## Facts

- Spouses married in 1980 and had four children; they separated, reconciled in 1988, and executed a postnuptial agreement allocating most future acquisitions and earnings as separate property, then separated again in 1994.
- The husband was a Stanford computer science professor and a Cisco consultant; he received vested Cisco stock options valued at more than $45 million at trial.
- In 1997, he received about $9.75 million in gross proceeds from exercising options and selling stock.
- In dissolution proceedings, the parties had stipulated temporary child support of $2,171 per month and temporary spousal support of $689 per month.
- After trial, the court set child support without including the 1997 stock-option/stock-sale proceeds in the guideline income calculation, awarded relatively modest spousal support, and largely denied the wife need-based attorney’s fees.
- The wife appealed the child support, spousal support, and attorney’s fees rulings.

## Issues

1. Whether proceeds from exercising stock options and selling stock must be treated as “income” for guideline child support calculations.
2. Whether the child support order improperly failed to reflect statutory policies that children share in both parents’ standard of living, especially where one parent is extremely wealthy.
3. Whether the spousal support award was an abuse of discretion for failure to properly apply the mandatory statutory factors governing spousal support.
4. Whether denial of need-based attorney’s fees was an abuse of discretion given the disparity in access to resources and earning capacity.

## Decision

- Reversed the child support order and remanded for recalculation consistent with the guideline statutes and the broad definition of income.
- Held the trial court erred by excluding substantial stock-option/stock-sale proceeds from the income analysis rather than addressing their irregularity through reasonable methods (e.g., averaging or other adjustments).
- Reversed the spousal support order and remanded because the trial court failed to adequately apply the governing statutory factors, including marital standard of living and the parties’ disparate earning capacities.
- Reversed the denial of need-based attorney’s fees and remanded for a new determination in light of statutory policies requiring relative parity in access to representation.

## Legal Principles

- For California guideline child support, “income” is broadly defined and is not limited to wages or regular salary; stock-option exercise gains and related stock-sale proceeds may constitute income for support purposes.
- Nonrecurring or fluctuating receipts may require discretionary treatment, but courts may not exclude large, support-relevant income streams simply because they are irregular.
- Child support orders must account for the policy that children are entitled to share in the standard of living of both parents, including the higher standard associated with an affluent parent.
- Spousal support awards must reflect a reasoned application of the statutory factors, including marital standard of living, duration of the marriage, needs, and relative earning capacities.
- Need-based attorney’s fees determinations must consider disparity in access to funds and ensure each party can litigate on reasonably equal terms.

## Conclusion

The appellate court reversed and remanded because the trial court improperly omitted substantial stock-option-related proceeds from the child support income analysis, inadequately applied mandatory spousal support factors, and improperly denied need-based attorney’s fees despite a severe disparity in resources.


In re Marriage of Cheriton, 92 Cal. App. 4th 269, 111 Cal. Rptr. 2d 755 (Cal. Ct. App. 2001)