The Economic Crisis—Not a Prima Facie Case for Changed Circumstances – By Megan S. Murray, Esq.

Not long ago, applications for a reduction in support awoke the skeptic in every judge and almost always resulted in their uniform reliance on a single well-known tenet of family law: A temporary decrease in income is an insufficient basis for modification. See Bonanno v. Bonanno, 4 N.J. 268 (1950); Innes v. Innes, 117 N.J. 496 (1990).

Indeed, as recently as 2006, the Appellate Division in Larbig v. Larbig, 384 N.J. Super. 17 (App. Div. 2006) upheld the trial court’s denial of the payor husband’s application to reduce support due to the fact that his filing nearly two (2) years after the divorce “strongly suggested that [the husband’s] reduced income had not become permanent.” Id. at 19. Times were good and absent extraordinary circumstances, the general consensus adopted by the bench was one of optimism— that instances of financial distress were fleeting and the supporting spouse would bounce back better than ever, perhaps even learning a thing or two from the experience.

Times have quickly changed, however, and the perspective from the bench, along with that of the entire nation, is now that of financial pessimism. The unsettling truth—that jobs are lost, salaries reduced, and businesses forced into bankruptcy—which has been hidden behind statistics of economic growth for years has now resurfaced with a vengeance. Thus has the economic crises, while not directly changing the law as it relates to applications to decrease support, now forced the judiciary not to dismiss modification applications after a perfunctory review and a promise to the payor that this too shall pass.

The courts eyes are now wide open to the legitimacy of all too many motions to reduce support. This does not mean, however, such applications will be granted as easily as the same applications in prior years may have been denied. Instead, the judiciary is now more than ever reviewing the particular facts of each case and applying those facts to the law to determine whether a prima facie case for changed circumstances has been established and, if so, the extent to which a reduction in support is necessary. For this reason, practitioners must ensure that applications seeking to decrease the payor’s support obligation are supported by the facts, backed up by evidential proofs, and accompanied with a reasonable solution for the future. To that end, the following are practice tips to consider in preparing the ever-increasing Notice of Motion to Reduce Support:

1. Give a detailed explanation for the change in income: While judge’s may view proclaimed demotions, lay offs or salary cutbacks with less skepticism than in the past, litigants seeking a decrease in their support obligation must still provide a legitimate reason for the reduction in their income. Relying on the economy alone to justify the loss of a job or the drastic reduction in a bonus that was awarded as a matter of course in the past is insufficient. Indeed, before advising clients as to their likelihood of success in obtaining a decrease in their support obligation, practitioners should make detailed inquiry into the reason for their reduction in income. Although the unemployment rate continues to rise and more companies are cutting back on employee incentives that were previously an excepted part of the practice, the economy does not explain away every job loss or salary decrease. Termination for cause still exists, as does diminishment in performance based bonuses due to an employee’s failure to meet quotas. Moreover, given the general acceptance of the poor economy as a reason for decreased income, employees and, even more so, the self-employed, have incentive to voluntarily decrease their income and then seek to have support decreased under the guise of economic necessity. Under the circumstances, when deciding modification applications, judges will demand more than conclusory statements regarding the state of the economy without any detail as to how the economy has specifically affected that particular applicant’s job or business.

Where the economy has legitimately resulted in a decrease or termination in the payor’s income, the best Lepis applications will contain a detailed explanation for this decrease or termination. For instance, the owner of a business who provides staffing to companies such as A.I.G. or Citigroup, should provide the actual numbers reflecting the decrease in placements over a period of time. The proprietor of a high-end retail store should provide actual figures as to the decrease in sales. The commission-based employee whose commissions have been capped at a certain number should provide a copy of the company memo wherein the revised commission policy is set forth. Moreover, if any other documents or memorandums regarding financial cutbacks in the company have been provided to the client, these should be attached to the motion. The more concrete the proofs justifying the reduction in income, the more likely the judge is to accept this change as legitimate. Indeed, mere statements from the applicant as to an alleged decrease in income without any material proofs will likely be rejected as unconvincing. See Donnelly v. Donnelly, 405 N.J. Super. 117 (App. Div. 2009) (upholding the trial court’s rejection of the payor’s allegations that the case load at his law practice was deteriorating due to the payor offering no support for this claim outside of his own testimony).

2. Explain how your client has tried to address the situation: Even after the court has determined that a payor has legitimately lost his job or suffered an involuntary decrease in salary, the inquiry does not end. Rather, the court will inquire as to what steps the payor has taken to secure new employment or to address the reduction in income. The court will be unsympathetic with the employee who has lost his job and is waiting contentedly for a new job to knock on his door. The contempt the court has for payors who chose not to rectify the downturn in their financial position is aptly demonstrated by the trial judge’s choice words for the payor in Harris v. Harris, 235 N.J. Super. 434 (Ch. Div. 1989), overruled on other grounds by Ohloff v. Ohloff, 246, N.J. Super. 1 (App. Div. 1991):

The court finds that the defendant has no intention of finding substantial employment in his or any other field. This court finds that defendant has found his niche in this world, in that he is maintaining a high lifestyle without having to work for it. To use the vernacular, he has made it. This court finds that defendant is content to sit back and become a complete human parasite…permitting a succession of fiancées, friends and relatives to provide for him so as to enable him to live in and maintain a lifestyle commensurate with his self-imposed high standard of living, while his children are reduced to the status of virtual beggars. He professes love and concern for them, yet this court finds a complete lack of same. Defendant’s application for modification of child support is denied.

Id. at 441.

Similarly, in Arribi v. Arribi, 186 N.J. Super. 116 (Ch. Div. 1982) the court made clear that proving a legitimate decrease in income is not enough. Rather, the payor must show that he has actively sought to redress the situation and that he continues to do so:
“[O]ne cannot find himself in, and choose to remain in, a position where he has diminished or no earning capacity and expect to be relieved of or to be able to ignore the obligations of support to one’s family. We do not scold defendant for the loss of his previous job. What we do say is that this apparently able-bodied defendant cannot sit back and allow his child to go without support, while he somewhat complacently waits for a job only in his field.

Id. at 118.

In cases where the payor has been terminated from his job, the payor should provide a list of all employers to which he has applied since the termination. Copies of job applications should be attached as exhibits, together with call back or rejection letters from potential employers. Business owners who have suffered from decreased business should explain with specificity the steps they have taken to foster new business through advertisement, solicitation, and client incentives, or to decrease business expenses by making across the board cuts. Payors who were employed in a specific niche should explain the limitations on their employability and why they may not be attractive to various employers outside their given field. Moreover, in the event a payor totally abandons his prior field and changes careers, the payor must be ready to justify this career change as the best alternative under the circumstances, and only after attempting unsuccessfully to find employment in his prior field and at his prior income. See Storey v. Storey, 373 N.J. Super. 464 (App. Div. 2004) (holding that in cases where the payor has changed careers, the reasonableness and relative advantages of a career change must be considered in light of various factors, including, the reasons for the career change (both the reasons for leaving prior employment and the reasons for selecting the new job); disparity between prior and present earnings; efforts to find work at comparable pay; the extent to which the new career draws or builds upon education, skills and experience; the availability of work; the extent to which the new career offers opportunities for enhanced earnings in the future; age and health; and the former spouse’s need for support. Id. at 470-71.)).

3. Demonstrate how the change has affected your client: Regardless of how legitimate the decrease in income is professed to be, an application to reduce support will lose any chance of success if the applicant cannot show that his own lifestyle has been affected by the alleged change in circumstances. Judge’s will likely reject any inability to pay argument if the lifestyle of the payor has not been negatively affected in any way. Cries of poverty will fall on deaf ears when the professed pauper recently purchased a new Mercedes, continues to spend thousands of dollars each week at the country club, and is scheduled for a two (2) week cruise of the Mediterranean. In upholding the trial court’s denial of the payor’s request to decrease alimony in Donnelly, the Appellate Division agreed that the payor’s alleged financial distress was belied by his lavish lifestyle:

[A]s the judge perspicaciously recognized, the change in Gregory’s income, if true, was only one part of the calculus to be considered in ruling upon the motion. Equally important was the fact that despite Gregory’s assertion that changes in the areas of law in which he practiced has caused a reduction in income-Gregory had taken on considerable debt and adopted a lavish lifestyle inconsistent with the way his law practice was allegedly trending. Among other things, Gregory had purchased an expensive home burdened with a large mortgage, as well as a new, expensive car. The [trial] judge’s comments…focused on Gregory’s inequitable attempt to have Elizabeth and their children bear the brunt of the luxurious lifestyle Gregory adopted with his new wife in the face of his allegedly dwindling law practice and claimed inability to meet his existing support obligations. Rather than suggesting arbitrariness on the judge’s part, the judge’s comments exhibit a legitimate basis for denying the motion as well as good common sense and sound advice.

Donnelly v. Donnelly, 405 N.J. Super. at 129. See also Harris v. Harris, 235 N.J. Super. at 441 (rejecting the payor’s request to decrease his support obligation due to an alleged decrease in income because the payor “failed to provide proof that his circumstances changed for the worse” during the period his income allegedly decreased).

In light of the above, practitioners should ensure that their client’s Certification in support of a reduction in support provides as much detail as possible regarding negative changes to the applicants own lifestyle, which would go hand in hand with a reduction in income. Has the applicant had to list his home for sale? Give up family vacations? Pack lunch, as opposed to eating out? Forgo household repairs and regular automobile maintenance? Increase deficit spending and credit card debt? Less is not more in convincing a judge to reduce support when that reduction will necessarily impact upon the ability of the payee and/or the children to maintain their standard of living. Payors must demonstrate with specificity that they will be sharing in the burden occasioned by economic hardship.

4. Provide a reasonable alternative plan: Proving a prima facie case of changed circumstances is only the first hurdle a payor faces in successfully having his or her support obligation reduced. After payors prove the legitimacy of their decreased income, the judge must still determine what the appropriate reduction in support will be. The range of possible results is many, with suspensions, reductions and terminations of support all being possible outcomes.

All too frequently, applicants seeking a reduction in support simply make a request for a reduction and leave it to the trial judge to do all the work in determining the appropriate amount of any reduction. However, payors are more likely to receive a workable reduction, which will prevent subsequent court applications, if they outline a legitimate reduction plan. Indeed, in cases where the payor’s reduction in income appears relatively permanent, this plan should provide a proposed decrease in support, which is reasonable based on the payor’s new financial circumstances and which will result in a sharing of the financial burden between the payor and the payee. Prepare a spreadsheet, if necessary, showing the areas where both the payor and payee can cut discretionary expenses so as to preserve all income for necessary expenditures. Offer budgetary alternatives, such as a grandparent to watch the children, in lieu of a childcare provider, or hiring a weekly cleaning service as opposed to employing a full time domestic. In the event the immediate reduction is temporary, such as in the case where the payor has lost his job and is seeking new employment, the plan should also provide a reasonable period after which support will be reassessed.

The practice tips contained herein are offered to aid practitioners in preparing applications to reduce support due to a decrease in the payor’s ability to pay. However, these pointers should not be substituted for a fact specific inquiry into the case at hand and consideration of the specific steps which should be taken to demonstrate that a reduction in support is necessary. While these applications may take more time than the average motion, the time and expense spent on the front end will be justified by the financial relief which will result from a successful application.