Marital Settlement Agreements and Privacy Interests

By Charles F. Vuotto, Jr., Esq.

Without question, divorce can be one of the most traumatic events in a person’s life. Divorce frequently results in emotional upset, depression, strife, severance of personal ties and relationships, a decrease in lifestyle, loss of assets, the imposition of financial obligations, negative impacts on children and relationships with children, and health issues.Added to this list is exposure of the parties’ personal affairs to the world. The ability to keep private the totality of a family law matter gave way to the public’s interest for transparency in litigated matters and court filings by way of Rule 1:38 et seq., which was implemented in 2009 after the Report of the Supreme Court’s Special Committee on Public Access to Court Records was issued under the leadership of Justice Barry Albin.[1]Notwithstanding the public’s right to access to court filings and litigated matters, parties should be able to keep their marital settlement agreement MSA) out of the public eye. The author suggests that Rule 1:38 should be amended to make it clear that, should the parties jointly request it, their MSA need not be attached to the judgment of divorce or made a part of the court’s file available for public view.

Before the enactment of the present form of Rule 1:38, et seq., debates about open records resulted in the establishment of thespecial committee. The committee was directed to start with a presumption of openness of court records and was assigned the goal of balancing legitimate privacy interests against the concept of keeping the legal process transparent and open to the public.

One of the main policy considerations for public access to court records was to instill public confidence in our court system. The public has the right to know that the courts are administering justice in a fair manner. The committee felt strongly that public trust and confidence in the integrity of the judicial process outweighs the privacy concerns of individual litigants in most cases. As a result,the committee concluded that personal information placed before the court for its consideration in rendering a decision must be made available for public inspection. Only by having the full record before the court can citizens fairly evaluate the effectiveness of their judicial system, and the fairness of the court’s decisions in a particular case.

Recommendation # 9 of the committee’s report, however, acknowledged that family division records should be viewed differently from records in other court divisions because of the involvement of children in family court matters and that the confidentiality of the children should be protected. Somecommittee members questioned whether a sufficient public interest warranted continuing the current open access to the private lives of citizens seeking matrimonial relief. However, the committee concluded these documents are central to the public’s ability to understand and evaluate legal process related to divorce and custody. Therefore, the committee concluded that dissolution and non-dissolution docket records should remain presumptively open and that existing mechanisms for sealing records and closing courtrooms are sufficient to protect the interests of children. Importantly, the committee did not address the confidentiality of MSAspecifically.

Ultimately, the report that was issued by Justice Albin resulted in the current form of Rule 1:38 et seq. Rule 1:38-3 et seq. provides for limited exceptions to documents that were not accessible by the public. Those documents are limited to the following:

• Family case information statements, including all attachments;
• Confidential litigant information sheets;
• Medical, psychiatric, psychological, and alcohol and drug dependency records, reports, and evaluations in matters related to child support, child custody, or parenting time determinations;
• Documents, records and transcripts related to proceedings and hearings required by the Supreme Court, or subsequent orders of the Court;
• Juvenile delinquency records and reports;
• Records of juvenile conference committees;
• Expunged juvenile records;
• Sealed juvenile records;
• Domestic violence records and reports;
• Names and addresses of victims or alleged victims of domestic violence or sexual offenses;
• Records relating to child victims of sexual assault or abuse;
• Records relating to Division of Child Protection and Permanency proceedings;
• Child custody evaluations, reports, and records;
• Paternity records and reports, except for the final judgments or birth certificates;
• Records and reports relating to child placement matters;
• Adoption records and reports;
• Records of hearings on the welfare or status of a child;
• Family, Finance and Probation Division records containing information pertaining to persons receiving or ordered to pay child support, including the child(ren); custodial parents; non-custodial parents; legal guardians; putative fathers; family members and any other individuals for whom information may be collected and retained by the court;
• Records and transcripts of civil commitment proceedings;

Missing from the above list is the parties’ divorce settlement agreement or MSA.

Private agreements between the parties resolving their litigation are just that– private. “It is difficult to imagine why the general public would have anything more than idle curiosity in private terms of the settlement. There is no relationship to potential public hazard or matters of public health, and unless official conduct is at issue, matters of public governance are not involved.”[2]The parties’ private settlement has no bearing upon the court’sconsiderationsin rendering a decision, the effectiveness of the judicial system, or the fairness of the court’s decisions in a particular case. Therefore, there is no legitimate reason for making MSAs readily available for public inspection. Presumably, that explains the omission of the MSA in the list of the exceptions to disclosure in Rule1:38-3. Nevertheless, it appears that many judges routinely insist upon the submission of the MSA in totoat the conclusion of the uncontested divorce hearing.

There are a number of reasons, beyond privacy concerns, why the MSA should not be accessible to the public. First, the MSA is evidence. At every uncontested hearing, the MSA is marked as “J-1.” This means that it is a joint exhibit submitted by the parties and marked into evidence. Rule 1:2-3 provides, “…Following the conclusion of trial, evidence shall be returned to the proponent and so acknowledged on the record unless the court otherwise orders. The record shall note any exhibits retained by the court….” Generally, following a matrimonial or other trial in the family part, the trial court returns all exhibits to trial counsel; retaining voluminous evidence would place an unreasonable and unwieldy burden on the court.

The uncontested divorce hearing, during which time the litigants each testify on the cause of action and the procedure that led each to accept the MSA as the final resolution of all claims between them, is a trial. Granted, it is a brief proceeding, usually lacking some of the other hallmarks of a trial, such as cross-examination. But it is nonetheless a final evidentiary hearing on the grounds for divorce and each parties’ waiver of his or her right to have the judge make substantive decisions, and acceptance of the MSA in lieu of giving testimony on each and every issue incident to the marriage. At the end of this trial, the evidence (i.e., the MSA)should be returned to the parties, not retained by the court over the parties’ objection or contrary to a specific request from the parties. The author is aware of no other type of litigation where the parties’ agreement is required to be incorporated into anorder of dismissal or retained by the trial court.

Most importantly, however, pursuant to a March 2005 Memorandum to Assignment Judges, Judgments and agreements should:

• Be conformed.
• If the matter has been tried to conclusion, the judgmentshould be stamped “tried to conclusion.”
• All Judgments of Divorce (JOD) should be stamped withthe Judge’s name stamp and date stamped “filed”.
• When there is a Property Settlement Agreement (PSA)the JOD should contain language that states that the Courtneither approves nor disapproves of the PropertySettlement Agreement, but that it is incorporated into theJudgment of Divorce at the parties’ request and isbinding. The PSA is marked into evidence and enteredinto FACTS.Note: At the conclusion of the case, the PSA may bereturned to the parties by the court upon request.
• Once the JOD is conformed, the original is retained bythe court and entered into FACTS[3]. (Emphasis added)[4] (Emphasis added)

Therefore, by said Memorandum, if the parties’ request, the PSA (or MSA) may be returned to the parties, not attached to the Judgment of Divorce and not made part of the court file.

As correctly stated by Mark Sobel, Esq. in a prior column published in the New Jersey Family Lawyer,

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[f]amily practitioners now have been sensitized to the public nature of filed documents and the potential exposure of the contents. Furthermore, the companies employing these litigants often have separate concerns regarding the disclosure of, for example, the existence of stock options, the salary of highly paid executives, the maintenance of various retirement programs, and a host of other financial information they do not wish divulged to their competitors or the public.[5]

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There are many other reasons why exposure of the parties’ personal affairs by way of disclosure of their MSA to the public can cause harm to either the parties or their children. Some examples of harm are as follows:

1. Exposure of custody and/or parenting time issues to the community in which the parties and the children reside may cause emotional distress to the parties, and most importantly the children.
2. As most competently drafted MSAs contain detailed references to the parties’ assets, liabilities and debts, it exposes every aspect of the parties’ personal financial affairs to the public at large. This could detrimentally impact the parties in various ways, including but not limited to, identity theft or traditional forms of theft.
3. If the parties’ agreement provides for the sale of property, along with mandatory reductions in listing price, it may place the parties at a disadvantage in negotiating a fair sale price.
4. Disclosure of the terms and settlement payments may encourage commencement of other lawsuits or unfair leverage or bias in obtaining similar settlement in subsequent lawsuits.

No countervailing public concern justifies the intrusive impact of allowing the public to have access to the parties’ private divorce settlement. The reasons for transparency of the judicial system relate to the need to assure the public that the Judiciary is rendering decisions and judgments in a fair and impartial manner. When the parties reach a divorce settlement, they have by definition taken the decision-making authority away from the court in favor of their own negotiated agreement. Therefore, in such settled cases there should be no concern for impartiality, bias, prejudice, backroom deals, political influence, or any of the other justifiable reasons for mandating transparency in the judicial system.

The courts’ treatment of the MSA varies from county to county, and from judge to judge. It is fair to say that not all judges permit incorporation of the agreement into the judgment by reference only. It is truly a county by county practice and, in fact, a judge by judge issue. Some judges insist on making the agreement part of the court’s files; other judges will allow it to be incorporated by reference only; and some (very few) will permit the agreement to be sealed by the court under Rule 1:38-11. The latter approach is dubious at best. Pursuant to the applicable rule, the moving party bears the burden of proving by a preponderance of the evidence that good cause exists to seal the record. “Good cause” is defined by a two-prong test: 1) that disclosure is likely to cause a clearly defined serious injury, and 2) that the individual interest in privacy substantially outweighs the presumption of openness.[6] Needless to say, this is a difficult standard to meet and has resulted in inconsistency.

There are some obvious advantages of attaching the agreement to the judgment of divorce. For instance, in the event the agreement is inadvertently lost or destroyed, the court has a record of it. We know, however, that the court does not maintain records in perpetuity. We also know that each party and his or her attorney usually retain a copy of the agreement. Therefore, the need for the court to safeguard this document is greatly diminished. More importantly, however, nondisclosure of such private and sensitive information may actually encourage litigants to settle because they know that if a judge tries the case, the judge’s findings are public.

Some judges state the court must retain the original MSA in the unlikely event the parties dispute the authenticity of the agreement proffered. Again, where four people have copies of the MSA, this concern seems unlikely. Moreover, this concern can be overcome by instructing the parties to maintain their agreements in a safe place post-divorce. If permitted by the court, many clients readily accept this burden and opt to incorporate the agreement by reference only, thereby keeping the terms of the agreement out of the public eye unless enforcement is required.

A more common explanation for why the court insists upon maintaining the MSA is so that it has a record of support payments to be made. Again, this can be overcome simply by incorporating the support obligation into the judgment of divorce and attaching the child support guidelines worksheet for all child support cases.

In the light of the AOC directive, the arguments set forth above and to promote consistency, it is the suggestion of the author that Rule 1:38 be modified to add to Section 1:38-3 the following:

When the parties have reached a full and final agreement with regard to all issues in their family law matter, waived and abandoned all claims against each other that are not specifically addressed in that agreement, and jointly request that the court not attach their agreement to the final judgment or include it within the court’s file, the court shall grant said request unless the court finds, for good cause, that said request should be denied. When the Agreement is not attached to the final judgment or made a part of the court’s file and the parties’ Agreement includes terms regarding child support or alimony, the final judgment shall include the requisite recitation pursuant to Rule 5:5-2. Further, said final judgment shall have annexed to it the child support guidelines worksheet when child support is applicable in accordance with Rule 5:6A.

The author wishes to thank Amanda S. Trigg, Esq. partner with Lesnevich& Marzano-Lesnevich, LLC, Ron Lieberman, Esq. of Adinolfi& Lieberman, P.A., Noel S. Tonneman, Esq., partner with Tonneman, Vuotto, Enis & White, LLC and Neha Pasricha, Esq., associate with Tonneman, Vuotto, Enis & White, LLC for their assistance with this column.

[1] Report by Justice Barry Albin, http://www.judiciary.state.nj.us/publicaccess/publicaccess.pdf

[2] See Arthur R. Miller, Confidentiality, Protective Orders and Public Access to the Courts, 105 HARV. L. REV. 427 (1991).

[3]Family Automated Case Tracking System

[4]Memo.to Assignment Judges on Transmitting the Dissolution Case, Manual II, Vol. A, Sec. 16 (Effective Mar. 1, 2005; replacing Dec. 12, 2003).

[5] See Mark H. Sobel, Confidentiality and Nondisclosure Agreements: The Prevention of Indiscriminate Disclosure, 26 NJFL 114.

[6] Rule 1:38-11(b).