One issue often looming over the preparation of a Property Settlement Agreement is whether or not the parties agree to waive statutory rights to seek a modification of support. Otherwise known as an "anti-Lepis" clause, such language seeks to essentially overcome the courts’ "equitable power . . . to modify alimony and support orders at any time," under N.J.S.A. 2A:34-23 and the New Jersey Supreme Court’s seminal decision in Lepis v. Lepis, 83 N.J. 139, 145 (1980). Drafting such an enforceable anti-Lepis clause is not as easy as it sounds, as found by the Appellate Division in Stefanacci v. Stefanacci.
The facts of the case are relatively straightforward, as it was the language of the Property Settlement Agreement at issue that formed the basis of the dispute. After a 20-year marriage, the parties filed for divorce. The parties ultimately resolved the matter, memorialized in an oral settlement stated on the record. Included in the oral stipulation was Joseph’s agreement to pay Marcia limited duration alimony for 13.5 years or until Marcia’s cohabitation with another person unrelated by blood or marriage for 120 days; Marcia’s remarriage; Joseph’s death; or Marcia’s death. Provision was also made for the commencement of payments and Marcia’s ability to seek child support should alimony cease and the children are unemancipated.
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:
Beyond the aforesaid alimony provided for in Article II, Paragraph 1, it is specifically understood . . . that both the [plaintiff] and [defendant] irrevocably waive any and all right and claim for alimony and support from the other party, past, present and future. Each party acknowledges that they are adequately provided for and capable of providing for their own support and maintenance, comfort and welfare. Each party recognizes that their income or asset structure may change from time to time even substantially and recognize that such change may have a detrimental effect upon their ability to provide for themselves. In full awareness that such potential change of circumstances may occur, the parties specifically agree that this agreement and especially, but not limited to their respective waivers of alimony, shall continue in full force and effect and shall not be altered or modified by either party or any judicial process notwithstanding that the parties may hereafter experience hardship. The parties have envisioned such change of circumstances and have agreed upon a distribution of their property and assets to contemplate such changes and provide for them. 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.
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:
bargain for a fixed payment or establish the criteria for payment to the dependent spouse, irrespective of circumstances that in the usual case would give rise to Lepis modifications of their agreement. Lepis established an approach that courts must take when faced with a request for modification of child support or alimony. Where the parties have agreed on the amount of support or alimony, Lepis permits later modification to the extent that changed circumstances render the agreed terms no longer "fair and equitable."
To recapitulate, we must give an equivocal answer to the question of whether an anti-Lepis clause is enforceable. It is both yes and no . . . . 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 on a reasonable basis.
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.