In Re the Marriage of Estes
1997 Wash. App. LEXIS 42, 84 Wash. App. 586, 929 P.2d 500 (1997)
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Rule of Law:
An attorney's pending contingency fee agreements for work performed during a marriage are marital property subject to division upon dissolution. The difficulty in valuing such agreements does not preclude their division; instead, a court should award the right to the fees to both parties and divide the proceeds, when received, based on the portion of work attributable to the marital community.
Facts:
- Yong Estes and Ronald Estes were married for ten years, separating in October 1993.
- Ronald Estes was an attorney in his own practice, and during the marriage, he worked on several personal injury cases on a contingency fee basis.
- At the time of the dissolution proceedings, Mr. Estes testified that these contingency fee cases had no value due to their uncertainty.
- However, evidence showed that in one of these cases, a settlement offer of $1.2 million had been made to Mr. Estes's client.
- Ms. Estes was employed as a part-time bank teller, earning significantly less than Mr. Estes.
- Shortly after the dissolution decree was entered, Mr. Estes settled one of the pending contingency fee cases and received a fee of $178,640.72.
Procedural Posture:
- Ronald Estes filed a petition for dissolution against Yong Estes in a Washington trial court in December 1993.
- The trial court found that Mr. Estes's contingency fee agreements were marital property but assigned them a value of zero and awarded them entirely to him.
- The trial court entered a decree of dissolution on July 25, 1994, dividing the parties' assets and awarding maintenance to Ms. Estes.
- Ms. Estes filed a motion for reconsideration, which the trial court denied.
- After discovering Mr. Estes had received a large contingency fee, Ms. Estes filed a motion to vacate the decree, which the trial court also denied.
- Yong Estes (appellant) appealed the trial court's property division and the denial of her post-trial motions to the Washington Court of Appeals, where the cases were consolidated.
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Issue:
Are an attorney's pending contingency fee agreements, for work performed during a marriage, considered marital property subject to division upon dissolution, even if their value is uncertain at the time of the divorce?
Opinions:
Majority - Schultheis, A.C.J.
Yes. An attorney's pending contingency fee agreements for work performed during a marriage are marital property subject to division, and a court errs by finding they have no value simply because the outcome is uncertain. The court reasoned that both an enforceable contract right and a contingent future interest constitute property. Although valuing such fees at the time of dissolution is difficult, this does not prevent their division. The proper method is to reserve jurisdiction and divide any fees when they are actually received. The court rejected the minority view that division would violate ethical rules against fee-splitting with non-lawyers, noting that fees earned during marriage are already community property shared with a non-attorney spouse. Therefore, the trial court's award of the fees entirely to Mr. Estes was contrary to law.
Analysis:
This decision establishes a significant precedent in community property jurisdictions for treating uncertain, contingent future earnings as divisible marital assets. By rejecting a speculative, upfront valuation in favor of a "wait and see" approach, the court provided a practical and equitable solution for dividing assets whose value is not ascertainable at the time of divorce. This framework prevents one spouse from being deprived of their community share of an asset just because its value is contingent. The ruling will likely influence the division of other hard-to-value assets, such as stock options, unvested pensions, or intellectual property rights, in future dissolution cases.
