The Appeals Division is cleansing up the Alimony Act movement for early retirement in circumstances previous to the Fox Rothschild LLP modification
The Appeals Division recently released a ruling, Amzler v. Amzler, which sets a precedent for the application of the new Maintenance Act in the event of early retirement of a payer where the parties entered into a maintenance agreement before it came into effect in September 2014, 2014 may feel like years ago because it was relatively new to the life of law. This means that we do not have many precedents for interpreting the various aspects of the Statute. Amzler gives us a new precedent for cases where the alimony was taken out before the updated statute and the debtor later attempts to cancel the alimony due to retirement before reaching full retirement age.
Specifically, subsection (j) of the Act deals with retirement in three (3) subsections:
- The debtor’s rebuttable presumption for termination of maintenance if the debtor retires at full retirement age;
- The burden of proof on the debtor in the preponderance of evidence demonstrating that probable or actual retirement is in good faith if the debtor intends to retire before full retirement age;
- Pension applications were submitted in cases where the parties’ final maintenance terms were entered prior to the updated statute.
In Amzler, in 2009, before the updated Maintenance Act, the parties concluded their divorce agreement with maintenance conditions. The plaintiff / debtor worked for PSE&G where he had to walk up and down descending ladders and use various hand tools. The parties agreed that Plaintiff would pay defendant $ 21,600.28 per year in maintenance based on Plaintiff’s income of $ 110,000 and defendant’s imputed income of $ 35,000. They also contained a provision prohibiting changes in maintenance in the case of “1). [t]the voluntary income reduction of a party; 2) [a]any voluntary increase or decrease in the cost of living of either party; [and] 3) [t]The donation of the property that a party received as and for a fair distribution. “This is known as the anti-Lepis provision because Lepis allows maintenance changes when circumstances change, and this provision prohibits changes in certain circumstances that you can read about in an earlier blog post.
The plaintiff retired in 2017 at the age of 59 due to medical problems that prevented him from doing his job (i.e., unable to continue doing the physical labor of ascension / descent and the like). Plaintiff was entitled to his full PSE&G pension benefit at the time of his retirement and Defendant received their share under the fair distribution agreement. The plaintiff believed that he and the defendant would receive more money from the pension upon retirement than if they applied for disability benefits.
The defendant applied for the obligation to be enforced and the plaintiff applied for termination due to his retirement. The court has scheduled a plenary hearing (evidence). The plaintiff retained a professional (employability) expert and met with a rheumatologist to prove his incapacity for work. Both parties and the plaintiff’s professional expert testified in court.
While the plaintiff’s expert testified that his medical problems prevented him from working in his historic position, he could work as a security guard or auto parts deliverer 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 the plaintiff would not qualify for a transfer at PSE & G. However, the applicant did not request any such transfers.
After the hearing, the court terminated the plaintiff’s maintenance obligation based on subsection (j) (2) relating to early retirement instead of (j) (3) relating to arrangements made prior to the updated Maintenance Act. The Appeals Department has reversed for this and other reasons.
To reverse the court’s decision, the appeals division cited Landers back, which can be discussed in our previous blog post. Basically, the appeals departments in Landers determined that j (1) only applies to maintenance conditions entered after the amendment date of the law (9/2014) due to the intention of the legislature, although such language is not expressly included in j (1) . The Appeals Department used the same logic here:
We now consider subsection (j) (2). Like subsection (j) (1), subsection (j) (2) appears to apply in isolation, regardless of whether the maintenance arrangement or arrangement was made before or after the 2014 amendments. When interpreting with the entire subsection (j) as in Landers, however, we come to the conclusion that the legislature intended to apply subsection (j) (2) only to orders or agreements that were made after the amendments of 2014 came into force. There is no solid basis for deviating from our reasoning in Landers as this construction is in line with the legislature’s intention to enact subsection (j). Indeed, doing otherwise would seriously affect the ability of the parties to rely on the otherwise binding arrangements made under their MSAs based on the law in force at the time of their accession. (internal quotations omitted) (emphasis added).
Since the Appeals Division clearly found that the Court had used the wrong section of the Statute, it also found that the Court did not review all relevant factors, as is now required in j (3). In particular, j (3) requires the Court to examine the defendant / creditor’s ability to have adequately saved for retirement, which the Court did not have to do in its analysis after j (2). While the plaintiff attempted to argue that the court had already done so based on factor (j) (2) (g), which represents the defendant’s financial independence, the appeals division did not buy him. The factors are different and require different reviews and results.
The Appeals Division also found that the court failed by failing to review the anti-Lepis position to determine how it would affect the requested dismissal. In particular, a party’s voluntary income reduction is not a change in circumstances that justify a change in maintenance as agreed between the parties. Here the plaintiff voluntarily retired at the age of 59. He had medical problems preventing him from continuing in his current position, but he might have been able to work in another area to supplement his income, as his own expert testified. Therefore, the Court needs to consider whether the anti-Lepis provision will affect the dismissal requested, as the applicant’s retirement may be seen as a voluntary decrease in income.
If this case is not resolved, it will be interesting to see if the updated review under paragraph j (3) and the anti-Lepis provision changes the court’s decision. While the subsections are the same in many ways, the main thing that distinguishes j (1) and j (2) from j (3) is the court’s obligation to review the creditor’s ability to save for retirement, which the Appeal Department indicates here. Remember, this does not mean whether they saved for retirement, but rather whether they were able to. This is particularly interesting in a case where virtually all of the creditor’s assets come from a fair distribution. The updated Maintenance Act explicitly states: “If a portion of an old-age pension is treated as an asset for the purpose of fair distribution, the court will not take into account the income subsequently generated from that portion to determine maintenance.” Stay tuned …