Employee and Marital Conflicts — Wife Claims Husband’s Law Firm Future Earnings, No Conflict in Joint HR Representation for Same Role

David Kluft notes: “Can I represent two employees in a failure to promote case if there was only one promotion available?” —

• “Two employees of a NYC municipal agency sued for employment discrimination after the agency promoted someone else instead of them to a job opening.”
• “The agency argued that both employees couldn’t be represented by the same counsel, because there was only one promotion available (a disputed point) and the plaintiffs would be competing with each other to recover for denial of a single promotion.”
• “The federal court found that, at least at the liability stage of the proceeding, each plaintiff only had to prove their qualifications relative to the person that got the job, not relative to each other.”
• “The Court acknowledged a potential for conflicts of interest, depending on the jury’s damages methodology, but found that ‘Plaintiffs could waive most conflicts imaginable under the possible methodologies,’ so with the appropriate informed consent, competent and diligent representation was possible.”
• Decision: here.

“NC Atty Says Ex-Wife Has No Claim To Firm’s Future Earnings” —

• “An intellectual property lawyer in North Carolina told the state’s top court that his ex-wife isn’t entitled to half the value of his law firm in their divorce, arguing that whatever he earns from the firm’s goodwill in the future can’t be divvied up as part of the marital estate.”
• “Jason M. Sneed of Sneed PLLC said in a reply brief Thursday in the North Carolina Supreme Court that neither his firm’s personal goodwill tied to his experience and reputation as a lawyer nor its enterprise goodwill stemming from the value of the business itself count as marital property under state law.”
• “Personal goodwill is never included, Sneed said, and enterprise goodwill in a solo practice like his is indistinguishable from the professional who runs it.”
• “‘Under the equitable distribution statute, marital property only includes property acquired during the marriage and before separation,’ Sneed said. ‘But future earnings are property necessarily acquired after separation. Goodwill, as future earnings, doesn’t meet the statutory definition.’”
• “According to the brief, the North Carolina Court of Appeals was therefore wrong to affirm the trial court’s equitable distribution order requiring Sneed to pay his ex-wife Charity Johnston $1.55 million, or half the value of Sneed PLLC on the day of their separation.”
• “Sneed is a former Alston & Bird LLP partner who opened his own boutique intellectual property practice in 2011, according to his LinkedIn profile. He divorced Johnston in 2016 after accusing her of infidelity, setting off a decade-long dispute over how to divide up their marital estate.”
• “At trial in 2021, a business valuation expert testified that Sneed PLLC was worth $3.1 million as of the date of separation. According to court filings, the expert said that roughly 90% of the firm’s value derived from Sneed’s personal goodwill, while the remaining 10% was enterprise goodwill.”
• “In September 2022, a judge awarded Johnston half the value of her ex-husband’s law firm, which was to be paid out in monthly installments of roughly $8,600 over 15 years,court documents state. The North Carolina Court of Appeals affirmed that decision in May 2024.”
• “On appeal to the state’s high court, Sneed has argued his law firm’s goodwill should never have been lumped into the marital estate since it represents future earnings after the date of separation.”
• “In response, Johnston pointed to North Carolina Supreme Court precedent in which she said the justices found goodwill in a professional corporation is marital property. She also said her ex-husband failed to preserve his arguments as to enterprise goodwill on appeal.”