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Alimony Waivers and Modifiability

Editor-in-Chief’s Column:  Alimony Waivers and Modifiability

by Charles F. Vuotto, Jr.

 

The recent published case of Fattore v. Fattore[1] is raising some concern for practitioners that have included alimony waivers in their divorce settlement agreements and advised their clients that such waivers are immutable. The perception of immutability of the waiver is buttressed by statements commonly made by almost every judge at an uncontested hearing that is advised of the waiver. Judges will typically inform the party or parties giving the waiver that they can never come back for alimony.

In Fattore, the parties had been married for 35 years, and both parties were 55 years of age at the time of their divorce. Their six-page consent dual final judgment of divorce (JOD) included all of the terms of their divorce, including the following mutual waiver of alimony: “Plaintiff and defendant each hereby waive alimony as to the other party now and in the future.” Among the remaining provisions in their JOD was equitable distribution of the husband’s military pension. Specifically, the parties agreed that the plaintiff-wife “shall be entitled to receive fifty percent … of defendant’s military pension which was accumulated during the marriage … via a [q]ualified [d]omestic [r]elations [o]rder [QDRO] to be prepared by attorneys for plaintiff.”[2]

The husband was serving full time in the Army National Guard when the parties were divorced. Approximately two years after their divorce, while the husband was still serving in the Army National Guard, the QDRO for the husband’s military pension was completed. The husband’s service in the Army National Guard ended approximately three years later, when the husband became disabled. Initially, the husband was able to collect his pension and disability benefits without any impact upon the pension payout, and was receiving social security benefits; however, some time later, he elected to receive tax-free disability benefits, resulting in a reduction in the portion of his pension that may be distributable via QDRO.[3]

In 2010, several years after the husband became disabled, the wife contacted the Army to inquire why she had not yet begun receiving her share of the husband’s pension benefit. She was informed that the husband’s election to receive disability benefits effectively rendered her ineligible to share in the husband’s payments, because the disability portion cannot be divided under the Uniformed Services Former Spouses Protection Act (USFSPA) and “when the disability amount is deducted from his gross pay along with the survivor benefit portion, there’s nothing left for the community property.”[4]

In 2016, the wife filed a motion seeking compensation from the husband for her share of his military pension, which the husband opposed. Following a two-day plenary hearing, the judge appointed a pension appraiser to determine the value of the wife’s coverture interest in the pension as of the time of the parties’ divorce, and pending that determination, directed the husband to pay to the wife the full amount of his monthly Social Security benefits. The judge denied the wife’s request to deem the payments alimony, noting that “[a]limony is not compensation for equitable distribution,” and citing the parties’ mutual waiver of alimony.[5]

On appeal, the husband asserted that the trial court erred in essentially providing indemnification, arguing such remedy was preempted by the United States Supreme Court in Howell v. Howell,[6] (decided three months after entry of the trial court’s decision in Fattore). The wife cross-appealed, arguing that in the event the trial court’s decision was preempted by Howell, the denial of alimony must be reversed based upon a substantial change in circumstances and the current circumstances of the parties.[7]

The New Jersey Appellate Division provided a detailed analysis of Howell and Mansell v. Mansell, another United State Supreme Court decision, in which the Supreme Court held the USFSPA preempted state court orders that permitted equitable distribution of disability benefits.[8] Ultimately, the Appellate Division reversed the trial court’s denial of alimony, despite the mutual waiver of alimony contained in the parties’ JOD, holding that Howell preempted its decision for the husband to indemnify the wife, .[9]

It is well known that “alimony and support orders define only the present obligations of the former spouses,” and that such “duties are always subject to review and modification on a showing of ‘changed circumstances.’”[10] This authority is largely derived from New Jersey statute, specifically N.J.S.A. 2A:34-23, which provides, in relevant part, that “[o]rders so made [as to the alimony or maintenance of the parties] may be revised and altered by the court from time to time as circumstances may require.”[11]

As part of the give and take of negotiations, parties may agree to prevent such modification by including provisions commonly known as “anti-Lepis clauses” in their settlement agreements. The Appellate Division has deemed such provisions enforceable. In Morris v. Morris, the Appellate Division held that while “parties cannot bargain away the court’s equitable powers[,] … parties can establish their own standards, and that these standards, where not unwarranted under the circumstances, will be enforced by the court irrespective of the need-based guidelines of Lepis, which are applied when there are no such standards.”[12] However, this comes with a caveat: “[i]f circumstances have made the parties’ standards unreasonable, they can in extreme cases be modified.”[13] In Morris, alimony was to be paid in the amount of $35,000 per year to wife for a specified term, at the conclusion of which there was to be a single final alimony payment of $150,000. The court held this provision enforceable, despite husband’s present decrease in income.[14] The court explained that husband bargained for this result when wife sacrificed her claim to equitable distribution and substantially greater alimony in exchange for a “guaranteed,” non-modifiable sum.[15] An excellent overview of additional law related to the enforceability of “anti-Lepis clauses” (as of March of 2000) was previously published in the New Jersey Family Lawyer.[16]

 

Fattore sheds light on an apparent gray area in the law and a seeming disconnect between the law and litigants’ general understanding of the finality of their agreements. It should be no surprise that parties believe a waiver is a waiver. In other words, parties will expect that the waiver is complete and final, not subject to modification irrespective of any future circumstances. It is this author’s experience that judges routinely give warnings to this effect during uncontested hearings when advised that the parties’ settlement agreement includes a waiver of alimony, whether mutual or applicable to only one of the parties. In these common instances, a litigant waiving alimony is forewarned that they would be barred from later returning to court seeking alimony, no matter what the reason, i.e. whether they later became ill or lost their job, or their former spouse won the lottery. Judges’ colloquy to this effect typically comes without the judges’ review of the parties’ settlement agreement to determine whether an anti-Lepis provision is included.

One could argue this stems from a belief that waivers differ from established support awards, in that the latter is subject to modification under Lepis and the former is not. Yet, in Fattore, the Appellate Division incorporated Lepis-like terminology in refusing to uphold the parties’ mutual waiver of alimony, noting that “the unforeseeable loss of the bargained for pension benefit was a substantial and permanent change in circumstances.”[17] On the other hand, within that same sentence, the Appellate Division seems to more expressly rely on principles of contract in rendering its decision. After noting that for “[a] waiver[]to be operative, [it] must be supported by an agreement founded on a valuable consideration,”[18] the court concluded as follows: “there was valuable consideration given by plaintiff in exchange for the alimony waiver, and the unforeseeable loss of the bargained for pension benefit … invalidated the waiver.”[19] This contract approach supports the fairness-based result in Fattore.

While the Appellate Division in Fattore appears to have carefully avoided an ordinary modification under Lepis, its mere reference to Lepis and use of associated language nevertheless calls into question the circumstances under which a waiver of alimony would be subject to modification, notwithstanding the absence of an anti-Lepis provision. In that regard, it is significant that otherwise enforceable waivers of alimony are supported by valuable consideration, distinguishing such provisions from typical support provisions or awards based upon such factors as the parties’ marital lifestyle, need for support, and ability to pay support, as opposed to any quid-pro-quo. Accordingly, waivers of alimony should be treated as more in the nature of a contractual claim, which often entails a bargained-for exchange, than in the nature of support. [20]

As such, it is this author’s opinion that absent the deprivation of such consideration as in the case of Fattore, the equitable authority of courts to reform or modify waivers of alimony in settlement agreements should be limited to such grounds as “unconscionability, fraud, or overreaching in the negotiations of the settlement.”[21] This standard is consistent with the balance New Jersey courts, such as in Fattore, Lepis, Morris, and Miller, have strove to achieve between promoting the stability of settlement agreements and preserving courts’ equitable powers in the realm of domestic relations. Nevertheless, as a practice pointer, this author suggests that clients entering into agreements with anti-Lepis clauses be advised that courts may use their equitable authority to modify alimony waivers in the event of certain limited circumstances.

The author wishes to thank Rotem Peretz of LaRocca Hornik Rosen Greenberg & Crupi, LLC in Freehold for his contribution to this column.

[1] Fattore v. Fattore, 458 N.J. Super. 75 (App. Div. 2019).

[2] Id. at 80.

[3] Ibid.

[4] Id. at 81

[5] Id. at 81-83.

[6] Howell v. Howell, ___ U.S. ___, 137 S. Ct. 1400 (2017).

[7] Fattore, 458 N.J. Super. at 84.

[8]  Mansell v. Mansell, 490 U.S. 581 (1989).

[9] Fattore, 458 N.J. Super. at 84-89.

[10] Lepis v. Lepis, 83 N.J. 139, 146 (1980).

[11] Id. at 145-46.

[12] Morris v. Morris, 263 N.J. Super. 237, 245-46 (App. Div. 1993) (emphasis added).

[13] Id. at 246.

[14] Id.

[15] Id. at 240.

[16] Console, Agreement to Terminate Alimony: When Is an Anti-Lepis Clause Enforceable?, 20 New Jersey Family Lawyer, 7 (Feb./Mar.), 2000.

[17] Fattore, 458 N.J. Super. at 89 (emphasis added).

[18] Id. at 88 (emphasis added).

[19] Id. at 89. The complete sentence, including both the Lepis-type phraseology and the principles of contract, reads as follows: “Thus, there was valuable consideration given by plaintiff in exchange for the alimony waiver, and the unforeseeable loss of the bargained for pension benefit was a substantial and permanent change in circumstances, which invalidated the waiver.” Ibid.

[20] See also Gordon v. Rozenwald, 380 N.J. Super. 55, 68-69 (App. Div. 2005), wherein the Appellate Division, in suggesting different standards of modification for different types of support, stated as follows:

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The premise for a term of limited duration alimony under N.J.S.A. 2A:34–23c is primarily historical not predictive and it is not based upon estimates about financial circumstances at the time of termination. Thus, the end date of a term of limited duration alimony is the equivalent of an arrangement to terminate support at a predetermined time or event, regardless of need. The statutory standard that precludes modification of the length of a term of limited duration alimony—“except in unusual circumstances”—is the equivalent of the standard applied to analogous arrangements for termination of support under prior decisional law—“not ordinarily equitable and fair.” Compare N.J.S.A. 2A:34–23c with Lepis, supra, 83 N.J. at 153–54, 416 A.2d 45. Because the statutory standard for modification of limited duration alimony is the equivalent of the standard utilized in prior judicial decisions addressing analogous arrangements, trial courts applying the “unusual circumstances” standard in N.J.S.A. 2A:34–23c should consider decisions addressing modification of such specific provisions under the “not ordinarily fair and equitable” standard of prior decisional law. See, e.g., ibid.; Morris v. Morris, 263 N.J. Super. 237, 241–42, 622 A.2d 909 (App. Div. 1993) (enforcing provision foreclosing modification based on changed circumstances despite economic hardship, and noting that a different result might be required in a case involving disability); cf. Peskin v. Peskin, 271 N.J. Super. 261, 275–76, 638 A.2d 849 (App. Div. 1994) (settlement agreements must be voluntary not the result of coercion, deception, fraud or undue pressure).

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[21] See Miller v. Miller, 160 N.J. 408, 419 (1999).

 

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