In re Marriage of Mulligan-Ehrie, 2022 IL App (1st) 210493-U

- Case citation and parties
In re Marriage of Mulligan‑Ehrie, No. 1‑21‑0493 (Ill. App. Ct., 1st Div. Dec. 20, 2022) (Rule 23 order). Petitioner‑Appellant/Cross‑Appellee: Lisa Mulligan‑Ehrie. Respondent‑Appellee/Cross‑Appellant: Richard Ehrie.

- Key legal issues
1) Whether payments received by Richard pursuant to a post‑closing restrictive covenant/non‑compete agreement are “Net Proceeds” payable to Lisa under the parties’ Share Agreement (which implemented a 33% interest awarded to Lisa in the MSA).
2) Whether payments to Richard under a post‑closing consulting/employment agreement fall within or are expressly excluded from “Net Proceeds.” The appellate court reviewed the trial court’s factfindings for manifest weight of the evidence.

- Holding / outcome
The appellate court reversed both of the trial court’s determinations and remanded. It held that the trial court’s finding that Lisa was not entitled to the restrictive covenant proceeds was against the manifest weight of the evidence, and that the trial court’s finding that Lisa was entitled to 33% of the consulting agreement proceeds was also against the manifest weight of the evidence.

- Significant legal reasoning (concise)
The Share Agreement defined “Net Proceeds” to include cash, notes, retained accounts receivable, deferred/contingent purchase price, “any earnout, payment for Richard’s personal goodwill, non‑competition payments made to the Shareholders of the Corporation generally, or other contingent payments based on the occurrence of future events.” Critically, the Share Agreement separately carved out and excluded “any reasonable amounts payable in connection with bona fide personal services to be performed by Richard after the closing of the Transaction under a consulting or employment agreement.” Applying that contract text, the court concluded: (a) proceeds characterized as non‑competition/restrictive covenant payments fall within Net Proceeds and thus are subject to Lisa’s 33% interest; (b) amounts paid as compensation for post‑closing personal services pursuant to a consulting agreement are excluded from Net Proceeds and are therefore not divisible under the Share Agreement. The appellate court found the trial court’s contrary factfindings unsupported by the record and thus against the manifest weight.

- Practice implications for family law attorneys
- Draft settlement language (MSA/share agreements) with precision: clearly define Net Proceeds, list specific inclusions/exclusions (non‑compete, consulting, personal goodwill, escrow/earnouts).
- Anticipate post‑closing allocations: secure mechanisms for allocating aggregate sums (LOIs/merger docs often use aggregate pools). If allocation between sellers is left open, build enforcement/valuation procedures into the MSA.
- Preserve trial record on allocation and character of payments (evidence of whether payments are for services vs. non‑compete/goodwill).
- Where a spouse serves as trustee/manager, ensure robust accounting, notice and inspection rights; consider fiduciary claims if disclosures withheld.
- Post‑judgment enforcement: use declaratory relief, contempt, and discovery to enforce contractual entitlement to contingent/escrowed sale proceeds.