Court agreed with the plaintiff, concluding that the plaintiff's violations of the automatic orders could be considered by the court only if they rose to the level of contempt or a dissipation of marital assets. Id., 589. The court explained that, ‘‘even if the plaintiff technically violated the automatic orders when he sold stock and exercised options during the pendency of the dissolution action without permission . . . the resulting sanction imposed on the plaintiff by the court-namely, some unspecified reduction in the plaintiff's share of the marital estate-was not legally justified and, thus, an abuse of discretion. First, the court expressly found that the plaintiff's actions were not contumacious, and, thus, we conclude that it lacked any authority to punish the plaintiff pursuant to its civil contempt powers. Second, although in exercising its statutory authority under § 46b-81, the court certainly could take into account, when dividing the parties' assets, whether a party had engaged in a dissipation of those assets, there is nothing in the present record that would support a finding that the plaintiff intended to hide or to dissipate assets, nor did the court make such a finding.'' (Footnote omitted.) Id.

         Concerning the trial court's contempt powers, the Appellate Court further explained that ‘‘[j]udicial sanctions in civil contempt proceedings may, in a proper case, be employed for either or both of two purposes: to coerce the defendant into compliance with the court's order, and to compensate the complainant for losses sustained. . . . [If] compensation is intended, a fine is imposed, payable to the complainant.'' (Internal quotation marks omitted.) Id., 590. Because, however, the trial court had not found the plaintiff in contempt, the Appellate Court concluded that the trial court had ‘‘lost its authority pursuant to its contempt powers to take any remedial action against the plaintiff simply because, with the luxury of hindsight, those transactions had proven unprofitable or even unwise. In other words, if the court had found the plaintiff in contempt of the automatic orders, that conclusion might have justified its further consideration of the effect those violations had on the assets available for distribution. In such circumstances, the court could have taken remedial action, perhaps reducing the plaintiff's distribution in an amount necessary to compensate the defendant. Nevertheless, having effectively denied the defendant's motion for contempt, the court was required to dispose of the marital assets in accordance with its authority under § 46b-81, which did not include the power to punish in the absence of dissipation.'' Id., 591.

         With respect to the trial court's authority to consider dissipation under § 46b-81, the Appellate Court noted that the trial court had not made a finding of dissipation, and that such a finding would be unwarranted in the present case because, as this court explained in Gersh-man v. Gershman, 286 Conn. 341, 348, 351, 943 A.2d 1091 (2008), ‘‘[p]oor investment decisions, without more, generally do not give rise to a finding of dissipation. . . . [A]t a minimum, dissipation in the marital dissolution context requires financial misconduct involving marital assets, such as intentional waste or a selfish financial impropriety, coupled with a purpose unrelated to the marriage.'' (Citation omitted; internal quotation marks omitted.) O'Brien v. O'Brien, supra, 161 Conn.App. 592.

         Because the trial court had not found contempt or dissipation, the Appellate Court concluded that the trial court did not have the authority to compensate the defendant for the plaintiff's transactions, even though those transactions had violated the automatic orders. Id., 593. The Appellate Court reversed the trial court's judgment with ...


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