The opinion of the court was delivered by: CARTER
ROBERT L. CARTER, District Judge
This action arises from an alleged breach of a divorce settlement. Pursuant to Rule 56, F. R. Civ. P., defendant now moves for summary judgment and plaintiff cross-moves for partial summary judgment.
Plaintiff Judith C. Zesiger and defendant Albert L. Zesiger were divorced pursuant to a judgment entered by the New York State Supreme Court on or about September 1, 1989. The judgment incorporated by reference but did not merge the terms of a settlement agreement, dated August 25, 1989 (the "Settlement Agreement"), which, inter alia, set forth the financial terms of the parties' marital dissolution.
One particularly contested issue in the matrimonial action was the value ascribed to defendant's 27,615 shares of stock in BEA Associates, Inc. ("BEA"), a money management firm in which defendant was an officer, director, and employee. Ultimately, the Settlement Agreement provided that for a period of eight years following the settlement (the "Payment Period"), defendant would notify plaintiff as to the number of BEA shares, if any, sold or otherwise conveyed by him at a price per share in excess of a "formula price," stipulated to be $ 404.20 for purposes of these motions.
(Pl.'s Mem. of Law at 1). In such event, the Settlement Agreement further provided that defendant would pay plaintiff a supplemental distributive award ("SDA") as scheduled in the Agreement.
In 1990, BEA entered into a series of transactions with Credit Suisse Capital Corporation ("Credit Suisse") involving, inter alia, the creation of a joint venture partnership, the sale of assets by BEA to Credit Suisse, and long term employment and non-compete commitments by defendant and other BEA employees. At this time, defendant sold 14,655 of his BEA shares. Defendant sold the balance of his shares over the next five years. On October 7, 1996, plaintiff filed a complaint in federal court
contending that defendant sold or otherwise conveyed all 27,615 shares of BEA in 1990 for more than the formula price, thereby obliging defendant to pay plaintiff an SDA of $ 2,761,500 plus interest from the date that the payment should have been made. Plaintiff also requested attorneys fees based upon a default provision in the Settlement Agreement.
Defendant claims that he did not sell or otherwise convey any of his shares for more than the formula price and now seeks summary judgment. Plaintiff, in turn, has cross-moved for partial summary judgment, claiming that it is uncontroverted that defendant's conveyance of 14,655 shares of his BEA stock in 1990 exceeded the formula price and triggered her right to an SDA in the amount of $ 1,465,500 plus interest and attorneys fees.
When BEA entered into a joint partnership with Credit Suisse, defendant claims that Credit Suisse gave him a choice of either selling his shares and retiring or receiving attractive bonuses predicated upon five more years of employment. (Def.'s Mem. of Law at 11). Specifically, defendant contends that Credit Suisse offered annual bonuses and "Additional Compensation" based on performance. Id. at 12. Defendant also contends that Credit Suisse agreed to pay a portion of the purchase price for BEA's assets only in the form of "Specified Anniversary Payments" and "Earn Out Payments" which were contingent upon defendant's continued employment. Id. According to defendant, not only would he have forfeited his right to these payments had he left BEA before the five years expired, but he also alleges that he would have been required to guarantee a repayment obligation of up to $ 1.1 million in the event any of the other key employees left BEA prior to the completion of the five year term. Id. Finally, had he not agreed to Credit Suisse's conditions, defendant contends that he would have foregone a $ 2.5 million signing bonus. Id. at 13.
Defendant opted to remain at BEA and, accordingly, received $ 10,198,275 from a "Special Bonus Pool" and $ 2,555,772 from a "Special Dividend Pool" in 1990, the year the transaction was consummated. Id. at 6. That same year, defendant received an additional $ 760,894 expressly for 14,655 BEA shares that he sold back to the company. Id. From 1991 through 1995, defendant sold the rest of his BEA shares for a total of $ 1,894,456; he also was paid Specified Anniversary and Earn Out Payments in annual installments totalling $ 6,966,725 during this period. Id. at 15. According to plaintiff, defendant also received approximately $ 30,000,000 from a "Purchase of Assets" fund distributed by Credit Suisse to key BEA shareholders. (P 7, Declaration of Gregory Cowhey, dated July 22, 1997).
Neither side disputes that, under the Settlement Agreement, defendant would have been obligated to pay plaintiff an SDA if defendant sold his BEA shares for more than their formula price during the Payment Period.
Rather, the conflict stems from the parties ascribing different values to defendant's compensation for his BEA shares. This difference arises because plaintiff views defendant's total compensation from the Credit Suisse transaction as a lump sum price for defendant's stock, while defendant differentiates between payments for his BEA shares and payments for his ownership interest in BEA's assets. Defendant argues that the Settlement Agreement does not "trigger [plaintiff's] right in a SDA [sic] if Defendant sold or received consideration for his 'interest' in BEA other than for the sale of his Shares." Id. at 17. In other words, defendant contends that a right with respect to the sale of shares does not give rise to a right with respect to the sale of assets. Id. at 21. Thus, defendant argues that he was only paid $ 51.92, $ 53.75, $ 74.10, $ 94.89, and $ 148.87 per share when he sold them in 1990, 1991, 1992, 1993, and 1995, respectively,
and that plaintiff is attempting to unjustly "re-characterize" his bonuses and other additional compensation as part of the stock purchase price. Id. at 16.
In justifying the uncoupling of his BEA stock from the rest of his compensation package, defendant indicates that other major BEA shareholders who did not sell their shares also received compensation in the form of Special Bonuses, Special Dividends, and Earn Out Payments. (See Declaration of Keith W. Gardner, dated September 4, 1997 ("Gardner Decl.")).
Defendant also asserts that the tax treatment of his income from the Credit Suisse transaction is dispositive of the true price garnered for his BEA shares. (Def.'s Mem. of Law at 22, 23). Since capital gains tax treatment is generally afforded only to the realization of income from the sale of long term capital assets such as stock shares, defendant argues that his Special Bonus and Special Dividend payments, which were reported on defendant's tax returns as ordinary income instead of capital gains, could not be considered payment for his stock. Id. Thus, defendant claims that the only distributions from the Credit Suisse transaction that could be treated as capital gains - the Specified Anniversary and Earn Out Payments and consideration for the BEA shares - either in 1990 alone or in total would not add up to a price per share that exceeds the formula price of $ 404.20.
(Id. at 23, 24).
For all the reasons stated above, defendant argues that plaintiff fails to present any genuine issue of material fact indicating that his BEA stock sale exceeded the formula price. Accordingly, he urges ...