§ 8.07 Pending Litigation

• Jurisdiction: United States
• Publication year: 2021

§ 8.07 Pending Litigation

Divorce courts have had to determine how to deal with pending or prospective litigation matters.⁴⁶⁶ First, because only property acquired before divorce can be divided, courts have had to determine whether such claims constitute "property" owned by a spouse at the time of divorce. In most instances, pending claims have been deemed property acquired before divorce.⁴⁶⁷ Some courts have disagreed.⁴⁶⁸

An Indiana court has held that when a claim arises it is a "chose in action," which is a property right (the claim involved the husband's tort claim against his former employer).⁴⁶⁹ Therefore, because the claim arose during marriage and before the divorce action was filed, the settlement amount could be divided even though it was received after the divorce was filed (which was the cut-off date for acquiring marital property). A Pennsylvania court has agreed with this analysis.⁴⁷⁰

If the cause of action is considered property acquired by a spouse during marriage, valuation difficulties can be presented. The value of the claim obviously is speculative in most cases. This problem can be avoided by awarding both spouses a portion of the net, after-tax award if and when any recovery is received.⁴⁷¹

Some courts have determined that, because the amount that will be realized from the claim is speculative, it should not be divided.⁴⁷²

An allocation issue also could be presented. In all states, post-divorce earnings of either spouse are not divisible.⁴⁷³ Some pending claim matters could include a recovery for wages (or lost wages) after divorce. For example, in one case, the husband promised to do extensive construction work in exchange for a parcel of realty.⁴⁷⁴ Sixty percent of the work was completed at the time of divorce. Even if the husband later completed the project, the marital estate should not have a claim to the compensation for post-divorce work.⁴⁷⁵

An analogous issue can be presented in personal injury cases or workmen's compensation cases, to the extent that the claim included post-divorce lost wages.

An Ohio court applied the majority "analytic approach" to characterize an amount received by a spouse in a breach of contract lawsuit against his former employer. In this case the employee signed an employment agreement to be the chief operating officer of a company for a three year period, beginning January 1, 2001. He was fired in August 2001, and filed suit in 2002. He settled the claim in 2004. The parties stopped accumulating...