Appellate Division Clears Up The Alimony Statute Application For Early Retirement In Pre-Amendment Cases

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The Appellate Division recently published a decision, Amzler v. Amzler, making it precedent setting on the use of the new alimony statute in a case of a payor’s early retirement, where parties entered into an alimony agreement prior to its enactment in September 2014.  While 2014 may feel like years ago because it was, its relatively recent in the life of law.  This means that we do not have much precedent-setting law on how to interpret each aspect of the statute.  Amzler gives us some new precedent for cases in which alimony was finalized prior to the updated statute and the obligor later seeks to terminate alimony based upon retirement prior to reaching his/her full retirement age.

Specifically, subsection (j) of the statute addresses retirement in three (3) subparts:

  1. The obligor’s rebuttable presumption for the termination of alimony when the obligor retires at full retirement age;
  2. The obligor’s burden of proof by a preponderance of the evidence to show that prospective or actual retirement is in good faith when the obligor seeks to retire before reaching full retirement age;
  3. Retirement applications filed in cases where the parties’ final alimony terms were entered prior to the updated statute.

In Amzler, the parties entered into their divorce agreement, complete with alimony terms, in 2009, which is prior to the updated alimony statute.   Plaintiff/obligor worked for PSE&G where he was required to go up and down descending ladders and use various hand tools.   The parties agreed that Plaintiff would pay Defendant permanent alimony in the amount of $21,600.28 per year,  based on Plaintiff’s income of $110,000 and Defendant’s imputed income of $35,000.  They also included a provision that prohibited modifications to alimony in the event of “1) [t]he voluntary reduction in income of either party; 2) [a]ny voluntary increase or decrease in each party’s cost of living; [and] 3) [t]he dissipation of the assets received by either party as and for equitable distribution.”  This is known as an Anti-Lepis provision because Lepis is the case that allows for alimony modifications in the event of changed circumstances and this provision prohibits such modifications in certain circumstances, which you can read about in a prior blog post.

Plaintiff retired in  2017 at age 59 due to medical problems that prevented him from being able to perform his job duties(i.e.: he could not continue to perform the physical work of going up/down the ladder and the like).  Plaintiff was entitled to his full PSE&G pension benefits at the time of his retirement and Defendant received her share per the equitable distribution agreement.  Plaintiff believed that he and Defendant would receive more money from the pension upon retirement as compared to applying for disability benefits.

Defendant filed to enforce the obligation and Plaintiff filed to terminate same based upon his retirement.  The court scheduled a plenary (evidentiary) hearing.  Plaintiff retained a vocational (employability) expert and met with a rheumatologist to prove his inability to work.  Both parties and Plaintiff’s vocational expert testified at trial.

While Plaintiff’s expert testified that he cannot work in his historical position given his medical issues, he could work as a security guard or autoparts delivery person to allow “freedom of movement” but his income would likely be lower and without benefits.  In response to the Court’s inquiries, the expert testified that Plaintiff would not qualify for a transfer at PSE&G.  However, Plaintiff did not actually apply for any such transfers.

Following the hearing, the Court terminated Plaintiff’s alimony obligation based on subsection (j)(2) as to early retirement rather than (j)(3) as to agreements entered prior to the updated alimony statute.  The Appellate Division reversed for this and other reasons.

In reversing the trial court’s decision, the Appellate Division cited back to Landers, which can be reviewed in our prior blog post.  Basically, the Appellate Divisions in Landers found that j(1) exclusively applies to alimony terms entered after the statute modification date (9/2014) based on the legislature’s intent even though such language is not explicitly found within j(1).    The Appellate Division applied the same logic here:

We now consider subsection (j)(2). Like subsection (j)(1), when read in isolation, subsection (j)(2) appears to apply regardless of whether the order or agreement creating an alimony obligation was established before or after the 2014 amendments.  However, when construed with the entirety of subsection (j), as in Landers, we conclude that the Legislature intended subsection (j)(2) to apply only to orders or agreements established after the 2014 amendments became effective. There is no sound basis to depart from our reasoning in Landers, as this construction conforms to the Legislature’s intent in enacting subsection (j).  Indeed, to hold otherwise would seriously undermine the ability of parties to rely on the otherwise binding agreements entered into under their MSAs based on the law in effect at the time of their entry. (internal citations omitted) (emphasis added).

Given that the Appellate Division clearly determined that the Court utilized the wrong section of the statute, it likewise determined that the Court did not review all relevant factors as now required by j(3).  Specifically, j(3) requires the Court to consider the ability of the Defendant/obligee to have saved adequately for retirement, which the Court did not have to do in its analysis under j(2).  While Plaintiff tried to argue that the Court already did so based on factor (j)(2)(g), which is Defendant’s financial independence,  the Appellate Division did not buy it.  The factors are different and require different review and findings.

The Appellate Division also found that the Court failed by not reviewing the Anti-Lepis position in terms of how it impacts the requested termination.  Specifically, either party’s voluntary reduction of income is not a change of circumstance warranting modification of alimony per the parties’ agreement.  Here, Plaintiff voluntarily retired at age 59.  He experienced medical issues that prevented him from continuing in his current position, but he could have possibly worked in another field in order to supplement his income, as testified by his own expert.  Thus, the Court needs to review whether the Anti-Lepis provision impacts the requested termination given the potential that Plaintiff’s retirement could be deemed a voluntary reductions of income.

If this case does not settle, it will be interesting to see if the trial court’s decision changes based upon the updated review under subsection j(3) and the Anti-Lepis provision.  While the subsections are alike in many ways, the key aspect the differentiates j(1) and j(2) as compared to j(3) is the  trial court’s obligation to review obligee’s ability to save for retirement, which the Appellate Division points out here.  Keep in mind that this does not mean whether they did save for retirement, but whether they had an ability to do so.  This is especially interesting in a case where virtually all of the obligee’s net worth stems from equitable distribution.  The updated alimony statute specifically states: “When a share of a retirement benefit is treated as an asset for purposes of equitable distribution, the court shall not consider income generated thereafter by that share for purposes of determining alimony.”  Stay tuned…

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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