The January 14, 2025 Court of Appeals opinion in Scherba v. Scherba, reversed the family court’s award of permanent periodic alimony to Wife, finding her underemployment and the frugal lifestyle the parties had during the marriage meant she did not need alimony. It also rejected Husband’s argument that his nonmarital restricted stock units (RSUs) should not be included as income in setting his support obligations and rejected Wife’s claim that she should have been awarded attorney’s fees and costs.
The parties were married for a bit over 20 years at the time Wife filed this action. Wife was a licensed attorney but, at the time of trial, she was serving “as an Individual Mobilization Augmentee, requiring approximately 4.5 weeks of duty annually. Wife reported income of $77,214 in 2022 and had been promoted from Major to Colonel.” She was not exploring full-time civilian employment, federal employment, admission to the South Carolina Bar, legal opportunities in Georgia where her license held reciprocity, or returning to active duty. Husband’s expert testified Wife had an earning capacity of $101,200.
The family court declined to impute civilian earnings to Wife but found her promotion to Colonel warranted an 11% income increase, resulting in annual income of $85,960. It found she overstated some expenses and determined her average monthly expenses to be $8,079.
At the time of trial Husband was unemployed but he had recently worked for Google and was exploring similar positions with comparable employers, including Microsoft and Meta. The family court found Husband’s gross compensation from Google from his severance includes principal earnings, bonus, RSUs, and seed money from group life and a health savings account totaled $33,000 gross per month.
Each party received over $800,000 as part of equitable distribution. Wife retained her nonmarital Thrift Savings Plan and military pension, and Husband retained approximately $90,000 in nonmarital RSUs.
At trial the family court ordered Husband to pay $1,500 per month in permanent periodic alimony and $3,125 per month in child support. It denied Wife’s request for attorney’s fees and other fees. Both parties appealed.
The Court of Appeals reversed the alimony award. The Court of Appeals noted, “the parties lived a middle-class standard of living. Each testified that they did not spend lavishly, they purchased their home in 2016 for approximately $300,000, they carried little to no debt, and they opted to save/invest throughout their marriage. Because of Husband’s support obligations, Wife’s standard of living improved.”
In reversing the alimony award, the Court of Appeals further found Wife was deliberately underemployed. It found she could have obtained full time employment and kept her reserve status and found she had not seriously pursued additional or full time employment. “Wife’s inflated monthly expenses and underreporting of her income as noted by the family court lead us to believe she has not sincerely sought additional employment to supplement her income. Wife testified she was satisfied with her current lifestyle because of the support. Wife only had to work 4.5 weeks per year and still received an imputed annual income of approximately $85,000. Wife is young, educated, and has the flexibility to supplement her income in numerous ways. Based on the foregoing, we reverse the family court’s award of alimony to Wife.”
The Court of Appeals rejected Husband’s argument that his RSUs should not be treated as income. It differentiated RSUs from stock options “because an RSU is a share of stock with restrictions and will always have value upon vesting if the stock is worth more than zero dollars. Stock options, on the other hand, are simply the option to purchase stock at a predetermined price; and, once those options vest, they may or may not have value.”
It concluded, “[l]ike the family court, we find the vested RSUs may be considered as income because they were reflected as compensation on Husband’s contracts, W-2s, and his tax returns as earned income; he received the funds in lieu of other forms of compensation; and he paid taxes on them as income when they vested. Accordingly, we affirm the award of child support.”
The Court of Appeals affirmed the denial of Wife’s fee claim agreeing with the family court’s analysis of the factors set forth in E.D.M. v. T.A.M., 307 S.C. 471, 476–77, 415 S.E.2d 812, 816 (1992):
The court found each party had the ability to pay their fees based on the value of the marital estate. In particular, the court noted that Husband was unemployed, had been required to liquidate the nonmarital portion of his RSUs to pay expenses, and owed $83,000 in tax debt. In comparison, Wife had $115,000 in checking and savings accounts. The court next noted that although Wife received the most beneficial results, Husband also received some beneficial results. Regarding the third factor, the court found each party would have more than $800,000 at their disposal. In addition, the court noted that although Husband had an excellent financial situation prior to the proceedings, that had changed over the course of litigation. In comparison, Wife was in good financial shape. Finally, the court found an award of fees to either party would affect the other party’s standard of living. Our de novo review leads us to the same conclusion regarding the equities, and we find the family court did not err in denying Wife an award of attorney’s fees and costs.
No matter how frugal the marital lifestyle, I believe case law supports permanent periodic alimony for a 20-year marriage where one party out earns the other 4 to 1. The family court found Wife’s earning capacity to be about 25% that of Husband’s. Clearly that was in error but how big an error? Since the Court of Appeals did not make any findings on either parties’ earning capacity (and it was clear neither party was earning at their capacity), it is hard to determine whether this reversal of alimony was unjust.
