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Relationships

# Brian Burke: About Your Divorce (Letter 140) — When \$1 Billion Can’t Resolve a Divorce

Oblique Strategy #34 — Only a billion?

My last column used the economists’ game of ultimatum to help you determine how much money it took to trump (I’m sorry, there’s a rhetoric germ in the air) your concern for abstract fairness.

In the final exercise we had a \$1 million pot. Your job is to propose the division. I am the mouthpiece for your opponent, which is a mysterious organization.

I have a message for you from the organization. I’m permitted to tell you that I don’t know if the following statement is true or if it is a ploy.

I don’t know anything about the organization, and I don’t know anything about the tactics it will actually employ in this game.

The organization’s board has decided on a tactic to force you to make a split to its maximum advantage. The organization has used Random.org to select a random number between \$1 and \$1 million.

If your proposal is equal to or greater than that number, it will be accepted. If it is less than the number, neither you nor the organization will get a cent.

If you believe the organization will act as it says it will, you should decide on your level of marginal utility and use that to split the million.

The less you try to get, the more likely you are to get it. If you think the organization’s statement is a bluff and it will take anything it can get, you could make the split very much to your own advantage, maybe even \$1 to \$999,999.

Answer: There isn’t any money to distribute; the “answer” may be of some interest but it’s of little significance. The hypothetical organization did go to Random.org and asked for an integer between 1 and 1,000,000.

That number was 153,736. If your spilt was equal to or less than that, you are the hypothetical recipient of a hypothetical \$846,264.

•        •        •

Now you’re ready to consider the positions and decisions of Harold and Sue Ann Hamm. They were married for 24 years during which Harold, a high school graduate, is an oil wildcatter and the CEO of and a major shareholder in Continental Resources, Inc. Sue Ann was one of Continental’s lawyers for seventeen years.

Semi-technical note No. 1: judicial decisions in divorce cases typically refer to the parties by their first names or simply husband and wife. The use of full names (e.g., Mr. and Ms.) or the terms “Petitioner” and “Respondent” makes the document difficult to read and prone to error. Often, the first footnote will say something like, “We refer to the parties by their first names. No disrespect is intended. We use this conventional practice because it makes legal writing easier to understand.”

Parties are sometimes shocked by how rude and impersonal this “conventional practice” can feel when they read what the court has written about them.

It can feel even worse when the judge, during the course of a trial or hearing, refers to a generic wife and husband, when the unique human beings are present in the courtroom.

While it can feel painful to the person I’ve been engaged to represent, the practice makes it clear that the judge doesn’t know, like or dislike the parties.

They are essentially faceless, and they are deluded (or poorly advised) if they believe that this judge is going to somehow find “the truth” that will resolve the psychological issues that are preventing a real settlement.

Back to the Hamms. An approximate version of the case puts the value of Harold’s interest in the company at less than \$1 billion when he and Sue Ann married and at about \$17 billion at the time of divorce.

The legal question in an Oklahoma court was the same as it would have been for a California judge: To what extent was the \$16 billion increase in value due to Harold’s talent and effort and how much was due to the natural appreciation of the asset?

For different legal reasons, Sue Ann would get half that amount from either an Oklahoma or a California court.

Sue Ann and Harold couldn’t agree on the amount for the division, so after 2.5 years of litigation they ended up in trial and a judge made the division they couldn’t make for themselves.

The decision awarded about \$1 billion to Sue Ann and the rest to Harold. Sue Ann received some valuable real estate, and cash had been distributed to her during the divorce proceedings.

When the final division tallied up under the terms of the court’s order, Harold owed Sue Ann: \$974,790,317.77.

The judge’s order permitted Harold to make installment payments. The first was to be \$322.7 million and thereafter \$7 million per month until the balance was paid in full. (Somehow interest on the judgment is included in the payments.)

When the trial court’s decision was rendered, Harold’s public response was that he thought it was “fair and equitable.”

If he said this before Sue Ann announced her reaction, Harold made a mistake. When one party says: “The judgment was fair and reasonable,” it will almost surely cause the other to say, “I’m going to appeal.”

From then on, Harold’s management of his divorce served as a demonstration of why Continental Resources was lucky to have him as its CEO and why it prospered under his leadership. First, study what a check for nearly \$1 billion looks like.

Now back to ultimatum. Here, it was the judge who made the proposed split. He said, in effect, “Sue Ann, you can say yes to about \$1 billion and take this check plus about \$25 million in other property and Harold will get about \$16 billion. Or, you can say no and an appellate court will reconsider the division. It’s 1 to you and 16 to Harold. Take it or leave it.”

I think Harold went first with the “fair and equitable” statement, so Sue Ann almost had to say, “It’s not enough and I appeal.” She said it privately, and she said it to the press, to the world.

Sue Ann’s public rejection of the terms of the judgment provided Harold with an excuse for not making the first payment of \$322 million, and this is where he started to play very, very well.

Oblique Strategy #35 — Will a \$2 billion version of yourself be better than a mere \$1 billion version?

— Brian H. Burke is a certified family law specialist practicing family law and mediation in Santa Barbara. A researcher and educator in the field of divorce and family conflicts, he is also the creator of the Legal Road Map™. Click here for more information, call 805.965.2888 or e-mail [email protected]. Click here to read previous columns. The opinions expressed are his own.

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