As a seasoned attorney here in East Brunswick, I am aware that 99% of divorce cases in our state settle. The settlement to conclude a divorce results in one of the lawyers preparing a property settlement agreement. However, an ex-spouse can always return to court and file a Lepis motion to modify a support obligation upon a showing of significantly changed circumstances. Divorcing parties’ who want their agreements to be final can include anti-Lepis provisions in their property settlement agreements. In other words, an anti-Lepis provision will block either party from returning to the Superior Court of New Jersey regarding any financial matters no matter what. While negotiating, if our adversary insists on an anti-Lepis clause, the lawyers at our divorce law firm know that this is leverage and an opportunity to obtain a better deal for our clients. The reason being is that a judge in a New Jersey Family Court is forbidden from allowing such a clause in their decision following a trial. Thus, when negotiating, our attorneys know that if they want that anti-Lepis clause bad enough, then they need to give something (i.e., money) to our client in order for us to agree.
It should be noted that an anti-Lepis clause is never applicable to children.
In Morris v. Morris, husband Roy Morris appealed from an order of the Superior Court of New Jersey, Family Part of Bergen County that denied his motion to reduce his alimony obligation. Maureen and Roy Morris got divorced June 27, 1991. A property settlement agreement was incorporated into their final judgment of divorce, which stated that the Family Part judge found “that it was entered into freely and voluntarily by the parties.” The New Jersey Appellate Division stated that the provisions in the property settlement agreement relating to alimony and equitable distribution were unusual. Maureen agreed to relinquish almost all of the marital assets to Roy, including condominiums in Florida, the 8,500 square foot marital house, investment property, a yacht, business partnerships, and other investments. None of these properties had any equity as they were all heavily mortgaged. According to the property settlement agreement, Roy would be liable for all the debts listed on his case information statement.
On appeal, the alimony section was challenged. Interestingly, the alimony scheme had many attributes that are common with equitable distribution. According to the property settlement agreement, the alimony payments would not be taxable to Maureen, nor deductible by Roy. The agreement further provided that the alimony obligation would remain payable, even if Maureen co-habited with another or remarried. Roy would be obligated to pay Maureen $ 35,000 a year in monthly installments, until 2001. Then he would pay her one final alimony payment of $ 150,000. The property settlement agreement also contained an anti-Lepis provision that explicitly stated the former couple waived their respective rights for modification based on a showing of changed circumstances as provided for in the paramount 1980 New Jersey Supreme Court case of Lepis v. Lepis.
When Maureen and Roy signed the property settlement agreement, they were going through a period of financial instability, and allegedly had a negative net worth. However, at that time, they were still able to keep title to numerous assets. Roy earned income from two sources: consulting fees and rental payments. The combined income from both was still not enough to cover the agreed upon alimony. Maureen argued that they had agreed that Roy would renegotiate with creditor, hoping for a favorable sale of assets, and recoup assets later. She contended that she bargained away her potential of being supported in the future like she had been in the past, in exchange for a guaranteed payment of $ 35,000 every year until 2001, when she would receive a lump sum of $ 150,000 to resolve all future payments.
Conversely, Roy argued that if he and Maureen had not divorced, she would have shared in his current depressed financial status. He also argued that Maureen had not really given up anything in terms of equitable distribution, because he alleged that the substantial assets were actually liabilities in reality, and that they had all been foreclosed, with nothing remaining but debts. Roy’s income decreased from $ 359,000 in 1986 to $ 47,000 in 1991. He argued that requiring him to pay Maureen the agreed upon amount of $ 35,000 plus the addition alimony he promised to cover arrearages, would result in him paying her more than he even earned, and that he did not have capital assets to liquidate to cover the balance. Roy further claimed that he had a right to relief from the property settlement because it was practically impossible for him to abide by its terms. As such, he contended that the property settlement agreement was unconscionable and inequitable from the moment it was executed, and that he was entitled to a Lepis modification, even though the property settlement agreement contained an explicit anti-Lepis clause.
The appellate panel explained that there is a conflict between the two Chancery Division decisions about the enforceability of an anti-Lepis clause. In the first case, Smith v. Smith, the Middlesex County court held that an anti-Lepis provision, that effectively blocked the Court’s exercise of equitable responsibility to review, and if it so chooses, to modify support obligations due to changed circumstances. The Smith court further held that such a preclusion is against the public policy of New Jersey, as enumerated in judicial decisions and Legislative Acts. However, in Finckin v. Fickin, a Bergen County court held that the inclusion of an anti-Lepis provision in a settlement agreement is not against this state’s public policy.
The New Jersey Appellate Division, to some degree, agreed with both cases. The Smith court was correct is holding that contracting parties cannot just bargain away the equitable jurisdiction of the court. With that said, as the case was in Finckin contracting parties, as long as they have full knowledge of all the current and reasonably foreseeable future circumstances, negotiate for a fixed payment or create the structure of payment to the spouse receiving support, without respect to the circumstances that would warrant a Lepis modification of their agreement. The seminal 1980 New Jersey Supreme Court case of Lepis v. Lepis, established a standard by which Family Part courts must abide by when hearing a motion to modify alimony or child support. Even if a divorcing couple agree on amounts for alimony or child support, either party can still file a motion to modify that agreed upon amount later, upon a showing of change circumstances that now make the settlement agreement unfair and inequitable. Lepis provides that if the property settlement agreement already accounted for the circumstances now being alleged as changed, generally it would not be fair or equitable to grant a requested modification. For instance, if a spouse receiving support cannot maintain the marital standard of the received support payments, this would not deserve a modification if a large single cash payment was given at the time of divorce with the clear intention of meeting the rise in the cost of living. In Morris, instead of providing for greater needs, the divorcing couple provided for Roy’s future reduced ability to pay support. The fair and equitable stand from Lepis still applied, but the court still had to figure out what exactly was warranted under the specific circumstances. Those circumstances include Roy’s agreement to pay a specific amount in spousal support, regardless of any future change in circumstance that may occur. The New Jersey Appellate Division illustrated this principle with some examples. For instance, a dependent spouse may agree to forgo half of the support he or she may be entitled to, or a reduced equitable distribution, in exchange for a guaranteed payment that is made regardless of the supporting spouse’s finances, or dependent spouse’s own future good fortune. Such an agreement would not be based on a dependent spouse’s need or his or her ability to pay. If the supporting spouse accepts such a decision, then he or she must also necessarily accept its burdens. Lepis review recognizes the divorcing parties’ standards as they can be reasonably enforced. This means that modification are permissible, but only upon a showing that a failure to modify would be unjust or unreasonable. As such, The New Jersey Appellate held that the trial judge properly enforced the agreement, and affirmed the judgment.
Please call our law firm if you are facing a divorce to learn more about what you shall be facing.