Davis v. Davis
75 O.B.A.J. 1219, 2004 OK CIV APP 30, 87 P.3d 640 (2003)
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Rule of Law:
A severance benefit received after separation is the separate property of the receiving spouse if it is intended to replace future, post-divorce earnings and is given in consideration for the waiver of personal legal claims, even if its value is calculated based on years of service during the marriage.
Facts:
- Jimmy Ray Davis (Husband) and Leslie Ellen Davis (Wife) were married for over twenty-two years.
- During the entire marriage, Husband was employed by Seagate Technologies.
- The parties separated and filed a petition for divorce.
- After the divorce petition was filed but before the decree was issued, Seagate eliminated Husband's position due to downsizing.
- Seagate offered Husband a "Special Separation Benefit" (SSB) severance package, the amount of which was calculated based on his twenty-two years of service.
- To receive the SSB, Husband was required to sign a waiver and release of all legal claims he might have against Seagate, including claims for age discrimination.
Procedural Posture:
- Leslie Ellen Davis (Wife) and Jimmy Ray Davis (Husband) were parties to a divorce action in an Oklahoma trial court.
- The trial court held that Husband's severance package was his separate property and not subject to equitable division.
- The trial court divided the parties' 401(k) retirement plan evenly as marital property.
- Leslie Ellen Davis (Wife), as appellant, appealed the trial court's classification of the severance package to the Oklahoma Court of Civil Appeals.
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Issue:
Does a severance package, received after the parties have separated but before a final divorce decree, constitute marital property subject to equitable division when its amount is based on years of service during the marriage, but its receipt is contingent on waiving personal legal claims against the employer?
Opinions:
Majority - Presiding Judge Bay Mitchell
No, the severance package does not constitute marital property. The court applies the "replacement" approach, which classifies benefits based on the nature of the assets they replace, not their name. A retirement pension, which is marital property, replaces life savings accumulated through joint spousal efforts during the marriage. In contrast, this SSB replaces future wages Husband would have earned post-divorce, which are his separate property. Furthermore, the SSB was paid in consideration for Husband's waiver of personal legal claims, such as age discrimination, which are personal to him and arose from an event (the layoff) that occurred post-separation. The fact that the benefit's amount was calculated based on years of service during the marriage does not convert it into marital property, as the triggering events—the termination and the waiver—were not a product of the parties' joint marital efforts.
Analysis:
This decision clarifies the application of Oklahoma's "replacement" test for classifying assets in a divorce, specifically distinguishing severance pay from retirement benefits. It establishes that the purpose and contingencies of a payment (i.e., replacing future wages and waiving personal claims) are more determinative of its character than the method used for its calculation (i.e., years of service). The ruling sets a precedent that makes it more difficult for a non-employee spouse to claim a share of a severance package that is tied to post-separation events and personal rights, solidifying the distinction between deferred compensation earned during the marriage and compensation for future economic loss.
