Equitable Distribution

Last week, I blogged about whether you should settle your retirement alimony case and the ingredients that might go into that decision. To be honest, this “why you should or should not settle” question is only the beginning of what you might be facing when you decide it is time to retire and terminate your alimony obligations. There is, of course, also the “where/when/how” of all of it. And that’s quite a nebulous concept if you’re only now beginning to think about your “whys” and whether or not you should even broach the topic. Below, I’ll give you a run-down of the possible scenarios that will at least address the “wheres” and “whens” of your journey.

In my experience, there are several possible ways in which alimony cases resolve: (1) Immediate settlement; (2) settlement following a motion; and (3) a full Court hearing wherein a judge makes a decision as to your continued alimony obligation. Examining each scenario will allow you to put the concept of “settlement” into the context of your particular situation.

(1)         Immediate Settlement: This is the path of least conflict and resistance if your spouse accepts your offer with an eye toward a termination of support. This will, more often than not, begin with a “feeler” letter to your former spouse. The letter may indicate that you are retiring, the date of your proposed retirement, provide some detail as to your financial circumstances, and ask if a termination of alimony would even be considered. Sometimes, the former spouses may negotiate directly with one another, with guidance from an experienced matrimonial attorney throughout.

If successful, this is the most cost-effective and low conflict resolution. The specifics of any settlement would be memorialized in an Agreement and simply filed with the Court, at which point, it would become an enforceable document.

But don’t be mistaken. This path is not for everyone. If you went through a very high conflict divorce, or know you’re dealing with an unreasonable ex-spouse, you may want to skip this step entirely. In the alternative, you may write a letter and the concept of termination may be rejected immediately.

If settlement at this early stage is not successful for whatever reason, you may decide to pursue litigation. That would bring us to scenarios 2 & 3, described below.

(2)         Filing a Motion: To provide some background, when someone paying alimony experiences a change in circumstances (including retirement, other reduction in income, or they believe their spouse is cohabiting etc.), you file what is known as a “Motion”, which is a formal application to the Court. You would be required to submit your current Case Information Statement, Case Information Statement from the time of your divorce, tax returns and a narrative of events leading up to your motion and describing your circumstances along with the motion.

You further file a legal brief describing the case law, including Lepis v. Lepis, which is the seminal support modification case in the state of New Jersey. Under Lepis, an alimony payor is required to file a Motion and establish what is known as a prima facie change in circumstances. A prima facie showing is simply an initial showing (on its face) that demonstrates that circumstances have permanently and significantly changed such that alimony may ultimately be modified.

Several weeks later, you would proceed to Court. This is a formal court proceeding, with oral argument from counsel, but not testimony of the parties, no formal introduction of evidence, etc. In other words, it is not at the point where the Court would conduct a full trial yet based on what has been submitted.

The Court would then review everything and determine if you meet the burden of a prima facie showing. The Court will then move you past what we call “Lepis 1”, or the initial prima facie showing, and enter an order as to whether you should move to a “Lepis 2” analysis – i.e. whether the change is substantial, continuing and permanent. As part of this analysis, the Court may also consider whether there is sufficient reason to award counsel fees to either party in connection with the motion. Because a supported spouse’s financial circumstances may be more precarious than yours, the Court may be inclined to grant counsel fees to equalize the playing field or to provide her an advance for litigation.

During the discovery phase, you are permitted to do a full examination of the other party’s finances to try and substantiate your claim. This includes written discovery, depositions, subpoenas, etc.

Typically following or during discovery and related proceedings the matter may settle. The parties have exchanged the majority of their discovery and the payee spouse, at some point, realizes alimony will end and that some concessions will need to be made. At that point, the parties will come to the table, make a settlement offer which is negotiated or reach a resolution through mediation (sometimes the Court will order the parties to go to mediation).

(3)         Court Hearing:  The matter can sometimes move toward a more contentious conclusion via a court hearing. In that regard, if all possibilities for settlement are expended and the parties have passed the discovery phase, the matter proceeds to a hearing, and the Court will hear testimony, consider evidence and make a determination based on everything before it. It is akin to a trial.

Keep in mind that neither party is obligated to agree to an out of court settlement. But as you can see, settlement at the early stages of the games provides finality without having to subject yourself to the time and effort of full-blown litigation. You also would avoid the counsel fees that go in to the discovery and litigation phases. Of course, having counsel on your side with experience in retirement alimony case will help you reach a conclusion on your terms.

___________________________________________________________________________________________________________________________________________________

Eliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or etbaer@foxrothschild.com

Several years ago I did a post on this blog of the same name and then updated it some time later. The list then, as re-compiled below, are things to do if you really don’t want to settle your case.  As I said before, everybody is entitled to their day in court if they want it, but what if there is nothing that can be gained from it?  What if you can’t win?  What if forcing the matter to trial will create other legal issues? What if trial will cost tens of thousand of dollars or more?  Here is the list:

22. Your new significant other is a lawyer, they know better than your lawyer.  Of course they know better, you have been completely honest with them.  Of course they aren’t telling you what you want to hear – why would they do that?  And when they are speaking to their matrimonial partner about your case, they are giving them all of the facts, context and subtext of the case.

21. Every case is the same, so make sure that you demand the same deal that your hairdresser, or cousin’s friend, heard that that their cousin’s friend got.  While this information, if true, may be food for thought or points of discussion, ignore the potential differences inherent to each matter and demand that you get the same, even if it bears no relation to the appropriate resolution of the case.

20.  Pretend that you are Bill Murray in Groundhog Day, and keep having the same conversation over and over, hoping that the answer will be different.  And don’t just do that with your spouse, do it with your lawyer too.

19.  Hold grudges and let anger blind you from coming to a resolution that lets you move on with your life.  They are your feelings, don’t only embrace them but let them control all.  And don’t get therapy to deal with the real hurt, betrayal, rejection, depression, mourning, etc. that you are feeling.

18.  Allow emotions to impair your judgment on financial issues.  I know that you can’t imagine your spouse living in your home with someone new, but it’s a good idea to take less for the house by selling it rather than allowing your spouse to buy you out.

17.  Create a ruse that an emotional issue is really a financial one.  There will be a lot of nasty letters and everyone will be confused because you are not even arguing about the same thing, but at least one of you and his/her lawyer won’t know it.

16.  Profess a desire to settle but then never compromise on any issue.  Also, don’t let your experts compromise either, even in the face of an error in their report.  And if they do have to concede the error, make sure that they change something else so that their final number never actually changes.

15.  Hire a new lawyer on the eve of mediation or trial, and let that person enter the case like a bull in a china shop, as if the case just started, and there was no prior history.  Ignore the fact that both sides were making concessions and working towards and amicable resolution, and just blow things up and start from scratch, without any basis for doing so.  I am not saying that people cannot and should not change lawyers.  Sometimes it is necessary.  Sometimes the concessions being made are too much, for a variety of reasons.  But in cases where the negotiations and concessions are appropriate on both sides, if you don’t want to settle, pull the rug out from under the negotiations.

14.  Hire a second, then third, then fourth, then fifth attorney every time something doesn’t go your way.

13.  In alternating conversations with your lawyer, tell them that you need to settle immediately, then tell her that you want her to litigate aggressively, then settle, then litigate, and so on.  Follow that up by being angry with your lawyer because they were trying to settle when you were back to aggressively litigating, and vice versa.

12.  Believe your spouse when they are pressuring you to settle for a lot less than your attorney tells you would be a reasonable settlement.  While perhaps this doesn’t belong on this list, because it is a “how not to settle” list, maybe it belongs on a new list regarding regrets people have after taking a bad deal for the wrong reason.

11.  Let your spouse convince you that they you don’t need all of the discovery because “you can trust me”, when all other evidence indicates that you can’t.  Perhaps this belongs with the prior thought.

10.  Ignore your expert’s advice.  What do they really know about the value of your business or how a judge will likely assess your total income/cash flow?  What does an accountant know about taxes, or more importantly, how the IRS may address the creative accounting practices that you or your business have employed?  What does the custody expert really know?

9.  Ignore your lawyer’s advice.  What do they know anyway?  If your lawyer is telling you that you should jump at the deal on the table because it looks like a huge win, disregard it.  If they tell you that you have real exposure on certain issues or may be forced to pay your spouses legal fees, roll the dice. If your attorney tells you that they are willing to try your case, but that you should consider settlement because the cost of the settlement will be less than the cost of the trial plus the absolute minimum you have to pay, don’t believe it.  And what does your lawyer know about the law or the judge anyway?

8.  Ignore the facts of your case.  Trust your ability to spin the facts in a way that doesn’t make sense.  Plus, how can they prove if you’re lying.

7.   Ignore what the neutrals are saying.  What do the Early Settlement Panelists know?  What does the mediator know?  When the judge has a settlement conference and gives directions, what does she/he know?  Assume that the people that have no “horse in the race” are aligned with your spouse or their attorney, have been bought off, or are just plain ignorant.  Really, it has nothing to do with the facts of your case or the reasonableness of your position.

6.  Ignore the law.  It doesn’t apply to you anyway.

5.  Continue to misrepresent things, even when the other side has documents to disprove virtually everything you are saying.  Assume that you will be deemed more credible than the documents.

4.   Believe that the imbalance of power that existed during the marriage will allow you to bully your spouse into an unfair settlement.  Assume that your spouse’s attorney wont try protect her/him.  All lawyers roll over on their clients, right?

3.   Take the position that you would rather pay your lawyer than your spouse. Ignore that fact that this tactic usually ends with your doing both, and maybe your spouse’s lawyer too.

2.  Pretend as if your spouse never spent a second with the kids in the past and has no right to do so in the future.  Make false allegations of neglect or abuse.  Ignore the social science research that says that it is typically in the children’s best interests to spend as much time as possible with each parent.  What do the experts know about your kids anyway?  And while you are at it, bad mouth your spouse to or in front of the kids. Better yet, alienate them.  Then fight attempts to fix the relationship.

1.   Take totally unreasonable positions implementing any or all of above and on top of that, negotiate backwards.  Ignore the maxim “Pigs get fat, hogs get slaughtered.”  Put deals on the table and then reduce what you are offering.  Negotiate in bad faith.  Negotiate backwards.  Don’t worry that this conduct may set your case back.

The above was and is clearly facetious and tongue in cheek. I do not recommend this behavior.  It is usually self destructive and short sighted.  But, believe it or not, these things happen all of the time.  While I am not saying that no case should ever be tried, because sometimes trials are necessary, if you want to ensure a costly trial that may not go well for you, try the things on this list.  And if it is your day in court that you want, be careful you wish for.

_________________________________________________________

Eric S. Solotoff, Partner, Fox Rothschild LLPEric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

Connect with Eric: Twitter_64 Linkedin

Credibility is key when it comes to matrimonial litigation – from your initial filing through the last day of trial. In our practice, we can often make educated guesses of the range for equitable distribution and alimony from the initial consultation based upon the many statutory factors that a court has to consider and some rules of thumb in settlement negotiations. However, there are those cases that do not result in such a typical manner and the reasoning often comes down to presentation.

For a trial that I conducted in February 2016, the Appellate Division recently upheld the court’s decision awarding the plaintiff/wife 100% of the equity in one of the parties’ businesses with a value of $133,000 (where she primarily worked) and 40% of defendant/husband’s $214,000 interest in the other business (where he primarily worked), as well as determining that each party retain his/her individual retirement accounts following a long-term marriage of over 30 years.  Wife’s retirement accounts exceeded those which husband disclosed – being the key word. In addition to this equitable distribution award, the Appellate Division upheld the trial court’s 40% counsel and expert fee award for the wife, totaling $31,388.10.

Why did the wife prevail in this way? It’s pretty simple based upon a reading of the decision – her husband just could not help himself as a litigant or a witness.

As a litigant, he “stonewalled” discovery, failed to pay the support obligation order during the pre-trial phase of the litigation (a.k.a pendente lite support) that was initially agreed upon, and failed to file a complete Case Information Statement (the bible in family law cases that lists income, budget, assets and debts).

As a witness, he would not even give a straight answer for his address. While he may have thought he was being cute when he responded that the wife could have the value one of the companies, and do “whatever she wants to do with it”, the trial court and the Appellate Division used the husband’s own words against him to find that he abdicated any interest in the company.

The husband’s lack of credibility resulted in a unique comment of the Appellate Division when it stated that the trial court’s counsel fee opinion was upheld even though the trial court did not specify the factors considered under the applicable Court Rule, R. 5:3-5(c). The Appellate Division opined that “…the discussion throughout the opinion made clear he had those factors very factors in mind”. The Appellate Division again cited to the husband’s bad faith (without utilizing the term) by citing to the trial court’s findings that the requested fees were “’fair and reasonable’ and that much work was required due to the ‘recalcitrance of [the husband]’”, as well as that the wife “faced substantial difficulties” to enforce court orders and agreements, and ultimately prepare for trial.

So, what’s the takeaway? What you say and how you act at each stage of the case is important… someone is always watching and, oftentimes, that someone is your spouse’s attorney who will jump at the opportunity to show the court how you have oppressed your spouse. Having handled this trial and appeal, I can confirm that cross examining the husband and finally having the opportunity to point out all of the misbehavior was fun, but not for him. You don’t want to end up in that seat! Mind your manners even in the heat of the moment and, as painstaking as it may be, always remember that it’s better to be the “bigger person” – the games will catch up to the other!


Lindsay A. Heller, Associate, Fox Rothschild LLPLindsay A. Heller is an associate in the firm’s Family Law practice, based in its Morristown, NJ office. You can reach Lindsay at 973.548.3318 or lheller@foxrothschild.com.

In 2014, I authored a post on this blog entitled Stern Revisited – Using the Shareholder Agreement to Determine Value.  I noted then that it seemed that after the Appellate Division’s decision in Brown v. Brown  which changed the landscape by doing away with discounts and essentially ushered in more of a value to the holder construct, that the consideration of an agreement was dead.  Rather, a myopic view of methodologies focused on income seemed to be the norm – disregarding all else.

This was the case even though there was New Jersey Supreme Court case law  (Stern v. Stern and Bowen v. Bowen to be precise ) that suggests the use of a “trustworthy” buy-sell agreement to establish value, noting that in some instances it may appropriately establish a presumptive value of a party’s interest.  Often the issue is what is a “trustworthy” buy-sell agreement?  What makes an agreement trustworthy?  It is updated frequently and routinely used when people enter and exit a business.  In my 2014 post, I blogged about the use of the buy-sell agreement in deciding the value of a medical practice where there had been 32 purchases or sales of interests in the practice in the recent past.  In the case cited in that blog, the Appellate Division noted “We find no error in the judge’s considered decision that the practice’s regularly updated corporate agreements were a better measure of value than plaintiff’s expert’s projection of cash flows through 2020, discounted by a rate chosen on the basis of U.S. Treasury bonds, augmented by selected risk premiums and reduced by an assumed long-term growth rate.”  Simply put, what the doctor would have received if he left the practice was used as the value.  Unlike many valuation calculations, there was no subjectivity to that number.  But this case was an unreported decision which means that it wasn’t precedential and there haven’t been many, if any, reported decision on the issue in some time.

That is, until August of 2017 when the Slutsky case was decided.  In that case, the husband was a partner at a major New Jersey law firm.  Though his income was substantial, he was not a rainmaker, and thus, worked on business generated by other attorneys at his firm.  In valuing the husband’s interest in the firm, the big issue was whether there was goodwill to be added to the amount that the husband would have been due under the firm’s partnership agreement.  The wife’s expert added goodwill; the husband’s expert did not.  The trial judge sided with the wife’s expert finding it “”incredible” the firm had no goodwill value. ”  The Appellate Division disagreed and reversed.

The Court noted that:

As Dugan instructs, the start of the examination of goodwill considers whether excess earnings exist. Dugan, supra, 92 N.J. at 439-40. This was a highly contested issue on which the experts used slightly different resources and offered greatly disparate opinions. Factual findings regarding this pivotal question were not provided.

Moreover, the court returned to Stern and the husband’s argument in that case regarding  “the propriety of considering his earning capacity as being a separately identified and distinct item of property” and pointed out the passage in Stern that held as follows:

[A] person’s earning capacity, even where its development has been aided and enhanced by the other spouse, as is here the case, should not be recognized as a separate, particular item of property within the meaning of N.J.S.A. 2A:34-23. Potential earning capacity is doubtless a factor to be considered by a trial judge in determining what distribution will be “equitable” and it is even more obviously relevant upon the issue of alimony. But it should not be deemed property as such within the meaning of the statute.

Of note, in this case the Appellate Division framed the real issue as follows:

Here, a nuanced valuation methodology is required because defendant is an equity partner in a large firm, who generally is not responsible for originations, and who is bound by the firm policies and a shareholder agreement.

In this case, the Appellate Division found that the formula in the firm’s agreement actually captured good will.  In addition, the court noted:

We believe the trial judge misunderstood Hoberman’s conclusion, as suggesting goodwill did not exist for the firm. Actually, Hoberman’s opinion asserted the TCA of each equity partner accounted for any goodwill. Further, plaintiff, who was not an originator but a worker in a highly specialized legal area, was actually paid what a similarly skilled lawyer would be paid. Thus, defendant’s compensation matched his earning capacity, nothing more. This view considered whether defendant’s “future earning capacity has been enhanced because reputation leads to probable future patronage from existing and potential clients” and concluded it did not. Accordingly, there was no additional component of goodwill. Id. at 433.

In this matter, any analysis of goodwill must evaluate the firm’s shareholder’s agreement to determine whether it is an appropriate measure of the total firm value, including goodwill. That formula computes an exiting partner’s interest, calculated as a portion of the firm’s excess earnings. See Levy, supra, 164 N.J. Super. at 534. The Court must discern the objectiveness and accuracy of the formula and calculations. When “it is established that the books of the firm are well kept and that the value of partners’ interests are in fact periodically and carefully reviewed, then the presumption to which we have referred should be subject to effective attack only upon the submission of clear and convincing proofs.” Stern, supra, 66 N.J. at 347.

The take away here is that Stern lives now for the same reasons that that it was originally decided.  If a regularly updated and followed agreement was disregarded, the titled spouse would be stuck getting only what the agreement allows, which the other spouse could wind up with a lot more, or less, if valuation methodologies with subjective components are used.  On the other hand, say that there are two similarly situated law firm partners with a similar book of business and making similar money, but one worked at a large firm with a regularly updated and followed shareholders agreement and the other at a smaller firm without a formal agreement, it seems like a safe bet that the values of their practices would be extremely different.  One other question to ponder.  Would the result have been different if the husband here was a major rainmaker?  Perhaps that will be addressed in a future case.

_________________________________________________________

Eric SolotoffEric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.

Connect with Eric: Twitter_64 Linkedin

 

What rights do people have to an equitable distribution of assets stemming from a period prior to the marriage itself?  If there is no right to equitable distribution under those circumstances, then what rights exist and what remedies can be implemented to protect those rights?  In Thieme v. Aucoin-Thieme, a post-Judgment dispute involving several interesting issues including the equitable distribution of marital assets, distribution of assets pursuant to equitable principles stemming from a pre-marital cohabitation period, and the remedy of a constructive trust in connection with an ex-husband’s receipt of a bonus, the Supreme Court of New Jersey primarily held that:

  1. said bonus received by the ex-husband (Michael) was subject to equitable distribution to the extent it was earned during the parties’ marriage; and
  2. the matter’s “extraordinary circumstances” merited imposition of a constructive trust to protect the ex-wife’s (Bernice) claim of unjust enrichment and request for a portion of the bonus earned during the parties’ pre-marital cohabitation period.

Before even getting into the details of what happened, what is, perhaps, most interesting about this matter is not the very specific facts and circumstances at issue and how such circumstances led to an understandably fair result but, rather, how this case addresses the sort of equitable claims that may arise in connection with a palimony claim that were kept alive in Maeker v. Ross.  While the 2010 amendment to the statute of frauds requires that all post-amendment palimony agreements be in writing, this case also provides a window to argue around the amendment in certain cases if no writing exists – in other words, even without a written palimony agreement for a post-amendment case, the equitable arguments discussed in Maeker can still be made to procure relief.  The case certainly is not limited to that sort of analysis, and, in because of the unique circumstances at issue it even seems to overcome prior case law suggesting that the rights of cohabitants come to an end once the marriage occurs.  With that being said, let’s take a look into what happened…

Here are the unique facts you should know:

  • Michael and Bernice cohabited for eight years and were then married for a brief time.
  • During the cohabitation period and marriage, Michael was an employee of a company called IBG.  He had no ownership interest in IBG, but the company’s principals made a written commitment to Michael that IBG would compensate him for his contributions to the company if it sold.  A written Statement of Understanding was executed, and Bernice’s knowledge as to same was the subject of dispute at the subject post-Judgment trial.
  • Based on that commitment, Michael and Bernice “made personal and financial decisions” with the expectation of such future compensation including, but not limited to, Michael working and traveling extensively for the company, Bernice foregoing employment to devote her time to the parties’ child, and the parties purchasing a new home.
  • The parties divorced and the resulting settlement agreement distributed their assets.
  • During the divorce negotiations, the parties discussed Michael’s potential receipt of deferred compensation or some form of ownership stake in the company, with Michael representing that it “may never happen,” and that he did not anticipate a “big cash payment.”  He further indicated to Bernice that they could revisit the issue in the future should something transpire with the company.
  • Three months after the divorce concluded, IBG was sold and paid Michael $2.25 million (described as a “closing bonus”) for his contributions to the company.  The bonus was paid in accordance with the earlier Statement of Understanding and was paid “to show our appreciation for [Michael’s] contributions in helping [IBG] grow into the successful organization that it is today.”  During a deposition, a company representative testified that the bonus was based on Michael’s contribution to the company over thirteen years and that Michael did not know about the sale before its completion.
  • Bernice first learned of the bonus payment when Michael deposited the money into a bank account that, unknown to Michael, remained a joint account despite the divorce.  Bernice, without notice to Michael, withdrew the funds from the account.
  • Bernice then filed an application for a share of the closing bonus.
  • The trial held that Bernice was entitled to distribution of the bonus, but only that portion stemming from Michael’s work during the marriage.  The Appellate Division affirmed the trial court.

In affirming in part and reversing in part, the Supreme Court, in a decision authored by Justice Anne Patterson, held as follows:

  • It would contravene New Jersey’s equitable distribution statute to find that the portion of the bonus earned prior to the marriage was a marital asset subject to distribution.  As a result, the Court held that the trial court properly allocated the pre-marital and marital periods in determining what portion of the bonus was subject to equitable distribution.  While arguments can be made that this component of the trial court’s decision should not have been upheld based on how the marital portion of the bonus was calculated, that is not the primary focus of the case or this blog post.
  • As Justice Patterson noted, however, the story was not over.  As for that portion of the bonus earned during the parties’ cohabitation period, the Court addressed whether Bernice had made a claim of unjust enrichment.  Addressing a claim for unjust enrichment and its related remedies, the Court provided:

To prove a claim for unjust enrichment, a party must demonstrate that the opposing party ‘received a benefit and that retention of that benefit without payment would be unjust.’

  • Bernice would also have to show that she “expected remuneration” from Michael at the time she “performed or conferred a benefit” on Michael and that “the failure remuneration” enriched Michael “beyond [his] contractual rights”.
  • In the event of unjust enrichment, a court may impose the remedy of a constructive trust to prevent such enrichment.  Legally speaking, a constructive trust is “the formula through which the conscience of equity finds expression.  When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.”  More generally, such a trust is a remedy designed to protect a party harmed by another party’s receipt or retention of property procured through unjust enrichment or some other wrongful means (fraud, mistake, undue influence, and the like).
  • Relying on its prior decision in Carr v. Carr, wherein the trial court equitably imposed a constructive trust awarding a wife a share of the marital assets controlled by the husband’s estate where the husband died during the divorce proceedings, the Court here held:

As the evidence presented at trial made clear, the prospect that [Michael] would be generously compensated was a significant factor in the parties’ personal and financial planning from the early stages of their relationship.  [Michael] and [Bernice] each relied on the expectation of deferred compensation if IBG were sold as they made important decisions for themselves and their family.

The parties’ shared anticipation that [Michael] would be paid deferred compensation was more than wishful thinking.  Given IBG’s written commitment to [Michael], and its owners’ genuine desire to reward their valued employee, both parties had reason to anticipate a significant payment in the event of a sale.

. . .

[I]t is clear that on multiple occasions [Michael] advised [Bernice] about his expectation that any sale of IBG could generate a substantial financial reward for their family.

. . .

[I]BG’s commitment to reward him was an important consideration in the decisions made by the parties throughout their cohabitation and marriage . . . In short, as they planned their finances and personal lives, [Michael] and [Bernice] anticipated that they might someday share in the proceeds of the company’s sale.

During the parties’ eight years of cohabitation, and for most of their brief marriage, [Bernice] undertook significant efforts to support [Michael’s] challenging career.

. . .

Indeed, [Michael] himself recognized that [Bernice’s] contributions to their family should be rewarded.

. . .

Accordingly, the record supports the conclusion that [Bernice’s] decision not to seek further education and employment was made, at least in part, in reliance on [Michael’s] financial commitment to her.

As family law practitioners, Thieme v. Aucoin-Thieme provides guidance as to how to not only bring an equitable claim stemming from a period when parties were not married, but also the sort of appropriate remedy that can be imposed in the event of a viable claim.  In a way, despite its specific factual scenario, it also opens the door to creative lawyering as to when these types of equitable claims could come into play.  Especially in the context of a palimony matter where other related equitable claims are raised, there is, perhaps, more opportunity to overcome an adverse party’s argument that all of the equitable claims are simply palimony claims dressed in different clothes.

_____________________________________________________

Robert A. EpsteinRobert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

Connect with Robert: Twitter_64 Linkedin

They say a picture is worth a thousand words, and in the recently unpublished (not precedential) case of C.S. v. B. S., Judge Jones determined that 25-years’ worth of family pictures destroyed by a scorned ex-wife are also worth $5,000.00.

In C.S. v. B. S., the parties divorced after approximately 25 years of marriage. They had one child, who was emancipated. The parties’ entered into a Matrimonial Settlement Agreement, and agreed, among other things, that the husband would have the right to share in the family photographs and videos that were kept in the in the marital residence, where the wife continued to exclusively reside.

However, shortly after the parties’ divorce, the wife refused to allow plaintiff to have or copy any of the photos or videos of the marriage. The husband sent the wife an email requesting her cooperation to retrieve the photos and videos and she replied that she had disposed of them because he had allegedly been unfaithful during the marriage and no longer wanted to be reminded of him.

24276086 - old letters and antique family photos parents, grandfather; grandmother; children nostalgic vintage pictures from ca 1900

The husband sought enforcement of his rights and damages for the wife’s breach of the marital settlement agreement and the Court scheduled the matter for a hearing. At the hearing, the Court did not accept the wife’s testimony that she returned the husband’s childhood pictures (one torn into pieces), completely skipping over the last 25 years of the husband’s life, due to her interpretation of the parties’ agreement. Further, the wife did not indicate how or when she disposed of the photos, but testified that she believed it was before the divorce. She could not answer why, if she disposed of the photos before the divorce, the settlement agreement provided for plaintiff to share in the photographs and videos. The Court concluded that the wife’s refusal to provide the husband with the photos and videos of the marriage was a violation of the husband’s rights.

So what is the husband’s remedy? Unfortunately, the 25 years of family photographs cannot be replaced, so the Court had the task of fashioning an appropriate remedy.

First, the Court found that, in divorce proceedings, there is an implicit duty of good faith and fair dealing between parties. This means that each party has an obligation to treat the other fairly and respectfully during the divorce process, including honoring each other’s rights to marital property and adhering to terms of settlement agreements and consent orders. Thus, the wife breached the duty of good faith and fair dealing by depriving the husband of the family photos and videos.

The Court came up with three scenarios based on the Wife’s testimony: (1) she disposed of the photos and videos after the entry of the marital settlement agreement; (2) she disposed of the photos and videos before the entry of the marital settlement agreement; and (3) the photos and videos were not destroyed and still exist.

The Court opined that under scenario 1, if the wife disposed of the photos and videos after the entry of the marital settlement agreement, such action is a violation of the husband’s rights under the express terms of the document.

Under scenario 2, if the wife disposed of the photos and videos before the entry of the marital settlement agreement, such action is a violation of the implicit obligation of fair dealing, as the wife could not have possibly honored the agreement regarding the sharing of the photos and videos if they no longer existed. Under this scenario, the wife’s conduct “would constitute more than a mere breach of contract, but an actual misrepresentation”. The court also added that, when parties file divorce pleadings, the property of the marriage is deemed, in custodia legia (i.e. property under control of the court) pending resolution. Thus, the wife’s complete disposal of the marital photos and videos during the divorce process is evidence of a lack of good faith and fair dealing.

Under scenario 3, if the photos and videos were not destroyed and still exist, the wife is committing the tort of conversion (i.e. the intentional exercise of dominion or control over a property which interferes with the legal right of another to possess or control same).

39848897 - old empty photo frame with tape

Regardless as to which scenario was the truth, each entitled the husband to damages from the wife and thus the Court was next tasked with crafting a remedy for the husband. Generally, when a party wrongfully takes another’s property, the aggrieved party is entitled to damages, which are assessed under either a market value analysis or cost replacement analysis. However, in this case, due to the unique nature of the photos and videos neither of these analyses apply, since there is no market value or cost replacement value for personal family photos and videos. Therefore, financial compensation and/or reasonable sanctions are the most logical and available options in the Family Court, even though assigning an amount may prove complicated.

Prior to assessing financial compensation and/or reasonable sanctions in this type of scenario, there must be a foundation of evidence to support that:

(a)        the other party actually did take, damage or destroy the property, in violation of the aggrieved party’s rights;

(b)        the aggrieved party genuinely wanted the items in question; and

(c)        the violating party knew or should have known that the aggrieved party wanted the property and that such property had a particular personal value or significance.

Here, after a consideration of the parties’ testimony and other evidence before the Court, Judge Jones found that the wife, by disposing of or destroying the family photos and videos, met all of these factors and awarded the plaintiff $5,000.00.

Before concluding, Judge Jones reminded us that each case and each issue is fact-sensitive and that damages are to be assessed based on the specific facts of each case.

That being said, revenge comes with a price. Here, it was $5,000.00 and 25 years of lost memories, but let this be a warning: before you act, whether it be out of anger, spite, or revenge, think twice about how much it may cost you for that moment of satisfaction.

Johnny Depp a.k.a. Capt. Jack Sparrow is in the news again, this time for his failure to pay Amber Heard a $7 million divorce settlement. Heard had promised that any settlement that she received from Depp would be donated to charity. She has chosen two charities, the American Civil Liberties Union and the Children’s Hospital of Los Angeles to be the beneficiaries of her largess. Depp hasn’t made the payout yet because he wants to pay directly to the charities rather than to Heard. At issue is the substantial tax benefits that Depp would reap by making the payments directly to charities rather than Heard.

Johnny Depp in Capt. Jack Sparrow costume
By NJM2010 (Own work) [CC0], via Wikimedia Commons
Tax consequences of divorce disbursements is an important consideration when negotiating a settlement. Often times the client will simply lump all assets together and come up with a value of the marital estate not taking into consideration possible tax issues for each individual asset. For instance, the average couple may have a house with $250,000 of equity, a 401(k) with $500,000, and various bank accounts equal to $250,000. The easy math would suggest that one spouse take the 401(k) and the other take the accounts and the house, right? Not so fast. The spouse who would walk away with the house and the bank accounts could liquidate everything and have $500,000 to spend now. The spouse with the 401(k), however, has significantly less available liquidity. Assume, for example, that the spouse that takes the 401(k) has an overall 30% tax bracket for state and federal taxes. To liquidate the 401(k), that spouse would have to pay not only 30% in taxes, but absent extraordinary circumstances, a 10% penalty to liquidate the retirement early. All too quickly that $500,000 becomes $315,000.

This simplistic example demonstrates the necessity of understanding tax consequences to all of the assets in a divorce. This includes stocks and bonds that may have been purchased at a low price that have gone up substantially in value, retirement accounts, real estate investments which in and of themselves may have tax consequences such as available deductions, and carry forward losses on prior tax returns. In the rush to settle the case, litigants sometimes forget the importance of the careful review of their prior tax returns and asset portfolio. A quick call to your accountant may assist your attorney in protecting your future significantly.

 

MillnerJennifer_twitterJennifer Weisberg Millner is a partner in Fox Rothschild LLP’s Family Law Practice Group. Jennifer is resident in the firm’s Princeton Office, although she practices throughout the state. Jennifer can be reached at 609-895-7612 or jmillner@foxrothschild.com.

Perhaps Kurt Cobain knew when writing the song “All Apologies” that one day his daughter would be embroiled in a nasty divorce battle.  While the lyrics, “Married, Buried, Married, Buried”, may not sound uplifting, they are undeniably classic Nirvana.  Fans of the band would largely agree that the most well known live performance of the song was the acoustic version played during the band’s “Unplugged in New York”, which took place shortly before Cobain’s death.  Now it is the guitar used by Kurt during that performance which lies at the center of Frances Bean Cobain’s divorce from her husband.

nirvana

Specifically, Frances’s husband is in possession of the guitar – thought to be worth several million dollars – and refuses to return it to her while alleging that she gave it to him as a wedding present.  Not surprisingly, Frances denies ever giving it to him at the start of their short-term marriage, and is taking the position that he has no right to any money from her fortune (Kurt’s estate is valued at approximately $450 million).

With that said, and straight from Seattle to the swamps of New Jersey, how would a court here potentially address the issue?

I Think I’m Dumb, or Maybe Just Happy:  Well, for starters, is there a prenup protecting Frances’s rights and interests in Kurt’s estate and, as part of the estate, the subject guitar?  I don’t know the answer, but even if Frances was blinded by her love for her now soon to be ex-husband, she would hopefully be smart enough to have had some sort of agreement drafted and signed protecting her from the claim now being made (unlike Paul McCartney in his divorce from Heather Mills, for example).  Such agreements often have language addressing so-called separate property and whether separate property is exempt from equitable distribution.  Language regarding interspousal gifts is also common and can be crafted in a way to ensure that even if she did gift the guitar to him during the marriage, it could still remain separate property exempt from distribution.

And For This Gift, I Feel Blessed:  At the heart-shaped box of this matter is whether the guitar was an interspousal gift from Frances to husband during the marriage.  This is essentially what husband is claiming.  In New Jersey, an interspousal gift is subject to equitable distribution.  Husband can take the position that even if the guitar was originally a non-marital asset exempt from equitable distribution (for instance, as an inheritance or gift to Frances, or by agreement), it lost that exempt status and became marital property subject to distribution once she gifted it to him.  If proven, Frances loses the right to claim that the guitar is exempt from equitable distribution at the time of the divorce.  With a guitar worth several million dollars, husband may look at his share of the guitar as the proverbial meal ticket in a short-term marriage where his rights are likely otherwise limited.

Hey!  Wait!  I’ve Got a New Complaint:  To rebut husband’s claim and supporting evidence/testimony that Frances gifted him the guitar, Frances would have to establish that there never was any gift.  In other words, there was no intent by Frances to gift him the guitar – a fact that perhaps she could establish by testifying about how she told husband at the time, and/or at other times during the marriage, that it was her/her family’s guitar, rather than husband’s guitar.  Maybe husband simply took it from the home and is now fabricating the entire story.  Credibility and the surrounding factual circumstances will play a large part in the final result.  Also, even if the guitar was ultimately deemed to be an interspousal gift, Frances may be aided in the actual allocation of the asset by New Jersey’s equitable distribution factors, especially that regarding who brought the subject property to the marriage.  Keeping the guitar in the Cobain family would seemingly be an important consideration for a family court judge, and may sway any determination regarding whether Frances could ever have intended it to be a gift.

It will be interesting to see how this matter unfolds and ultimately concludes.  Whether the litigant is Frances or anyone else similarly in her shoes, learning the law regarding gifts and equitable distribution may leave the litigant forever in debt to such priceless advice.

______________________________________________________

Robert A. EpsteinRobert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

Connect with Robert: Twitter_64 Linkedin

*image courtesy of google free images.

I’m not usually one to place a lot of stock in celebrity gossip, but I couldn’t help but take notice of the fact that it has been rumored that Amber Heard’s monthly income is $10,000, yet she spends $44,000 a month on shopping, dining out and vacations. Her ask for spousal support: $50,000 per month, based upon the parties’ marital lifestyle.

45351836 - champagne bottle in ice bucket and two full glasses realistic vector illustration
45351836 – champagne bottle in ice bucket and two full glasses realistic vector illustration

Amber Heard may not be only one spending beyond her means. This phenomenon applies to us common folk as well.

Particularly during the economic downturn, we have seen many cases where parties have splurged during times of plenty and then failed to scale back when the economic downturn hit. As a result, the parties are living on credit or perhaps not paying their bills. It, in effect, creates an artificial lifestyle which neither party really has the ability to maintain.

This puts the Court in a tough spot. On the one hand, the Supreme Court explained in Crews, “the standard of living experienced during the marriage . . . serves as the touchstone for the initial alimony award.” On the other hand, what happens when the marital standard of living is based on nothing more than irresponsible spending?

An unpublished case was just recently decided by the Appellate Division that touched on this issue. Although the crux of the case really focused on the reversal of a judge’s suspension of alimony as a discovery sanction, what peaked my interest was how the judge dealt with what he classified as an “artificial lifestyle,” marked by the parties’ “irresponsible spending and outlandish behavior, whether going on expensive vacations to South America and Europe, or purchasing fancy cars” when awarding alimony.

In Ponzetto v. Barbetti, decided on June 28, 2016, the parties had a nineteen year marriage which ended in a contentious divorce when the parties were in their mid-forties. The parties did not have any children and the only issues in the case were equitable distribution and alimony, both of which were hotly litigated during the course of a lengthy trial.

The husband had started a sound system business when he was a teenager, for which the wife kept the books. At one point, the business was so lucrative, that it generated revenue of $500,000 per year. These were the times of plenty.

Unfortunately, the business suffered during the economic downturn. The parties’ lifestyle, however, did not. They continued to spend lavishly. By the time of the divorce, they had two Ferraris, a Harley Davidson, Pontiac Fiero and two hummers.

While typically a judge would look at the parties’ spending during the last several years of the marriage to determine lifestyle, in this case, the trial judge found that it would not be appropriate to do so in this situation, where the lifestyle was not based on income or need.

As a result, the judge declined to use “the parties’ irresponsible spending from 2006 through 2008 in determining marital lifestyle” and instead determined to “kindly” utilize the marital lifestyle from 1990 through 2006, which the judge determined to be $14,500 per month. Ultimately, the wife was awarded $400 per week in alimony.

This is just one example of how a judge has dealt with this increasingly common situation. However, judges are frequently placed in these precarious situations, where the parties have exceeded a reasonable lifestyle based upon their income as compared to their expenses. In the case of Ponzetto v. Barbetti, the judge crafted a remedy that was equitable given the specific circumstances of the case.
_________________________________________________________________________________________________________________________________
Eliana Baer, Associate, Fox Rothschild LLPEliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or etbaer@foxrothschild.com.

If I’ve heard it once, I’ve heard it a million times: “why don’t judges enforce their own orders or take hard lines against obstructers?” Many times, litigants feel powerless. Powerless to change anything; powerless to have courts take a firm position in favor of those aggrieved; and, powerless to be heard. Clients and attorneys alike feel this frustration.

This is despite the fact that there are specific rules in New Jersey that apply to non-compliance in the family part. Rule 5:3-7 provides for very specific types of relief in specific actions:

Non-Compliance with Custody or Parenting Time Orders:

(1) compensatory time with the children;
(2) economic sanctions, including but not limited to the award of monetary compensation for the costs resulting from a parents failure to appear for scheduled parenting time or visitation such as child care expenses incurred by the other parent;
(3) modification of transportation arrangements;
(4) pick-up and return of the children in a public place;
(5) counseling for the children or parents or any of them at the expense of the parent in violation of the order;
(6) temporary or permanent modification of the custodial arrangement provided such relief is in the best interest of the children;
(7) participation by the parent in violation of the order in an approved community service program;
(8) incarceration, with or without work release;
(9) issuance of a warrant to be executed upon the further violation of the judgment or order; and
(10) any other appropriate equitable remedy.

Non-Compliance with Alimony or Child Support Orders:

(1) fixing the amount of arrearages and entering a judgment upon which interest accrues;
(2) requiring payment of arrearages on a periodic basis;
(3) suspension of an occupational license or drivers license consistent with law;
(4) economic sanctions;
(5) participation by the party in violation of the order in an approved community service program;
(6) incarceration, with or without work release;
(7) issuance of a warrant to be executed upon the further violation of the judgment or order; and
(8) any other appropriate equitable remedy.

27249354 - symbol of sanctions as a clamps

In other words, with most family part actions, the sky is the limit in terms of what remedies can be utilized to secure compliance. Moreover, in other instances of non-compliance not covered by the family part rules, for instance, filing frivolous motions to harass the other party, or failing to make discovery, other rules apply that should serve to get a litigant to do the right thing.

So why the disconnect?

Well, it appears that some judges are beginning to take a hard stance against people who just feel like marching to the beat of their own drums, people without any regard for Orders of the Court, or resultant victimization to the other party.

For example, in August, a New Jersey couple was hit with a $543,000 sanction by a Manhattan judge for interfering with their son’s divorce. Justice Ellen Gesmer said that the couple “orchestrated the litigation” between their son and his wife, caused extensive delays, and launched a legal battle designed to “intimidate” their daughter in law.

The parties were married in 2005, and had one child in 2007. Tragically, the husband suffered a brain aneurysm in 2008, rendering him disabled. The wife initially cared for the husband, but was ultimately pushed out of the picture by his parents, who actually took him to a facility and hid him from the wife for several months in 2009.

When the divorce was filed in 2010, the grandparents ran the show on behalf of the son, and directed the son’s lawyers to delay the custody hearing for as long as possible so that they could pursue 50% custody of their grandchild, based upon the pretense that it was on their son’s behalf. By the end of the litigation, the wife’s legal bills were in excess of $928,000.

The judge ultimately found that the parents “willfully interfered with (their granddaughter’s) development of a positive and loving relationship with her father…(and) purposefully engaged in frivolous litigation.”

The judge also came down hard on the father’s lawyers, ruling that they engaged “in frivolous conduct by repeatedly making misrepresentations and knowingly false statements and claims to the court.” She ordered the lawyers to contribute $317,480.67 toward the wife’s legal bills.
The in-laws were ordered to pay, in total, a whopping $543,000.

Back on the other side of the river, in a recent Somerset County case, two opposing litigants were both ordered to perform community service for what the judge found was their willful non-compliance with their marital settlement agreement. The judge also warned them that they were to comply or face the possibility of sanctions.

It appears that judges are “getting real” about compliance. Whether it means the imposition of counsel fees against an overly litigious party or community service, a more clear message is being sent by these judges that non-compliance will not be tolerated.
______________________________________________________________________________________________

Eliana Baer, Associate, Fox Rothschild LLP Eliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or etbaer@foxrothschild.com.