College Costs After Divorce: Agreement for Child to Take Out Loans Rendered UnenforceableAugust 9, 2018
Once again, New Jersey provides a conflicting remedy for a child of divorce attending college compared to a child in an intact family. In an unpublished (non-precedential) decision, the Appellate Court affirmed a trial court order finding that a child was not bound by a property settlement agreement requiring her to apply for college loans. Carl J. Soranno, Esq. of the Family Law Department previously wrote on this issue for the New Jersey Law Journal in January of 2015. Unfortunately, it appears that the situation for divorced parents has only gotten worse.
The parents in M.F.W. v. G.O. were divorced in 2003. At the time their daughter was five years old. The parties entered into a property settlement agreement which required both parents to contribute toward college expenses. The Agreement also required their daughter to apply for all “loans, grants, aid, and scholarships available to her, the proceeds of which shall be first applied to college costs.” In 2016, the daughter was accepted at Georgetown University – a school with a first semester tuition of over $30,000. The parties then filed motions over the payment of the daughter’s education costs and child support (among other issues not addressed in this post).
On the issue of college costs, the trial court ruled that it was “unfair and unjust” to require the child to apply for and utilize “loans, grants, aid, and scholarships” before the parents would be required to contribute. The court also found a change in circumstances warranting a modification of the Agreement; i.e., both parents’ incomes and assets had increased since the divorce. Consequently, the court determined that the parties could afford to send their daughter to Georgetown University without requiring their daughter to apply for loans first. The Appellate Division affirmed the trial court’s decision, which was reached without a plenary hearing. The Court wrote that “because it was the parents’ obligation to pay for college and they had the ability to do so” it was unfair for the daughter to obtain loans.
The M.F.W. v. G.O. decision is another blow to divorced parents. While intact families can make the decision about whether and how they want to contribute to their child’s college education, divorced parents are forced to abide by a judge’s determination on how to finance college. The parents in M.F.W. v. G.O. tried to make their own decision in their settlement agreement on how to pay for college, only to have the court reject their agreement in favor of the child. The provision included in the parties’ settlement agreement was standard and is included in many settlements. Although the parents’ income had increased (from approximately $130,000 per year combined to $300,000 per year combined), it will still be difficult to pay tuition of over $30,000 per semester with no financial contribution from the daughter. It is discouraging that parties could enter into these terms only to find out years later that they are unenforceable. In sum, divorced parents who litigate over college costs have little to no control over the outcome.
Although the bulk of the M.F.W. v. G.O. decision creates a legal headache for divorced parents and family law practitioners, the opinion did affirm the trial court’s decision not to hold a plenary hearing on the issue of college costs and child support. Most prior decisions on similar issues confirmed the need for a plenary hearing – and thus created a significant cost to any litigant seeking the relief. Nevertheless, the M.F.W. v. G.O. decision confirms the risk for parents litigating college costs. Although avoiding a plenary hearing can save money for a client, the risk over what the judge will order regarding college costs outweighs any benefit.
Tax Reform Bill Puts Alimony Deductibility on the Chopping BlockNovember 3, 2017
Hidden deep within the proposed Republican tax bill entitled the “Tax Cuts and Jobs Act” (Sec. 1309, Pages 122-126) published yesterday is a scarcely publicized provision that eliminates the long-standing tax deductibility of alimony payments. While this prospective provision will impact agreements/judgments entered after January 1, 2018, the provision, if adopted, amounts to a significant paradigm shift in the way that alimony payments have been treated by both the payor and payee. Those individuals currently in negotiations and practitioners should be aware of this possible legal landscape change. If adopted, it is unknown how this would impact alimony and child support calculations going forward. To view the entire bill, please click on the attached hyperlink: https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf
Tax Reform Bill Eliminates Tax Benefits Related to Adoption by Taxing Employer Assistance and Eliminating Tax CreditNovember 3, 2017
Under the proposed Republican tax bill entitled the “Tax Cuts and Jobs Act” (Sec. 1406, Page 142) published yesterday, families seeking to adopt a child will suffer two significant cuts. First, the employer assistance credit for adoption will be eliminated. Currently, if an employer provided assistance to a worker adopting a child up to $13,750, the employee pays no taxes on that assistance. The proposed bill eliminates that provision and the assistance would be taxed as income. Second, the adoption credit of up to $13,750 per eligible child will be repealed. Currently, the credit is applicable for taxpayers with adjusted gross income of between a range of approximately $200,000 to $240,000. To view the entire bill, please click on the attached hyperlink: https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf
Court Rules that Title 9 (abuse and neglect) hearsay exception does not apply to Title 30 (termination of parental rights).May 22, 2017
In a case of first impression, the Appellate Division has ruled that the Title 9 hearsay exceptions that are authorized for abuse and neglect investigations is not applicable to parental termination cases under Title 30 and that D.C.P.P. may not rely solely upon that uncorroborated hearsay from children to support a termination of parental rights. In the matter entitled Division of Child Protection and Permanency v. T.U.B. and J.E.C. (https://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/published/a2565-15.pdf), the Court ruled that Title 30 (which outlines process for termination of parental rights) does not allow the Court to rely uncorroborated hearsay statements from children when considering the termination of a parent’s rights. In the case, a man identified only as J.E.C. was living with his son, identified by the fictitious name of Calvin, with J.E.C.'s girlfriend, T.C., and her two minor female daughters, given the fictitious names of Jenny and Sandy. At one point, the girls alleged that they were raped by J.E.C., and the DCPP launched an investigation. Following a hearing, the trial court terminated J.E.C.'s parental rights after relying heavily on the girls' uncorroborated hearsay testimony (which is permitted under Title 9). In reversing, the Appellate Division ruled that the trial court committed reversible error by relying upon the Title 9 hearsay exception as the plain statutory language of Title 30 does not extend the exception to trials involving the termination of parental rights. The court held that such an expansion would violate a parent’s due process rights.
A Warning to Parents Litigating College Expenses in the Family CourtFebruary 24, 2017
In a recent decision, Ricci v. Ricci, the Appellate Division addressed emancipation and parents’ obligation to pay college costs for a child who has left the parent’s home. This case is unique in that it involved divorced parents who agreed their daughter, Caitlyn, should be emancipated. Caitlyn disagreed and legally intervened, causing years of litigation which – according to the Appellate Division – has only just begun.
There was no dispute that Caitlyn had disciplinary problems which began in high school. These issues, which continued after Caitlyn graduated in 2012, caused significant family strife. In February 2013, at the age of nineteen (19), Caitlyn moved from her mother’s home to reside with her grandparents. Based on Caitlyn’s conduct and what the Ricci parents perceived to be an obvious desire to be independent of their control, Caitlyn’s parents agreed it was no longer necessary or appropriate to continue supporting their daughter financially. The parents signed a Consent Order emancipating Caitlyn and stopping child support.
Legal action followed, and Caitlyn asked the Court to vacate the Consent Order and require her parents to provide financial support for college. The parents objected, but two Orders were subsequently entered against them “un-emancipating” Caitlyn and requiring them to contribute towards her college tuition. The Ricci parents appealed.
The Appellate Division’s decision outlined the law governing emancipation and college contribution in New Jersey, and found that neither issue was properly considered. The Court first advised there should have been an examination of the events triggering Caitlyn’s departure from her mother’s home in 2013 and her subsequent emancipation. Following existing law, the Court advised: when determining if a child should be emancipated, judges must focus on whether that child has moved beyond the influence of his or her parents and obtained total independence from them.
Second, the Court could not uphold the conclusion that Caitlyn had been un-emancipated, since the trial court did not make the required findings or hold a plenary hearing (essentially a shortened trial) on the issue. Because there was no requisite finding of un-emancipation, the Order requiring the Riccis to pay for Caitlyn’s college expenses was also improper and had to be vacated. In remanding the matter back to the trial court for a hearing, the Court underscored that the threshold question of emancipation is fact-sensitive and must precede any consideration of a parent’s obligation to contribute towards the cost of college. In other words, Caitlyn will first have to prove she was un-emancipated before the trial court can conduct an analysis about whether her parents should be required to contribute towards her college expenses.
The Appellate Division got it right in the Ricci case; i.e., the Court identified a series of procedural mistakes and ultimately remanded the case to the trial court for the proper proceedings. That’s because under New Jersey law, any time there is a significant factual dispute between the parties (which almost always occurs in Family Court matters), a plenary hearing is required. But there is some truth to the legal maxim “justice delayed is justice denied”, and plenary hearings often take months or even years to complete. Therein lies the issue. By affording the Riccis their “day in court”, the Appellate Division effectively ensured this litigation won’t be ending soon. Practically speaking, the Riccis could be sharing the cost of Caitlyn’s wedding before they resolve college costs.
Despite its holding, the Appellate Division acknowledged the trial court judges in this case made the best equitable decisions based on what was before them. They did so without requiring a plenary hearing – recognizing the limited resources of the parties and the court. This type of “swift justice” is something practitioners demand on a regular basis. However, judges will often avoid this because it’s technically contrary to applicable law and leaves most litigants feeling unsatisfied. The bottom line: litigation in Family Court is often a “no-win” for both parents and children. Although easier said than done, a family feud is best resolved without involving the courts and it’s worth exploring mediation or other forms of dispute resolution.
Domestic (physical) Violence Warrants Issuance of FROOctober 31, 2016
In the published decision of A.M.C. v. P.B., the New Jersey Appellate Division reviewed and reversed a trial court’s denial of a final restraining order (FRO) under the New Jersey Prevention of Domestic Violence Act. In so doing, the Court reviewed the seminal case Silver v. Silver which required the victim to establish (1) a qualifying relationship with the abuser; (2) that the abuser committed one or more of the predicate acts of domestic violence identified in the Prevention of Domestic Violence Act; and (3) there is a need for the protection of an FRO going forward. In the recent decision, the Appellate Division reviewed the step three. In the A.M.C. v. P.B. trial, the trial court determined that the victim satisfied the requirements of (1) and (2), but failed to meet (3). Consequently, the trial court determined that a final restraining order was not necessary to protect the victim from future acts of domestic violence. On appeal, the Appellate Division reviewed and reversed this finding.
In rejecting the trial court’s finding, the court opined that the trial court misapplied (3) to the case and improperly created mitigation factors (length of relationship and lack of children) that were not contained within the New Jersey Prevention of Domestic Violence Act to find against the issuance of a FRO. Consequently, the Appellate Division exercised original jurisdiction and issued a FRO. This case stands for the general proposition that when there exists a physical assault on a victim, the general presumption weighs in favor of the issuance of a FRO. From a practitioner’s standpoint, this case represents a tool for victims of domestic violence to guarantee that they receive the strongest civil protection available under the New Jersey Prevention of Domestic Violence Act.
Palimony Statute Ruled Constitutional Comes as no SurpriseAugust 3, 2016
A recent Chancery Division case upheld New Jersey’s new palimony statute as constitutional. The fact that the court upheld the palimony law as constitutional was not surprising, but it did confirm the shift away from the prior case of Devaney v. L’Esperance which held cohabitation was not necessary for a palimony claim and reinforced the requirement that palimony agreements be in writing. The case also criticized the Plaintiff for her frivolous claims and may serve as support for awarding sanctions in future cases where a plaintiff attempts to utilize creative arguments to circumvent the palimony statute.
The Plaintiff in the Chancery Division case of Lee v. Kim brought a suit against her ex-boyfriend and the Attorney General of New Jersey alleging a palimony claim and that the new palimony statute violated her rights to equal protection, privacy, and due process under the Constitution. Ms. Lee filed her suit after the conclusion of a two year relationship with Dr. Kim. Since the parties began dating after the enactment of the palimony statute, Ms. Lee’s claim for palimony was subject to the requirements of the statute; that the agreement be in writing and that the parties to the agreement be represented by counsel. However, Ms. Lee and Dr. Kim never entered into a written agreement. Therefore, Ms. Lee’s complaint for palimony was based solely on alleged oral promises made by Dr. Kim. The court denied each of Ms. Lee’s constitutional arguments and ultimately dismissed her complaint with prejudice.
The Lee v. Kim decision reflects the trend in family courts to limit protracted litigation and make valuable court time available for other cases. Today, with the shortage of judges in many of the family courts, access to a judge to determine issues such as palimony is limited. The court in the Lee matter dismissed Ms. Lee’s case on the papers without oral argument. The decision also sharply criticized Ms. Lee for wasting time and money with her frivolous palimony litigation. Many judges are reluctant to critique a lawyer’s creative litigation decision, so the opinion in Lee makes clear that courts are unwilling to indulge cases such as this and stands as a warning to other plaintiffs and attorneys.
Bankruptcy and Divorce – Where Should You Go To Seek Relief?May 6, 2016
On May 4, 2016, in the unpublished decision of Strunck v. Figueroa, the Appellate Division reaffirmed longstanding jurisdictional jurisprudence involving bankruptcy and divorce. In the case, the parties divorced in August 2011. As part of the divorce, the Plaintiff was awarded the sum of $23,369 to be transferred from Defendant’s Fidelity account by way of Qualified Domestic Relations Order. The divorce decree further directed that the Plaintiff be responsible for the preparation and cost of the QDRO.
However, prior to the amount being transferred, the Defendant withdrew all funds from the Fidelity and filed a Chapter 7 bankruptcy petition. In the bankruptcy petition, the Defendant listed the Plaintiff’s $23,369 claim as being incurred on August 2011 alleging that the amount was an obligation arising out of a matrimonial judgment and not a domestic support obligation.
Plaintiff received notice of the bankruptcy petition and the inclusion of the $23,369 as an unsecured claim in that petition. The Plaintiff chose not to file an adversary proceeding to challenge the dischargeability of the claim. As no objection was reached by the bankruptcy court, the Defendant was granted a discharge of the claim and all other debts.
Thereafter, the Plaintiff elected to pursue an alternative course to recover the $23,369. More than a year after the discharge, the Plaintiff filed a complaint against the Defendant in the Superior Court alleging conversion of the asset. He contended that the Defendant falsely stated in a bankruptcy petition that she was not holding the property of another and sought to enforce litigants rights based upon the divorce decree.
On appeal, the Appellate Division held that Plaintiff’s decision to not file an adversary proceeding in the bankruptcy matter resulted in the Plaintiff being estopped from later seeking to collect discharged claim. Effectively, the Court noted that the Plaintiff failed to protect his rights by not participating in the bankruptcy proceeding, including but not limited to appealing the discharge of the debt. The decision, while unpublished, should reinforce practitioners close scrutiny of bankruptcy proceedings in a post divorce judgment world. The warning from the courts of New Jersey is that when such a proceeding is filed, a client should avail themselves of appropriate bankruptcy counsel and appear in the bankruptcy matter if there is any dispute as to the listing of a any obligation that arises out of a divorce judgment.
Are Trial Court’s Prohibited From Suspending Alimony Upon Cohabitation?May 3, 2016
Matrimonial settlement agreement alimony termination clauses are one of the most highly negotiated provisions in a divorce proceeding. Often, the parties negotiate a provision that provides for the “termination” of alimony when the supported spouse cohabitates with an unrelated adult. In consideration cohabitation “termination” post-judgment applications, many trial courts enter awards which “suspend” alimony obligations during the period of cohabitation. This type of suspension order was often without prejudice which would permit the previously supported spouse to seek the reinstatement of alimony if/when the cohabitation ended.
On May 3, 2016, the Supreme Court of New Jersey in Quinn v. Quinn declared that such a suspension remedy may be impermissible. In that case, the Court analyzed a marital settlement agreement which included an express provision that terminated alimony upon cohabitation. After finding that the agreement was entered by fully informed parties represented by independent counsel and without any evidence of overreaching fraud or coercion, the Court reversed the trial court’s equitable remedy of suspending alimony and ruled as a matter of law that the trial court was required to apply the remedy of termination as fashioned by the parties in their marital settlement agreement.
In so doing, the Supreme Court has now instructed all trial courts to enforce the express language of the property settlement agreement when there is no ambiguity in the provision. Simply, the court ruled that if the language is clear and unambiguous, the trial court must enforce the agreement as written unless doing so would lead to an absurd result. In so doing, the court found in Quinn that the parties agreed to the circumstances that would terminate the alimony obligation by contract, to wit: cohabitation = termination.
From a practical matter, this ruling will have a significant impact in the way that cohabitation clauses and property settlements are negotiated, drafted and presented to trial courts on a going forward basis. In representing your clients, such a provision should receive close scrutiny before being included in a marital settlement agreement.
Sometimes Honesty is Still the Best PolicyApril 15, 2016
In the recently published decision of Taormina-Bisbing v. Bisbing, the Appellate Division examined the effect of a non-relocation agreement on a subsequent request by one parent to relocate to another state.
The case involved a relocation application, which is what a primary custodial parent files when he or she want to move out of state with the children. These cases are generally governed by a case called Baures v. Lewis, 167 N.J. 91 (2001). Under Baures, the moving party must first show there is a good faith reason for the move. Then, they must demonstrate the move will not be “inimical” to the child’s interests. There are 12 factors a court must assess in conducting a Baures analysis, but overall it’s a relatively easy standard to meet. A non-custodial parent seeking to relocate with the children is subject to a different standard. Because he/she is essentially asking the court for a change in custody, the request is determined by conducting a “best interest of the child” analysis. This is a much more difficult standard.
The parties in Bisbing separated in August of 2013. A few months later, the Wife began a long-distance relationship with man residing in Utah who had children from a previous marriage. The parties eventually entered into a Marital Settlement Agreement (“MSA”) in March 2014 and were divorced in April 2014. In their MSA, they agreed the Wife would have primary residential custody of the parties’ 8-year old twin girls on the condition that she would not relocate out of state. She also agreed to give the Husband “broad reasonable and liberal parenting time”.
One month after the divorce, the Wife informed the Husband she was quitting her job to become a stay-at-home mom (which she did). About eight months later, she called the Husband and told him she was marrying her significant other from Utah and asked for his consent to relocate with the children. The Husband refused and the Wife filed a motion. Without conducting a plenary hearing – which is usually required in relocation cases – the trial court found in favor of the Wife and allowed her to move to Utah. The Husband appealed. The Appellate Division reversed and remanded the case back to the trial court with a roadmap for a plenary hearing.
First, the trial court must determine whether the Wife negotiated the MSA in bad faith. In other words, the court must first decide whether the Wife knew of her plans to move to Utah when she was negotiating the MSA. If the Wife knew, she essentially manipulated the situation to obtain residential custody so her removal application would be subject to the more favorable (Baures) standard. Under such circumstances, the Court instructed, the Husband would have to be restored to the position he was in before the Final Judgment of Divorce. The trial court would then apply the best interest standard and make a new determination on the issue of custody. This would force the Wife to prove it would be in the children’s best interest to stay with her and move to Utah.
If, however, it is found that she did not negotiate in bad faith, the trial court should next consider whether the Wife proved a substantial unanticipated change in circumstances warranting avoidance of the agreed-upon non-relocation provision in the MSA. This would trigger a Baures analysis, which would require the Wife to show only that moving with the children is not inimical to the children’s interest.
The Bisbing decision does not necessarily clarify an ambiguous issue or create a new test or standard to be applied in relocation cases. However, the Appellate Division did openly acknowledge a somewhat harsh reality of the laws of this State: once a parent obtains primary residential custody, it’s much easier for him or her to obtain an Order permitting an out-of-state relocation (since the burden would be placed on the parent who wants to stay in New Jersey to show that removal/relocation is against the children’s interests). Matrimonial practitioners should take time to explain this to clients and ask more questions regarding future plans when negotiating settlement agreements. Moreover, although it’s still not entirely clear where to draw the line, this case seems to suggest that a party who knows or strongly suspects circumstances are likely to change soon after an agreement is signed, may later be accused of “negotiating in bad faith”. Therefore, it is important for a party to disclose any intentions he or she may have of moving out of state, marrying, etc., prior to signing an agreement, as these major events typically constitute a change in circumstances warranting a modification of custody/parenting time, alimony/child support, or even equitable distribution.
How Will Retirement Affect Your Award of Alimony? Well, That All Depends...April 1, 2016
As previously reported, in the Fall of 2014 Governor Christie signed into law an alimony reform bill that substantially amended several provisions of the existing alimony statute, N.J.S.A. 2A:34-23. Among other changes to the law, there is now a rebuttable presumption that alimony terminates once an obligor spouse reaches full retirement age, i.e., 66 years old. N.J.S.A. 2A:34-23(j)(1). This means that in cases where a payor spouse retires and wishes to terminate alimony, the burden is on the recipient spouse to demonstrate that alimony should continue. Previously, it was the payor spouse’s burden to show a change in circumstances warranting a modification or termination of alimony. The statute also expressly provides that the amended law does not apply retroactively. In other words, the law applies only to alimony awards in divorces entered after the effective date of the new statute – September 10, 2014. Unfortunately, this language caused controversy and confusion among matrimonial practitioners, who argued over whether the rebuttal presumption of subsection (j)(1) applied to all matters – including those filed before the statute was amended. A recent reported decision addresses this precise issue.
In Landers v. Landers, the Appellate Division was asked to clarify the application of the newly-enacted amendments in cases where an obligor retires and seeks a termination of alimony. In the Landers case, the parties were divorced in 1991 – long before the alimony reform bill was passed. Defendant-husband was required under the Judgment of Divorce to pay alimony to his ex-spouse, which he faithfully paid for over 20 years. After retiring, the husband filed a motion to terminate alimony. The recipient-wife opposed the application and filed a cross-motion seeking continuation of alimony.
Ruling in favor of the husband, the trial court terminated alimony, finding the wife had failed to overcome the presumption under N.J.S.A. 2A:34-23(j)(1) that alimony terminates when a payor attains full retirement age. The wife appealed, arguing the recent statutory amendments did not affect the terms of their divorce judgment, which was entered before the effective date of the amended statute. The Appellate Division agreed, finding “the particular language used in subsection (j)(3) clarifies the Legislature’s intent to apply (j)(1) only to orders entered after the amendments’ effective date.” In reversing, the Court held:
Unlike other amended provisions of N.J.S.A. 2A:34–23, subsection (j) distinguishes alimony orders executed prior to the amendment’s effective date and those executed afterwards. See N.J.S.A. 2A:34–23(j)(1), (3). Therefore, this unambiguous legislative directive governs a court’s examination of alimony modification requests arising when an obligor retires, depending on the original date alimony is awarded. [. . .]
In sum, the Appellate Division found that based on the date of the parties’ Judgment of Divorce, the trial judge improperly followed the statutory provisions of N.J.S.A. 2A:34–23(j)(1), which incorrectly placed the burden of proof on the recipient-wife, rather than the husband, and also omitted the necessary analysis of important applicable factors.
The Landers decision provides important guidance to trial courts when examining requests to modify alimony in cases of retirement; the analysis all depends on the date alimony was originally awarded. Section (j)(1) applies in cases where alimony was awarded after September 2014. This section establishes a rebuttable presumption that alimony will terminate upon the obligor spouse reaching full retirement age, and places the burden on the recipient spouse to demonstrate why alimony should instead continue. Alimony orders that predate the 2014 amendments are governed by Section (j)(3), which contains a different standard and places the burden on the payor spouse to demonstrate that modification or termination of alimony is appropriate.
New Guidance on Parents’ Duty to Contribute Toward Child’s Car InsuranceMarch 9, 2016
For the parent of primary residence, child support rarely feels like enough funds to make ends meet and because of this there is often a battle over what expenses are covered by the payments. The New Jersey Court Rules outline categories that are covered including housing, food, clothing, and transportation with descriptions and exceptions for each but it is impossible to define all potential expenses that may arise in a child’s lifetime. When expenses are omitted from the Court Rules parents are left wondering and potentially litigating over whether a certain expense is included in child support or whether it requires an additional contribution. Thanks to a recent Chancery Division case there is now some guidance on the issue of car insurance when a teenager obtains his or her driver’s license.
In the case of Fichter v. Fichter, the Chancery Division ruled that “a court may in its discretion find good cause to deviate from the guidelines and require each parent to contribute additional reasonable and affordable monies towards a newly licensed teenage driver’s car insurance.” The court found that the contribution would fall outside the regular child support payment. The ruling is a clarification of the transportation category in the New Jersey Court Rules which states that the purchase price and expenses associated with a new vehicle for a teenage driver were not included in the guidelines. This exception to the guidelines was criticized in the Fichter opinion for its bias against families who cannot afford to purchase a new vehicle but must still pay the increase in auto insurance. The court found that it would be unfair to require families who do not purchase a new car to attempt to cover the increased auto insurance on child support alone.
Although the Fichter decision will give courts some direction on how to allocate the cost of car insurance for new unemancipated drivers, it does not close the door on future litigation. Rather than provide a bright line rule the allocation is within the discretion of the court and can be ordered upon a showing of good cause. The good cause referenced in the Fichter decision may be broad enough to cover most families as it includes the “special nature and importance of car insurance and the need to adequately protect a child as a newly licensed driver.” It will be interesting to see how judges and practitioners apply the Fichter decision to future cases and negotiations.
Over The River And Through The Woods, To A 'Complex Litigation Track' We GoFebruary 19, 2016
Recently, in a unanimous decision, the N.J. Supreme Court ruled that some grandparent visitation cases may warrant designation as “complex litigation” – requiring case management by trial courts and even lengthy discovery. To fully appreciate the potential impact of this decision, a basic understanding of laws governing grandparent visitation is helpful.
Sixteen years ago, our nation’s highest court overturned Washington State’s “breathtakingly broad” grandparent visitation statute in the case of Troxel v. Granville, 530 U.S. 57 (2000). The statute was struck down on the grounds that it unconstitutionally infringed upon fundamental rights of parental autonomy. In support of its decision, the U.S. Supreme Court held that a parent’s right to decide how his or her child will be raised is one of the oldest and most fundamental rights emanating from the liberty interest of the Due Process Clause. Therefore, a fit parent’s decision as to whether he or she wishes to permit third party visitation, including visitation with a child’s grandparents, must be protected and given great deference.
Following Troxel, the N.J. Supreme Court was asked to review our State’s grandparent visitation statute, N.J.S.A. 9:2-7.1, in the case of Moriarty v. Bradt, 177 N.J. 84(2003). In that case, after the death of one parent, the child’s grandparents successfully petitioned the Court for visitation (over the objection of the surviving parent). The defendant-parent appealed, arguing that N.J.S.A. 9:2-7.1 was unconstitutional because it allowed courts to order visitation with a grandparent over the objection of a parent, so long as the grandparent could show that the proposed visitation was “in the child’s best interest”. The Moriarty Court ultimately agreed, holding that the State could not constitutionally infringe on parental autonomy, absent a showing the child would suffer harm if deprived of contact with his or her grandparents. After Moriarty, the rule in New Jersey became that a petitioner must make a threshold showing that a denial of visitation will result in harm to the child before a best interest analysis may be undertaken under N.J.S.A. 9:2-7.1. In other words, parents have a fundamental right to decide whether they want their child visiting with his or her grandparents, and absent a showing of actual harm to the child – neither the court, nor an involved grandparent, are entitled to veto rights.
A procedural framework for grandparent visitation cases was later outlined by the Appellate Division in the case of R.K. v. D.L., 434 N.J. Super. 113 (2014). In R.K., the Court held that all grandparent visitation cases should be assigned to a particular judge for individual case management, and that judge should review the pleadings and determine whether active case management is needed. The Court also recommended that in any such case, the trial court should first conduct a fact-sensitive analysis applying the statutory factors in N.J.S.A. 9:2-7.1 to determine whether the grandparents have presented a prima facie case warranting the relief requested. Then, the Court should determine whether the grandparents have satisfied their burden of proving visitation is necessary to avoid harm to the child.
The recent N.J. Supreme Court decision of Major v. Maguire addressed the R.K. framework. There, Plaintiff-grandparents moved for an Order compelling visitation with their late son’s daughter under N.J.S.A. 9:2-7.1. At an initial hearing, Defendant-mother moved for dismissal of the complaint, arguing Plaintiffs had failed to establish a prima facie showing of harm to the child in the absence of visitation. The trial court agreed that Plaintiffs’ failed to make the necessary showing of harm in the complaint, but permitted Plaintiffs to supplement their pleadings with testimony. The Court did not, however, allow expert testimony on the issue of harm. The grandparents later offered testimony expressing their view that the child would suffer harm if deprived of a continued relationship with her grandparents. Notwithstanding the additional testimony, the Court found the complaint failed to demonstrate a particularized harm to the child in the absence of grandparent visitation and dismissed the application. The Appellate Division reversed, invoking the procedural guidelines set forth in R.K. and concluding that the trial court’s approach was inconsistent with governing statutory and case law. The panel remanded the matter to the trial court with directions to re-examine the complaint under R.K.
The Supreme Court was asked to review the case and ultimately agreed with the Appellate Division, holding that the trial court erred when it dismissed Plaintiffs’ complaint. The Court found the pleadings satisfied the requirements of Moriarty for a prima facie showing of harm to the child because: (1) Plaintiffs demonstrated their granddaughter enjoyed a close relationship with her father, who shared custody with her mother, and contended that his death caused a major trauma in the child’s life; and (2) Plaintiffs presented evidence that they had maintained a close bond with their granddaughter prior to her father’s death and assumed significant responsibility for her care during her father’s parenting time. Based on these allegations, the Court found Plaintiffs established a prima facie showing of harm to the child at the pleading stage, as required by Moriarty, and the trial court should have denied defendant’s motion to dismiss. The Court also found that Plaintiffs should have been given the opportunity to satisfy their burden of proving harm by permitting the matter to proceed beyond the pleading stage and managing the case as a complex matter.
Although it’s still too soon to tell, Major v. Maguire may change the landscape of grandparent visitation cases in this State. Complaints filed under N.J.S.A. 9:2-7.1 are generally handled under the inundated FD (non-dissolution) docket, where most cases get much less attention and are treated as summary proceedings without the benefit of discovery. Now, courts may be more hesitant to dismiss grandparent visitation cases in their usual swift manner, and may even insist on providing petitioners with a greater opportunity to satisfy their initial burden. At the very least, the Supreme Court has given courts and litigants a clearer roadmap as to how these cases should be litigated going forward. However, these expanded procedural principles will inevitably lead to an increase in attorney involvement in these types of cases.
Does a Change in Minimum Wage Equate to a Change in Circumstances?February 9, 2016
There has been a movement throughout the country to raise minimum wage and New Jersey joined the discussion on February 3, 2016 when Assembly Speaker Vincent Prieto and Assemblyman John Wisniewski announced their plan to introduce a bill seeking to raise the state’s minimum wage to $15 per hour. If passed, an increase to minimum wage could have significant effects on alimony and child support calculations across the state.
In calculating child support and alimony, judges are given the discretion to impute income when either parent is voluntarily underemployed or unemployed. In these cases, the court can look at the individual’s salary history, estimate his or her earning ability based on the New Jersey Department of Labor Statistics, or impute an amount equal to full time employment at minimum wage. In the 2015 version of the New Jersey Court Rules, minimum wage was set at $8.25 per hour for 40 hours per week or $17,160 per year. If the minimum wage is raised to $15 per hour, the annual wage will rise to $31,200, almost double the previous imputation.
While the bill would affect future alimony and child support calculations, it also raises the question as to whether it would trigger a change in circumstance argument for previous support awards that were based on the old minimum wage. Recipients of support based on imputation may have an argument to return to court and impute the payor’s income at $31,200 in order to receive an increase in their alimony or child support. Although speculation suggests that the bill is unlikely to pass, any raise in minimum wage can affect support calculations based on imputed income and should be considered when calculating awards.
Important Changes to Child Support and Emancipation in New JerseyFebruary 8, 2016
The State of New Jersey continues to look for ways to streamline the financial aspects of matrimonial cases with the recent supplement to the statute on child support, which was signed into law by Governor Christie on January 19, 2016. The new child support statute hopes to resolve issues that previously plagued cases when children reached the age of emancipation, but will likely cause confusion and litigation when it goes into effect on February 1, 2017.
The most significant change under the new statute is that child support can terminate without a court order when a child turns 19. It then becomes the recipient’s obligation to demonstrate that child support should continue, either because the child is still in high school or pursuing a post-secondary education (such as college), or has a physical or mental disability. Previously, the burden was on the paying parent to petition the court for an Order emancipating their child. Now, this process can happen automatically.
To effectuate the new procedure, the statute calls for notices to be sent to parents who pay and receive child support through Probation. Probation must provide two notices to parents advising them that the child support will terminate. The first notice must be sent 180 days prior to the child’s 19th birthday and the second must be sent 90 days later. If child support is not paid through Probation (meaning, one parent pays the other directly) there will be no notice, and if there is no property settlement agreement or governing order, the payor can automatically stop paying. In that case, the recipient would need to show cause why child support should resume.
In addition to the automatic termination of child support, the new statute also states that child support will not continue after a child turns 23 years old. Under existing case law, there was no “cut off” point for child support. Though, this particular clause does not demonstrate a significant shift in the law because many settlement agreements include a final age when child support will terminate. Additionally, most parents consider the child’s 23rd birthday as an end date for support, based on the presumption that their child will have graduated from college by then and established some level financial independence.
There are several issues with the new statute that will likely occur in a year when parents begin to be affected by the changes. First, parents who do not pay or receive child support through Probation may have little notice of the changes. This will be detrimental to the paying parent, who may continue to make payments without knowledge of his or her right to stop, as well as the recipient, who may be confused and frustrated when the other parent suddenly stops making payments. Second, the statute will have little to no change for parents with multiple children under the age of 19, as any modification of child support after one child’s emancipation will require consent or court involvement. Third, the statute as originally drafted allowed a child to bring a claim on their own behalf for child support to continue beyond the age of 19. But since that language was removed, only a custodial parent can petition for continued child support. Although it is rare for children to have to move for child support, the statute now expressly prevents it.
As the statute goes into implementation in February of 2017, we will likely see other issues arise and gain more insight as courts make decisions based on the changes. In the meantime, parents have one year to educate themselves on the law and determine how the changes will affect their families. Please contact our family law department if you have further questions about the statute and how it may affect your child support award or payments.
The Appellate Division “Contempt-plates” Due Process in Family CourtsNovember 16, 2015
On November 9, 2015, the Appellate Division in Ippolito v. Ippolito considered whether it was improper for a family judge to have presided over a summary contempt proceeding that he himself initiated. The Order in question was analyzed under R. 1:10-2 (although not properly captioned as such by the trial court). This rule requires contempt proceedings “not be heard by the judge who instituted the prosecution if the appearance of objectivity requires trial by another judge”.
The events that gave rise to this appeal are – unfortunately – all too familiar to family law practitioners. Plaintiff’s counsel wrote a letter to the Court alleging that Defendant-husband had violated the terms of a February 20, 2014 Order which prohibited him from “threatening or intimidating any expert” in the parties’ divorce matter. The Court did not afford Defendant an opportunity to explain or respond to the allegations contained in counsel’s letter, but instead issued an Order requiring Defendant to show cause as to why he should not be held in contempt for his failure to comply with the Court’s prior Orders in this regard. The Appellate Division noted that this “sudden leap from a complaining letter of matrimonial counsel to the commencement of summary contempt proceedings might alone suggest the appearance of objectivity had been lost.” But the events that followed made it even more readily apparent.
It is important to note that because a R. 1:10-2 contempt proceeding constitutes a charge of criminal conduct, Defendant should have been entitled to most of the safeguards afforded to criminal defendants. However, at the contempt hearing, the judge required Defendant to testify first, and made clear that Defendant “was there to explain his conduct” and to respond to the unsworn allegations in counsel’s letter that led to the contempt proceeding. What’s more, the judge did not call any other witnesses to testify – not even the expert who was allegedly threatened/intimidated by Defendant. The Appellate Division found that in doing so, the trial judge effectively created a new burden of proof and deprived Defendant of “the presumption of innocence, the privilege against self-incrimination, the right of cross-examination, proof of guilt beyond a reasonable doubt, and the admissibility of evidence in accordance with the rules of evidence.” Ultimately the Appellate Division held that the “appearance of objectivity” unquestionably required trial by another judge in this case. The Order under review was vacated and the matter was remanded to the assignment judge for the designation of another judge to preside over the summary contempt proceeding.
Perhaps most significant to family law practitioners was Plaintiff’s unsuccessful argument that “what occurred was not actually a summary contempt proceeding, but rather a proceeding of the type permitted under R. 1:10-3” – a mechanism routinely utilized by matrimonial attorneys for the vindication of litigant’s rights. The Court outright rejected this argument, finding that the trial court demonstrated “a clear understanding of the difference between the proceedings permitted by R. 1:10-2 and those authorized by R. 1:10-3.”
It appears the lines have been blurred, among both bench and bar, between R. 1:10-2 and R. 1:10-3. Family law practitioners should read this decision and carefully review both of these rules. This will help ensure the relief sought in future R. 1:10-3 enforcement motions is appropriate, and that family court judges do not exceed the scope of the proceedings permitted under R. 1:10-3 when disposing of such motions.
Gnall v. GnallAugust 11, 2015
Recently the New Jersey Supreme Court issued the opinion, Gnall v. Gnall, deciding whether a fifteen year marriage constitutes a marriage of long duration thus requiring permanent alimony. Family law practitioners were waiting for the outcome of Gnall to determine whether the recent amendments to the alimony statute would apply to pending cases filed prior to the amendment. Under the amendment to New Jersey’s alimony statute, permanent alimony was completely removed from our lexicon. Rather, under the law, trial courts are permitted to award open durational alimony for those marriages that last longer than 20 years (or in the case of exceptional circumstances in marriages that are shorter).
While the decision could have opined as to the application of the new alimony statute to pending cases (as discussed in prior blogs), the Supreme Court dismissed this issue in a footnote by simply stating that the new alimony law was not applicable to Gnall. By demoting this issue to a footnote, the Court failed to guide attorneys as to why the amendment is not applicable to the Gnall case. Thereafter, the Court dedicated its decision to analyzing and establishing the standard that lower courts should adopt when determining whether to award permanent alimony over limited duration alimony. In light of the new alimony statute, this decision was seemingly obsolete before it was issued.
So what do we learn from Gnall? The Supreme Court made it clear that the length of the marriage factor contained in the prior alimony law cannot be improperly weighed over the other factors when deciding to award limited duration alimony over permanent alimony. Perhaps the Court is subtly providing practitioners with guidance for an argument when addressing future awards of alimony including whether exceptional circumstances exist in cases where the marriage lasted less than 20 years. While the Court explicitly rejected bright line rules, it will be interesting to see whether the Gnall decision will prove useful for future cases under the amendment or if courts will defer to the statute when analyzing the length of the marriage and the award of open durational alimony.
"See You in September": Parenting Time and the Battle for Summer VacationJune 30, 2015
In a recent New Jersey trial court decision, the court grappled with the familiar debate of whether a parent may take a child on vacation out of the country over the other parent’s objection. The facts of Lyle v. Lyle are similar to many cases where divorced parents cannot agree on their child’s summer vacation plans. In Lyle, the mother wanted to take her son to the Netherlands for the entire summer to visit with the maternal grandparents. On the other hand, the father categorically disagreed with the vacation plans. The court found that both parents were unreasonable in their positions. The mother wanted to monopolize the full vacation time while the father wanted to prevent any travel with the mother. The court reached a compromise, allowing the son to visit the Netherlands for two weeks thus permitting the father to exercise vacation time with the son as well.
The facts of Lyle could be transposed with many other divorced families where neither parent can agree on how they want their child to spend vacation time. Lyle is unique in the sense that the travel requires a passport, a fact which the trial court also addresses, but it could otherwise be any two parents disagreeing on the amount of time and location of a vacation. The importance of Lyle is the emphasis on the child’s enjoyment of the summer. The court recognized that “for a great many kids, some of the most positive and happy memories they have are of family vacations and travels with each parent.” Unfortunately, as the court also discusses, parents can lose sight of the positive aspect of vacation and spend time and money fighting the other parent’s decision to travel with the child.
As we near the 4th of July holiday, the court in Lyle encourages parents to put aside their differences and ensure a safe and enjoyable vacation for their children. While this is not always easy in contentious cases, the memories children make on the trips is worth a brief ceasefire.
Careful What You Post: Supreme Court Rules on Threats Made Through FacebookJune 3, 2015
Recently, the United States Supreme Court considered whether violent language on an individual’s Facebook page constituted a threat. Anthony Douglas Elonis posted lyrics under the pseudonym “Tone Dougie” including violent statements regarding his wife who recently left him. Mr. Elonis’s wife subsequently filed a restraining order after viewing the statements. The case made its way to the Supreme Court after Mr. Elonis’s employer informed the FBI regarding the posts and he was charged and convicted with communicating a threat under 18 U.S.C. §875(c). Under §875(c) it is a felony to transmit “in interstate or foreign commerce any communication containing any threat to . . . injure the person of another.”
While the Supreme Court focused on whether the trial court provided adequate jury instructions as to mental state, the case raises issues in the context of a divorce, separation, or domestic violence proceeding. Frequently individuals use social media to express their opinions and feelings with the belief that their statements are protected under the First Amendment. Even Mr. Elonis thought he protected himself from liability by including disclaimers and statements that his lyrics were fictitious. The Supreme Court found that for the purpose of §875(c) whether a reasonable person receiving the message viewed it as a threat did not matter, rather, conviction requires a showing that the individual purposefully issued a threat and knew the statement would be viewed as a threat. The Supreme Court’s ruling did not address exactly what mental state is required for conviction. Therefore, individuals, especially those with potential divorce, custody, or domestic violence proceedings should proceed with caution when posting on social media. There may also be State laws that would make similar activities criminal or actionable.
Although the Supreme Court reversed and remanded the conviction against Mr. Elonis based on the inaccurate jury charge, this should not provide any comfort to the individual who continues to use the internet as a forum for venting. Justice Alito’s concurring and dissenting opinion summarized the issue best when he wrote that “the fact that making a threat may have a therapeutic or cathartic effect for the speaker is not sufficient to justify constitutional protection.” Furthermore, the Supreme Court failed to rule on what mental state is required to constitute a threat. This leaves the door open for courts to determine whether the angry spouse’s statement is a venting exercise or rises to a criminal act. Maybe it is best to adhere to the idiom, “keep your opinions to yourself.”
Credit Damage in DivorceOctober 15, 2014
Divorcing couples probably already realize how intermingled their assets and finances are, but they may not think about their credit. A party’s credit report can be significantly affected by their spouse’s actions depending on whose name the debt is in. For example, if the family has a joint credit card with one party as the primary user and the other as an authorized user, both parties’ credit scores may be harmed if one individual fails to timely pay the bill or if their spending exceeds the credit limit.
Some attorneys and experts argue that the innocent spouse, whose credit is harmed by their partner’s actions, should be compensated. Credit damage or credit reputation harm can have far reaching effects on the victim including increased fees and costs, higher interest rates, and the inability to qualify for loans or financing. Although difficult to quantify, these negative effects may add up to considerable financial harm.
Currently, there are few legal remedies for a spouse whose credit is harmed in connection with their divorce. The best solution, although only preventative, is to require both parties to pay off or refinance all marital debt upon the conclusion of the divorce. This prevents either party from taking actions that harms the other party’s credit. If credit damage is a concern it is also helpful for a party to obtain a credit report at the outset of the case and at the conclusion for comparison purposes. Maneuvering the financial hurdles in divorce are complicated and often issues, such as credit scores, arise when least expected. If you are concerned about your credit or finances being affected by divorce it is important to get legal advice right away. Brach Eichler’s family law attorneys are experienced in issues related to credit and finances during divorce and may also recommend financial professionals that can be helpful in navigating difficult financial issues if necessary.
Who Decides on Pre-School: A Case of First Impression in New JerseyOctober 10, 2014
In a case of first impression in New Jersey, the trial court in Madison v. Davis outlined a seven point analysis for parents and courts to follow when determining where a child should attend pre-school. The case examined an all too common battle between parents who share joint legal custody with one parent serving as the primary residential custodian. Prior case law held that parents with joint custody have equal rights in making decisions regarding education but that the custodial parent has the right to determine child care or day-care. The case law prior to Madison failed to address pre-school, a program that is generally a blend of both day-care and education and often functions as both.
The court in Madison created a mechanism for determining where a child should attend pre-school with the hope that the approach would limit potential disagreements between parents who share joint legal custody and require pre-school as a form of work related child care. The seven point analysis is as follows:
The primary residential custodian has the right to select the pre-school or to transfer the child to a newly selected pre-school.
However, the residential custodian’s authority is limited in that the selection must be reasonable, taking into consideration factors such as location, hours of operation, curriculum, cost, etc.
Barring any orders to the contrary, the residential custodian must alert the non-custodial parent as to the pre-school selection or transfer.
The non-custodial parent then has a right to investigate the proposed pre-school. If the non-custodial parent objects to the school they may file a motion but they carry the burden of proof to convince the court that the pre-school selection is unreasonable and contrary to the child’s best interests.
Further, the non-custodial parent must show that there is an alternative more reasonable plan than that offered by the custodial parent.
The court must then make a determination as to the reasonableness of the pre-school selection and has the power to enforce the selection or override it.
Lastly, the court has the power to award counsel fees or order sanctions based on either party’s bad faith or unreasonableness.
In summary, although the primary residential custodian has the authority to select pre-school for the child, it comes with the caveat that it must be reasonable and may be subjected to a court’s review. Despite the fact that “reasonableness” is defined in the court’s decision, the selection of a pre-school is extremely fact sensitive, not only varying from family to family but also among children in each family.
In addition to addressing the selection of pre-school, the Madison decision also addressed whether the right to parenting time takes precedence over a child’s attendance at pre-school. For example, if a non-custodial parent has a work schedule which allows them to spend time with their child during the day, under Madison, this additional parenting time takes priority over pre-school unless there is a special event scheduled for that particular day. The non-custodial parent must provide advance notice to both the primary residential custodian and the school and the decision requires that the request be reasonable, but does not define what constitutes reasonable. As with the rest of the court’s decision, the precedence of parenting time over school attendance only applies to pre-school as once the children begins kindergarten the child’s uninterrupted school attendance becomes a priority.
While the Madison decision provides a rubric as to the procedure for selecting pre-school, it in no way limits disagreements and litigation between parents who cannot agree on the selection. As the decision comes from the Superior Court, it will be interesting to see its interpretation in future decisions both on the trial court level and above.
Alimony Amendment Signed by GovernorSeptember 22, 2014
New Jersey has joined states across the county and amended its alimony statute with Governor Christie signing the bill into law on September 10, 2014. New Jersey's amendment is part of a growing trend to modify alimony laws to reflect changes in how families and marriages operate. As more families consist of two working parents as opposed to one parent staying home to raise the children, laws are also changing with the times. States are moving away from the concept of permanent alimony and recognizing the need to cease or modify alimony upon retirement. Some sates, such as Massachusetts, have modified their alimony laws to create a more formulaic approach to the alimony calculation by focusing on the length of the marriage and the income of the parties. New Jersey's amendment fell short from making such a strict modification.
The current amendment went into effect immediately. However, if you currently have an alimony order in place, the new amendments will generally have little or no impact on you. However for anyone who has an alimony award decided after these new laws go into effect the amendments will apply. The changes represent a compromise between the alimony reform movement and the need for some flexibility in determining alimony awards. For example, the amendment eliminates the term "permanent alimony" replacing it with "open durational alimony" which now can only be utilized in marriages lasting 20 years, unless there are exceptional circumstances. This particular modification while on its face appears to present an opportunity to limit the duration of alimony awards for long term marriages; it is likely to lead to litigation over the meaning of open duration and whether exceptional circumstances should apply. Since the statutory amendments have yet to be tested in courts, law will certainly develop further defining these terms. On the other hand there may be a significant impact on alimony awards going forward for older couples. The amendment creates a presumption that alimony will terminate upon the payor reaching retirement age, which at present depending on when you were born, is 67 years of age. This new retirement provision should streamline the process of terminating or modifying alimony that previously required costly motions or even hearings. The presumption can be challenged in court and again could lead to litigation over whether there are circumstances present to overcome the presumption. Importantly, the amendment simplifies the process of terminating or modifying alimony when the payor becomes unemployed or when the payee beings cohabitating with another individual. Under prior case law, both proceedings placed significant burdens on the party seeking the modification to cease or decrease alimony. Although untested, the new law strives to create and efficient standard, assisting judges on otherwise complex and fact specific issues. Current, Brach Eichler's family law department is representing a number of clients and cases where these issues will be at the forefront of negotiations, mediations and trials. Certainly, we will gain first-hand expertise and insight into this reform and how it will impact our clients.
How New Alimony Statute will Effect Millennials and Generation XSeptember 19, 2014
The alimony reform movement aligns with the changes in family dynamics in Millennials and Generation X. Couples are entering marriage later in life after completing secondary education and beginning their careers. The new alimony laws reflect these changes and recognize that upon divorce, the spouses are not necessarily on unequal ground with regard to earning capabilities. The notion that one partner requires support for life is becoming antiquated in generations where women outnumber men and colleges and universities. That being said, some new laws contain a formulaic approach to the alimony calculation, which removes a courts ability to analyze the unique circumstances of each family to determine fair and equitable awards. The extent to which the new law will affect future alimony awards is unknown, but they will certainly require skilled counsel to assist clients in understanding the changes and how they might be applicable to their particular case. The new law has implications for younger adults that are marrying and may now require planning at the outset with the use of premarital agreements and other mechanisms to ensure ongoing support in the event of divorce. Brach Eichler's family law department stands poised to assist anyone dealing with a matrimonial controversy or is planning to marry and can assist with questions and concerns involving how these sweeping new changes may affect them.
How to Protect Assets with New Alimony StatuteSeptember 16, 2014
With the growing trend to modify alimony laws, partners who live in a marriage where the other party earns substantially more may need greater protection through prenuptial agreements. There is no longer a guarantee that the supported spouse will be supported for life, and upon divorce they may be surprised to learn just how short in duration their alimony may be. While a prenuptial agreement provides some protection, at the end of the marriage the supported spouse may need to consider relief such as a higher share of equitable distribution, a portion of the retirement accounts, and rehabilitative alimony to cover education and job training. This may put greater importance on seeking rehabilitative alimony for the supported spouse. Rehabilitative alimony is awarded based upon a plan in which the payee shows the scope of rehabilitation, the steps to be taken, and the time frame, including a period of employment during which rehabilitation will occur. The payee may also seek reimbursement alimony, which may be awarded under circumstances in which one party supported the other through an advanced education. Although the amendments appear to have made it easier for the payor spouse to retire and stop or modify his or her alimony payment, the payor must also consider protecting assets to ensure their stability upon retirement. With the reform there will be new challenges for divorcing couples depending on whether they are the paying spouse of the supported spouse. The extent to which the new law will affect future alimony awards is unknown, but they will certainly require skilled counsel to assist clients in understanding the changes and how they might be applicable to their particular case. Brach Eichler's family law department stands poised to assist anyone dealing with a matrimonial controversy or is planning to marry and can assist with questions and concerns involving how these sweeping changes may affect them.
New Alimony Statute SummarySeptember 11, 2014
On September 10th, Governor Christie signed a bill into law that has made significant changes on how alimony is awarded in New Jersey. The amendment follows a growing trend across the country to modify alimony laws to reflect changes in how families and marriages operate. Although the amendment made considerable changes to the prior law, of most importance is the removal of permanent alimony as an option for courts and makes modifications to the requirements for decreasing or terminating alimony upon retirement, job loss, or when a former spouse cohabitates with another adult. The following is a quick summary of the important changes:
The statute removes the term "permanent alimony" replacing it with "open durational alimony." Although this modification does not make any changes to the actual duration of a current alimony award, the alimony statute now includes provisions that alimony will not last longer than the duration of the marriage in marriages that lasted twenty years or less. For longer term marriages over 20 years, Court's still have discretion to decide the duration of the alimony.
Unlike prior case law, the statute includes a presumption that the payor's obligation to pay alimony will terminate upon reaching retirement age as defined under the Social Security Act, currently 67, if the payor was born after 1959. This provision lifts a significant burden that previously required costly motions and hearings.
The statute now includes standards for modifying or terminating alimony upon unemployment. The amendment breaks down the standard for those who are self-employed and not self-employed.
Lastly, there is now a standard for terminating alimony when the supported spouse begins cohabitating. Similar to retirement and unemployment, this modification simplifies a process that was previously overly burdensome.
Unfortunately, the amendments do not affect existing alimony orders or awards, but will certainly affect pending cases and cases filed in the future. Brach Eichler's family law department stands poised to assist anyone dealing with a matrimonial controversy and can assist with questions and concerns involving these sweeping new changes.
Going Through a Divorce is Protected Under the Law Against DiscriminationJuly 23, 2014
The New Jersey Appellate Division recently held for the first time in Smith v. Millville Rescue Squad, --- A.3d --- (2014), that the “marital status” protection under the New Jersey Law Against Discrimination (LAD) extends to persons who are in the process of getting divorced. In Smith, a married couple worked for the same employer for several years. They began the divorce process after the husband was discovered having an extramarital affair with another employee. The employer’s executive director told the husband that he did not want an “ugly divorce” in the workplace and subsequently terminated the husband (but not the wife), purportedly for performance-related issues. The Court ruled that the employer improperly relied upon stereotypes of divorcing persons, namely that they cannot be civil and cooperative in the workplace. The takeaway from Smith is that the broad interpretation of the scope of “marital status,” which is not a defined term in the LAD, now covers discrimination against about to be divorced persons.
Compromise Bill Amending New Jersey’s Alimony Laws Proceeds to GovernorJuly 1, 2014
In an update to our earlier blog posts tracking the efforts underway in the New Jersey State Legislature seeking to amend New Jersey’s alimony laws, the New Jersey Legislature approved a combined compromised Bill that will modify New Jersey’s existing alimony statute imposing limits for alimony awards and modified the factors to be considered by the Court when awarding alimony.
The amended bill eliminates the phrase “permanent alimony,” from New Jersey’s statutes and establishes the term “open durational alimony.” The amended bill likewise establishes durational limits on alimony for any marriage of less than 20 years in length. For these marriages, barring exceptional circumstances, the length of any alimony award shall not exceed the length of the marriage.
Under the amended bill submitted to the Governor’s office, the Court must now consider the impact of both parties’ need for separate residences and the ability for both parties to maintain a standard of living reasonably comparable to the standard of living established in the marriage, “with neither party having a greater entitlement to that standard of living than the other.”
The amended bill likewise enumerates specific grounds for the modification and termination of alimony when the obligor retires, loses a job or otherwise faces a reduction in earnings, or when the obligee enters into a cohabitation relationship with a third party. Under the substitute legislation, there would now be a rebuttable presumption that alimony shall terminate upon the obligor reaching full retirement age, as defined by the federal Social Security Act. Furthermore, when a non-self employed obligor is terminated from his employment, the amended bill provides the Court with the power to modify an award of alimony, directing the Court to consider the circumstances surround obligor’s loss of employment and its impact upon both parties to the marriage.
Finally, the amended bill provides the Court with the power to suspend or terminate alimony if the payee cohabitates with another person. To establish a finding of cohabitation, the amended bill directs the Court to consider factors, such as (1) the frequency of contact between the oblige and the third party, (2) whether the obligee’s finances have become intertwined with that third party and shares responsibility for living expenses and chores and (3) the recognition of the relationship in the couple’s social and family circle. Notably, the fact that the supported spouse does not live together with another person is not, in itself, grounds to find that cohabitation does not exist.
The amended bill, which passed both the State Assembly and the State Senate, now heads to the Governor’s desk for signature. Stay tuned for further developments.
New Jersey Supreme Court Hears Argument on Palimony ClaimMay 5, 2014
Today, the New Jersey Supreme Court held oral argument in Maeker v. Ross, the test case for the 2010 amendments to the Statute of Frauds governing "palimony", which is a form of support arising out of contractual obligations between adults who were never married. Originating over thirty years ago in Kozlowski, palimony has been recognized in New Jersey. However, since that time, palimony has received significant criticism especially after the Supreme Court recently held that cohabitation was not essential for a palimony claim.
In response to this palimony backlash, the New Jersey legislature amended the Statute of Frauds to state that any agreement to support an individual in a non-marital relationship must be in writing and both parties must have independent legal advice in order for the agreement to be enforceable. N.J.S.A. 25:1-5(h). The Amendment was adopted on January 18, 2010, but it did not make clear if it would apply retroactively to oral agreements made prior to that date.
Maeker is the first case to test this issue before the New Jersey Supreme Court. In Maeker, the parties allegedly entered into an oral agreement whereby one party promised to support the other for life. The oral agreement was entered into prior to January 18, 2010 but was allegedly breached after the Amendment was adopted in July 2011.
Although we will have to wait for a final decision, the arguments and inquiries from the Court suggested a prospective application, meaning parties with oral agreements originating prior to 2010 may still have recognizable palimony claims. The Court expressed concern regarding the Amendment's usefulness if it can be circumscribed by equitable remedies such as partial performance, but also expressed reservation about applying the law retroactively and the potential constitutional ramifications of invalidating oral agreements created prior to the Amendment. The final decision may be months away, but individuals currently living under oral agreements may face risk if they are currently operating under an oral agreement or if they did not retain counsel to draft the agreement.
Agreement Provision Linking Spousal Support Payment to Children's Education Invalidates Alimony DeductionApril 17, 2014
April 14th is a tough day for most Americans as we rush to complete our taxes, but it was especially difficult for Allen H. Johnson because the Tax Court ruled that his alimony payments were not deductable because under the Tax Code they constitute child support.
Like most divorced spouses who pay alimony to their ex-partner, Mr. Johnson deducted his alimony payments on his tax return and his ex-wife included the payments as gross income on hers. Under the Tax Code, a payment is alimony if made in cash and:
- The payment is received by a spouse under a divorce or separation instrument;
- The divorce or separation instrument does not state that the payment is neither includible in gross income nor allowable as a deduction;
- The payor and payee spouses are not members of the same household when the payment is made; and
- The payment obligation terminates at the death of the payee spouse and there is no liability to make either a cash or a property payment as a substitute for the payment after the death of the payee spouse.
Johnson v. Comm'r, T.C. Memo. 2014-67.
Mr. Johnson's separation agreement with his ex-wife complied with the Tax Code requirements for alimony, except it failed to take into account the definition of child support under the Code. Under I.R.C. § 71(c)(2) support subject to "contingencies involving [a] child" are considered child support. The spousal support for Mr. Johnson's ex-wife would terminate upon the occurrence of several events, one being their youngest child's graduation from high school. This contingency qualified all spousal support as child support under the tax code despite the fact that Mr. Johnson was paying separate child support. The Tax Court held that the intent of the parties does not apply, only the specific requirements of section 71.
Many settlement agreements include language detailing when alimony will terminate, and often the termination date centers around events involving the children. Although the parties may intend the date to be used merely as a reference, or are factoring in the payee's ability to return to work after the children reach a certain age, the IRS will not take these factors into account for tax purposes. It is important that parties understand the tax implications of their settlement agreements because the consequences can have far reaching effects.
Child's Right to SupportApril 7, 2014
News headlines across the country took sides over a New Jersey Superior Court case where 18 year-old Rachel Canning sued her parents over their failure to pay her high school tuition, child support, and college tuition. This would be a run of the mill case except for one fact; the family is still intact with both parents married.
The Canning case raises an interesting question regarding the right of the child to support. In New Jersey courts have the power to order divorced parents to pay child support and college costs for their children. The applicable case law requires a fact sensitive investigation to determine whether divorced parents are required to contribute to their child’s college education under the Newburgh v. Arrigo case. Although the child is most likely over the age of 18, the parents may still have a duty to provide support until emancipation, a determination that is not solely based on age. Up until the Canning case, the law has only been applied to children of divorced parents, essentially creating the argument that children of divorced parents have more rights than children of intact parents.
Rachel Canning recently dismissed her case after she moved back home with her parents, however the discussion of a child’s right to support during college will certainly continue. On March 24th, the New Jersey Senate Judiciary Committee approved a bill that would terminate child support once the child turns 19. Although a parent may petition for support to continue beyond the age of 19, the bill places that burden on the person receiving the funds, instead of on the person responsible for paying the support. As with previous cases, the bill makes no distinction between children of intact families and children of divorced families.
While much of the state has already made up their mind on the Rachel Canning case, the law is still unclear. Because the case was dismissed, we still do not know whether a judge would be willing to order child support for a child of an intact family, however as the law stands, if the child is not emancipated, the judge may have no other choice. Children, no matter what their family dynamic, have a right to support under the current laws. Therefore, it should make no difference whether the parents are married, separated, or divorced.
Parenting Time with a "Flawed" ParentMarch 17, 2014
New Jersey has long upheld the best interest of the child standard when determining custody and parenting time. In the recent Appellate Court decision, S.M. v. K.M., the court held that parenting time with a father accused of the criminal charge of child endangerment must be analyzed under the best interest standard. The court emphasized the importance of a child spending time with both parents, even if they are a "flawed" parent.
In S.M. v. K.M. the father, Steve, was eventually convicted of second-degree endangering the welfare of a child among other charges after held a BB gun to his son's head. While the criminal charges were pending, Steve filed a motion in family court for parenting time with his minor children. Without any oral argument on the motion, the family court judge denied Steve's request for parenting time, despite the fact that Steve had not seen his children in a year and a half. The Appellate Court remanded the case to the family court to determine whether Steve could be given supervised therapeutic visitation and whether this was in the best interests of his children.
The case of S.M. v. K.M. stresses the importance of children spending time with both parents, and that denying a child access to a parent for an extended period of time can cause significant harm to the child. The best interest standard allows a court to conduct a factually sensitive investigation and balance any risk of harm against the known harm to a child when they are unable to maintain a relationship with a parent. The court can award various forms of parenting time, including supervised parenting time or visitation only in public areas if the court suspects any danger to the child if alone with the parent.
Johnson v. BradshawMarch 14, 2014
Child support statutes and regulations vary from state to state but the Uniform Interstate Family Support Act ("UIFSA") unifies all states on enforcement. In a recent Superior Court decision the court looked at how to apply UIFSA when dealing with a temporary child support award when all parties no longer live in New Jersey.
The case, Johnson v. Bradshaw, involves the football player Ahmad Rashad Bradshaw who in 2011 was playing for the New York Giants and living in New Jersey. Bradshaw and Johnson had a child together who was born in Virginia. The child and Johnson never lived in New Jersey but Johnson brought an action for child support in the state. A temporary support award was entered with the intention that the parties would return for a full hearing after obtaining all necessary financial discovery. However, the parties did not return and Bradshaw left the New York Giants and moved to Virginia. Bradshaw then filed a motion to dismiss the complaint for lack of jurisdiction. In a case of first impression, the Superior Court ruled that although the court had power to enforce the child support award under UIFSA, now that all parties lived outside the state of New Jersey the Court could not modify the child support award even though it was temporary.
In many families after divorce or separation, one or both parents may move out of the state. If none of the parties or children remain in the state of New Jersey, New Jersey no longer has jurisdiction to modify the child support award. Even temporary awards cannot be modified because they too are considered child support and are covered under the same definition as permanent awards. Because each state has different statutes regarding procedures and standards for modification UIFSA may have a significant affect on a parent's ability to modify child support. What may constitute grounds for modification in New Jersey may no longer apply in another state.
How Do You Divide a Pension Upon Divorce?December 30, 2013
For many families, their 401(k) or pension is the largest asset after the marital home. When determining how to divide the asset upon divorce, it is especially important to understand the different methods of valuation. In New Jersey, there are three accepted methods for valuing a defined-benefit pension plan.
Present-Value Offset Distribution
Under this method, the pension is valued as of the date of complaint, as if the pensioner-spouse terminated participation in the plan as of that date. The non-pensioner spouse receives the present value, offset against the value of another asset. Often this method is used when the parties agree that one will receive the marital home with the other receiving the pension.
When using deferred-distribution a court must first calculate what is called the coverture fraction. The coverture fraction is the percentage of the pension that is subject to equitable distribution based on the length of the marriage. For example, if the pensioned spouse was a member of the pension for ten years, but was only married for five of those years the coverture fraction would be 5/10 and only 50% of the pension would be subject to equitable distribution.
Once the coverture fraction is determined, the parties must obtain a Qualified Domestic Relations Order (“QDRO”) to distribute the non-pensioner spouse’s share upon retirement of the pensioner spouse. It is important to know that under this method the parties are dividing a benefit that is contingent upon the pensioned spouse reaching retirement age. Additionally, both parties must pay their respective tax consequences.
This last method is a hybrid of the deferred-distribution, where the non-pension spouse receives the current value of any non-contingent portion of the pension as well as their share of the deferred-distribution if/when the pensioned spouse retires.
A recent unpublished New Jersey Appellate Court decision, Tominus v. Tominus, No. A-0202-12T1, 2013 WL 5658460 (N.J. App. Ct. Oct. 18, 2013), held that courts must consider each of the possible distribution methodologies. A court may only deviate from one of the three methods after making appropriate findings of fact. The decision is a reminder of how complex pension division can be and just how important it is to complete it in the most equitable way possible.
Litigation Privilege – Protecting Advocacy in Family CourtDecember 27, 2013
The litigation privilege is a historical protection created to provide immunity to an attorney for particular civil liabilities incurred during the course of a case. The purpose of the privilege is to encourage zealous advocacy; allowing the attorney to make their case with the knowledge that they will not later be sued for defamation. The litigation privilege is especially imperative in family law cases where attorneys are required to defend their client’s right to the things most important and personal in their life.
Recently, in a Connecticut Supreme Court Case, Simms v. Seaman, the protection was expanded to include claims of fraud, when an attorney was given immunity after allegedly concealing his client’s financial information in a divorce proceeding. Importantly, the court analogized fraud to that of defamation. Even though the family court ruled that the ex-wife’s attorneys improperly concealed information regarding an inheritance from the ex-husband, the ex-husbands claim of fraud against the attorneys was barred under the litigation privilege.
At first the decision may seem unfair to the ex-husband who had to defend his claim without accurate information. However, upon closer inspection, the Court acknowledged that the ex-husband had additional remedies available to him including but not limited to filing a formal ethics complaint or asserting a claim of vexatious litigation for prosecuting an improper claim with malice. For practitioners, this decision illustrates the expansive scope of the litigation privilege to ensure that attorneys are not timid in their defense of clients – especially in matrimonial actions where emotions run high.
Alimony Reform - Where is Alimony Going in New JerseyNovember 22, 2013
The state of permanent alimony in New Jersey is currently in flux with arguments on both sides regarding alimony reform.
After a push by private citizens to abolish permanent alimony, a bill was introduced, A3909, seeking to eliminate permanent alimony for marriages lasting 20 years of less and effectively eliminating all permanent alimony by creating a presumption that support will terminate upon the payor attaining the age of 65. The bill also proposes tiers of support, for example, if the marriage lasted 5 years or less "the term of alimony shall not be greater than one-half the number of months of the marriage.
Then, in a decision made this summer, the Appellate Court ruled that a 15 year marriage was long term, thus justifying an award of permanent alimony. In Gnall v. Gnall, the lower court awarded limited duration alimony to the ex-wife, focusing on the fact that the marriage lasted 15 years and the parties were 42 years old upon date of trial. The Appellate Court reversed, finding that "a fifteen-year marriage is not short term." While at first glance the decision seems to preclude the award of limited duration alimony for marriages lasting 15 years or longer, the court's decision was fact sensitive, placing weight on the inability to the ex-wife to independently achieve the same standard of living as enjoyed during the marriage.
The Gnall decision has not been analyzed in a subsequent published decision so it is unclear if it has created a hard line rule, or more of a guide for future cases, but it further fuels discussions surrounding alimony reform in New Jersey and the debate of those in favor of permanent alimony or its limitation.
We will continue to monitor the developments and supply updates in future posts.
Garden State Equality v. Dow - Same Sex Marriage in New JerseyNovember 20, 2013
New Jersey is leading the way as states scramble to align their state marriage laws following the federal decision striking down the Defense of Marriage Act (DOMA).
Aside from the obvious political challenges it was inevitable that legislatures and courts would reach this point as equal protection of all citizens in one of the fundamental tenets of our democracy. Governor Christie should be applauded for his personal convictions, but he surely recognized that the country has moved towards accepting that same-sex couples should not be deprived of their right to marriage under state law and New Jersey should not be different given the protections afforded by the state's constitution.
The New Jersey Superior Court held on September 27, 2013 that the state must allow same-sex couples to marry effective October 21, 2013, and after an unsuccessful attempt to stay same-sex marriages, Governor Chris Christie has withdrawn his pending appeal, thus sanctioning same-sex marriage in New Jersey.
The lower court found that the state's former parallel system of civil unions violates the New Jersey Constitution by denying access to federal benefits that same-sex married couples now receive. The decision relied on precedent set in the prior same-sex marriage case, Lewis v. Harris, which required the state to provide same-sex couples "the full rights and benefits enjoyed by heterosexual couples." 188 N.J. 415, 463 (2006). At the time of the Lewis decision, the federal government denied benefits to any same-sex couples regardless of their title. Now, same-sex couples who are legally married are entitled to federal benefits, while couples who are designated under another title, such as civil union, are not. The New Jersey court held that "[t]his unequal treatment requires that New Jersey extended civil marriage to same-sex couples to satisfy the equal protection guarantees of the New Jersey Constitution".
After the lower court's ruling, Governor Chris Christie sought a stay of same-sex marriages pending an appeal before the New Jersey Supreme Court. After Governor Christie's stay was denied by the New Jersey Superior Court, the New Jersey Supreme Court granted the motion for direct certification. In a ruling denying the stay, the New Jersey Supreme Court held that "[t]he State has advanced a number of arguments, but none of them overcome this reality: same-sex couples who cannot marry are not treated equally under the law today. The harm to them is real, not abstract or speculative". The decision made it clear to the Governor that he would be unlikely to overrule the lower court's decision on appeal. In a letter filed with the New Jersey Supreme Court, Governor Chris Christie officially withdrew his appeal, ending what could have been months of uncertainty as to the status of same-sex marriage in the state.
The withdrawal of Governor Chris Christies' appeal creates stability for same-sex couples wishing to marry, who previously ran the risk of their marriage being nullified. Now, same-sex couples who are married in New Jersey are able to receive the benefit of not only state resources, but federal resources for married couples.
Minkowitz v. Israeli - Can a Mediator After Mediation Also Serve as an Arbitrator?November 18, 2013
As more cases turn to alternate dispute resolution in an effort as an alternative to litigation and on over burdened court system, the New Jersey Appellate Division has issued an opinion clarifying the role of arbitrator after conducting the mediation.
Upon filing for divorce, the parties in the case of Minkowitz v. Israeli agreed to engage an arbitrator. However, after an initial conference, the parties entered into settlement and mediation discussions with the arbitrator acting as a mediator. The parties reached a series of agreements that were incorporated into the arbitration. Plaintiff then sought to set aside the agreements claiming the arbitrator exceeded his powers by acting as a mediator and then reverting back to the role of arbitrator. The Appellate Division held that unless "the parties' contract to the contrary, once a neutral assumes the role of mediator, he or she may not assume the role of arbitrator."
The decision goes to the heart of the purpose of an arbitrator versus a mediator, stating that "an arbitrator's role is evaluative, requiring the parties to present their evidence for a final determination," while a mediator "encourages confidential disclosures" in an effort to reach a final agreement. These two roles are at odds with each other, and if a mediator then assumes the role of arbitrator, the parties' confidential information may be used against them when the arbitrator makes a binding determination.
Importantly, the court recognizes that objectivity in family law matters is especially imperative due to "already suspicious adverse parties." Allowing a mediator to later serve as an arbitrator on the same matter not only deteriorates the integrity of the process, but it also raises the potential for increased litigation of arbitration decisions.
This shows an ongoing trend in New Jersey to define the parameters surrounding alternate dispute resolution. In a case decided earlier this summer, the New Jersey Supreme Court inWillingboro Mall, Ltd. v. 240/242 Franklin Ave., LLC held that an agreement reached through mediation must be in writing to be enforceable.
Both cases reflect an effort to cut back on litigation following mediation.
Child Support Modification Based on Child in College - Plenary Hearing Always Necessary?October 30, 2013
As more parents send their children to college, the issue of how to calculate child support for a child living away from home has increasingly become a concern. In 2012, the Appellate Division in Jacoby v. Jacoby attempted to clarify how child support should be calculated for a child living away at college.
While support for children under the age of 18 may be calculated using the New Jersey Child Support Guidelines, the Jacoby decision held that it would be unusual to apply the guidelines to a child attending college away from home because there are many expenses associated with a child in college that are not factored into the guidelines. The Jacoby decision even goes so far as to say that child support may increase for a child in college. Importantly, the court held that a child attending college away from home constitutes a change in circumstances, warranting a review of child support.
The Jacoby decision seemed to provide a clear answer to the calculation of child support for children away at college, but it simultaneously opened the door to an extremely fact sensitive investigation. Now courts must consider all the potential expenses incurred for the college student as well as possible grants, loans, scholarships and other income sources from the student.
In the recent, unpublished, Appellate Court decision, Freeman v. Freeman, the court remanded the issue of child support for the child attending college. The court held that the changed circumstances warranting a modification in child support was a fact sensitive question and that "a plenary hearing ordinarily would be required." The Freeman decision is not alone, and is just one example of the hurdles a parent may face when seeking a child support modification. What does this mean for the parent seeking a modification? This could spell a costly motion or even a plenary hearing to determine child support if the parents cannot agree.
For more information or if you would like to speak with an attorney, contact Diane Famula, Family Practice Coordinator at 973-364-8323 or firstname.lastname@example.org.
Ramifications of the New LLC Act on Issues in Divorces Affecting AccountantsOctober 24, 2013
New Jersey has adopted the Revised Uniform Limited Liability Company Act (RULLCA) which governs all New Jersey limited liability companies formed after March 18, 2013 and which, after March 1, 2014, when the 1996 LLC Act is repealed, will govern all New Jersey limited liability companies whenever formed.
Divorce May Lead to Dissolved LLC
Business owners and financial advisors are probably already aware that New Jersey has enacted the Revised Uniform Limited Liability Company Act, but they may not be aware of how the new LLC statute will affect an entity during a divorce. Under the new statute, the court is given broad powers to dissolve and LLC, including on the basis of oppression or harm toward the applicant. N.J.S.A. 42:2C-48(5)(b).
While we are waiting for a case in New Jersey to interpret the statute in the context of a divorce, a recent Texas Court of Appeals case provides some guidance. In the case of Kohannim v. Katoli, the wife was awarded her husband's 50% interest in an LLC. After the transfer, the wife filed an action to dissolve the LLC upon several grounds including oppression. The court held that the other owner "engaged in wrongful conduct and exhibited a lack of fair dealing in the company's affairs to the prejudice of the [wife] and dissolved the LLC.
Going forward, LLC members need to be aware that transfers of ownership, whether through divorce or otherwise, may pose significant risks to the stability of the LLC.
Inspection of LLC's Records
The right of members to be able to inspect books and records of the LLC is not new, it is a right often exercised on behalf of the member by his or her accountant. Indeed, the new statute expressly authorizes inspection rights through "an agent". N.J.S.A. 42:2C-40e.
The inspection rights afforded by the statute may, however, be modified by the LLC's operating agreement, and those modifications will apply to the accountant sent in to conduct the inspection. Consequently, before undertaking an engagement to inspect an LLC's books and records, an accountant needs to become familiar not only with the limitations to Section 40 of the statute, but also the limitations contained in both the operating agreement and any additional limitations the LLC is authorized to impose pursuant to subsection g. of the statute.
Members have inspection rights, spouses do not. If a member spouse assigns his or her economic rights to the other spouse, the new statute is clear that (unless permitted by operating agreement) the transferee spouse does not have access to the LLC's records except from and after dissolution. N.J.S.A. 42:2C-42a(3)(b). This is something to be considered in connection with Property Settlement Agreements in a divorce proceeding.
Amendment to Premarital Agreement StatuteJune 27, 2013
The New Jersey State legislature recently made a significant modification to the Premarital Agreement Statutes, N.J.S.A. 37:2-32 and 37:2-38, that will not only affect agreements drafted after the effective date of June 27, 2013 but also agreements entered into prior. The important modification removes the ability to set aside a premarital agreement based on unconscionability at the time of enforcement. According to the amendment, a premarital agreement may only be set aside if the agreement was entered into involuntarily or the agreement was unconscionable at the time of execution.
A premarital agreement will be found unconscionable if at the time of execution a party:
(1) Was not provided full and fair disclosure of the earnings, property and financial obligations of the other party;
(2) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided;
(3) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party; or
(4) Did not consult with independent legal counsel and did not voluntarily and expressly waive, in writing, the opportunity to consult with independent legal counsel
The statute will apply to all agreements entered into or voluntarily revised after June 27, 2013. While the statute strengthens the power of premarital agreements, it also raises some significant questions as to how courts will interpret addendums made to preexisting agreements since courts generally do not enforce mid-marriage agreements finding them to be “inherently coercive.” Pacelli v. Pacelli, 319 N.J.Super 185, 191 (App. Div. 1999).
If you have questions regarding how the amendment will affect your existing premarital agreement or if you are contemplating drafting an agreement, please contact us to discuss your legal options.
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- Equitable Distribution
- Business Valuation
- Premarital Agreements
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