When parties resolve their divorce via a settlement agreement, can they agree that neither party will seek to modify the agreed upon terms of alimony and child support? In New Jersey, a court may generally modify a support obligation at any point in time to achieve equity inherent in this State’s alimony law. For instance, as detailed countless times on this blog, a party must establish that they have experienced a substantial and continuing change in circumstances under the seminal case of Lepis v. Lepis, 83 N.J. 139 (1980), in order to merit some form of support modification.
An "anti"-Lepis clause, however, attempts to limit the court’s ability to modify via a waiver by the parties to seek such modification. To be enforceable, the clause must fulfill several conditions. First, the parties must include such language in the settlement agreement "with full knowledge of all present and reasonably foreseeable future circumstances," and second, "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."
However, consistent with my assertion above that such clauses are enforceable – until they are not enforceable – the overriding legal principle in New Jersey is that "If circumstances have made the parties’ standards unreasonable, they can in extreme cases be modified. In less extreme cases . . . the payments can be accrued with enforcement conditioned upon the payment of reasonable periodic payments."
The Appellate Division recently affirmed a trial court’s finding regarding the enforceability of anti-Lepis language in King v. King, where the husband sought to have the language deemed unconscionable in an effort to modify support following his loss of employment. Since the language was found to have fulfilled the above-conditions and was not an "extreme" case warranting a support reduction, the trial court did not alter the support amount, but rather allowed for the accrual of unpaid portions of support conditioned on partial periodic payments. The Appellate Division found this approach to be an appropriate alternative, thereby providing some form of relief to the payor without modifying the actual monetary obligation.
To that end, the Appellate Division agreed that the settlement agreement was not so unfair and inequitable to set it aside, especially since loss of employment was expressly mentioned in the anti-Lepis language. It was not found to be an "extreme" situation because the payor failed to provide sufficient evidence as to how he lost his employment and his search for a new position to mitigate the resulting problem.
I found a few notable points made by the Appellate Division towards the end of its decision. First, it noted that, while the payor’s decision to agree to such language "may have been a bad decision in retrospect, we do not believe that amounts to unconscionability." This language only reinforces the risk and inherent danger to the payor spouse of an anti-Lepis clause. A court may not order the imposition of such language upon parties, since it is contrary to the alimony statute and Lepis itself, but it can enforce a parties agreement to such language. If a payor spouse is going to agree to such language, he or she should seek to obtain substantial consideration in return considering the major concession being made.
Next, the court noted that it can "take judicial notice of the recent severe economic downturn," but that "there have been signs of an economic recovery." One published Appellate Division decision since the start of the downturn conveyed that judicial notice could be taken of the downturn itself, but I have experienced on several occasions courts declining to do so, limiting that published decision to its facts. Further, many motions for a support modification still seek to rely on the economic downturn as a primary basis for a reduction. With the Appellate Division noting here that a recovery is in progress, is the end approaching for the economy-based Lepis applications about which so much has been written since 2008? At the very least, perhaps a more industry-specific approach will be even more necessary than before to highlight any ongoing downturn.
Finally, in an interesting footnote, the Appellate Division asserted the legal principle that the term of limited duration alimony may not be modified except in "unusual" circumstances. It added, however, that a trial court may need to consider on a future motion whether an "extreme case" meriting an actual support modification despite anti-Lepis language would also constitute "unusual circumstances" meriting an alimony term extension at the lower rate. While the Appellate Division’s assertion inherently makes sense, a merging of the two concepts seems to unfairly overcome the hurdle of establishing "unusual circumstances" as to the length of alimony.
Nevertheless, entering into an anti-Lepis provision can have potentially harmful ramifications on the payor spouse and, as a result, should only be considered in limited situations and in exchange for substantial consideration.