NJ Family Legal Blog : New Jersey Divorce and Family Lawyer & Attorney : Fox Rothschild Law Firm : Domestic Violence, Prenuptial Agreements, Child Custody

The Appellate Division, in the recent unpublished decision of Bakalian v. Bakalian, A-4773-07T1, decided October 21, 2009, revisited this issue.  In this case, the ex-husband appealed, in part, from the trial court's Order that imputed income to him as well as objecting to the way in which the trial judge reached the imputed income number.

Imputed income- what's this?  In simplest terms- imputed income is income that is ascribed to an individual as the amount of money they could be earning, if they either chose to work or chose to find employment similar to their past employment and/or earnings. 

In Bakalian, where the parties were both employed in the medical field but where child support had to be recalculated because the parties' son decided to live with husband, however hehad given up his chiropractic practice after the death of the parties' 16 year old daughter because he "could not get out of bed in the morning", had to deal with the legal issues stemming from his divorce, and he had raise the parties' other child, a 17 year old son.

The trial judge used the New Jersey Department of Labor statistics (NJDOL) in coming up with a comparable salary for husband if he had in fact been working and imputed that number to him when recalculating the child support obligation.

The Appellate Court affirmed the trial judge's imputation of income and methodology used to determine the amount imputed. First, the Court noted that a trial judge's decision to impute income won't be changed unless the underlying facts to do so are either contrary or unsupported by the available evidence. 

That said, the Court went on to hold that whenever a parent remains unemployed or underemployed without a good reason, imputing income allows for a fair and just determination of child support.  In doing so, the potential earning capacity should be taken into consideration in the support calculation.  The first part of this analysis requires a determination by the trial judge that the parent has good reason to be voluntarily unemployed.  To make that decision, the judge needs to consider the employment status and earning capacity of that parent if the family had stayed together, as well as the reasons for the voluntary unemployment or underemployment.

As for the methodology used to determine the imputed income, the New Jersey Rules of Court provide guidance for this process, once a court decides that a party does not have good cause for being unemployed.  These three options are listed in descending order of priority:

1).  Impute income based on potential employment and earning capacity using the parent's work history, occupational qualifications, educational background, and prevailing job opportunities in the region.  The court may impute income based on the parent's former income at that person's usual or former occupation or the average earnings for that occupation as reported by the NJDOL;

2).  If potential earnings can't be determined, impute based on the parent's most recent wage or benefit record; or

3).  If a NJDOL wage or benefit record is not available, impute income based on the full-time employment (40 hours) at the NJ minimum wage ($7.15 per hour).

As you can see, courts don't simply guess a number when making these determinations.  If you are going through a divorce or have an ex-spouse who you believe is voluntary unemployed or underemployed and support (either spousal or child) is an issue in your case, take the above considerations to heart.

In an attempt to reconcile the two decisions, the Morris court stated the following:

 We must give an equivocal answer to the question of whether an anti- Lepis clause is enforceable. It is both yes and no. Smith is correct when it states that the parties cannot bargain away the court's equitable powers. Finckin is also correct when it states that the parties can establish their own standards, and that these standards, where not unwarranted under the circumstances, will be enforced by the court irrespective of the need-based guidelines of Lepis, which are applied when there are no such standards. If circumstances have made the parties' standards unreasonable, they can in extreme cases be modified. In less extreme cases, as here, the payments can be accrued with enforcement conditioned upon the payment of reasonable periodic payments. In short, the court should endeavor to carry out the agreement of the parties on a reasonable basis. (Emphasis supplied.) Morris, 263 N.J. Super. at 245-46.

Although the court held that the anti-Lepis clause rendered a determination of the Morris wife’s needs irrelevant since the alimony was not negotiated on the basis of her needs, the following example of an “extraordinary case” was provided in a footnote by the Appellate Division: “[T]he wife's needs might be relevant if, for example, there is little economic need on the part of the wife and the husband's countervailing needs warrant his being permitted to retain a higher percentage of his income. (Examples that come to mind are a sick child from a second marriage, an impending loss of his business, or the like).” Id. at 245 n. 5 (emphasis added). Finally, the court held that “defendant's failure to pay can result in his incarceration only if such failure is willful, given his then-existing means.” Id.

Interestingly, there are not to many decisions that deal with an anti-Lepis clause. I surmise this to be the case because very few people would agree to be locked into a number that they are required to pay or entitled to receive regardless any change in circumstances. Of course there are situations in which it makes sense to agree to non-modifiable support; however, all facts should be considered with an attorney and the litigant should be prepared to take a significant risk. If on the other hand, your agreement already contains a non-modifiability or anti-Lepis clause and you have encountered significant changed circumstances, it is imperative that at the least you consult an attorney to determine if your circumstances are such that a Court could find the clause to be unreasonable to warrant a modification.

The parties subsequently memorialized the terms in a Property Settlement Agreement, which also addressed alimony in detail.  In one paragraph of the alimony section, the PSA specifically stated that Marcia "waiv[ed] any ability to attempt to modify or extend the . . . term before any [c]ourt of competent jurisdiction."  In the following paragraph, however, was another section entitled, "Waiver of Alimony" which stated:

In 2007, Joseph filed an application to reduce his alimony obligation based on a purported change in his financial circumstances - a $150,000 reduction in his income which he claimed rendered him unable to pay $143,000 in annual alimony and other expenses for the children required by the parties' settlement.  The trial court denied Joseph's application, claiming that the "Waiver of Alimony" section constituted an "anti-Lepis" clause precluding alimony modifications. 

On appeal, the Appellate Division initially noted the well established contract principle that the PSA is to be enforced to the extent it is fair and equitable, consistent with the parties' intent.  Analyzing the limited duration alimony at issue, the Appellate Division then noted that such support, in following N.J.S.A. 2A:34-23(c), may be modified "when either party experiences a substantial change in financial circumstances."

Noting that parties may waive statutory rights to seek modification through use of what is commonly known as an "anti-Lepis" clause, the Appellate Division quoted from its earlier decision in Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993) for the proposition that such a clause must be entered by the parties "with full knowledge of all present and reasonably foreseeable future circumstances" and, more explicitly must:

Applying these principles to Joseph and Marcia's PSA, the Appellate Division initially concluded that terms within the agreement regarding support, alimony and equitable distribution were interrelated - i.e., Marcia could seek child support in the event that alimony payments terminate.  It then noted that while the PSA prevented Marcia from seeking any increase in alimony, it was silent as to Joseph's ability to seek modification. 

The Appellate Division then analyzed the "Waiver of Alimony" section quoted above, noting that its language referencing the parties' mutual waiver of other alimony claims "past, present and future" waived claims "in addition to" or "outside of" the alimony award detailed in the earlier portion of the PSA.  Thus, the Appellate Division held that the trial court's reliance on the last sentence of this paragraph - "This Agreement shall have firm stability and shall not be subject to modification by reason of any change of circumstances encountered by either or both of the parties," did not apply to and, thus did not impact, the alimony terms found earlier in the agreement.  Rather, the Court concluded that it only related to the other alimony claims "past, present and future."

Moreover, the Appellate Division also held that the PSA neither specifically indicated that Joseph's alimony obligation was non-modifiable should he experience changed financial circumstances nor did it expressly waive modification rights granted in Lepis.

Accordingly, the Appellate Division, for three separate reasons, remanded for a plenary hearing to determine whether the PSA actually included an anti-Lepis clause precluding modification of the amount of alimony :  (1) It found that the oral settlement placed on the record contained no provision prohibiting an alimony modification and the final hearing expressed no indication that the parties were contemplating an anti-Lepis clause; (2) the record was unclear as to consideration provided for the modification waivers sought within the language of the PSA detailed above since any such modification required the parties' knowledge as to what they bargained for and the bargain's intended consequences; and (3) additional evidence was required to determine the parties' intended meaning of the modification language. 

The point to be reiterated again is that when you make a motion to reduce support, give the judge as much information as possible regarding why you lost your job, whether you were the only one or whether there was a reduction in force, what efforts have you made to find a new job (including voluminous and painstaking records regarding each inquiry and response), if you took a new job for lower than your historical pay, why you did this as opposed to holding out, what you have done to reduce your own expenses, what your current finances are, etc?

In any event, our firm is keenly able to assist those seeking a reduction and those opposing it.
 

To see a recent blog post addressing this issue in greater detail click here.

In addition, the husband disclosed a savings account with a balance of $90,000, three vehicles valued at $33,000, and an Individual Retirement Account valued at approximately $676,000 and liabilities totaling $10,000. 

The husband never distinguished which of these assets had been divided in the divorce, and therefore would be exempt from consideration now, and which were post divorce assets available to pay support.The Court relied upon this as the reason to deny the application, finding that he he had sufficient assets to continue to pay his support. 

In affirming, the Appellate Division succinctly restated the law on support modification, as follows:

Orders for support "may be revised and altered by the court from time to time as circumstances may require." N.J.S.A. 2A:34-23. The moving party bears the burden to make a prima facie showing of changed circumstances. Isaacson v. Isaacson,
348 N.J. Super. 560, 579 (App. Div.), certif. denied, 174 N.J. 364 (2002). A decrease in the obligor's income may be a changed circumstance warranting a revision of a support obligation. Lepis v. Lepis, 83 N.J. 139, 151 (1980). In Lepis, the Supreme Court addressed the changed circumstances standard. Id. at 157-59. Although expressed in the context of an application to reduce child support, the basic showing for a reduction in alimony is similar. The obligor must establish a diminution in income, earned and unearned, or a substantial increase in the financial circumstances of the former spouse or a combination of changes for both parties. Id. at 151; Stamberg v. Stamberg, 302 N.J. Super. 35, 42 (App. Div.
1997).

A reduction in salary has long been recognized as a change in circumstances. See, e.g., Martindell v. Martindell, 21 N.J. 341, 355 (1956) (a decrease in resources, standing alone, justifies a reduction in alimony). However, a reduction in salary, even the  loss of a large income, may not warrant a reduction in a support obligation if the reduction is temporary. Larbig v. Larbig, 384 N.J. Super. 17, 22-23 (App. Div. 2006).  If the obligor has assets that produce or have the potential to produce unearned income to meet on-going support obligations, the loss of earned income may not create a changed circumstance. See Connell v. Connell, 313 N.J. Super. 426, 432-33 (App. Div. 1998) (inherited assets and the income produced by such assets are factors to be considered in calculation of a support award).

Ex-husband informed the trial court that his law partner who ran the firm's New York office had committed suicide in 2006 and that upon his death, ex-husband learned that the deceased partner had stolen client trust funds, embezzled, wrongfully dissipated business assets and forged ex-husband's name on various contractual obligations. Ex-husband further claimed that a bank had issued a demand letter in the amount of $149,000 and that a former client filed a lawsuit to recover $450,000 that the deceased partner had stolen.  Moreover, ex-husband advised that the law firm's professional liability carrier disclaimed coverage and ex-husband was forced to file a lawsuit against the insurance carrier to assert the firm's rights.  Although the embezzlement seemed tragic, at the time that ex-husband had applied for a termination of alimony, ex-husband failed to provide the Court with the bank's demand letter and failed to provide the Court with court filed documents showing that the former client had sued the law firm to recover $450,000 of stolen money.  Additionally, the court noted that significantly, ex-husband made no claim that any single creditor had successfully obtained a judgment against the law firm as a result of the embezzlement.

The second devastating event claimed by ex-husband to substantiate his request for a termination of alimony related to the head bookkeeper's alleged mishandling of attorney trust funds in ex-husband's Florida office.  Ex-husband claimed that after the suicide of his New York partner, ex-husband undertook an audit of the Florida office's financial records.  Ex-husband claimed that the audit revealed that his bookkeeper had over a period of time transferred trust funds into the firm's operating accounts and that as a result, unbeknown to ex-husband, the firm had been operating at considerable losses having over $4.5 million in contingent liabilities.  Ex-husband indicated that as a result of the bookkeeper's conduct, the Florida office lost most of its clients, that no law firm was willing to hire him as a result of all the controversy surrounding his law firm, that his net taxable income dropped from $300,000 to $132,420 and that ex-husband was forced to forgo a draw from the law firm commencing in October 2006.  Moreover, ex-husband's Florida partner certified to the Court that the Florida office had been operating at a loss or at break-even.  Ex-husband claimed that to keep him afloat, he borrowed money from family and borrowed monies from his life insurance policy and his 401k account.  Notably, ex-husband's then current wife was employed as a legal secretary, paralegal and office administrator by the law firm earning $75,000 per year.  Except ex-husband's statements regarding the financial circumstances of the law firm, ex-husband failed to provide the Court with the audit that allegedly showed the misconduct of the bookkeeper, failed to provide the Court with certified financial statements showing that the law firm was subject to over $4.5 million in contingent liabilities and failed to provide the Court with any documentation showing his liquidation of his life insurance cash surrender value and his 401k account.

Ex-husband also argued that ex-wife no longer needed alimony because her income had increased from $25,000 to $70,000 per year.

The trial court denied ex-husband's application finding there was no changed circumstances to warrant a modification.  The trial court found that although ex-husband was having difficulties his liabilities at that point were still substantially contingent. Moreover, the trial court pointed out that ex-husband had expenses of over $200,000 per year and that ex-husband claimed he was surviving on his current wife's income of $70,000.  Suspiciously, the trial court noted that "it doesn't add up".  

On appeal, the Appellate Division affirmed the trial court's findings and rejected ex-husband's arguments finding that ex-husband did not meet his burden of showing changed circumstances.  The Appellate Division cited Lepis noting that the party seeking a modification has the burden of proof and that a request for modification based upon expected circumstances that have yet to occur should be rejected.  In making its determination, the Appellate Court looked beyond ex-husband's gloomy characterization of the law firm's state of affairs and focused on what ex-husband failed to provide.  The record did not contain any objective evidence supporting his description of a failed law firm.  Moreover, the Court noted that the liabilities resulting from the deceased partner's embezzlement and the bookkeeper's mishandling of accounts had not yet come into existence.  In other words, while there was a potential of judgments, losses and damages to be paid by the law firm, such liabilities were not yet present.  Finally, the Appellate Division found that while ex-husband claimed that he was unable to secure a job at any other law firm, ex-husband made no showing that he even attempted to do so.  The Appellate Court found that when the payor makes no effort to replace alleged lost income, he has failed to meet the burden establishing he has undergone changed circumstances.  Citing Aronson v. Aronson, 245 N.J. Super. 354 (App.Div. 1991.)

Notably, in light of the current state of the economy, I expect that modification requests such as that in Norych will be more prevalent.  I further suspect that among those applications there will be a good handful of litigants who will paint very bleak financial pictures but have no evidence to substantiate their claims.  Those cases are defendable.  For example, I successfully defended against a payor's application to modify alimony and child support based upon the payor's insistence that after he was laid-off by his company he was unable to obtain employment with comparable income.  The payor in my case was a regional executive for a plumbing manufacturer earning a significant amount of money.  After getting laid-off, the payor decided to live off of his severance and when it ran out, he filed an application to modify support. He claimed that he had actively sent his resumes to numerous companies and was not offered a position.  After some investigation, we learned and I advised the Court that every position for which the payor applied were positions that he was either overqualified for or did not have experience which clearly decreased his chances in securing employment.  The Court shot down his application noting that his conscious decision to avoid obtaining employment comparable to that which he had could not meet the standard for changed circumstances warranting review of support.

Undoubtedly, their will also be cases in which there are truly changed circumstances warranting review.  As evident in Norych, it is imperative that the applicant not only paint the picture for the Court but the applicant must also back up the description with objective evidence.  In the Norych case, the outcome for the ex-husband could have been entirely different had he presented certified financial statements, documentation of his liquidation of assets to maintain his expenses, documentation showing his attempts at seeking employment with other law firms, copies of court filings showing that the law firm had been sued, etc. assuming that such documents did in fact exist.  It is not too far fetched to assume that there are modification cases lingering in the courthouses of New Jersey where the litigant should have received a modification but did not due to a poor presentation of evidence.  For example, I have been consulted on a case in which the payor, prior to consulting me,  filed a modification of support after sustaining significant injuries in a horrific automobile accident and was denied review of his support obligations.  When he filed his application, he provided a thorough description of his injuries and indicated that he was unable to work.  The application was denied for failure to show changed circumstances- - no physician report was provided to the Court indicating that he was unable to work and that his injuries were permanent.  Notably, he did present to the Court some of his medical records showing the extensive medical treatment that he had received and was continuing to receive with the incorrect assumption being that the Court would automatically take the next step and find that he was unable to work.  

In short, just describing the severity of a litigant's current financial circumstances will not be enough.  If you are defending against a modification application, look for the objective substantiating proof and if there is none it must be made clear for the Court that no changed circumstances exist.  On the other hand, if you are in desperate need of a modification based upon your current financial circumstances, don't assume that the Court will take your word for it--no matter how obvious you believe your situation to be--better to take the time gathering documentary evidence than rushing to Court on what may (or may not be) obvious change circumstances.

What happens if you take a job in another field?  There is a reported decision that found that someone who was in computers and then took a job in massage therapy was not entitled to relief.  I think that whether relief will be granted in this case will be based upon, how long you were out of work, and the good faith nature of the job search. 

I think people who could have a harder time are those who, after losing a job, have decided to start their own business, in a related field or perhaps in some other field.  The choice to become en entrepreneur will present difficult problems for a court, especially when the income is nominal, as is often the case in a start up business.  In these cases, the good faith nature of the job search may come in to play, however, I suspect that a court will impute income to that person.  If the imputation is consistent with prior employment, which very well may be the case, because what other information will a Court have, that is probably not fair if we are dealing with a job loss caused by the current catastrophic economy.  If not that number, what is fair.

In these cases, lawyers and judges are going to have to be more creative.  I think that the concept of income averaging, as previously blogged about, may very well be unfair given these trying times.  Perhaps the remedy is for parties to "ride along" together, sharing income information yearly, if support is going to be reduced (or set a a level based upon income lower that was earned historically).  Traditionally, court's were reluctant to Order the yearly exchange of income information post divorce.  However, given the current times, that may be the most fair way to deal with support where income is reduced. When the income gets back to prior levels, or perhaps as it increases, maybe there can be reviews and self-executing increases.  There are many ways to to this, and these are only examples. 

Family law issues involve complex choices and decisions, and alimony and child support in these trying times is no exception. For more information regarding this issue  or guidance on other family law issues, contact an attorney in Fox Rothschild's an attorney in Fox’s Family Law Practice or visit us on the web at www.foxrothschild.com. 

Approximately 7 months later, husband filed another motion seeking child support for the son. This motion was granted, however the trial judge also ordered husband to pay child support for daughter, who remained with wife. About one month later, husband filed a motion seeking alimony. He argued that his obligation to now pay child support for daughter was a change in circumstances that entitled him to alimony per the terms of the agreement. This motion was denied as the trial judge found there was no change in the financial circumstances of the parties demonstrating a need for alimony to be paid.

One month thereafter, husband filed a motion for reconsideration and sought permanent alimony, termination of his obligation to pay child support for daughter, custody of daughter, discovery and for wife to file a CIS. This motion was also denied.

From there, husband filed his appeal arguing that the trial judge overlooked his entitlement to permanent alimony; did not properly read the PSA; failed to find that the change in custody of the son was a change in circumstances; improperly altered the terms of the PSA; and decided the matter without a plenary hearing.

In its opinion, the Appellate Court noted that trial judges are given deference to the issue of alimony, if those findings are supported by substantial credible evidence in the record as a whole. The Court also found that the parties could not waive the children's right to support, thus making that portion of the PSA unenforceable. Therefore, there was no error in the trial court's denial of husband's application to terminate child support for daughter.

As to the issue of alimony, the Court found that the PSA clearly and unambiguously provided that husband waived his right to alimony in exchange for non payment of child support. Thus, his obligation to pay child support for daughter constitutes a change of circumstances making enforcement of the alimony waiver unjust and inequitable. The Court found sufficient evidence of changed circumstances and ordered discovery and a plenary hearing to determine the amount of the alimony award.

EDITOR'S NOTE:  This case re-affirms the basis tenet that agreements regarding support are modifiable  based upon changes of circumstances.  Moreover, agreements are integrated and when two provisions are clearly related to each other and one is modified, it may be possible and/or necessary to modify the other provision too.  ERIC S. SOLOTOFF

In May 2005, defendant lost his position at Pershing. He attributed this loss to the fact that Bank of New York had taken over Pershing and his position was eliminated. The husband received a bonus in May 2007 of $700,000 (as opposed to the year-end bonuses defendant had received in the past) and a severance pay of $175,000, supporting the husband's claim that
his separation from Pershing was involuntary.

The husband eventually obtained a new position at Olson Global Markets, at which he was to receive a salary of $120,000 (equivalent to what he had earned as a salary at Pershing) and
receive bonuses that would place his earnings at the same level he had previously enjoyed. However, he asserted that Olson was not profitable, that he had not received any bonuses, and that he had not even received a salary for the years 2006, 2007, and 2008. Indeed the husband claimed that the situation at Olson was such that he was obliged to advance $138,000 to it from July 2007 to January 2008.

Based upon this apparent reduction in his earnings, the husband filed a motion in March 2008 seeking a reduction in his monthly alimony obligation. After hearing oral argument, the trial court denied defendant's application. It did so without conducting a plenary hearing.  The trial court analogized the case to a reported decision called Storey v. Storey where the husband changed careers, going from a computer technician to a massage therapist.
 

The Appellate Division reversed  noting that while the proofs presented by the husband at the motion did not warrant a reduction in and of them self, they certainly warranted a hearing.  The reason was that it was clear that the husband did not voluntarily leave his job and further, remained in the same industry.

The matter was remanded for a plenary hearing on whether a reduction was warranted. 

I suspect that there will be many cases like this.  For instance, I suspect that many people will be forced to take lower paying jobs in the same or similar industry.  They may even try to go into other industries when their job search proves fruitless.  Parties are going to have to be creative and have to be reasonable.  Otherwise, they risk a lot of litigation.

In the remand proceeding, Melanie sought alimony through the graduation of her youngest child from college in 2024.  Martin wanted the alimony tied to the continuation of his career. 

Martin signed a six  year, $31.2 million contract extension  in January 2006 (after the divorce), which will take him to the end of the 2011-2012 hockey season.  To put this in perspective, during the term of this contract, he will earn more than $31.2 million, not including endorsements and any other income that he may have but only pay $3 million in alimony. 

The judge rejected Martin's position and granted alimony through he youngest child's graduation from high school, given that the parties contemplated that Melanie would be the full time caretaker of the children.

The Court also rejected Martin's argument that tying the term to the age of a child or life event, such as college graduation, would "masquerade" alimony payments as non-deductible child support in
violation of the federal tax code. 

The Appellate Division noted that the duration in this case was longer than typically seen in the reported decisions regarding limited duration alimony, however, given the parties' expectations regarding Melanie being the caretaker, and the fact that Martin could afford to pay the alimony lead to this long term of limited duration alimony.

The Court also reiterated that the issue of the term and amount of the limited duration alimony are separate issues and further, "nothing precludes a motion to reduce the amount of alimony once defendant retires and his post retirement employment and income is known."  However, given Martin's income set forth above, I think he will be hard pressed to successfully seek a reduction in alimony when he retires from hockey.  Given his income for the remainder of his hockey career, he should have the ability to pay the alimony thereafter.  In addition, should he make a motion at that time, I believe that Melanie would have a good argument that Martin was aware of his obligation and the fact that the career of a professional athlete is limited and thus, should have saved accordingly.  Given the litigation in this case, no doubt we will be reading about this case again in 11 years, if not sooner.

In late 2006, the wife filed an enforcement motion because the husband stopped making payments.  The husband cross moved seeking a temporary suspension of paying his alimony and equitable distribution obligations and for a reduction in his child support obligation.

The trial judge questioned the validity of the husband's motion given the lifestyle that he claimed on his Case Information Statement and the fact one month after ceasing his alimony payments, the husband entered into a $465,000 mortgage.  In addition, for 2005, the year of the agreement, despite the aforementioned language in the agreement, the husband claimed a negative income on his tax returns.  Notwithstanding, the judge suspended the husband's equitable distribution obligations for six months and temporarily reduced his alimony obligation by fifty percent for six months. He indicated in his oral decision that if, after six months, defendant continued to contend that his economic situation had not improved, the court
would be inclined to hold an evidentiary hearing.

Approximately three months before the court was to reconsider the husband's ability to pay, he filed another motion seeking a second six-month reduction to his support obligations.  The motion was denied. 

The Appellate Division determined that it notably missing from husband's proofs in support of his
motion is any certified statement from an accountant concerning the finances of his business.  All that were provided were self created documents and his tax returns which were suspect.  The Court noted:

In short, it is not possible to draw meaningful conclusions based on defendant's submissions, without a detailed report from an accountant explaining the earnings and losses of the business and what income as well as other financial benefits defendant obtained from the business. As we indicated in Larbig, supra:

[I]t is the self-employed obligor who is in a better position to present an unrealistic
picture of his or her actual income than a W-2 earner. In light of this self-evident
fact, it would seem, as a general proposition, that what constitutes a temporary change in income should be viewed more expansively when urged by a selfemployed obligor. [Larbig, supra, 384 N.J. Super. at 23.]

The record also raises questions about defendant's personal finances as well as those of his business.

In this case, the proofs were just inadequate.  One may assume that there were substantial personal expenses paid by the business.  The refusal to get an accountant is telling.

The bottom line to those that are self-employed, if your income is down, you will need to open your books and records and get an accountant to certify to his or her review to be credible to a court.

Notwithstanding all of the above, the Appellate Division reversed finding that Mr. Cordero was entitled to a hearing because he no longer had his earned income as a professional baseball player.  The Court held:

Any consideration of a request to reduce a child support award cannot focus solely on the amount of income earned in the past. The judge must also consider the type of work performed by the obligor that produced the income. This is particularly
true when the obligor is a professional athlete. At the height of a career, a professional athlete may earn vast sums of money. The ability to earn such an income is almost always transitory. Here, there is no question that plaintiff has not played professional baseball since 2005, when he was cut by the Washington Nationals. He obtained a minor league contract with the New York Mets organization but did not make the team. While a court may impute income, Caplan v. Caplan, 182 N.J. 250, 268- 69 (2005), a judge cannot assume that the obligor will continue
to earn income at the same level as an active professional athlete unless the athlete has other exceptional attributes. There is nothing in this record to suggest that is the case. Admittedly, current income is not the sole focus of an analysis of a request to reduce child support. The judge must consider the moving party's ability to earn income in the future. Such an inquiry must consider the education and other
abilities demonstrated by the moving party. N.J.S.A. 2A:34-23. The judge must also consider the assets of the moving party and the ability of those assets to produce income to meet the moving party's obligations.

The Court, however, reiterated that Mr. Cordero has the burden of proof  to demonstrate that he is entitled to a further reduction of his child support obligation. He was required to fully disclose his financial condition, including the value of his major league baseball and the the terms and conditions of this pension,.  He also was required to disclose the obligations he has assumed in the course of the dissolution of his 2 subsequent marriages.

However, can the case in this post and the one in last week's post be reconciled.  In both cases, the disclosures were lacking.  The difference here is that, unlike the self employed lawyer who can manipulate his income, Mr. Cordero's status as a major league ball player was easy to discern and the loss of income from that pursuit virtually impossible to dispute. 

In addition, the judge found no proof to support the husband's claims about his practice's "deteriorating case load." He held that the husband's testimony, which was the only evidence provided  "unconvincing" and his testimony that  he was unable to support the marital
standard of living was "incredulous."   Further, while  unpersuaded that his level of income had substantially deteriorated, the judge also referred to the Appellate Division decision in Larbig v. Larbig,  and held he was "not convinced" that the husband's alleged decline in business "is of [a]
permanent nature which inhibits his ability to sustain himself as well as child support and alimony payments" in the amount set forth in the PSA.

Nine months after the January 2007 Order denying the first motion, the husband filed a second motion for essentially the same relief.  On this occasion, the motion was denied after oral argument without a plenary hearing.  The Court found that since the original motion was filed in 2004, the husband took on greater obligations that were reasonable if his income were actually dwindling.  The husband appealed.

The husband argued that the trial judge was in error because he was committed to his prior findings.  The Appellate Division agreed that this was no doubt true but not error and as such, the case should not be assigned to another judge.  The Court further held:

As we have already indicated, the judge was not required to wipe the slate clean and consider a similar contention regarding Gregory's earnings less than one year after the prior order as if the earlier hearing had never occurred. To the contrary, the judge was required to consider not whether there was a substantial change since the 2003 PSA but whether there was a substantial change since he rendered his fact findings in December 2006. Admittedly, a sworn assertion that the obligor's income had fallen to $50,000 strongly suggests a substantial change in circumstances -- if that is all that is considered.   The judge correctly observed, however, that the focus must also be on the length of time that had elapsed since the last milepost in these post-judgment proceedings. In Larbig, for example, we affirmed a trial judge's determination that a motion for a reduction in support filed "a mere twenty months after the parties' execution of the PSA," 384 N.J. Super. at 22, alleged only a temporary change. See also Lepis, supra, 83 N.J. at 151 ("Courts have consistently rejected requests for modification based on circumstances which are only temporary . . . .").

The Court further found that given that this motion was filed 9 months after the last one, the husband had not demonstrated a change of circumstances.

Not surprisingly, there was skepticism regarding the husband's income which was enhanced because he was self employed and thus could manipulate his income.  In fact, the Appellate Division stated:

As we also observed in Larbig, "what constitutes a temporary change in income should be viewed more expansively when urged by a self-employed obligor," as here, who is "in a better position to present an unrealistic picture of his or her
actual income than a W-2 earner." 384 N.J. Super. at 23. The judge recognized this in denying Gregory's motion; indeed, the judge's decision on Gregory's first Lepis motion reflects a determination that Gregory's actual income was greater than what
was urged.

This case demonstrates a problem that is often seen in the cases, post-judgment, to wit, repeated motions for the same relief without providing competent evidence, and then re-filing the motion over and over without really providing more.  The Court correctly determined that it need not expend the wife's money in counsel fees or the Court's resources to have another trial less than one year later.