Learning Lessons

So one of the latest stories that has been circulating the internet concerns the pending divorce of Harold Hamm, the founder and CEO of Continental Resources, a prominent US oil company.   One such article, found here, lists 10 facts that you need to know about the divorce. Really, some of the fact are more about the company and some are about the people involved.  However, there are lessons to be learned by anyone who is involved in a divorce case – even those not worth billions of dollars.  Through this article I want to highlight some of those lessons.

1. Hamm is America’s 32nd Richest Man:  The lesson here is that, rich or poor, people get into relationship and sometimes those relationships end. Being worth millions or billions of dollars does not guarantee happiness.

2. The Couple Didn’t Sign a Prenup: This may be the one fact that can hurt Mr. Hamm and benefit Mrs. Hamm. People enter into prenuptial agreements for many reasons. One reason is to decide, before the parties marry, what will happen in the event of death or divorce.  For reasons probably known only to the parties, their attorneys, and their financial advisors, they decided not to have a prenuptial agreement.  You do not need to be worth millions to have a prenuptial agreement. If two people are planning to get married and the parties have assets they want to protect from distribution in the event of death or divorce,a prenuptial agreement is the best way to proceed.  Without one, however, the law of the state where one of the parties files for divorce (not where the parties married necessarily) will determine what assets are marital property subject to division by the court.

3. This Could be the Most Expensive Divorce Ever: This “fact” remains to be seen.  Mr. Hamm is reported to be worth over 11 billion dollars. That is not the size of the marital estate.  There may be assets that are not part of the marital estate. Under Pennsylvania law, those assets and debts that existed prior to marriage and those that came into being after separation are not marital property subject to equitable distribution.  Only the increase in value of pre-marital assets is subject to division as part of a divorce.  In Pennsylvania, this is true whether or not either party had a hand in the increase in value.  This is not true of every state. Gifts and inheritances to one of the parties would also be excluded from the marital estate and not subject to equitable distribution, except for the increase in value. It is not uncommon for parties, through pre-nuptial agreements, to exclude certain assets from the division as part of a divorce, including the increase in value.

4. Sue Ann Has Been Surveying Harold Since 2007:   The article referenced above indicates that the Daily Mail reported that Sue Ann Hamm has been spying on her husband since 2007 electronic surveillance.  There are several important considerations raised here. First, electronic surveillance is not automatically legal and/or admissible in Court.  Factors that influence this how the surveillance was obtained and whether or not Mr. Hamm had knowledge/had consented to it.   Under federal law, only 1 party to a telephone conversation has to consent for the conversation to be recorded. So, under federal law, whomever Mr. Hamm was talking with can consent to a call being recorded without Mr. Hamm’s knowledge.  Under Pennsylvania law, however, BOTH parties have to consent. Otherwise, the recording of the conversation is illegal.  Since this is a divorce action, state law will control.

5. The Couple Agreed on a ‘No-Fault’ Divorce: So, despite the surveillance, the parties have agreed to a no-fault divorce.  Under Pennsylvania law, there is a preference for a “no-fault” divorce over a fault divorce. A fault divorce can be entered for such reasons as Mr. Hamm having committed adultery.  There are several reasons why, however, parties can agree not to proceed with a fault divorce:

  • Under Pennsylvania law, the person seeking a fault divorce has to be the “innocent and injured spouse”. So, if Mr. Hamm would be able to prove that Mrs. Hamm engaged in conduct which would also give rise to a fault divorce, she could not obtain a fault divorce;
  • Perhaps, Mrs. Hamm did not have enough conclusive evidence to prove Mr. Hamm had engaged in adultery;
  • The parties do not want to “air their dirty laundry”. In many instances, if a party wants to obtain a fault divorce, there will have to be a hearing.
  • The parties do not want to pay for a fault divorce. As will be mentioned again below, under Pennsylvania law, the fault of a party which resulted in the divorce will not entitled the other party to more in the division of assets.

6. Harold’s Lawyers Want Sue to Turn Over the Recordings:  Supposedly, Mr. Hamm wants the recordings to show that the marriage of the parties was over long before the date of separation claimed by Mrs. Hamm.  If that is proven, then the end point for determining what is part of the marital estate has been shifted possibly 10 years earlier.  As mentioned above, under Pennsylvania law, the court will divide the assets and debts that were acquired prior to separation. The assets that exist after separation are not divided by the Court.

7. Hamm’s Company Has Nearly Quintupled Since 2007: If Mr. Hamm can prove that the parties’ date of separation was 10 years earlier, as he is alleging, then a significant portion of the increase in value of Continental Resources is excluded from division by the Court.  Of course, this can result in Mrs. Hamm getting a greater portion of the marital estate if there is a sizable amount of assets to which Mrs. Hamm has no claim.

8. They Initially Tried to Keep Divorce a Secret:  In many jurisdictions, family court records, like those in divorce cases, are not readily subject to public scrutiny. In Pennsylvania, even in counties where one can free access the docket entries for any case, the general public is not allowed free access to the actual documents filed.   In some situations, where there is a legitimate reason to keep the names of the parties private, especially in cases where children are involved, courts have used the initials of the parties instead of the parties full names.

9. Hamm Could Lose Controlling Stake of His Company:  It is speculated that Mrs. Hamm could receive half of Mr. Hamm’s 68% interest in Continental Resources.  While this is for the judge in the case to decide, if Mrs. Hamm were to receive 50% of the marital estate (which is not automatic under Pennsylvania law), a court could decide that Mrs. Hamm is not going to get any percentage of the business. Mr. Hamm might have to give Mrs. Hamm more of other assets so that she does not end up going into business with him.  Or, Mr. Hamm may have to liquidate some of his shares  of Continental Resources in order pay Mrs. Hamm her share of the marital estate.

10. The Couple Has Two Daughters:  These parties’ daughters are adults. The should not be thrust into the limelight as a result of their parents’ divorce.  Even if the children were minors, the children should not be the focus of any divorce case. A divorce case involves the end of the relationship between a husband and a wife. The relationships between parents and their children should not be legally impacted by the entry of a divorce decree. All too often, parents drag their children into the divorce proceedings telling them the details of the divorce. One does not have to be a mental health professional to know that this is not good for the children – especially for minor children.

There may be many more lessons that one can learn from high-profile divorce cases such as the one between Harold and Sue Ann Hamm.

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