What Happens If I Violate My Matrimonial Settlement Agreement?

What Happens If I Violate My Matrimonial Settlement Agreement?

Under New Jersey divorce law, if you violate your Divorce Settlement Agreement a judge of the Superior Court of New Jersey may require you to pay for your ex-spouses attorney fees.  In a recent case, the ex-husband failed to tell his ex-wife about 1 million dollars in stock options although he was obligated to so in their divorce agreement.  All told, the judge found the ex-husband to have acted in bad faith and ordered that he must pay his ex-wife’s attorneys fees.  In this case the lawyers had to have a separate plenary hearing (or trial) just to determine the amount due to the ex-wife’s lawyer.  This is why, whenever possible, the lawyers at our East Brunswick, New Jersey divorce law firm try to bring the parties together in order to reach a settlement.

In K.B. v. T.B., the parties were married in 1990 and later divorced in 2013.  As part of their final judgment of divorce, they included a Property Settlement Agreement (“PSA”) which detailed how their assets would be divided as well as alimony payments and other financial determinations.  The Husband was working as a marketing director for Donovan Data Systems, which later merged with a company called Mediocean, until March 31st of 2014.  During their marriage, the Husband’s annual income was as a high as $1.15 million, but at the time of the divorce was around $250,000 a year.

The PSA also addressed the distribution of 5,000 stock options that the Husband received through his employment with Donovan Data Systems, which vested at four different dates over the span of three years.  The Wife was entitled to a designated portion of each of the first three distributions, but not the fourth and final distribution.

Another section of the PSA determined that for purposes of the Husband’s alimony payments to the Wife, his income would not include any of the stock options he received from his employment with Donovan Data Systems.  However, the PSA did specify that the Husband was to notify his Wife if at any point he left his current job, or decided to exercise any of the stock options mentioned above.  The PSA further stated that if the Wife lost her right to exercise any stock options because the Husband failed to notify her, that he would reimburse her for the money she lost, as well as counsel fees.  The PSA also included a portion stating that if either the Husband or Wife did not comply with the provisions of the PSA, that party would pay 100% of the other party’s counsel fees in connection with the failure to comply and resulting litigation.

In May of 2015, the Wife claimed that the Husband had received an unexplained $1 million payment from his former employer, Donovan Data Systems.  The Wife therefore asked the court to require the Husband to pay her one-third of the $1 million payment as alimony, according to the provision in the PSA, as well as counsel fees.  The Husband, however, argued that the $1 million payment was a result of his former employer accelerating the vesting of the last group of stock options, to which the Wife was not entitled under the PSA.  Because the PSA explicitly stated that stock options did not qualify as income, the Husband argued that he did not have to pay his wife any portion of the $1 million payment.   

In response, the Wife argued that the Husband had violated the PSA by failing to notify her of the vesting opportunity that he took advantage of, and therefore caused her to miss out on an opportunity to sell her options back as well.  The judge agreed with the Husband in finding that the $1 million payment was not considered income, and denied the Wife’s motion for a portion of the payment as alimony.  However, the judge agreed with the Wife in finding that the Husband had violated the PSA by not notifying her that he was exercising his stock option, and awarded her $3527.50 in counsel fees and costs.  The judge was meticulous in her review of the Wife’s certification of services detailing her attorney’s fees, even rejecting some of the requests for payment.  The Wife then filed a motion for reconsideration.

At oral argument, the Husband was unable to provide specific information about the sale of the stock and the $1 million payment.  Because of this, the judge decided that discovery was needed in order to determine “the truth about the $1 million payment.”  At the hearing that followed, the Husband’s former boss, Donovan, testified as to the stock options and validated the Husband’s prior testimony that the payment was in fact for the vested stocks and was not income.  Feeling that Donovan’s testimony was credible, the judge concluded that the payment was for stock options, not income, and therefore rejected the Wife’s request for a portion of the payment as alimony.  The judge further held that the Husband had indeed violated the PSA by not notifying his wife of the option to sell back her stocks when he did, and ordered the Husband to pay the Wife $14,677,60 for her losses. 

The Wife also claimed that she had spent $75,000 in counsel fees in connection with the plenary hearing and asked for reimbursement from the Husband pursuant to the PSA.  Unlike in the prior determination, the judge did not ask the Wife to show any certification detailing her attorney’s fees, or even a retainer agreement.  Instead of carefully reviewing the request as she had in the last motion, the judge simply ordered the Husband to pay the entirety of the Wife’s attorney’s fees without showing any proof that she had actually spent that money, or that the amount was reasonable.   

Feeling that the judge was incorrect in her ruling, the Husband appealed the order to pay the Wife $75,000 for attorney’s fees.  He argues that the judge erred in granting the Wife’s motion without requiring her to show any proof of the money she had spent or the hours the attorney had logged in regard to the plenary hearing.

On appeal, the Appellate Division agreed with the Husband. Although hesitant to overturn the decision of a trial judge in awarding counsel fees, it is necessary where there is clear evidence of mistake or abuse of discretion.  Attorney’s hours are not reasonable if they are “excessive, redundant, or otherwise unnecessary” or are spent on “claims on which the party did not succeed.”  Using this as guidance, the Appellate Division determined that the trial judge had abused her discretion in granting the Wife all of the fees she sought. Although not explicitly stated in the PSA, neither party disagreed with the fact that no fees are to be awarded in connection with claims that are unsuccessful.  Here, the Wife’s primary claim was that the Husband was required to pay her a portion of the $1 million payment as alimony, and this claim was unsuccessful. The judge did not take this fact into account, and still awarded the Wife all of the fees she was seeking.

The Appellate Division therefore reversed the trial judge’s award of $75,000 for the Wife. Awards for attorney’s fees are to be carefully reviewed by the judge, and no fees should be paid if there is not a detailed certification of services and a retainer agreement.  Further, a careful review of the hours logged is necessary to determine whether the money being requested was for time that was reasonably spent on a successful claim.

Please contact our law firm if you or a loved one is facing a divorce. 


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