By: John P. Paone, Jr.1

In 2022, there continued to be a noticeable downturn in reported Appellate Division opinions. In addition to the lingering impact of COVID-19, the record shortage of judges brought the Family Part to a crawl, with some vicinages suspending trials altogether. This backlog of our legal system is in large part responsible for the paucity of published cases. Another result of the legal backlog is that practitioners continue to resort to mediation and arbitration to move cases that they have been unable to move through the court system. As has been noted previously, while no one can dispute that resolving matters by way of Alternate Dispute Resolution (ADR) is a good thing, this process does not advance the case law.

In the end, 2022 had several important reported cases impacting the practice of family law. Without a doubt, the most significant case was the Supreme Court decision in Moynihan v. Lynch, which struck down a provision in the palimony statute that required the engagement of legal counsel to enter into a valid palimony agreement. Also of importance was the Appellate Division’s opinion in AAR v. JRC, which mandates that trial courts advise pro se defendants about their rights before proceeding with a domestic violence trial.

The following are my selections for the ten most important family law cases reported in 2022.

Moynihan v. Lynch, 250 N.J. 60 (2022)

Issue: Did the parties have an enforceable written palimony agreement notwithstanding the fact that the parties were not represented and advised by independent counsel when they entered into the agreement as required by the Statute of Frauds pursuant to N.J.S.A. 25:1-5(h)?

Holding: Yes. The written palimony agreement was valid since the attorney-review requirement in the Statute of Frauds was unconstitutional as it contravened substantive due process protections under Article 1, Paragraph 1 of the New Jersey Constitution. No other law in New Jersey conditions the enforceability of an agreement between private parties based on attorney review. Parties are also entitled to personal autonomy in order to make their own decisions without the compelled participation of an attorney.

Discussion: The parties, Kathleen Moynihan (hereinafter “Moynihan”) and Edward Lynch (hereinafter “Lynch”) met in 1997, during which time Moynihan served as a flight attendant and Lynch worked as a pilot for U.S. Airways. They were involved in a long-term marital-type relationship but never wed. During the beginning of their relationship, Lynch would occasionally sleep in Moynihan’s home as he had a home in New Hampshire and apartment in Philadelphia in which he divided his time between the two residences.

When Moynihan and her children moved to a new home in Bordentown in 2000, Moynihan made the down payment on the home which Lynch purchased with a mortgage and titled in his name. As time passed, Lynch moved into the Bordentown home and played a more active role in the Moynihan family. Lynch would regularly dine with Moynihan and her children, attend the after-school activities for Moynihan’s children, and spent a number of holidays with the family.

Lynch and Moynihan would share financial responsibilities with regard to the maintenance and upkeep of the home. Specifically, Moynihan initially paid the monthly mortgage and real estate taxes as well as other household expenses while Lynch paid for house improvements. After a period of time, Lynch began to provide Moynihan with approximately $1,000.00 per month to pay the mortgage and other expenses.

Lynch placed the title to the Bordentown home into a trust in 2007 and named Moynihan as the beneficiary upon his death. In 2013, he thereafter converted his ownership of the home into a joint tenancy with rights of survivorship, naming himself and Moynihan on the deed.

Sometime between 2012 and 2014, the parties entered into a handwritten agreement. The agreement stated, in pertinent part, that Lynch would pay off the mortgage on the Bordentown home, deed it over to Moynihan, pay her $100,000.00, and, within two years of vacating the home, pay the real estate taxes on the property for two years. Although the agreement was reduced to writing and signed by both parties, Lynch refused to abide by their written agreement, with the exception of paying the mortgage against the Bordentown home, after the parties severed their relationship in 2015.

Moynihan filed a complaint and subsequently an amended complaint in the Superior Court, Burlington, County, seeking enforcement of a written palimony agreement. In addition, Moynihan also sought enforcement of an alleged oral palimony agreement which she claims that the parties entered into prior to the Statue of Frauds, N.J.S.A. 25:1-5, being amended in 2010 to include subparagraph (h) which mandated that palimony agreements be reduced to writing and made with the independent advice of counsel.

Lynch responded to Moynihan’s complaint by denying the existence of an oral palimony agreement and stated that the written agreement was unenforceable since the parties did not have the advice of independent counsel before entering into the contract as required by N.J.S.A. 25:1-5(h).

During a six-day trial in the Family Part, the trial court heard testimony from Moynihan, her two daughters, and Lynch. Moynihan claimed that her relationship with Lynch was tantamount to a marriage as they operated like a family. Her two daughters viewed Lynch as a stepfather and a member of their household and family unit. Moynihan testified that Lynch expressed his love for her and that after Moynihan’s ex-husband filed an application to terminate his alimony obligation in 2011, Lynch assured Moynihan that she would not need the alimony because he would take care of her for the remainder of his life.

Moynihan also provided detail during her testimony as to the circumstances surrounding the existence of the written agreement. Moynihan testified that Lynch broached the subject of what he would do if their relationship came to an end. Moynihan further testified that when she asked Lynch as to whether they should make an appointment with an attorney, Lynch responded that there was no reason to see a lawyer and that he would follow through on his promises. Moynihan admitted that she signed the agreement freely and voluntarily in addition to getting it notarized.

Lynch’s testimony provided a contrasting view of his personal and financial relationship with Moynihan. Notably, Lynch declined to describe his eighteen-year relationship with Moynihan as a marital-like relationship and instead referred to it merely as a relationship which worked for the parties at that time. Lynch denied that he moved into the family home but admitted that he began to pay the mortgage and real estate taxes on the home starting around 2004. Lynch further denied that he promised to support Moynihan for life and that they would get by based on their combined finances.

Lynch also testified that he recalled signing the written agreement in 2014 but did not provide clear answers at trial as to whether he intended to be bound by the terms of the document. He testified that he knew Moynihan had feelings of financial insecurity and that the purpose of the written agreement was to put her concerns to rest.

Upon conclusion of the parties’ testimony, the trial court found Moynihan’s testimony to be much more credible than Lynch. However, because the parties did not comply with the attorney review requirement set forth in N.J.S.A. 25:1-5(h), the trial court dismissed Moynihan’s claim that she had an enforceable written palimony agreement. Furthermore, the trial court declared that Moynihan did not have a viable oral palimony agreement since there was no proof at trial that Lynch made any implied or express promise to support Moynihan for life prior to the 2010 amendment to the Statute of Frauds.

Notwithstanding the dismissal of the palimony claims, the trial court nonetheless concluded that the parties had a legally enforceable contract. The trial court compared the dissolution of the parties’ relationship to an orderly removal in a landlord/tenant action in which the written agreement constituted the orderly breakup of the parties setting forth their responsibilities and obligations.

Following the trial court’s ruling, both parties sought to appeal the decision before the Appellate Division. The Appellate Division determined, however, that the agreement, despite it constituting a palimony agreement, was unenforceable because the parties failed to comply with the attorney-review requirement of N.J.S.A. 25:1-5(h). It upheld the constitutionality of N.J.S.A. 25:1-5(h) finding that compelling attorney review of palimony agreements met the following criteria: (1) did not equate to a substantial impairment of a contract; (2) reasonably related to a significant and legitimate public purpose; and (3) advanced an appropriate legislative objective by protecting the rights of parties entering into palimony agreements.

The New Jersey Supreme Court granted Moynihan’s petition for certification. Among her numerous arguments, Moynihan contended that the attorney-review requirement substantially impaired a contractual relationship of two willing and informed individuals who seek to govern their own affairs without the burden of hiring counsel. Moynihan also contended that there is no logical explanation for imposing an attorney-review requirement exclusively for palimony agreement but not for other agreements.

On the other hand, Lynch asserted that the 2010 amendment to the Statute of Frauds did not violate the constitutional rights of Moynihan who should have known the requirements of the statute when entering into the written palimony agreement. He also submitted that Moynihan had the funds to retain counsel which does not entitle her to claim that the law applies unequally to her.

Amicus briefs were also filed by the New Jersey State Bar Association (“NJSBA”) and New Jersey Chapter of the American Academy of Matrimonial Lawyers (“AAML”) which mirrored many of the same arguments made by Moynihan. In particular, AAML highlighted the impact that the attorney-review requirement will have on partners with limited financial resources who are unable to afford legal counsel and that self-represented litigants comprise the majority of those who seek relief in non-dissolution proceedings.

In considering the competing arguments by the parties including those presented by the organizations who were amicus curiae, the New Jersey Supreme Court held that the attorney-review requirement in N.J.S.A. 25:1-5(h) was unconstitutional as it violated the substantive due process guarantees set forth in Article 1, Paragraph 1 of the New Jersey Constitution. As part of its reasoning, the Court made clear that the right of individuals to govern and manage their own affairs is an implicit guarantee of the New Jersey Constitution. However, by requiring the parties to retain counsel as a prerequisite to entering into a palimony agreement, it infringed on this right which would effectively be no different than the right of an individual representing themselves in a court of law. Despite reaching this decision, the New Jersey Supreme Court did not find that the attorney-review requirement violated the Contract Clauses of the United States and New Jersey Constitutions since the law did not retrospectively impair a preexisting contact as the parties entered their written agreement long after the effective date of N.J.S.A. 25:1-5(h).

The Court was guided by the fact that of all the private contracts in a family law context, only a palimony agreement requires that the parties secure the independent advice of counsel. Even premarital agreements under the Uniform Premarital and Pre-Civil union Agreement Act permit the parties to voluntarily and expressly waive, in writing, the opportunity to consult with independent legal counsel. The Court added that there was nothing in the legislative history of the statute to explain why only palimony agreements required attorney review.

The Court also explained that it was unable to ignore the financial implications of requiring a party to hire an attorney when entering in palimony agreements. It noted that the need to hire an attorney represents an unreasonable burden that a party may not wish to bear or simply cannot afford. While the Court acknowledged that the attorney-review requirement potentially serves as a protection against contracts being wholly one-sided or a product of overreaching, it found that this hurdle would almost certainly result in fewer palimony agreements and would prevent parties from being able to make personal and financial choices regarding their life without the obligation of having to afford legal representation. Accordingly, the Court found sufficient basis to enforce the written palimony contract negotiated and entered into by the parties.

Observation: Moynihan is a landmark case which eliminated the provision in the Statute of Frauds that parties must retain independent counsel when entering into palimony agreements finding that such a restriction was unconstitutional. Unfortunately, the Court did not address additional arguments which had been presented on appeal, including those which were raised by the New Jersey State Bar Association and AAML regarding the viability of equitable remedies such as partial performance and promissory estoppel to prevent a fraud. It is inevitable that the Court will need to address N.J.S.A. 25:1-5(h) within the context of cases where there is no written agreement but a long term relationship giving rise to legal and equitable remedies such as partial performance, unjust enrichment, quantum meruit, quasi-contract, equitable estoppel and fraud. See also C.N. v. S.R, 463 N.J. Super. 203 (Ch. Div. 2020) (utilizing the remedy of partition to overcome the Statute of Frauds.

Primmer v. Harrison, 472 N.J. Super. 173 (App. Div. 2022)

Issue: Was the palimony agreement that the parties entered into unenforceable and barred by the Statute of Frauds, pursuant to N.J.S.A. 25:1-5(h), due to the fact that the defendant was unrepresented by counsel at the time that the agreement was negotiated and executed?

Holding: No. Contemporaneous with the appeal in this case, the Supreme Court decided Moynihan v. Lynch, 250 N.J. 60 (2022), which struck down as unconstitutional the part of N.J.S.A. 25:1-5(h) requiring parties to a palimony agreement to receive the advice of counsel. Based on the fact that Moynihan established a new rule of law which determined that the statutory requirement of counsel for palimony agreements violated fundamental constitutional rights, the Appellate Division in this matter made the decision in Moynihan retroactive for all written palimony agreements. Ignoring the retroactive application of Moynihan would be improper since the defendant used the Statute of Frauds as a sword to bar enforcement of parties’ agreement despite the fact that both parties viewed the agreement as valid and abided by its terms for many years. Moreover, by declining to apply Moynihan to the facts of this case would be contrary to the parties’ conduct and frustrate their bargain.

Discussion: The parties began cohabiting in 1998 and their relationship ended in 2011. The parties did not have any children born of their 13-year relationship. The plaintiff had a position through a medical billing service earning approximately $50,000.00 per year. The defendant has a significantly higher income in connection with his debt collection law firm.

A written agreement was memorialized by the parties with the help of an attorney, Ira A. Cohen, who was a long-time friend of the defendant. He assisted the parties with the dissolution of their relationship but did not open a mediation file, hold a mediation session, or request the parties to sign a mediation retainer.

There was no discovery conducted by the parties nor was there any disclosure of assets by each side. As the plaintiff had concerns that she lacked the means to support herself, she discussed the situation with Cohen and another mutual friend. The plaintiff subsequently retained counsel and all future communications were directed between her attorney and Cohen.

Due to the plaintiff’s inability to receive any response from the defendant as to their ongoing issues, it was alleged by plaintiff’s counsel that Cohen informed him that he would be representing the defendant. As the parties continued to negotiate the agreement, Cohen ultimately faxed a handwritten message to the plaintiff’s attorney advising that the parties had renegotiated their agreement for the last time and had requested changes to the agreement.

A few days later Cohen sent a letter to plaintiff’s lawyer referring to the defendant as “my client” and communicating defendant’s wishes. This letter was resent the following day in which Cohen again referenced the defendant as his client and requested that plaintiff’s lawyer forward the agreement to him for his review with the defendant.

On September 1, 2011, Cohen reached out to plaintiff’s attorney in a letter following up about the status of the settlement agreement and that his client was prepared to provide the plaintiff with checks in satisfaction of the terms of the agreement. Two weeks later, Cohen provided the countersigned agreement from defendant along with defendant’s checks which were made out to the plaintiff.

Notably, the agreement included a severance clause upholding the remainder of the agreement even if a court declared a portion void. It also contained a provision which indicated that the defendant acknowledged that he has been advised of his right to obtain independent legal advice by counsel of his own selection but that he is giving up the right to have counsel review it by virtue of signing the agreement. Plaintiff’s attorney claimed that the provision about the defendant’s right to independent counsel was included in April 2011 during which time it had been plaintiff’s understanding that the defendant was representing himself.

The plaintiff filed a palimony complaint in the Family Part in November 2011 incorporating the signed settlement agreement. The Complaint was dismissed for reasons unrelated to this appeal.

The parties adhered to the terms of their agreement until 2017 with the exception of the plaintiff not paying her share of the down payment for a condominium. In July 2017, the defendant stopped paying financial support in the amount of $1,500.00 per month to the plaintiff and had a new attorney write a letter to the plaintiff contending that the agreement was null and void because the defendant was not represented by an attorney as required by N.J.S.A. 25:1-5(h).

In February 2018, the plaintiff filed a complaint in the Law Division seeking damages for breach of the agreement. The defendant asserted in his answer and counterclaim that he did not have advice of counsel in violation of the Statute of Frauds. The defendant alleged that while the plaintiff claimed that her only means of financial support was to sell inherited property, he later learned that she possessed over $400,000.00 in bank accounts and over $800,000.00 in retirement savings as of 2018.

Following the matter being transferred to the Family Part, the trial court denied each party’s motion for summary judgment finding that there was a material dispute of fact regarding the nature of the agreement, whether there was fraud, whether the role of Cohen was as a mediator or defendant’s attorney, and whether the defendant’s waiver of independent counsel was valid based on his status as an attorney. The trial court ultimately scheduled the matter for a two-day trial during which time both parties, plaintiff’s counsel, and Cohen gave testimony.

Defendant represented that Cohen was not retained as his attorney but rather served as a go-between who essentially acted as a mediator. He never signed a retainer with Cohen or paid him for representation. The defendant explained during his testimony that he decided not to hire an attorney because he was not looking to get involved in litigation and felt that the money would be better spent by attempting to reach an agreement.

When questioned during trial about the defendant being referenced in his correspondences as his client, Cohen testified that it was an error and he misspoke in that regard. Cohen claimed that the demands which were made in his letters used language which the defendant told him to write.

Plaintiff’s counsel testified that Cohen called her and said that he had been mediating the case and plaintiff needed counsel. She testified that after she drafted the agreement and forwarded a written correspondence to the defendant who never answered, Cohen contacted her and confirmed that he was representing the defendant. She described the tone of Cohen’s letter as adversarial who was vehemently advocating for a client.

At the conclusion of trial, the trial judge found the plaintiff’s version of events to be credible and determined that the signed agreement was enforceable and not barred by the Statue of Frauds since defendant continued to make monthly support payments to the plaintiff for six years as partial performance of the contract which was an integral part of the agreement. He further found that the Statute of Frauds was satisfied because the communications and conduct by Cohen led to the unavoidable conclusion that he provided independent counsel to defendant with regard to the agreement. As such, the trial judge found that the defendant was in breach of contract and awarded the plaintiff $108,300.00.

During the time that the defendant appealed this decision, the Appellate Division decided Moynihan v. Lynch which vitiated the requirement under the Statute of Frauds that parties receive advice of counsel for palimony agreements. The Appellate Division allowed the parties to file supplemental briefs in order to determine whether the holding in Moynihan should be made retroactive in this case or afforded pipeline retroactivity.

On appeal, the defendant argued in pertinent part that Moynihan should not be applied retroactively because the decision in that case focused on individuals who could not afford an attorney. He further claimed that Moynihan should not be given pipeline retroactivity because the new rule dispensing with the statutory requirement for counsel is not an expansion of the law and was utterly novel and unanticipated.

Upon consideration of the defendant’s legal arguments, the Appellate Division determined that Moynihan should apply retroactively and that the violation of the Statute of Frauds under N.J.S.A. 25:1-5(h) could not be used as basis to annul the parties’ agreement. The Appellate Division noted that applying Moynihan retroactively would not have an adverse impact on the administration of justice because the record did not reflect a substantial number of similarly situated cases in the pipeline which addressed this issue. Retroactivity was particularly appropriate here since a new rule of law was promulgated and it directly implicated a litigant’s constitutional right.

The Court further noted that to not apply Moynihan in this case would serve an injustice since the parties by their own conduct had sought to abide by the agreement for many years and to dissolve the contract entered into knowingly and voluntarily by the parties would frustrate their bargain, specifically what the Court sought to avoid. The Appellate Division further emphasized the point that it would be imprudent and shortsighted to reject consensual agreements in contentious family and personal matters that have been reached by the parties themselves.

Observation: “In sum, the holding in Moynihan applies retroactively to written palimony agreements reached prior to the Court’s Ruling, where such agreements are otherwise enforceable.” The importance of the Appellate Division’s opinion in Primmer cannot be understated insofar as it retroactively applied the Supreme Court’s ruling in Moynihan v. Lynch which eliminates the requirement under the Statute of Frauds that parties must have advice of independent counsel when negotiating and reviewing palimony agreements. In applying Moynihan v. Lynch, the Court did not need to reach the question as to whether Cohen was acting as the Husband’s attorney rather than as a mediator or whether the Husband, as a practicing attorney, still required independent legal advice in order to enter into a binding palimony agreement.

A.A.R. v. J.R.C., 471 N.J. Super. 584 (App. Div. 2022)

Issue: Did the trial court deprive the defendant of his procedural due process rights by failing to instruct the defendant as to his right to retain legal counsel and the consequences of a Final Restraining Order in connection with a domestic violence proceeding?

Holding: Yes. Procedural due process requires trial courts to apprise domestic violence defendants of the serious consequences and the civil penalties that may result from the entry of a Final Restraining Order, and the right to retain legal counsel in order to properly defend against the allegations.

Discussion: The plaintiff obtained a Temporary Restraining Order (“TRO”) against the defendant based on allegations that the defendant assaulted her by punching her in the mouth and shoving her against his car. Although this account was corroborated by the plaintiff’s boyfriend who witnessed the incident, the defendant filed a cross-complaint against the plaintiff alleging that he was a victim of domestic violence.

Neither party was represented by counsel at trial. Prior to the beginning of the final hearing, the trial judge asked the defendant if he was ready to proceed. While the defendant confirmed that he was ready to proceed with trial, the trial judge did not inform the defendant of his right to retain counsel or of the serious consequences that could arise if a Final Restraining Order (“FRO”) was entered against him.

Both parties including the plaintiff’s boyfriend testified at the final hearing. Following the conclusion of the testimony, thorough findings of fact were made by the trial judge who found that a FRO was warranted in the plaintiff’s favor and also dismissed the defendant’s domestic violence cross-complaint. It was only after the hearing concluded that the trial judge explained to the defendant the consequences of the FRO, in particular that the defendant would be required to submit to fingerprinting and photographs of him would be included in the New Jersey Domestic Violence Registry.

After the trial judge addressed the consequences of the FRO, the defendant requested the need for an attorney to represent him. Despite the defendant’s statements, the trial judge explained that the hearing already took place and a decision had been reached. Thereafter, the defendant filed an appeal in which he sought to vacate the FRO based in part on the trial judge’s failure to provide him with proper instructions about the consequences of a FRO and his right to an attorney.

Following the appeal, the Appellate Division vacated the FRO and remanded the matter back to the trial court for a new trial. In reaching this determination, the Appellate Division noted the importance of defendants in being afforded a meaningful opportunity to defend against the allegations and accusations in a domestic violence matter. The Appellate Division made clear that while there is no automatic right to a defendant being represented by an attorney in a domestic violence proceeding, the trial court must safeguard the defendant’s rights by ensuring that they understand that they have a right to retain legal counsel and a reasonable opportunity to retain an attorney.

Moreover, the Appellate Division observed that in a reported case it had decided nearly a decade earlier, D.N. v. K.M., 429 N.J. Super. 592 (App. Div. 2013), the accused party in a domestic violence matter had voluntarily relinquished their right to counsel where the trial judge asked her the following: 1.) whether she wanted the opportunity to retain counsel; 2.) whether she understood what would happen if a FRO was entered; and 3.) whether she knew that she could be subject to civil penalties and other potential consequences.

The Appellate Division found that there was a clear difference between what occurred in D.N. versus what took place in this matter. In the present matter, the Appellate Division was unable to determine whether the defendant would have waived his right to counsel if properly advised about the consequences of a FRO before the final hearing commenced. Had he at least been advised by the trial court about the consequences arising from a FRO such as being placed on a domestic violence central registry, he would have had a more meaningful basis to decide whether to retain counsel. Insofar as these instructions were not given, the defendant was denied procedural due process which mandated that the FRO be set aside and the matter be remanded for a new trial.

Observation: A defendant’s right to procedural due process is an essential safeguard in domestic violence proceedings, in particular as many defendants who are accused of domestic violence are self-represented when appearing at a FRO hearing. By way of example, although domestic violence proceedings are civil matters in which defendants are not automatically entitled to legal representation, they must be given the opportunity by the trial court to retain an attorney, if they so choose, in order to prepare a legitimate defense at a FRO hearing. A defendant in a domestic violence action must also be apprised by the trial court of the potential ramifications that may arise in the event that a FRO is entered including statutory fines and inclusion in the New Jersey Domestic Violence Registry. Here, the trial court in A.A.R. violated the defendant’s procedural due process by failing altogether to advise him of his right to seek counsel and by not explaining to him the serious legal consequences of a FRO until after the hearing took place and the FRO was entered. Although A.A.R. is not the first reported opinion by the Appellate Division that has addressed the import of procedural due process, it serves as a cautionary tale as to what can happen when defendants are not provided with basic information so that they have an opportunity to prepare a meaningful defense to a domestic violence complaint.

Although conduct in violation of the Prevention of Domestic Violence Act is a civil infraction, over the years the Legislature has increased the penalties and sanctions against defendants (financial penalties, photographs and fingerprinting to be entered in a Central Registry, familial relationships being fundamentally altered, the potential loss or interference with employment opportunities). We have indeed come a long way from the time of “in house restraints” which were regularly imposed at the time the Act first came into being. And therefore it is appropriate that pro se litigants (many of whom are entering the court system for the very first time on 10 days or less notice) be advised of their rights before proceeding. As a result of A.A.R., it would appear that the AOC needs to embark on a training campaign to ensure that Family Court Judges adequately and uniformly provide the requisite information to litigants before each and every domestic violence trial.

A.A.R. does not address the question of whether the holding will be given retroactive application, such that defendants with FRO’s who did not receive procedural due process will now be able to vacate the FRO’s issued against them. Even if retroactive application is not given such as to vacate the FRO, question remains as to whether an FRO entered without procedural due process will be treated the same in subsequent contempt violations (where punishment is enhanced due to the initial finding). In that regard see State v. Laurick, 222 N.J. Super. 636 (Law Div. 1987) where a defendant convicted of a driving while intoxicated offense a second time was treated as a first time offender as a result of the Court’s failure to advise him of his right to counsel during his first trial.

A.A.R. would also appear to dictate that any defendant appearing for the initial domestic violence hearing can now obtain an automatic adjournment just by advising the Court of his or her desire to retain counsel.

D.M.C. v. K.H.G., 471 N.J. Super. 10 (App. Div. 2022)

Issue: Did the trial court’s decision to appoint the parties’ children as co-guardians for the defendant based on the recommendation of the Guardian Ad Litem render the Property Settlement Agreement (“PSA”) unconscionable, thereby meeting the exceptional circumstances requirement to vacate the PSA under R. 4:50-1?

Holding: No. There was no showing by the defendant of any impropriety by her children as co-guardians to warrant vacating the divorce decree and PSA under R. 4:50-1(f). Specifically, the defendant produced no objective evidence to support her claim that the children were under the financial control of the plaintiff and acted against her interests in such a way that would have led to an unjust outcome in the divorce. Rather, the evidence demonstrated that the children worked in collaboration with the GAL and defendant’s matrimonial attorney in order to control legal costs and to reach a reasonable resolution of the litigation.

Issue: Were the terms of the PSA grossly unfair and inequitable including but not limited to an alimony buyout and a disproportionate division of the marital assets in the plaintiff’s favor in order to establish unconscionability and to set aside the PSA under R. 4:50-1?

Holding: No. There was no unjust result stemming from the terms of the PSA itself that would prove the settlement to be unconscionable. The payout of the equitable distribution and alimony was fair and appropriate considering the parties’ ages, needs, lifestyles, and most importantly, the defendant’s ongoing incapacity at the time of the settlement.

Discussion: The plaintiff, D.M.G. (hereinafter “Husband”), filed a complaint for divorce against the defendant, K.H.G. (hereinafter “Wife”), in April 2016 seeking to dissolve their marriage of thirty-one years. The Husband was the owner of a tavern along with other businesses and the Wife was employed as a guidance counselor and was vested in the Teachers’ Pension and Annuity Fund. Since 2000, the Wife has been diagnosed with a myriad of mental health ailments which include but are not limited to bipolar disorder and schizophrenia.

In September 2016, a consent order was entered which appointed Diana L. Anderson as the Wife’s GAL. The consent order provided the GAL access to all information regarding the Wife and provided her with a six-month review of the Wife’s ongoing situation. There was also language memorialized in the consent order which gave the Wife the right to revoke the consent of the GAL’s appointment.

The trial court entered a pendente lite order in February 2017 which awarded the Wife $4,100.00 per month in pendente lite financial support. A subsequent order was entered in April 2017 allowing the GAL to make any and all financial decisions for the Wife and allowing the GAL to attend all court proceedings on the Wife’s behalf. The April 2017 order also directed the Wife to undergo psychiatric testing and for an account to be opened by the GAL for deposit of the Wife’s pendente lite funds and Social Security Disability benefits.

The GAL thereafter filed an Order to Show Cause in the Probate Part asking the court to grant a judgment of guardianship appointing the parties’ two adult children as co-guardians for the Wife. Based on medical records and interviews, the Probate Part judge determined that the Wife was incapacitated as she was incapable of managing her own affairs and ordered the parties’ children to serve as permanent co-guardians and to participate in the divorce proceedings on the Wife’s behalf.

In October 2017, the Family Part judge entered an order denying the Husband’s request to reduce pendente lite support based on the Wife’s incapacitation and costs for her care. The trial judge denied the Wife’s request for counsel fees and expert fees as the costs incurred by the Wife matrimonial attorney and forensic expert were deemed to be excessive. The trial judge further noted that the decision for continued litigation at the expense of the marital estate should be left to the parties’ children as co-guardians.

The case settled on January 25, 2018 and the GAL was dismissed the same day. The PSA required the Husband to continue paying $4,100.00 per month in pendente lite support until the sale of the marital residence. The Wife also received a tax-free alimony buyout in the amount of $61,500.00 which was based in pertinent part on the Husband having a 2016 cash flow of $91,731.00 as determined by the Husband’s forensic expert and the Wife having an annual pension income of $36,432.00 and Social Security Disability income of $23,604.00 annually. The PSA also contained a mutual alimony waiver which was non-modifiable.

As for equitable distribution, the PSA stated that the Husband owned fifty-two percent of the tavern and the Wife was awarded thirty percent of its value. There were also three loans receivable in which the Husband would retain the monthly payments on the first note to pay the costs of the marital residence pending its sale with an equal distribution of the note and interest thereafter until a balloon payment was due. The Wife received fifty percent of the principal balance of the second note and thirty percent of the value of the third note in consideration for the Husband retaining the loans. Attached to the PSA was an equitable distribution schedule prepared by the Husband’s expert which set forth the value of each asset which showed an equal distribution of $919,789.00 to each party.

The PSA further included a provision for an irrevocable trust which designated the Wife as beneficiary in order to privately pay for the Wife’s long-term care. The term of the trust was for a minimum period of sixty months in which the children were appointed as trustees and named as remainder beneficiaries.

In February and April 2019, the Wife obtained evaluations from two doctors who were different than those who evaluated her at the time that the guardianship complaint was filed. She also obtained a third evaluation in September 2019 by a doctor who previously determined that she was incapacitated. The doctors all concluded that the Wife was able to manage her own affairs and that she was no longer a candidate for guardianship. Accordingly, in December 2019, the Probate Part judge terminated the guardianship and declared the Wife to be competent.

In November 2020, the Wife filed a post-judgment motion seeking in relevant part to vacate the judgment of divorce and PSA. The Wife contended that the children should not have been involved in her divorce as co-guardians because they were not neutral parties and were influenced by the Husband based on the outcome of the settlement and the assets that they stood to inherit.

The Wife also claimed that the alimony and equitable distribution terms were grossly inequitable. With regard to alimony, the Wife contented that the income relied upon in the Husband’s Case Information Statement (“CIS”) was low and the amount of alimony was predicated on a cash flow analysis prepared by the Husband’s forensic expert. The Wife also believed that she did not receive an equal division of the marital assets insofar as the Husband was undervaluing marital assets and improperly excluded interest from the equitable distribution payout.

The Husband in opposition to the Wife’s post-judgment application explained that there was no financial influence between him and the children. The parties’ daughter had testified that she became a guardian to protect the Wife’s financial interests and had even terminated the Wife’s first attorney during the divorce action because she believed that the attorney had been taking advantage of the Wife by charging her for too many calls, texts, and emails in her manic and paranoid state. The Husband also produced a certification from the GAL that she worked alongside the co-guardians in helping to create an irrevocable trust fund for the Wife.

As for the financial terms of the PSA, the Husband maintained that there was no overreaching or unfairness during the negotiation process. The Husband explained that his CIS was accurate and that the income information was derived from the parties’ tax returns. The equitable distribution scheme was based on formal appraisals and evaluations and was devised in a way which would protect the Wife from her own unstable behavior.

Based on the circumstances, the trial judge did not find that there was any unconscionability surrounding the negotiation and execution of the PSA. It was clear that the alimony buyout was a product of negotiations since the Husband was reaching retirement age. The trial judge noted that there was nothing manifestly unfair with the equitable distribution terms as the distribution amount was nearly equal and a mere disagreement of the numbers by the Husband’s expert was not a basis to undo the settlement. The trial judge also declared that the Wife’s return to competency was not sufficient grounds to set aside the agreement since there was evidence that she could relapse.

The Appellate Division affirmed the ruling of the trial court in all respects in determining that there was no inequity or unconscionability regarding the comprehensive settlement which would be required in order to set the PSA aside under R. 4:50-1. Before addressing the merits of the Wife’s appeal, the Appellate Division observed that unconscionability exists when there is overreaching or a disparity in bargaining power between the parties or such patent unfairness that no reasonable person not acting out of compulsion or necessity would accept its terms.

The Appellate Division concurred with the trial judge in finding that there was no sufficient showing by the Wife that the children who were her co-guardians were under the Husband’s financial control or were acting contrary to her best interests. The Appellate Division noted that many of the Wife’s arguments and statements were self-serving and there was no evidence to persuade the Appellate Division that the parties’ children engaged in impropriety in the divorce process or otherwise should not have been appointed. It was clear that the GAL was also a competent attorney who worked in tandem with the children as co-guardians in order to take prudent measures to minimize legal fees and expenses and reach a satisfactory resolution of the matter.

The Appellate Division also determined that there was also no manifest injustice regarding the terms of settlement. Since the Husband was retaining the three loans receivable, he was also assuming the risk associated with collecting the loans which would explain why the division of these assets were not accorded a 50/50 split in the PSA. Regardless, the Appellate Division added that the Wife ended up receiving one-half the total value of the marital assets.

As for the mutual waiver of alimony in the PSA which was in exchange for a non-taxable buyout payment made by the Husband to the Wife, the facts of the case supported this agreed upon financial arrangement. Based on the parties’ advanced ages and the fact that they would be supporting separate households, the Appellate Division agreed with the trial judge that the buyout was a product of compromise. The PSA that was entered into between the parties also contemplated that the Wife would receive long-term care due to her psychological issues which would justify the alimony buyout payment as well as the establishment of the irrevocable trust which was part of the equitable distribution terms.

There was also no basis to vacate the PSA based on the Wife’s sudden improvement in her mental health thereby allowing her to manage her own affairs and finances. The Appellate Division explained that equitable distribution provisions are not modifiable based on a substantial change in circumstances. Furthermore, the Appellate Division was guided by the enforceability of the anti-Lepis clause in the PSA with regard to alimony in which the clause could only be declared invalid if the agreement is found to be unreasonable. Here, it was readily apparent based on the totality of the circumstances, which included the ages, needs, lifestyles, and equitable distribution provisions, that the Wife’s ability to support herself would not be substantially impaired to warrant vacating the anti-Lepis clause.

Observation: Proving that a settlement agreement is unconscionable and thereby unenforceable is a high standard for any litigant to meet in a family law matter. That same premise holds true in the D.M.C. opinion. In D.M.C., the Appellate Division defined substantive unconscionability as being so one-sided that it shocks the Court’s conscience and an agreement so unfair “no reasonable person…would accept.” Here, no evidence was proffered by the Wife that there was any clear misconduct or impropriety by her children who were serving as her co-guardians or by the Guardian Ad Litem who was in regular communication with the children which would rise to the level of unconscionability. Moreover, the Wife’s argument that the terms of the MSA, in particular alimony and equitable distribution, were unconscionable was unsupported by the record in the trial court. A key aspect to the case that also weighed in favor of the MSA being declared valid was that the alimony buyout which was negotiated during the Wife’s incapacity took into consideration the equitable distribution scheme in addition to the parties’ ages, their separate household, and the need for long-term care. D.M.C. is a perfect example of how settlement agreements are integrated agreements which embody a series of compromises by two parties which may not otherwise be ordered by a court if the case went to trial. Thus, the fact that one party may be disenchanted with an agreement and believes that they may have gotten a bad deal will not win the day in court when proving unconscionability.

The buy-out of alimony and the anti-Lepis waiver provisions of the agreement never could have been ordered by the court if the matter were tried. Nevertheless, the court did not find these provisions uncommon in settlement agreements and they were not a basis to find the settlement agreement to be unconscionable.

Kopec v. Moers, 470 N.J. Super. 133 (App. Div. 2022)

Issue #1: Did the trial court err when it determined that the Law Division, not the Chancery Division, Family Part, was the appropriate forum to hear applications to collect unpaid legal fees against former matrimonial clients?

Holding #1: No. Contractual enforcement claims to collect unpaid legal fees do not arise out of a family or family-type relationship. Although the Appellate Division previously held in Giarusso v. Giarusso, 455 N.J. Super. 42, 55 (App. Div. 2018) (decided May 29, 2018) that an attorney may obtain a judgment for unpaid legal fees in the underlying divorce action instead of the Law Division, Giarusso was decided before Rule 4:3-1(a)(3) (effective September 1, 2018) was amended to provide that other than those actions listed in the Part V Family Part rules, the only other cases to be heard in the Family Part must be specifically referenced in Rule 4:3-1(a)(4). To be clear, collection actions for unpaid legal fees are not included in the Part V Family Part rules or in Rule 4:3-1(a)(4).

Issue #2: Did the trial court err when it determined that the petitioner firm was not entitled to an entry of a judgment for unpaid legal fees?

Holding #2: No. The firm’s certifications in support of its Motions did not address all of the factors enumerated in RPC 1.5(a), addressing the reasonableness of attorney’s fees. Specifically, the firm failed to address the outcome of every Motion filed, the fee customarily charged in the locality for similar legal services, the reputation and ability of the lawyer or lawyers who performed the services, and why the amount of time expended was reasonable and necessary.

Issue #3: Did the trial court err when it refused to enforce the binding arbitration provisions in the petitioner firm’s retainer agreement?

Holding #3: No. Pursuant to Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 435-36 (2014), a binding arbitration clause must make mention that the consumer is “waiving their right to seek relief in Court.” In addition, pursuant to Kernahan v. Home Warranty Administrator of Florida, Inc., 236 N.J. 301, 308 (2019), a binding arbitration clause cannot contain language that is “debatable, confusing and contradictory – and, in part, misleading” which would negate a “finding of mutuality of assent to form an agreement to arbitrate.” In this consolidated case, the trial court determined that the firm’s arbitration provisions were vague, confusing, misleading, and failed to satisfy the requirements of Atalese and Kernahan.

Discussion: Between 2015 and 2017, the Weinberger Divorce & Family Law Group, LLC (“the firm”), filed ten Motions in the Chancery Division, Family Part in four different counties (Sussex, Union, Morris, and Burlington) to enforce the terms of its retainer agreement to obtain judgments against its former clients for unpaid fees, or alternatively, to compel the former clients to submit to binding arbitration to resolve the parties’ fee disputes. All of these Motions were denied because they were (1) improperly filed in the Chancery Division, Family part instead of the Law Division, (2) the firm’s Certifications failed to address all of the factors in RPC 1.5 (a) for purposes of determining the reasonableness of attorneys’ fees, and (3) the arbitration provisions of the firm’s Retainer Agreement failed to provide clear and unambiguous language regarding their clients’ waiver of their respective rights to seek relief in Court in violation of Atalese and Kernahan. After the firm’s Motions for Reconsideration were subsequently denied in 2018, the firm appealed.

The Appellate Division heard ten one-sided appeals back-to-back and consolidated the cases for the purpose of writing a single opinion. Ultimately, the Appellate Division affirmed the trial court’s decisions in each of the ten cases. With regard to the issue of improper forum, the Appellate Division determined that while applications for attorneys’ liens pursuant to N.J.S.A. 2A:13-5 are appropriately venued in the Chancery Division, Family Part, applications for judgments for unpaid attorneys’ fees are not and should be filed in the Law Division. The Appellate Division recognized that this determination conflicts with and overturns its prior determination in Giarusso (permitting attorneys to file petitions in the underlying Family Part action to obtain a judgment against clients for attorneys’ fees), but reasoned that the Court Rules were amended to preclude this practice after the Giarusso case was decided. Specifically, the Appellate Division explained that in light of the 2018 amendment to Rule 4:3-1(a)(3), which sets forth the parameters for actions cognizable in the Family Part, only certain case types, aside from those provided in the Part V Family Part rules, are to be heard in the Chancery Division, Family Part “as specified in Rule 4:3-1(a)(4).” The Appellate Division further made clear that judgments against clients for attorneys’ fees are not actions arising out of a family or family-type relationship and, therefore, they are not included in the Part V Family Part rules and are not otherwise provided in Rule 4:3-1(a)(4).

Notwithstanding the forum issue, the Appellate Division determined that the entry of a judgment for unpaid legal fees could not be granted in all of the underlying cases because the firm’s summary judgment Motions were defective, both procedurally and as a matter of law. First, the firm’s summary judgment requests were procedurally deficient because the firm failed to file a statement of material facts with its applications, as required by Rule 4:46-2(a). Second, as a matter of law the Appellate Division could not grant entry of a judgment for unpaid legal fees because the firm’s certifications in support of its Motions did not address all of the factors enumerated in RPC 1.5(a), addressing the reasonableness of attorney’s fees. Specifically, the firm failed to address the outcome of every Motion filed, the fee customarily charged in the locality for similar legal services, the reputation and ability of the lawyer or lawyers who performed the services, and why the amount of time expended was reasonable and necessary. Because the firm failed to establish the reasonableness of the fees requested, the Appellate Division was persuaded that the trial court properly denied the firm’s requests for judgments against its former clients for unpaid fees.

With regard to the firm’s request to enforce the binding arbitration provisions in its retainer agreements, the Appellate Division focused on paragraphs 15 and 17 of said documents. Paragraph Fifteen is titled “Attorney Withdrawal,” and states:

If the firm chooses not to exercise its option to withdraw in the event of any defaults to the Agreement, the firm does not waive its right to enforce any and all provisions of this Agreement. If it becomes necessary to bring a lawsuit for collection of the amounts due us under this Agreement, you will also be responsible for our court costs and reasonable attorney’s fees.” (Emphasis added).

Paragraph Seventeen is titled, “Arbitration of Differences Between the Client and the Firm,” and provides:

You agree that should any dispute between you and the firm arise as to its representation of you, the matter shall be submitted to binding arbitration. As such, you agree to file the applicable papers with the appropriate Fee Arbitration Committee within 30 days of your receipt of a Pre-Action Notice pursuant to Rule 1:20A-6 in order to have such issue resolved in that forum. Should you fail to submit the fee dispute to fee arbitration within the specified time, or should the Fee Arbitration Committee refuse to accept jurisdiction, or the differences between you and the firm involve a matter other than fees and costs, you or the firm may submit the dispute to binding arbitration governed by the New Jersey Uniform Arbitration Act, N.J.S.A. 2A:24-1 et seq…Signing of this Agreement will be deemed your consent to the method of alternative dispute resolution set forth in this Section, and constitutes a waiver on your part and on the part of the firm to have such dispute(s) resolved by a court.(Emphasis added).

The Appellate Division further focused on the fact that the firm sent each client a pre-action notice to Rule 1:20A-6, which explained that if any outstanding fees were disputed, the client “ha[d] the opportunity to file for an arbitration hearing” with the District Fee Arbitration Committee and further advised that if the firm did not receive notice that the client requested arbitration, it would “have no alternative but to file a Complaint for legal fees and costs outstanding in [thirty] days.”

When determining the enforceability of the arbitration provisions contained in the firm’s retainer agreement, the Appellate Division explained that there must be “mutual assent” to arbitrate, which can only be present if the parties have an understanding of the terms to which they agreed. Specifically, both parties need to understand that arbitration is a substitute for the right to have one’s claim adjudicated in a court of law and what the distinctions are between the two forums. The Appellate Division discussed that because the retainer agreements in the consolidated case “do not explain what arbitration is or how arbitration is different from a proceeding in a court of law” it is unenforceable, as determined in Atlease.

In addition, the Appellate Division explained that these arbitration provisions were debatable, confusing and contradictory – and, in part, “misleading” because paragraph fifteen of the retainer agreement talks about the firm “initiating suit” for fees, but then paragraph seventeen provides that the firm and the client shall submit all issues to binding arbitration. Likewise, the Appellate Division proffered that paragraph seventeen of the firm’s retainer agreement, mandating that its clients initiate fee arbitration pursuant to Rule 1:20A-6, is contrary to the Rule itself, which provides that it is the client’s right and decision to go to fee arbitration. This contradiction was only furthered by the language provided in the pre-action notice. Moreover, the Appellate Division opined that paragraph seventeen also contains confusing language because it refers to an alternative forum for binding arbitration pursuant to the New Jersey Uniform Arbitration Act, without explaining the difference between the two types of arbitrations. For these reasons, the Appellate Division determined that the language did not comport with the requirements enumerated in Kernahan.

Observation: After Kopec, the holding in Giarusso, permitting attorneys to file a petition in the underlying Family Part action to obtain a judgment against a client for attorneys’ fees, is no longer good law. These actions must now be filed in the Law Division, which is unfortunate for two reasons. First, it is preferable for the judge who presided over the underlying action to decide the fee dispute. That is the judge who understands the work needed to be performed in the matter and whether the case was over litigated, not a judge (or jury) in the Law Division who knows nothing of the case. In addition, proceeding in the underlying Family Part may have served as a prophylactic against the knee jerk malpractice action which is frequently filed in the Law Division in response to a simple collection suit, but now this possible safeguard for family law attorneys has been terminated. If possible, the best course of action is to file for an attorneys’ lien for unpaid fees pursuant to N.J.S.A. 2A:13-5 in the Family Part while the divorce case remains active.

Practitioners looking to add an arbitration provision in their retainer agreements must be mindful of Delaney v. Dickey, 244 N.J. 466, 472-73 (2020), where attorneys are required to “discuss with the client the basic advantages and disadvantages of a provision in a retainer agreement that mandates the arbitration of a future fee dispute or malpractice claim against the attorney.” As made clear in Kopec, the written arbitration provisions must be unambiguous and specifically state what arbitration is and how arbitration is different from a proceeding in a court of law.

Finally, it is incongruent to require litigants to enter into binding arbitration and at the same token reference Rule 1:20A-6 which provides for arbitration only at the election of the litigant.

Devers v. Devers, 471 N.J. Super. 466 (App. Div. 2022)

Issue #1: Did the trial court’s mislabeling of an order as being “without prejudice” and the wife’s subsequent filing of a Motion for Reconsideration out of time preclude the wife from having her appeal adjudicated on the merits?

Holding: No. The wife’s misunderstanding about the inclusion of without prejudice in the trial court’s order does not procedurally bar her appeal or render it fatal. To bar the wife’s appeal because of an honest mistake that the “without prejudice” designation in the order meant that not all issues were fully resolved would be contrary to the policies of substantial fairness and justice.

Issue #2: Did the trial court erroneously conclude that it lacked subject matter jurisdiction to determine whether the wife was entitled to equitable distribution of an investment account which was governed by a federal statute?

Holding: Yes. State courts have concurrent jurisdiction along with federal courts in order to address the marital division of an account that may be regulated by federal law. The trial court should have rendered findings regarding the nature of the account and whether the wife had an equitable interest in the account or whether the contents of the account belonged to non-party investors.

Discussion: The plaintiff (hereinafter “wife”) filed a complaint for divorce in 2009 to dissolve her nearly 23-year marriage to defendant (hereinafter “husband”). The principal issue in the parties’ divorce related to the equitable distribution of a hedge fund that was managed by the husband which included multiple investment groups located throughout the United States and Cayman Islands. The hedge fund began winding up its affairs in 2002 and approximately $1,500,000.00 was transferred into an account owed by Gauss, LLC. in which the husband is the sole member.

Following a matrimonial trial spanning 34 non-consecutive days over three calendar years, the parties entered into a settlement agreement which resolved all issues with the exception of the wife’s equitable distribution claim to the Gauss account. A plenary hearing was thereafter scheduled by the trial court to determine whether the account was a marital account or an account which consisted of funds belonging to investors.

After conducting a three-day plenary hearing, the trial judge did not resolve the factual dispute about the Gauss account other than to conclude that the court lacked subject matter jurisdiction to determine the true nature of the Gauss account. The judge’s January 16, 2020 opinion and accompanying order denied the wife’s equitable distribution claim without prejudice. As part of the order, the trial court also denied the wife’s summary judgment motion without prejudice which she had filed prior to the plenary hearing to determine the Gauss account to be a marital asset.

The wife did not move for reconsideration of the January 2020 Order until three months after it was entered. The trial judge denied the reconsideration motion in concluding that the January 2022 Order was a final order and that the wife’s reconsideration motion was untimely. The trial court relied on the procedural requirements of R. 4:49-2 (altering or amending final orders) in arriving at its decision. Based on this result, the wife filed a notice of appeal on August 14, 2020 seeking review of the January 16, 2020 Order and the July 16, 2020 Order that denied reconsideration.

As a preliminary matter, the Appellate Division found that notwithstanding that the trial judge intended the January 2020 Order to be a final order rather than an interlocutory order, it would be unfair and unjust to dismiss the wife’s appeal as being time barred since the trial judge’s order unintentionally trigged doubt about its finality. Specifically, the Appellate Division observed that the trial judge denied the wife’s equitable distribution claim for lack of subject matter jurisdiction but also stated the denial was “without prejudice,” giving the appearance that the decision was not a final adjudication on the merits and that the wife’s claims may be reinstated in the same action.

The Appellate Division reasoned that the trial judge’s declaration of “without prejudice” was not meant to suggest that the Gauss account dispute would continue to be entertained in the trial court but rather, that it did not preclude the wife from asserting the same issue in another forum. However, the Appellate Division noted that to not remedy this ambiguity would produce a result that is wholly foreign to the policies of fairness and justice which lies at the heart of New Jersey rules of procedure. Accordingly, the Appellate Division found that there was adequate basis to consider the merits of the wife’s argument regarding the January 16, 2020, Order.

The Appellate Division also made clear that the trial court’s determination that it did not have subject matter jurisdiction to address the nature of the Gauss account was erroneous. Although the trial court relied on a federal statute, the Investment Advisers Act, which grants federal courts jurisdiction for all suits in equity and law which fall under the statute’s umbrella, the Appellate Division observed that the trial court also ignored the part of the federal statute which specified that the United States has jurisdiction concurrently with State and Territorial courts. Thus, Appellate Division found that a remand was warranted in order for the trial court to adjudicate all issues regarding the Gauss account and to resolve all evidentiary disputes that arose during the plenary hearing.

Observation: Every day the Family Court enters Orders “without prejudice” calling into question exactly what that means. Does it mean:

A) Not an adjudication on the merits;

B) That the dismissed claim has not been finally resolved and may be reinstated in the same action;

C) That dismissal does not bar reinstitution of the same claim in a later action; or

D) That the dismissed claim has not been finally or fully considered.

In this case, the trial court intended to say that the claim was denied in the Family Court on jurisdictional grounds without prejudice to the merits of the claim if filed in the appropriate forum. And as it turns out, the trial court got it wrong on both scores as the Appellate Division found that the Family Court did have jurisdiction and that the framing of the Order “unintentionally triggered doubt about finality.”

Steiner v. Steiner, 470 N.J. Super. 112 (App. Div. 2021)*

Issue #1: Did the trial court abuse its discretion in bifurcating the divorce proceedings by ordering that a first trial be conducted to determine whether a valid cause of action for divorce existed and thereafter, if necessary, ordering a second trial to be conducted to adjudicate the parties’ unresolved equitable distribution issues?

Holding: No. Although bifurcation of issues in a divorce action is unusual, there was good cause for the Court to bifurcate the grounds for divorce from the relevant financial issues in the instant matter. The parties were elderly, and it would not have been in the interests of judicial economy to engage in prolonged discovery or a trial on a host of economic issues that would have ultimately been rendered moot if the cause of action for divorce was not established.

Issue #2: Did the trial judge err in finding that the wife had proven by a preponderance of the evidence that there were irreconcilable differences between the parties which led to an irreparable breakdown of the marriage?

Holding: No. The fact that there was an unsuccessful attempt at reconciliation while the parties’ divorce matter was ongoing did not preclude the trial court from concluding that irreconcilable differences existed. The trial judge’s credibility determination based on the parties’ testimony that the wife was not pressured or unduly influenced in seeking a divorce was also entitled to deference in concluding that there were irreconcilable differences.

Issue: Did the trial court commit error by awarding counsel fees to the wife based on the husband’s bad faith opposing the wife’s cause of action for divorce?

* Approved for publication in 2022

Holding: Yes. The bad faith of a litigant does not arise merely because a litigant failed at trial on the merits or because a factfinder sees the evidence differently than a litigant. Here, there were significant fees expended by the wife in order to prove her case which suggests that the husband’s actions in contesting the cause of action were legitimate. Thus, there must be a more compelling showing of bad faith in order to sustain an award of counsel fees.

Discussion: The thrust of this case involves the bifurcation of the grounds for divorce separate and apart from the financial aspects of the case. By way of brief background, the parties were married in 1955 in which the plaintiff (hereinafter “wife”) was in her mid-eighties and the defendant (hereinafter “husband”) was in his nineties at the time of the divorce action. During the marriage, the parties had four children together who have since been emancipated. The parties amassed significant wealth during their long-term marriage which was primarily attributed to the husband’s success as a real estate developer in which their son worked alongside the husband. The wife did not work outside the home.

The wife filed a complaint seeking a divorce from the husband in June 2018. During the course of the divorce proceedings, the wife alleged that the parties’ marital assets, among which exceeded $130 million in value, were controlled exclusively by the husband. One year after the wife filed her complaint, the wife filed an application to bifurcate the divorce proceedings requesting that the Court first address whether there were adequate grounds for divorce before delving into the equitable distribution issues. The presiding judge of the Family Part granted the wife’s motion to bifurcate on November 22, 2019.

During the trial regarding the cause of action, the wife testified as to the state of the parties’ marriage and the fact that they had been experiencing irreconcilable differences. The wife testified that it had not been a happy marriage and that she did not care for the way in which the husband treated their children, in particular their three daughters who were not allowed to work in the family businesses. She also took issue with the fact that the husband’s will left two-thirds of his assets to their son and a very small percentage to their three daughters. The wife further testified that the husband was fixated about controlling the parties’ finances and treated her as if she was not important to him.

In opposing the wife’s pursuit for a divorce, the husband testified that he believed that one of their daughters had been pulling the strings and encouraging the wife to get the divorce. Although the husband testified that he did not want a divorce, he did acknowledge that the parties were now suffering from irreconcilable differences. He also conceded that he filed a counterclaim for divorce in which he alleged that the parties had been suffering irreconcilable differences for a period of 6 months and that there was no reasonable prospect of reconciliation. The husband testified that the wife would harass him on a daily basis and that she was relentless about his estate plan in which they would have disagreements and arguments as to how he should manage his assets.

At the conclusion of trial, the trial judge determined that there was sufficient basis to grant a divorce based on irreconcilable differences. The trial judge made clear that there was no reasonable prospect of reconciliation given the conflicts throughout the marriage regarding the issues of money, power, and control between the parties and the mistreatment of the children which became apparent with the parties’ estate planning. The trial judge also rejected the husband’s contention that it was the daughter, not the wife who orchestrated the divorce and that a reasonable prospect of reconciliation existed because the wife had been assisting the husband with his medical care during the divorce proceedings. The wife was awarded $229,711.25 in counsel fees by the trial court in connection with the proceedings relating to the cause of action.

The husband subsequently took the matter up on appeal arguing that the trial court’s decision to bifurcate the divorce was improper and that there was no evidence in the record to support a finding of irreconcilable differences. The Appellate Division affirmed in primary part the decision of the trial court with the exception of its counsel fee award.

The Appellate Division first rejected the husband’s argument that the filing for divorce by the wife was a sham and that she did not intend to end their relationship. The Appellate Division made clear that even if there was evidence of collusion between the wife and the daughters, this did not mean that the trial judge was required to credit this claim. The trial judge was entitled to deference as there was competent and credible evidence introduced during trial that the conduct and attitudes of the parties had changed such that the parties had experienced irreconcilable differences for more than six months without any reasonable prospect of reconciliation.

Furthermore, the Appellate Division concurred with the trial court that the wife’s willingness to remain in the marital household and help the husband with his medical issues was not a basis to conclude that there was a reasonable prospect of reconciliation between the parties. The Appellate Division agreed with the trial court that the wife was not required to abandon or turn her back on the husband in order to grant a divorce. It was noted by the Appellate Division that the wife had testified that she attended functions and continued to care for the husband for the sake of the parties’ children and grandchildren.

With regard to the issue of bifurcation, the Appellate Division found that extraordinary circumstances and good cause existed based on R. 5:7-8 for the trial court to segregate the cause of action from the financial issues in this matter. The parties were elderly and had health issues and as a result, there were legitimate concerns with regard to the viability of a divorce as enumerated in Carr v. Carr, 120 N.J. 336 (1990). In the interest of judicial economy, it was appropriate for the trial court to bifurcate the matter so as to determine whether there were even adequate grounds in the first instance to proceed with a divorce. Assuming that no grounds for divorce existed, the parties would not have to deal with protracted discovery and litigation regarding their considerable economic issues. Simply put, a trial on those issues would dwarf a trial on the cause of action.
Although the Appellate Division did not find fault with the trial court’s decision as to the issues of irreconcilable differences and bifurcation, it did vacate the counsel fee award that was assessed against the husband and remanded the issue back to the trial court for further consideration. The Appellate Division explained that the trial judge’s decision to award counsel fees in favor of the wife was heavily predicated on what the judge deemed to be the husband’s bad faith. However, the Appellate Division emphasized that the bad faith of a matrimonial litigant does not arise because they were unsuccessful during a trial on the merits. Rather, bad faith is established when a party makes a claim or takes a position which is not based on any factual or evidentiary support.

The appellate panel could not reconcile the fact that it was reasonable for the wife to incur $229,711.25 in fees to contest the husband’s response to her cause of action if the husband’s opposition was completely frivolous or without merit. It noted that the ability to pay and the need for an award, which are two other factors considered in a counsel fee analysis as set forth in R. 5:3-5(c), militated against issuing a counsel fees award. Thus, without a more compelling showing of bad faith such as the husband intentionally delaying the proceedings, a finding of a counsel fee award in the wife’s favor could not be sustained.

Observation: While divorce in New Jersey is not merely granted on request or demand, the Court gives great discretion to trial judges in determining whether irreconcilable differences exist. As stated by the Appellate Division, family judges know irreconcilable differences when they see them.

Bifurcation under R. 5:7-8 is unusual. But Steiner now opens the door to a finding that the age of the parties alone can justify extraordinary circumstances and good cause shown as required under the Rule. Here, the Court also found that because a party was contesting the grounds for divorce, this was also a substantial justification for bifurcation as it would have been “uneconomical” to allow for discovery or a trial that would ultimately have been rendered moot if no viable cause of action was found.

Finally, Steiner makes clear that in awarding fees under R. 5:3-5(c)(3), bad faith does not arise merely because a litigant failed at trial on the merits. It requires that the party against whom fees are sought acted beyond the bounds of proper advocacy by pursuing a claim or defending against a claim without factual support. That a factfinder sees the evidence differently from a litigant does not demonstrate that the losing litigant acted in bad faith.

Sipko v. Koger, Inc., 251 N.J. 162 (2022)

Issue: Are the defendants entitled to a marketability discount with regard to a buyout of the plaintiff’s ownership interests in multiple closely held corporations where the defendants willfully engaged in bad faith conduct in an attempt to reduce the value of plaintiff’s ownership interests?

Holding: No. Courts are required to take fairness and equity into account in deciding whether to apply a discount to the value of a company in a buyout. In applying fairness and equity, a marketability discount is not to be applied in light of the defendants’ gross misfeasance, blatant misrepresentations to the trial court, and lack of transparency regarding their financials, and absconding from the country in order to escape enforcement of prior court orders. As there was a litany of both pre-judgment and post-judgment misconduct by the defendants to deprive the plaintiff of any value from the business entities, equity cannot abide imposing a discount to the benefit of the defendants.

Discussion: The parties in this matter were involved in protracted litigation for 15 years arising from a family business dispute between Robert Sipko (hereinafter “plaintiff”) and his father, George Sipko, and his brother, Rastislav Sipko (hereinafter “defendants”). The parties are the principal owners of business entities known as Koger Distributed Solutions (“KDS”), Koger Professional Services, Inc. (“KPS”), and Koger, Inc. (“Koger”), which entities are also named as defendants in this action.

By way of brief background, defendant George Sipko, a Slovakian processing programmer, formed Koger in 1994 and subsequently gifted 1.5% of the company’s stock to his twin sons, the plaintiff and defendant Rastislav Sipko both of whom worked for the company. The entities KDS and KPS were formed in 2002 and 2004 respectively in which the plaintiff and Rastislav each owned 50% of each company’s shares.

Discord ultimately arose between the parties as a result of a dispute involving the plaintiff’s wife. This dispute ultimately fractured the personal relationships of the parties and the family businesses. Due to the family strife, the plaintiff resigned from Koger on March 10, 2006. Before his resignation, he signed two documents in which he waived his 50 percent interests in KDS and KPS. Later that year, defendant George Sipko recalled the plaintiff’s 1.5% Koger stock which had been gifted to him in 2000.

The plaintiff thereafter filed suit against the defendants in November 2007 alleging that he was an oppressed shareholder and that he signed the documents relinquishing his interests in KDS and KPS under duress. Following a trial, the trial court ruled in January 2009 that the plaintiff was not entitled to relief since KDS and KPS had no independent value as distinct companies from Koger and that notwithstanding, the plaintiff had voluntarily ceded his interests in those entities. This decision by the trial court was later reversed by the Appellate Division in May 2011 in which it was found, in primary part, that the transfers that were made by the plaintiff lacked consideration and were therefore void.

The issue as to whether KDS and KPS had independent value separate from Koger was eventually brought before the New Jersey Supreme Court which affirmed the Appellate Division’s reversal of the trial court. As part of its decision, the Court noted that the plaintiff’s expert at trial concluded that KDS was valued at $1,457,278.00 and KPS at $34,973,236.00. Despite the compelling testimony by the plaintiff’s expert, the defendants instructed their expert not to calculate the value of the two companies independently from Koger.

With regard to the two documents signed by the plaintiff in which he was divested of his ownership interests in KPS and KDS, the Court concurred with the Appellate Division that any waiver of ownership by the plaintiff in these two entities was invalid as there was no consideration given as a result of executing the documents. Consequently, the matter was remanded back to the trial court with the plaintiff’s claims for relief being reinstated with the exception of the plaintiff’s oppressed minority shareholder claim in which he failed to provide adequate proofs to the trial court. The question that the trial court would be confronted with was what consideration or remedy, if any, was appropriate in order to compensate the plaintiff for his interests in in KPS and KDS.

The trial court issued a written decision in July 2014 in which it determined that an accounting of KDS and KPS was appropriate from January 2006 to the present including an accounting of all assets and contracts for that time period. Upon the accounting being performed, it was discovered that four out of seven contracts for KPS and KDS were transferred to Koger either during trial or after the Appellate Division’s 2011 opinion. The trial court noted that the contracts were not transferred for any legitimate reason and that the underlying motive of the defendants was to devalue the plaintiff’s interests in KPS and KDS by stripping the companies of their assets.

As further evidence of the defendants’ misconduct, the trial court found that defendant Rastislav Sipko backdated the transfer certificate that the plaintiff signed for KPS, which was the more valuable of the two companies, from February 2006 to December 2004. The trial court observed that this scheme was orchestrated in order to deprive the plaintiff of his financial interests in certain contracts that he negotiated on behalf of the company in 2005 and that became lucrative by 2006.

Given these extraordinary actions by the defendant and the fact that KDS and KPS were worthless entities in which a third-party sale would not yield any return, the trial court concluded on remand that the only appropriate remedy was to impose a buyout obligation upon the defendants in order to pay the plaintiff 50% of KDS and KPS as of the date that the plaintiff filed his complaint in November 2007. Significantly, although the defendants were given the opportunity during trial to call their own expert in order to testify as to the independent values of KDS and KPS for purposes of a buyout, they declined.

On August 19, 2016, the trial court entered a judgment awarding the plaintiff damages against the defendants to the tune of $24,697,571.14, jointly and severally, which included pre-judgment interest in the amount of $6,437,311.14. After the entry of this judgment, the trial court appointed a special fiscal agent to oversee the financial transactions Koger in addition to ordering the defendants to produce audited financial statements within 100 days.

As part of a sworn accounting overseen by the special fiscal agent, it was revealed that the defendants transferred approximately $20 million in cash to overseas accounts in a series of transactions between July 2016 and August 2016 contemporaneous with the plaintiff’s award of $18 million and subsequent entry of the judgment by the trial court. While the defendants claimed that they sent the monies overseas in order to pay off a debt to a relative who loaned them $17 million in order to purchase properties in Slovakia, there was no evidence offered by the defendants to support their claim of repayment for an alleged financial debt.

The defendants were ultimately held in violation of litigant’s rights by the trial court and ordered to return the sum of $18 million by July 16, 2018 or else they would be remanded to the Bergen County jail to serve each weekend until the money was returned. When the deadline passed and the money was unreturned, defendant George Sipko fled the country and defendant Rastislav Sipko commenced his period of incarceration at the Bergen County jail.

The defendants also initiated an appeal seeking to overturn the decision reached by the trial court regarding the valuation of KPS and KDS. As the thrust of their appeal, the defendants disagreed with the buyout remedy and valuation methodology adopted by the trial court.

Upon review of the record below in the trial court, the Appellate Division held that the buyout remedy was proper but that the trial court improperly accepted the opinion of the plaintiff’s expert. The Appellate Division criticized the trial court’s failure to apply a marketability discount to KPS and KDS and remanded the matter back to the trial court to consider all sources of information which impact the fairness and equity of the buyout price proposed by the plaintiff’s expert.

After the Appellate Division addressed the valuation issue, the plaintiff filed a petition for certification which was granted by the New Jersey Supreme Court. The plaintiff argued that by remanding the matter back to the trial court, it gave the defendants another bite at the apple to present an alternative valuation of KDS and KPS which they initially declined to do when the matter was first before the trial court.

In support of their argument before the Court for a marketability discount, the defendants contended that there was a need for such a discount due to the unique corporate structure and relationship between Koger, KDS, and KPS. Without application of the marketability discount, the defendants further claimed that it would give the plaintiff a windfall and effectively vitiate the ability of the judiciary to assess the fair value of closely held corporations.

Although the plaintiff was not considered to be an oppressed shareholder during the first wave of litigation that came before the trial court, the Court explained that the oppressed shareholder statute, N.J.S.A. 14A:12-7(1)(c) does not limit the equitable authority of New Jersey courts to fashion an appropriate remedy in a shareholder dispute otherwise known as a “corporate divorce” where there may be proof of illegality or fraud.

When applying those principles of the oppressed shareholder statute to the buyout and valuation of the parties’ business entities at issue, the Court recognized that the concept of fair value is not an exact science and the term itself suggests that courts must take equity and fairness into account when deciding whether to apply a discount to the value of a dissenting shareholder’s stock. The Court relied on the leading case of Balsamides v. Protameen Chemicals, Inc., 160 N.J. 352, 377 (1999), in which it previously held that application of only a 35 percent marketability discount was appropriate as it does not entitle the oppressing shareholder to instigate problems and thereby benefit at the expense of the oppressed. Balsamides not only underscores the importance of determining the fair value of a corporation on a case-by-case basis, but also makes clear that a marketability discount cannot be invoked by the parties whose misconduct and baith faith caused the corporate split to benefit themselves to the detriment of aggrieved parties.

In the instant matter, the Court recounted that the actions of the defendants in this matter over the course of 15 years were particularly egregious insofar as they attempted to deplete KDS and KPS of their assets and deprive the plaintiff form being fairly compensated for his interests in these business entities. The Court noted that for the Appellate Division to ignore the realities of all that had transpired during the history of the case and to order a remand would give the defendants another opportunity to address the valuation of their business entities, an issue which they had the opportunity to fully litigate during the first remand. Accordingly, the Court reversed the judgment of the Appellate Division and remanded the matter back to the trial court in order to reinstate its August 19, 2016 judgment.

Observation: After Brown, most family lawyers believed that marketability discounts and minority discounts no longer had a place in the fair value evaluation of business assets. However, the Supreme Court decision in Sipko v. Koger, Inc. is likely to open the eyes of practitioners to the argument that equity can give rise for the court to deviate from standard evaluation practice to permit these discounts in appropriate cases. Put simply, the concept of fair value is not an exact science and courts must take equity and fairness into account when deciding whether to apply a discount to the value.

M.A.P. v. E.B.A., 471 N.J. Super. 250 (App. Div. 2022)

Issue: Does New Jersey have personal jurisdiction over a non-resident who is alleged to have fathered a child through a sexual relationship with a New Jersey resident in New York City?

Holding: Not in this case because the non-resident defendant had no other relevant contact with New Jersey.

Discussion: Plaintiff M.A.P. (hereinafter “the mother”) gave birth to a child in New Jersey in April 2020. She claims the child was conceived during her brief relationship – in July 2019 in New York City – with defendant E.B.A. (hereinafter “the alleged father”). At the time of their sexual encounter in New York City, the mother was a resident of New Jersey and the father resided either in New York or in D.C.

By the time the mother commenced a paternity action in New Jersey in 2021, the alleged father had indefinitely moved back to Argentina, his national origin. When the alleged father failed to appear at the paternity hearing – later claiming he was not properly served with process – the trial court conducted a hearing and granted the mother relief based on her testimony alone. A few months later, the alleged father hired a New Jersey attorney to vacate the substantive order and to dismiss the paternity action based on an alleged lack of personal jurisdiction and insufficiency of service of process. The trial court denied the alleged father’s requested relief and determined that New Jersey had personal jurisdiction over him because he had intercourse with a resident of New Jersey. The trial Court did not address the improper service claim. The alleged father appealed.

On appeal, the alleged father argued that New Jersey lacks personal jurisdiction over him because: (1) “the child does not reside in New Jersey as a result of [his] acts and directives”; (2) he “does not maintain sufficient minimum contacts with New Jersey”; and (3) “fair play and substantial justice” militate against haling him into court in New Jersey. Meanwhile, the mother argued that in addition to having intercourse with a New Jersey resident, the alleged father sent her letters while she resided New Jersey and visited her once in New Jersey, which established his minimum contacts with New Jersey. Moreover, the mother argued that when the alleged father hired a New Jersey attorney to try to settle this matter, he voluntarily submitted himself to the jurisdiction of New Jersey. The Appellate Division agreed with the alleged father and reversed and remanded the matter to the trial court for dismissal of the paternity action.

In making its decision, the Appellate Division analyzed N.J.S.A. 2A:4-30.129(a), which statute delineates seven instances in which New Jersey may exercise personal jurisdiction in an action “to determine parentage of a child” over a non-resident. At the outset, the Appellate Division concluded that only two (2) of the seven (7) provisions arguably applied. The first provision that arguably applied dealt with when “the child resides in this State as a result of the [non-resident’s] acts or directives,” N.J.S.A. 2A:4-30.129(a)(5). The Appellate Division determined that having intercourse with a New Jersey resident alone does not satisfy this provision and that such an interpretation would create “a boundless jurisdictional reach.” Moreover, the Appellate Division determined that such an interpretation was not “in harmony with the rest of the long-arm statute.” Specifically, subsection six (6) of the aforesaid statute already provides that New Jersey has jurisdiction over “a nonresident who has engaged in sexual intercourse with the plaintiff in [New Jersey].” There would be no reason for subsection six (6) to exist if subsection five (5) meant that simply having intercourse with a New Jersey resident, regardless of where, is enough to create personal jurisdiction. Therefore, the Appellate Division concluded that the “act” or “directive” that causes a “child” to reside in New Jersey “is most likely limited to the non-resident’s affirmative conduct after the child’s birth.”

The second provision of the aforesaid statute that arguably applied dealt with when “there is any other basis consistent with the constitutions of this State and the United States [to create personal jurisdiction],” N.J.S.A. 2A:4-30.129(a)(7). In this regard, the Appellate Division determined that the letters that the alleged father mailed to the mother while she resided in New Jersey and the text messages that he sent to her while she resided in New Jersey were “insufficient to establish specific jurisdiction.” In addition, the Appellate Division noted that the fact that the alleged father may have visited the mother in New Jersey one time to discuss the birth of the baby was not enough to satisfy this subsection, even if proven to be true. Moreover, the Appellate Division determined that the fact that the alleged father hired a New Jersey attorney for purposes of trying to resolve this action did not satisfy this provision and would go “against the policies underlying N.J.R.E. 408 for offers of settlement to be used in this manner.”

Observation: The key takeaway from this case is that New Jersey will not have personal jurisdiction over a non-resident if the only meaningful contact with this state is having intercourse with someone who resides in New Jersey. That makes sense because it would be inequitable and inconvenient for a resident of Alaska to have to appear in a New Jersey court for a paternity suit simply because the New Jersey resident had intercourse with an Alaska resident while vacationing in Alaska. If that interpretation proved to succeed, New Jersey’s jurisdiction over non-residents in a paternity action would be limitless.

Another important lesson from this case is that retaining a New Jersey attorney for purposes of attempting to settle a pending lawsuit in New Jersey does not mean that you are submitting yourself to the jurisdiction of New Jersey. A decision to the contrary would run afoul of N.J.R.E. 408, which precludes evidence of settlement discussions in Court, and would likely foster the litigation of cases that would otherwise settle. Courts should continue to make decisions which incentivize settlement negotiations.

J.R. v. A.R., 470 N.J. Super. 623 (Ch. Div. 2020)*

Issue: In the context of a dispute where a child is removed from a foreign country and enters the United States, does an accession to the Hague Convention on the Civil Aspects of International Child Abduction by the foreign country which is the habitual residence of the child mandate that the Convention applies where the United States has not accepted that accession?

Holding: No. While Article 38 of the Hague Convention specifies that it is open to accession by non-member States, it is only enforceable between those States and member Contracting States which specifically accept their accession to the Convention. In this matter, since the United States as a Contracting State had not yet accepted the accession to the Hague Convention by the Philippines, the alleged wrongful removal at issue was not subject to the Convention’s prompt return protocols.

Discussion: The parities were married in the United States in January 2016. The parties had one child in common who was born in the United States in 2013. In 2016, the parties and the child moved to the Philippines where they resided with the parents of J.R. (hereinafter “husband”). Despite the turmoil in their marriage that subsequently ensued in 2018, the parties remained married and continued to live together with the husband’s parents.

Circumstances changed however in January 2020 when A.R. (hereinafter “wife”) left the residence with the child. The wife then left the Philippines with the child for New

* Approved for publication in 2022

Jersey without the husband’s consent the following month in February 2020. Prior to leaving, the wife had briefly addressed with the husband the idea of returning with the child to United States, to which the husband responded that the wife could leave but not the child.

Upon finding that the wife was living in Monmouth County with the child, the husband filed an application seeking the return of the child to the Philippines in accordance with the rights and obligations of the Hague Convention. During a hearing that was conducted by the trial court, the wife testified that her reasons for moving to the United States with the child were for multiple reasons due to loneliness, financial strain, and the fractured marriage with the husband. In deciding the husband’s application, the trial court concluded that the Hague Convention did not apply in these circumstances since the United States had not accepted Philippines’ accession to the Convention.

In support of its ruling, the trial court recognized that the critical issue here was the relationship between the United States and the Philippines in connection with the Hague Convention. It was undisputed that the United States was a Contracting State as they were an original signatory of the Hague Convention while the Philippines only acceded to the Convention in March 2016.

To understand the applicability of the Hague Convention between the two nations, the trial court undertook an analysis of its key articles which were Article 35 and Article 38. Article 38 states that an accession only has effect between the acceding State and the Contracting State as the Contracting State has declared their acceptance of the accession. Additionally, Article 35 provides that the Convention applies between Contracting States only to wrongful removal or retentions occurring after its entry into force in those States. Thus, the trial court emphasized that when reading the two articles together, the acceptance of accession was a condition precedent to the Convention’s applicability between the two nations. When applying the plain language of Articles 35 and 38 to the undisputed facts, it was clear to the trial court that the Hague Convention did not yet have effect between the United States and the Philippines since the United States had not accepted their accession.

The trial court was also guided by case law in other jurisdictions to bolster its conclusion that the Hague Convention did not apply in this instance. Specifically, the trial court found in a recent federal appeals case from 2017 that where the United States had not accepted Thailand’s succession until a year after the child’s removal, the Hague Convention had no applicability in the matter. Likewise, the trial court noted that in a federal appeals case from 2005 which involved a custody dispute between the United States and Dominican Republic, it was undisputed that the two nations had not entered into negotiations required by Article 38 and therefore, the Hague Convention’s administration and judicial mechanisms were not available in that case.

Based in primary part on the plain language of the principal articles of the Hague Convention and the case precedent from other jurisdictions, it was clear to the trial that the failure of the United States to have accepted the accession of the Philippines was dispositive to the outcome of the case. Thus, the husband would not be able to prevail on his application based on the protections afforded by the Hague Convention.

Observation: This case underscores the difficulty in obtaining justice under the Hague Convention on the Civil Aspects of International Child Abduction which provides that a child is to be returned to their country of habitual residence (here the Philippines). Keep in mind that the return is only a procedural remedy which fixes the forum for determining custody. So, if the trial court found the Hague Convention applicable here, the matter would go to a tribunal in the Philippines to determine custody.

For another Hague Convention case published in 2022, see the United States Supreme Court Opinion in Golan v. Saada, 596 U.S. ___, 142 S. Ct. 1880 (2022). Golan addressed a child taken from his habitual residence in Italy and brought to the United States. As Italy and the United States were treaty partners under the Convention, the husband sought the return of the child in the United States federal court. What we learn from Golan is even if you have two countries who have acceded to the Convention and even if the child’s habitual residence is clear, the party opposing the child’s return can still block that from happening upon a clear and convincing showing of grave risk of harm to the child.

1 I wish to thank my associates, John P. Paone, III and Victoria Paone Rosa, for their assistance in the preparation of this article.