Minnesota Supreme Court Rules Post-Decree Earn-out Payments are Marital Property

October 31, 2018

The Minnesota Supreme Court, in a 4-2 decision, ruled that the right to receive earn-out payments, memorialized in a purchase agreement for the sale of marital property, is itself marital property. Henson Efron family law attorneys Alan Eidsness and Lisa Spencer on behalf of their client, Gretchen Gill, won this case before the Supreme Court which affirmed the Court of Appeals’ decision to reverse the district court. Reversal was based on the fact that the parties’ ownership interest in the company, Talenti, was marital property acquired during the marriage, although the sale of the company, and receipt of payment, occurred after the marital valuation date, and the husband continued to work for the company post-sale. The Supreme Court concluded that the right to receive payment for the sale price of the marital asset, including future earn-out payments, vested in the marital estate prior to the valuation date. The dispute goes back to 2014 when the husband filed for divorce and sold the entire company for an initial installment payment of $180M plus the right to receive up to an additional $170M in two earn-out payments. Ms. Gill and he together owned approximately 30% of the company through an entity.

Gretchen Gill expressed her appreciation for the work done by Henson Efron in her case. “Alan and Lisa did an outstanding job advocating for my right to a fair and just outcome.” Ms. Gill shared, “The whole team went above and beyond in researching and presenting my case.”

“In my opinion this result clarifies, not changes, Minnesota law, but it took a long time to achieve success,” Alan responded. “We’re pleased with the Court’s decision and happy for Gretchen and her children.”

Read the article from Minnesota Lawyer here or full case decision here.