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James P. Wunsch v. Kelly M. Pickering

April 12, 2011


Appeal from the District Court of Teton County The Honorable Nancy J. Guthrie, Judge

The opinion of the court was delivered by: Burke, Justice.

Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

[¶1] In this post-divorce case between James Wunsch and Kelly Pickering, formerly known as Kelly Wunsch, the district court resolved a dispute between the parties concerning an amount of money Mr. Wunsch owed Ms. Pickering pursuant to the provisions of their divorce settlement agreement. Mr. Wunsch challenges the district court's decision. We will affirm.


[¶2] Mr. Wunsch presents these issues:

1. Did the district court abuse its discretion by issuing an order compelling Mr. Wunsch to produce documents that were irrelevant or not in his possession, custody, or control?

2. After the district court entered default against Mr. Wunsch as a sanction for failing to produce the documents as ordered, did the district court err as a matter of law by restricting Mr. Wunsch's participation in the subsequent hearing on damages?

3. Was the evidence sufficient to support the trial court's award of damages?


[¶3] Before their divorce in 2004, Mr. Wunsch and Ms. Pickering owned and operated a financial services business, helping to invest their clients' funds in a wide variety of financial products, including mutual funds, stocks, bonds, annuities, and life insurance. The two were affiliated with LPL Financial Corporation, a financial investment company. During the divorce, the couple entered into a property settlement agreement that was later approved by the district court and incorporated into the divorce decree. The agreement provided generally that Mr. Wunsch would continue operating most of the financial services, while Ms. Pickering would receive payments to compensate for her share of the former business. The agreement, referring to Mr. Wunsch as "JIM" and to Ms. Pickering as "KELLY," included this fee-splitting provision:

The parties will share equally any fees earned on joint client accounts . . . . If JIM replaces any of the above joint client accounts, JIM and KELLY will share equally the fees on the replaced account . . . until such time as KELLY has received in fees an amount equal to two times the annual earnings on the amount replaced, based on the fee charged before the replacement. At such time, KELLY shall no longer receive any fees on the replaced account.

[¶4] Not long after the divorce, disputes developed between the parties about the interpretation and administration of this agreement. The disputes were mediated, and many of them settled. In this mediation, the parties agreed to appoint an accountant as Administrator to perform the accounting required under the settlement agreement. The mediation did not resolve the parties' disagreement about the meaning of the phrase "two times the annual earnings on the amount replaced." That dispute was ultimately resolved in Wunsch v. Pickering, 2008 WY 131, 195 P.3d 1032 (Wyo. 2008).

[¶5] The Administrator developed a list of approximately 165 joint accounts held by the parties as of the date of divorce. As long as clients' funds remained in the parties' joint account, the accounting was relatively simple. The financial services company could split the fees, and send one half directly to Mr. Wunsch and one half directly to Ms. Pickering. Both parties had access to information about the accounts and the fees received. The Administrator could use this information to reconcile the accounts and, when some adjustment was necessary because of medical expenses for the children, for example, the Administrator would facilitate payments from one party to the other to balance the accounts.

[¶6] The accounting was more difficult when clients removed their funds from the parties' joint accounts. A client might take the funds and reinvest in another financial product offered by Mr. Wunsch, such as insurance or annuities. In their settlement agreement, the parties referred to this as a "replaced" account. For a replaced account, Mr. Wunsch would continue to receive fees, and under the agreement, Ms. Pickering remained entitled to half of those fees. Because a replaced account was held by Mr. Wunsch individually, however, Ms. Pickering did not have the same access to information about it, and the fees would not be paid directly to her. She and the Administrator had to rely on information provided by Mr. Wunsch to determine what amount Ms. Pickering should receive pursuant to the settlement agreement.

[¶7] However, a client might instead remove funds from the parties' joint account and, for example, keep the cash or reinvest through a different financial services company unrelated to Mr. Wunsch. For a "non-replaced" or "closed" account such as this, Mr. Wunsch would no longer earn any fees. According to Mr. Wunsch, he would, in turn, not owe Ms. Pickering any fee split under the terms of the settlement agreement.

[¶8] As noted above, the Administrator originally listed approximately 165 joint accounts held by the parties. By the time the current dispute arose, the Administrator had listed approximately 50 of those as "inactive" accounts that were no longer held in the parties' joint accounts. A dispute developed concerning these inactive accounts. Ms. Pickering pointed out that, if the accounts had been replaced and Mr. Wunsch was still earning fees on them, then she was still owed half of those fees. Mr. Wunsch claimed, to the contrary, that these accounts had not been replaced and he owed Ms. Pickering no fees relating to these accounts. The Administrator could tell that the clients' funds had been removed from the parties' joint accounts, but did not have adequate information to tell if the accounts had been replaced. He continued to calculate the "projected amount" Ms. Pickering would be owed if these accounts had been replaced, but he could not determine whether Ms. Pickering was actually owed these amounts.

[¶9] In 2009, Mr. Wunsch filed a motion asking the district court to clarify what, if anything, he owed Ms. Pickering on certain accounts. Ms. Pickering filed a response asserting that Mr. Wunsch had replaced these accounts, but had breached the settlement agreement by failing "to disclose sufficient information to [allow her or the Administrator] to follow the replaced accounts." Based on this alleged breach, she asked the district court to order Mr. Wunsch to pay the entire projected amount. The district court set a hearing on these issues for May 8, 2009.

[¶10] On March 24, 2009, Ms. Pickering served discovery requests on Mr. Wunsch. These included requests for admissions, interrogatories, and requests for production of documents. Among the documents requested were those referring to or relating to the "inactive" accounts, the tax returns and forms for Mr. Wunsch individually and for Wunsch Financial Services, Inc., and the commission statements Mr. Wunsch had received since August of 2005. Mr. Wunsch's response, delivered on April 28, 2009, was generally to object to the production of these documents, stating that the requests were "irrelevant and not calculated to lead to the discovery of admissible evidence and . . . propounded only to harass and intimidate." Ms. Pickering filed an "Expedited Motion to Compel" on April 29, 2009, arguing that the objections were both untimely and without merit. Responding to the motion to compel, Mr. Wunsch defended his objections, but further explained that he had requested information about the 50 inactive accounts from LPL. LPL did not respond until April 28, 2009, when it informed Mr. Wunsch that it could not provide the requested information without a court order. Mr. Wunsch had obtained the court order and sent it to LPL, but had not yet received the documents.

[¶11] The district court held a brief hearing on the motion to compel on May 4, 2009. Both sides presented argument, with Ms. Pickering contending that she needed the requested documents in order to present her case at the May 8 hearing, and Mr. Wunsch contending that the documents were irrelevant, unnecessary, and unavailable. Mr. Wunsch also indicated that the documents requested from LPL should be delivered soon, and near the end of this hearing, the parties suggested that they could meet on the evening of May 7, just prior to the hearing, and attempt to work out their differences.

Encouraging the parties to meet as scheduled, the district court took the motion to compel under advisement.

[¶12] The record does not explicitly reflect the parties' meeting on May 7, but their comments at the May 8 hearing suggest that they had met. They indicated that some documents had been received from LPL and delivered to Ms. Pickering. Based on information from the LPL documents, Mr. Wunsch had prepared a summary of the 50 inactive accounts, indicating the date the funds had been transferred from the joint account, the amount transferred, and to whom the funds were paid. When Mr. Wunsch attempted to introduce this summary as a hearing exhibit, Ms. Pickering objected to the lack of foundation, stating that "this is exactly the type of material which we were not allowed discovery on." She argued that the underlying information had been compiled by an LPL employee who was not present to testify or be cross-examined, using documents that were not identified or produced. She objected that the exhibit was only a summary, and because it lacked any foundation or "backup material" to support it, it was inadmissible. Emphasizing that the backup materials were the same documents Mr. Wunsch had failed to produce in response to her discovery requests, Ms. Pickering offered a continuing objection to the summary document.

[ΒΆ13] Although the district court neither admitted nor excluded the disputed document, the hearing continued, with both parties questioning the Administrator. The district court then announced a short recess. Following the recess, the parties informed the court that they had "reached some agreements" about certain interim payments Mr. Wunsch would make to Ms. Pickering. They also informed the court that the parties "may still have discovery problems," but "could perhaps resolve them . . . in ...

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