MARC Z. EDELL v. PAULA N. EDELL
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-1695-02T51695-02T5
A-5953-03T5
MARC Z. EDELL,
Plaintiff-Respondent,
v.
PAULA N. EDELL,
Defendant-Appellant.
______________________________________
Argued November 2, 2005 - Decided
Before Judges Conley and Winkelstein.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Morris County, FM-14-1105-98.
Bonnie C. Frost argued the cause for appellant (Einhorn, Harris, Ascher, Barbarito, Frost & Ironson, attorneys; Ms. Frost and Ivette R. Alvarez, on the briefs).
Barbara Ulrichsen argued the cause for respondent (Fox Rothschild, attorneys; Ms. Ulrichsen, Holly M. Barbera and Derek M. Freed, of counsel and on the briefs).
PER CURIAM
In A-1695-02T5, defendant wife (Paula) appeals support, equitable distribution and counsel fee determinations by the trial judge. In A-5953-03T5, she appeals a confidentiality order and a subsequent confidentiality agreement (hereinafter MVP agreement) the trial judge imposed upon her. The order and agreement were prompted by a settlement entered into by plaintiff husband (Marc) arising from litigation over his entitlement to a portion of a settlement obtained in a suit brought by the State of Maryland against the tobacco industry. In A-1695-02T5, we reverse in part and remand in part. In A-5953-03T5, we affirm the denial of counsel fees, but remand for entry of an order vacating the confidentiality order and MVP agreement.
I.
Background Facts
The parties were married on July 30, 1972. They had three children. At the time of the final judgment, the eldest was emancipated, the middle child was entering his senior year of college, and the youngest was entering her freshman year of high school.
The parties separated on November 1, 1996, twenty-four years after their marriage. On March 2, 1998, after over twenty-five years of marriage, Marc filed a complaint for divorce. Paula responded by filing an answer and counterclaim for divorce. That led to four acrimonious years of pretrial litigation. The parties submitted numerous case information statements, as well as voluminous motions for pendente lite support and motions to enforce litigant's rights. During the course of all of this, Marc claimed reduced economic means tied to the alleged declining economic circumstances of his law firm, Edell & Associates, which was, then, in its first few years of existence. As a result, the trial judge permitted Marc to invade certain assets in order to meet those obligations. Even then, Marc did not meet all of his obligations. His financial wherewithal to have done so was hotly contested.
The employment and financial background of the parties is as follows. Marc, born on November 13, 1950, is fifty-five years old. Paula, born on July 7, 1951, is fifty-four years old. Following their marriage in 1972, Marc attended New York Law School. Paula, who had obtained a nursing degree from Boston University, completed her undergraduate degree at Seton Hall University and commenced full-time employment as a registered nurse.
Both parties worked over the entire course of the marriage. In the early years of the marriage, Paula worked in various New Jersey hospitals while Marc was completing law school. Beginning in 1990, and continuing through the time of trial, Paula worked as a school nurse at the Pingry School in Short Hills. All three of the parties' children attended that school.
Marc was the primary wage earner during the marriage. After graduating from law school in 1975, he clerked for a Superior Court judge in Middlesex County. In 1976, he began working as an associate at Porzio, Bromberg and Newman (Porzio). Five years later, in 1981, he became a partner.
It was while working at Porzio that Marc began the Cipollone litigation. He left Porzio, however, in 1986 to join Budd Larner as a partner, where he continued his work on Cipollone. The case was tried in 1988. Marc left Budd Larner in December 1994 under acrimonious circumstances. Marc stated that he had personality conflicts with several partners who were disappointed with his lack of business acumen. He also felt compelled to leave because the firm was steadily decreasing his income. He opened his own practice, Edell & Associates, in 1994. Paula testified that, during the years Marc attended law school and hereafter during his employments, she supported his career by taking care of all of the family's needs, particularly during the extended tobacco industry litigation.
The following chart summarizes the parties' income between 1991 and 1996 (the year of separation), and Paula's income between 1997 and 2001. As Marc's income between 1997 and 2001 is more complicated, we will deal with it separately:
Year
Marc's Income
Paula's Income
Adjusted Gross Income
1991
$238,678
$34,040
$294,564
1992
$234,966
$35,522
$280,799
1993
NOT IN THE RECORD
NOT IN THE RECORD
NOT IN THE
RECORD
1994
$195,486
$43,590
$299,402
Year
Marc's Income
Paula's Income
Adjusted Gross Income
1995
$104,131
$45,886
$513,695
1996
$110,260
+
$189,900
(gift of IVC stock)
$44,669
$174,170
1997
$46,508
Year
Marc's Income
Paula's Income
Adjusted Gross Income
1998
$48,568
(wages)
+
$ 4,417
(alimony)
1999
$54,370 (wages)
+
$14,663 (alimony)
2000
$55,311 (wages)
+
$14,663 (alimony)
2001
$54,410 (wages)
+
$7800 (alimony)
Marc's income from his practice dropped sharply in 1995 and 1996, the first two years of Edell & Associates. The drop-off in his income continued over the next several years, during the parties' separation and divorce proceedings. Over that period of time, Marc supplemented his direct compensation from Edell & Associates by: 1) taking withdrawals from an IRA account and selling securities; 2) taking paybacks on loans and other withdrawals from Edell & Associates; 3) utilizing the firm credit card for personal expenses, and having the firm cover his motor vehicle expenses; 4) taking loans from his father; and 5) taking loans from his partner, Diane Mulligan.
The chart that follows summarizes Marc's income and economic resources between 1997 and 1999. At the time of trial, he had not filed income tax returns for 2000 and 2001.
Year
Income
IRA Invasions
Stock Sales
Other Receipts from E&A
1997
$14,308 (E&A)
$127,500 (deferred comp. from Budd Larner)
$123,000 (E&A's repayment of loan)
1998
$71,431
(E&A)
$41,246
$165,796
1999
$190,853
(E&A)
$72,790
$51,564
Interestingly, in the year after the filing of the divorce complaint, Marc's income from his practice more than doubled. Yet, for 2000, his W-2 indicated $88,685 in wages received from Edell & Associates, and he took IRA distributions totaling $22,687. For 2001, he testified that he received $104,226 from Edell & Associates, only $4526 of which was in the form of wages. The remainder came from other distributions and from his personal use of the firm's American Express card. None of this, though, was verified by filed tax returns for 2000 and 2001 provided.
As noted by the trial judge in his post-trial written decision, it was "tremendously difficult" for him to assess Marc's income and economic resources in the immediate years leading up to trial. Further complicating Marc's financial status was the significant co-mingling of his financial interests with those of Diane Mulligan, an attorney who became a partner in Edell & Associates in August 1998. The record reflects that Marc and Mulligan began dating in June 1997, after the parties had separated, but before Marc filed for divorce. In early September 1997, Marc and Mulligan began sharing a residence and living expenses. In July 1998, Marc and Mulligan purchased a home together at a price of $427,500. They took out a mortgage of $226,000 and a home equity line of credit of $110,000. Marc made a down-payment of $110,000 on the home using proceeds from the sale of IVC stock.
Marc maintained during trial that Mulligan had "loaned" him money to meet his portion of their living expenses and his pendente lite support obligations. As to such "loans," the record reflects that in June 1998, Marc used 24,000 shares of IVC stock as collateral. In August 1998, the same month she became a partner in Edell & Associates, Mulligan exercised her rights to the shares, and, as a consequence, 24,000 shares were transferred from Marc's account to Mulligan's account. Thereafter, in December 1998, Mulligan sold the shares and realized a profit of $14,228. Mulligan stated that she applied the proceeds from the sale, plus a credit of approximately $3000 for the tax loss, to reduce Marc's indebtedness to her. Marc's tax return for 1998 reflects the sale of 24,000 shares of IVC stock in November 1998. Marc stated that this item on his tax return reflected the transaction with Mulligan. However, his tax returns indicated that the value of the stock sold was $26,880, not the $14,228 realized by Mulligan.
The record also reflects that in July 1998, Marc paid $18,626 to Mulligan out of monies from the closing on the marital home. Of that amount, $18,000 was used to repay outstanding loans to Mulligan, and the remainder was used to cover Marc's joint living expenses with Mulligan. In July 1998, Marc sold IVC stock and received $9825. He deposited the money in Mulligan's checking account in order to cover joint living expenses. Finally, in addition to the $42,679 in monies exchanged between Marc and Mulligan, as set forth above, in March 2000, in an uncontested proceeding, Mulligan obtained a consent judgment against Marc in the amount of $47,325 plus post-judgment interest, supported by promissory notes signed by Marc. That judgment was paid out of the proceeds of sale of the marital home, before distribution of the parties respective interests.
As to the parties' marital lifestyle, the trial judge's conclusion that it was affluent, upper-middle class, is well supported by the record. From 1987 to the date of separation, they resided in a large, 4800 square foot, custom built, well-appointed and lavishly furnished home in Harding Township, which had a three-car garage. The children always attended private schools. And, over the years, the parties employed nannies, housekeepers, and outside maintenance and landscaping services. With the parties' busy work schedules, and the children's involvement in extracurricular activities, the family also ate many of their meals outside the home. And, too, they took annual vacations to Florida which were financed primarily by Marc's parents. They also financed their own vacation to Florida, as well as several trips to popular destinations in the western United States.
The parties drove expensive automobiles. At the time of separation, Marc drove a Chevrolet Suburban; previously he had driven a Porsche 911. Paula drove an Audi Quattro wagon and also had a Ford Taurus for family use. Moreover, their eldest son was provided with a Nissan Pathfinder.
During the marriage, the parties did not rely solely upon their earned incomes to maintain their lifestyle. They also received gifts from Marc's parents. The parents paid for Marc's law school education, provided a $50,000 down-payment for the parties' first home, financed the children's bar and bat mitzvahs at a total cost of approximately $100,000, and financed the parties' annual vacations to Florida. They also gave money and presents to Marc and Paula and their children on numerous occasions. However, several years prior to trial, Marc and his parents became estranged and their financial support ceased.
In addition to gifts from his parents during the marriage, Marc also received, and used as marital income, income from his ownership of IVC stock and from his part ownership of Hidel Partners (Hidel). Hidel was formed in 1987. The partnership consisted of Marc, his mother, and his brother-in-law. Marc's interest in Hidel was gifted to him by his parents in the mid-to-late 1980s. Ultimately, the partnership was purchased by IVC, at which time Marc received 24,000 shares of stock.
As we have noted, Marc's income decreased after he opened his firm in 1995. Notwithstanding the reduced economic circumstances, however, the record reflects that, over the course of the divorce proceedings, he did not reduce his lifestyle. For example, as we have said, in July 1998 he paid $110,000 to partially fund the purchase a $427,500 home with Mulligan. Further, the record reflects that in December 1997, Marc purchased a fur coat for Mulligan. At the same time, he was not meeting his pendente lite support obligations, and, as a result, the marital home went into foreclosure, Paula's car was repossessed, and other marital bills, along with the children's tuition, went unpaid.
Paula sought permanent alimony from Marc. In her case information statement dated April 10, 2002, she contended that her combined monthly expenses, for both her and the children, were $7822, whereas her net monthly income was only $3480. At the time of trial, however, Paula had been residing for four months with her paramour, who was separated from his wife with a divorce pending. He had two children, one of whom was emancipated but to whom he continued to provide financial support, and the second of whom was in college. He was employed as a physical education teacher and athletic director at a school in the Bronx and earned $77,903 per year. Paula admitted that he assisted with her living expenses. She stated that he provided money toward food, gasoline, the phone bill, clothing expenses for the children, and hockey expenses for the parties' youngest child. In addition, Paula anticipated that he would pay approximately $1000 toward the rent once his former marital home had sold and he was no longer contributing to that mortgage.
II.
Edell & Associates
At the time of trial, a significant source of marital funding was Marc's interest in Edell & Associates and his stream of income therefrom. As we have said, Marc established this firm in December 1994, before the parties separated in November 1996. Before Marc left Budd Larner where he was earning approximately $200,000, the parties discussed the fact that his income would probably decline in the firm's early years. Marc envisioned Edell & Associates as primarily a plaintiff's personal injury firm, and he anticipated that it would take several years before he could earn an income equivalent to that which he had earned as a partner at large New Jersey law firms. Notwithstanding the financial uncertainty involved, Paula supported Marc's decision to open his own firm, and she assisted him in choosing office space and furnishings. Paula never believed money would be an issue because Marc was so well funded at the time the firm opened. Moreover, Paula believed that, if the firm did not succeed, Marc could always find another job. Indeed, the family's lifestyle did not change prior to Marc's filing for divorce.
In August 1998, Mulligan purchased a 49 percent share in Edell & Associates, at a cost of $98,000, payable in ten equal annual installments of $9800, with the first installment due on December 31, 1999. It was unclear at the time of trial what percent of the $98,000, if any, Mulligan had paid. When Mulligan joined the firm, both she and Marc executed employment agreements with Edell & Associates. Under the terms of the agreements, both are to receive: $120,000 per year in base compensation; bonuses in equal amounts; retirement, disability, life insurance, and medical and dental benefits; an automobile leased in the name of the firm; membership fees for professional associations; and cellular telephone service.
Gary Trugman, the court appointed expert, valued Edell & Associates at $200,000. In rendering this valuation, Trugman commented that the transaction transferring 49 percent of the firm to Mulligan did "not appear to have been an arm's length transaction." Although the total payment of $98,000 was approximately 49 percent of $200,000, the installment payment plan dramatically reduced the present value of the transaction. On the other hand, the record reflects that, in terms of client billings, between 1998 and 2001, Mulligan and Marc contributed relatively equally to the earnings of the firm. For example, between October 1998 and December 2001, Mulligan's billings totaled $1,097,722; and, between August 1998 and December 2001, Marc's billings totaled $1,320,332.
At the time of trial, Trugman could not provide a specific value for the firm's pending contingency fee cases, admittedly marital assets. However, he prepared a formula for valuing such "work in progress" should Edell & Associates ever recover fees in those proceedings. Trugman's formula for calculating "tax effected work in progress" is as follows:
Total fees received
- costs and fees relative to said fee
x (total hours as of 2/28/98 * total hours expended
+ pre-2/28/98 disbursements
- 40% for taxes
= tax effected work in progress
The most lucrative of the contingency fee litigations in which Edell & Associates was involved at the time of the divorce complaint was Marc's services as counsel for the State of Maryland in its Medicare/Medicaid reimbursement litigation against the tobacco industry. As we have indicated, this litigation spawned litigation between Edell & Associates and its Maryland co-counsel, the Angelos Firm, regarding the appropriate allocation of counsel fees recovered in the underlying litigation (Angelos Litigation). It is this "works in progress", i.e., his recovery of counsel fees therefor, that is the fundamental moving force in Paula's appeals.
III.
Angelos Litigation
The relevant background for the Angelos Litigation is as follows. In 1995, the Attorney General of the State of Maryland solicited proposals from attorneys to represent the State in its litigation against the tobacco industry to recoup Medicare/Medicare expenditures for cigarette-related diseases. In March 1996, the State of Maryland accepted the proposal for representation made by the Angelos Firm. Marc's participation was a part of the Angelos Firm's proposal. Based upon his experience and prestige in litigating against the tobacco industry, as well as his databank of information on the industry stemming from the Cipollone litigation, the Angelos Firm had recruited Marc to serve as co-lead counsel on the Maryland Tobacco Litigation.
The Maryland Tobacco Litigation was commenced on May 1, 1996, in the Circuit Court for Baltimore County. The record reflects that Marc began billing on this matter on March 1, 1996. In total, Edell & Associates spent 725 hours on the Maryland tobacco litigation prior to the divorce complaint, and 1270 hours after the divorce complaint.
Pursuant to a fee arrangement with the Angelos Firm, for fifteen hours of work per month, plus Marc's database of tobacco documents and testimony, the Angelos Firm agreed to pay Edell & Associates $10,000 per month, plus expenses, with a guaranteed minimum of $500,000 in fees. In addition, the Angelos Firm agreed to pay Edell & Associates an hourly fee for any hours billed in excess of fifteen per month. There was also a contingency agreement.
By July 10, 1998, settlement negotiations in the Maryland Tobacco Litigation became serious. This occurred before Mulligan joined Edell & Associates on August 1, 1998. By letter dated August 13, 1998, the Angelos Firm advised Marc that neither Marc nor Edell & Associates was entitled to any contingency fee from the Maryland settlement. The Angelos Firm took the position that it had no obligation to Marc or his firm beyond the minimum monthly payment of $10,000 for fifteen hours of work and an hourly rate compensation for any hours worked in excess of fifteen hours per month.
On November 18, 1998, the State of Maryland settled the tobacco litigation for $4.4 billion. Originally, the State of Maryland and the Angelos Firm had agreed to a 25 percent contingency fee. However, the statutory limit for counsel fees was subsequently reduced to 12.5 percent, or $550 million of the $4.4 billion settlement. The Angelos Firm litigated with the State of Maryland over the amount of the contingency fee. Ultimately, in 2002, the Angelos Firm settled with Maryland for $150 million in counsel fees, to be paid over five years.
On or about February 8, 1999, while the Angelos Firm was disputing the counsel fee issue with the State of Maryland, Marc filed the Angelos Litigation. After a change of venue from the federal district court in New Jersey, the Angelos Litigation proceeded in federal district court in Maryland. The district court granted summary judgment in favor of the Angelos Firm. However, by opinion dated August 24, 2001, that was reversed. Edell & Assocs., P.C. v. Law Offices of Peter Angelos, 264 F.3d 424 (4th Cir. 2001).
Marc's litigation against the Angelos Firm settled in July 2002, shortly after the trial judge had issued its opinion in the divorce proceedings. Under the terms of the Angelos Settlement, Marc will receive a counsel fee award of $13.5 million (9 percent of the monies received by the Angelos Firm), minus a credit of $768,000 for fees already paid to Edell & Associates. The settlement monies will be paid over a period of five years.
Edell & Associates represented itself in the Angelos Litigation, with the assistance of two other firms. The agreement was that they would be paid on a contingency fee basis. Pursuant to the terms of the settlement, the proceeds are to be divided among those firms as follows: (1) Zuckerman, Spaeder, Goldstein, Taylor & Better (Zuckerman) receives 5 percent plus costs and expenses; (2) Baumeister & Samuels (Baumeister) receives 12.5 percent plus 50 percent of costs and expenses, (3) Edell & Associates receives 28.3 percent. The remaining 54.2 percent of the $13.5 million goes to Edell & Associates as its portion of the Maryland Tobacco Litigation settlement.
The first payment to Marc was $2.7 million, representing 9 percent of the $30 million received by the Angelos Firm in its first installment payment from the State of Maryland. The $2.7 million was split as follows:
$2,700,000.00 Gross Settlement
(1st Payment)
- 208,304.92 1/2 Baumeister Expenses
- 8,151.19 Zuckerman Expenses
$2,483,543.89 Net Settlement
- 310,442. 98 Baumeister 12.5% contingency fee
- 124,177.20 Zuckerman 5% contingency fee
- 702,842.92 E&A 28.3% contingency fee
$1,346,080.79 Net Settlement Proceeds to E&A
Accordingly, between its contingency fee portion of the Angelos Settlement ($702,842.92), and its "net settlement proceeds" portion ($1,346,080.79), Edell & Associates received a total of $2,048,923.71 from the first settlement payment. The four additional installment payments will be substantially similar to the first, except that the final installment will be approximately 30 percent less than the others.
IV.
Trial Judge Final Judgment
On July 15, 2002, the trial judge issued his post-trial written opinion, and on August 12, 2002, the judge entered a final judgment of divorce. For support purposes, the judge found that Marc's income was $165,000 per year and Paula's income was $60,000 per year. The judge concluded that, while Marc's income had been reduced from his peak earning years while employed at prestigious New Jersey law firms where he had earned in excess of $200,000 per year, the diminution of Marc's income and concomitant reduction in the parties' lifestyle was "inevitable without regard to the parties' divorce." Given the income Marc and Edell & Associates has and will continue to receive over a period of five years from the settlement of the Angelos Litigation, this "inevitable" diminution simply is not supported by the record. Moreover, the record does not support the judge's conclusion that Marc's lifestyle has in anyway been reduced.
In any event, the judge awarded Paula $3000 per month in permanent alimony, reduced by 50 percent for as long as she continued to cohabit and share living expenses with her paramour. In terms of Paula's economic need, the judge found that her monthly expenses were $7100, and her monthly take-home pay was $3174, leaving a shortfall of $3230 ($7100, minus $3174, minus a $696 wage garnishment).
The judge awarded $53 per week in child support for the youngest child for the time during which she was at boarding school in Massachusetts, and $106 per week for the time during which she was at home in New Jersey. The judge ordered the parties to share in her school and extracurricular expenses on a 55/45 percent basis. No child support for the middle child, who was a senior at Yale University, was ordered; however, the judge ordered Marc to pay any college expenses not covered by the paternal grandparents or financial aid.
In terms of equitable distribution, the judge ordered a 50/50 split of marital assets and debts subject to certain offsets and credits resulting in a net payment to Paula of $52,267.25. The distribution and offsets and credits are as follows:
1. IVC Stock: the judge concluded that the contested IVC stock had been gifted to Marc alone and that the funds were never intermingled with marital assets. Paula, therefore, received no distribution and/or credit for the IVC stock.
2. Budd Larner Deferred Compensation Payment: the judge concluded that the Budd Larner deferred compensation payment, which Marc received during the divorce proceedings, had been spent by Marc to meet marital expenses. Therefore, Paula was not awarded any portion of these funds.
3. IRA: the judge found that Marc improperly withdrew $72,790 from an IRA account during the course of the divorce proceedings. He concluded that the IRA account was a marital asset, and awarded Paula one-half of the balance, and one-half of the $72,790 improperly withdrawn by Marc. But, he concluded the parties are to share the tax consequences of all of the IRA withdrawals on a 50/50 basis.
4. Edell & Associates: the judge found that Marc's law practice was valued at $200,000 and awarded Paula 30 percent of that amount, or $60,000.
5. The Marital Home: the judge found that the money from the sale of the marital home was to be split 50/50, subject to certain credits and offsets. In terms of the credits and offsets, the judge ruled that Marc was solely responsible for the consent judgment of $48,178.52 entered against Marc and in favor of Mulligan for alleged loans. He also ruled that the parties should share equally in a home equity loan; however, Marc was to receive a credit of $7500 equal to one-half of $15,000 Paula had unilaterally withdrawn on the home equity line of credit. The judge also ruled that Paula was entitled to a credit of $5,078.06 representing one-half of mortgage arrears incurred as a result of Marc's failure to pay pendente lite mortgage obligations. Further, the judge ruled that 1997 and 1998 tax liens (totaling $71,479.50) should be paid equally by the parties. Finally, the tax liabilities incurred as a result of Marc's early withdrawals from the IRA account, to be shared equally by the parties, was also included as an offset. As a result of all of this, Marc received $39,911.23 from the remaining proceeds of the sale while Paula received $88,089.75.
6. MBNA Credit Card: the judge ruled that the $19,222 balance on the parties' MBNA credit card arose from the parties' son's expenses during a study abroad program in Australia. It was a joint liability to be shared equally by the parties.
7. Hidel Partners: the judge ruled that the loan received to Marc from Hidel was Marc's alone and not subject to equitable distribution.
8. Paula's Pension: the judge ruled that Marc would receive a credit equal to 30 percent of the gross amount of Paula's TIAA/CREF pension, in the amount of $9210.
9. Life Insurance: the judge ruled that Marc would receive a credit of $11,000, representing one-half of the $22,000 which Paula unilaterally withdrew on the life insurance policy. He ordered Marc to maintain a life insurance policy in the amount of $500,000 until the parties' youngest child entered her freshman year in college, at which time the policy could be reduced to $400,000; at the time of her graduation from college, the policy could be reduced to $300,000 for the purpose of funding alimony.
10. Furniture and Jewelry: the judge ordered that each party would retain their own jewelry and furniture.
11. Marc's Washington Township Home: the trial judge ruled the home Marc purchased and shared with Mulligan was not subject to equitable distribution because the down-payment Marc made on the property was not derived from assets subject to equitable distribution.
In addition, the judge made various determinations as to certain other credits requested by the parties. And, too, he awarded Paula $25,000 of the $144,000 in counsel fees she had requested.
V.
Post-Judgment Proceedings
The Angelos Settlement was reached seven days after the judge issued its written opinion in the divorce proceedings. Four days later, Marc advised the judge of the settlement, but told him it was confidential. He agreed to provide a copy of the settlement papers for the judge's in camera review. At the time of the in camera review, Marc submitted a proposed form of order which calculated Paula's share of the settlement proceeds, using the Trugman formula. He would not provide a copy of the Angelos Settlement papers to Paula, neither did he provide her with the numbers he inputted into the expert's formula. Paula objected to the secret nature of the proceedings on due process grounds.
Marc continued in his refusal to provide her with the settlement documents on the grounds of confidentiality. In this respect, the Angelos Settlement included the following provision regarding confidentiality:
6. The parties agree that the financial terms of this Agreement are HIGHLY CONFIDENTIAL, and that they will at all times maintain the confidentiality of its financial terms. If inquiry is made of the parties, their attorneys, or their "need to know" agents about settlement, the parties and "need to know" agents shall refer any such inquiry to counsel, and counsel shall say in substance: "The parties reached an amicable settlement mutually satisfactory to both sides," and shall say or otherwise communicate no more. The parties understand that each side may be required to disclose the terms of this settlement to persons, such as tax advisors, attorneys, the U.S. Government, state governments, or other persons reasonably determined by a party to have an absolute need to know, but in each such case (except where confidentiality is imposed as a matter of law, as in the case of the U.S. Government) the parties shall (a) emphasize that the financial terms of the . . . Settlement are highly confidential, (b) stress that unauthorized disclosure could lead to the assessment of substantial liquidated damages, and (c) note that the financial terms are subject to an executed confidentiality agreement. The parties in their discretion may require that any "need to know" person sign a written confidentiality agreement. The parties acknowledge that the harm associated with public release of the terms of this settlement cannot be quantified, that the harm in such event would flow to LOPA but not Edell, and in the event that the Edell parties, their attorneys, and/or "need to know" persons disclose the financial terms of this Agreement to the public or to persons who then make the terms public, and LOPA can prove by a preponderance of the evidence that the Edell parties, their attorneys and/or "need to know" persons to whom disclosure has been made cause the financial terms of this Agreement to become public, the Edell parties shall pay to LOPA as liquidated damages and not as a penalty the one-time sum of $250,000. The Edell parties shall have no liquidated damages payment obligation, however, if the source of public disclosure is an instrumentality of the United States or any other public agency required to maintain the confidentiality of taxpayer financial information. The Edell parties have disclosed that Marc Edell is in a divorce proceeding, and the financial terms of this settlement may be disclosed in connection with that proceeding. The Edell parties agree to seek to obtain written confidentiality orders from all private parties subject to that divorce proceeding and, in addition, to advise the Court that this settlement is highly confidential, and request, if the financial information set forth herein is relevant to the Court in the divorce settlement, that the Court prepare [its] opinion in such a way that the terms of this Settlement Agreement and the source of funds are not directly disclosed. Nevertheless, if the Court discloses the terms of this Confidential Agreement, and it becomes public, the Edell parties shall not be subject to the $250,000 liquidated penalty.
[Emphasis added.]
On August 19, 2002, Paula moved for reconsideration to alter or amend the final judgment of divorce. The motion for reconsideration addressed the Angelos Settlement, among numerous other matters, including alimony and child support.
In response to this motion, on November 20, 2002, the judge entered an order supplementing the final judgment of divorce. This order corrected a few minor errors or omissions in the final judgment (for example, reducing his estimate of Marc's annual income to $161,398), but declined to alter the final judgment in any substantive manner. Alimony and child support remained the same, as did the equitable distribution of the proceeds from the Angelos Settlement.
At the same time, in connection with its distribution of the proceeds from the Angelos Settlement, the trial judge entered a confidentiality order. Based upon the confidentiality of the financial terms of the Angelos Settlement, and the fact that Marc would be penalized in the liquidated damage amount of $250,000 for any non-permitted disclosure of the financial terms of the Angelos Settlement Agreement, the judge ordered that Paula was prohibited from disclosing, except to specified authorized professionals, the monetary amount or percentage amount of the payments she would receive from Marc as a result of the Angelos Settlement. The judge further ordered that, if Paula disclosed the monetary amount or percentage amounts she was to receive from Marc as a result of the Angelos Settlement, she would be liable to indemnify Marc for any and all amounts of monetary damages suffered by him as a result of her prohibited disclosures, including the liquidated damage amount of $250,000 Marc may be assessed for any unauthorized disclosure of the financial terms of the Angelos Settlement.
On November 26, 2002, pursuant to the confidentiality order, Marc provided Paula with copies of the confidentiality order and the order supplementing the final judgment of divorce, along with her portion of the first installment of the Angelos Settlement. But he, however, continued to deny Paula access to the Angelos Settlement papers, contending that the November 20, 2002, confidentiality order did not require release of the settlement papers to Paula.
On December 5, 2002, Paula filed a timely notice of appeal from the final judgment of divorce entered on August 12, 2002, and from the order entered on November 20, 2002, supplementing the final judgment of divorce. That appeal was assigned docket number A-1695-02T5. Paula then requested a temporary remand so that she could move before the trial judge for the release of the Angelos Settlement papers. We granted that request.
On remand, Paula moved for release of the Angelos Settlement papers. Marc opposed the motion and, in the alternative, made a cross-motion to compel Paula and her counsel to enter into a written confidentiality agreement in order to gain access to the documents.
By order dated April 21, 2003, the judge ordered Marc to disclose the Angelos Settlement papers to Paula, and ordered Paula and her counsel to enter into a confidentiality agreement regarding that disclosure. Thereafter, the parties engaged in a lengthy period of unsuccessful negotiations regarding the terms of the proposed confidentiality agreement. Ultimately, Paula moved to compel Marc to enter a particular form of agreement so that she could obtain release of the settlement documents. On November 7, 2003, after hearing argument on Paula's motion, the trial judge ordered the parties to execute the MVP agreement.
Thereafter Paula moved for a second remand to address the terms of the MVP agreement. We granted that remand. On remand, Paula moved to amend the terms of the MVP agreement so that they would correspond with the confidentiality provisions of the Angelos Settlement. In response to the motion, Marc consented to certain of the proposed changes, but not others.
After hearing argument on May 25, 2004, the trial judge issued an oral opinion, and, on May 28, 2004, entered a consent order amending the MVP agreement in certain respects requested by Paula, but not others. As relates to the present appeal, the trial judge declined to amend Paragraphs 4 and 5 of the agreement, which addressed procedures Paula must undertake to maintain the confidentiality of the financial terms of the Angelos Settlement, and declined to amend Paragraph 6 of the Agreement, which made Paula liable for counsel fees incurred by Marc as a result of Paula's breach of the agreement. Those provisions are as follows:
4. To the extent PNE or her authorized agents intend to use the Angelos Settlement Agreement and/or any other terms thereof, in whole or part, as an exhibit or otherwise refer thereto in any certification, affidavit, brief, pleading, communication or any other documents filed with the Courts of the State of New Jersey during the course of representation of PNE in the Matrimonial Proceeding and/or the Appellate Action, the same shall be submitted [] by PNE and her authorized agents to the counsel for MZE and the Court in a protective inner envelope conspicuously marked with the caption of the subject matter and the following notice: "This envelope contains Confidential Documents and Information subject to a Confidentiality Agreement pursuant to the Order of the Superior Court of New Jersey, Chancery Division -- Family Part in the matter of Marc Z. Edell v. Paula N. Edell, Docket No. FM-14-1105-98. This envelope shall not be opened by, nor the contents removed by or disclosed to, any person or party except to the Court and/or counsel of record for the parties hereto." In addition, any such submission to the Court hereunder by PNE and her authorized agents shall be accompanied by an application to the Court requesting that the submission at issue be sealed by the Court and specifically designated as documents subject to this Confidentiality Agreement. PNE and her authorized agents shall provide E&A and counsel for MZE with written notice of any intended disclosure to the Court as provided hereunder at least five (5) business days prior to any such actual disclosure. The reasonable fees and costs incurred in connection with this application shall be equally shared by the parties.
5. To the extent either party or their authorized agents intend to use the Angelos Settlement and/or any of the terms thereof, in whole or part, as an exhibit or is otherwise presented, referred to or discussed in any manner whatsoever at any hearing, oral argument, conference, trial or other appearance before the Courts of the State of New Jersey during the course of representation of either party in the Matrimonial Proceeding and/or the Appellate Action, both parties and/or their attorneys shall so advise the Court at the beginning of such hearing, oral argument, conference, trial or other appearance, and request that the Court thereafter exclude from such hearing, oral argument, conference, trial or other appearance all persons other than essential court personnel, the parties and their counsel. In addition, each party shall request that such exhibits and the portion of the Court transcript, however recorded, referring to or discussing such exhibits and information be sealed by the Court and specifically designated as documents subject to this Confidentiality Agreement.
6. Except for PNE's or her authorized agents' disclosures to the Courts of the State of New Jersey as permitted by and in compliance with the terms hereof, in the event that it is established by the preponderance of the evidence that PNE and her authorized agents disseminates and/or otherwise discloses to any other individual and/or entity the Angelos Settlement Agreement and/or any of the terms thereof, in whole or part, including without limitation the monetary amount and payment terms thereof, or otherwise violates the terms of this Confidentiality Agreement, PNE shall be liable to and indemnify MZE and E&A for any and all amounts of monetary damages, penalties and/or other injuries incurred, sustained, paid, and/or otherwise suffered by MZE and/or E&A [as] a result of and/or caused by any such prohibited disseminations and/or disclosures or other violation of this Confidentiality Agreement by PNE or her authorized agents, including without limitation, indemnification of the liquidated damage amount of $250,000.00 that MZE and/or E&A may be assessed and/or otherwise required to pay to the Law Offices of Peter Angelos, or its successors or assigns, under the terms of the Angelos Settlement Agreement as well as any and all reasonable legal fees and costs incurred by MZE and/or E&A in connection with defending any claim, action, proceeding or other demand asserted or initiated by the Law Offices of Peter Angelos against MZE and/or E&A relative to any breach of the confidentiality provisions of the Angelos Settlement Agreement due to and/or arising from PNE's or her authorized agent's violation of this Confidentiality Agreement if established by the preponderance of the evidence. In addition to the foregoing, upon any breach or violation of this Confidentiality Agreement, MZE and E&A shall be entitled to seek injunctive relief, sanctions and/or other such equitable remedies as may be deemed appropriate against PNE, or her authorized agents. The Superior Court of N.J. Family Part shall have jurisdiction to determine the responsibility for reasonable legal fees and costs incurred to enforce this Confidentiality Agreement or to recover damages and/or other relief for the breach thereof or to defend against an application related to this Confidentiality Agreement.
V.
A-1695-02T5
We first address A-1695-02T5, in which Paula appeals various provisions of the support and equitable distribution awards. The governing legal principles are as follows.
When a trial judge makes findings and conclusions as to equitable distribution and support, it is axiomatic that those issues are interrelated and intertwined. Claffey v. Claffey, 360 N.J. Super. 240, 263 (App. Div. 2003). Clearly, the question of support is intimately related to the question of equitable distribution. Conforti v. Guliadis, 128 N.J. 318, 324 (1992). See N.J.S.A. 2A:34-23(b)(10); Lepis v. Lepis, 83 N.J. 139, 154-55 (1980). As required by the Legislature, all determinations of alimony, child support and equitable distribution are governed by a number of factors, including the needs of the supported parties, their income, assets, earning abilities, the duration of the marriage, and the standard of living during that time. See N.J.S.A. 2A:34-23(a),(b); N.J.S.A. 2A:34-23.1.
Recently, our Supreme Court has held "that a trial court's determination of the interplay between an alimony award and equitable distribution is subject to an overarching concept of fairness, bearing in mind the interrelated yet separate purposes of alimony versus equitable distribution." Steneken v. Steneken, 183 N.J. 290, 293 (2005).
Although the issues of equitable distribution and support are "clearly interrelated, the structural purposes of alimony and equitable distribution are different." Id. at 298. In Crews v. Crews, 164 N.J. 11, 16 (2000), the Court "reaffirm[ed] the Lepis v. Lepis, supra, 83 N.J. at 139 (1980) principle that the goal of a proper alimony award is to assist the supported spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage." "Accordingly, the supporting spouse has a continuing responsibility 'to contribute to the maintenance of the dependent spouse at the standard of living formerly shared.'" Glass v. Glass, 366 N.J. Super. 357, 370 (App. Div.), certif. denied, 180 N.J. 354 (2004) (quoting Lepis v. Lepis, supra, 83 N.J. at 152). See Crews v. Crews, supra, 164 N.J. at 16; Innes v. Innes, 117 N.J. 496, 503 (1990); Heinl v. Heinl, 287 N.J. Super. 337, 344 (App. Div. 1996).
The standards for child support are similar except that child support is a joint obligation of both parents for as long as the children remain unemancipated. Martinetti v. Hickman, 261 N.J. Super. 508, 512 (App. Div. 1993); Lynn v. Lynn, 165 N.J. Super. 328, 343 (App. Div.), certif. denied, 81 N.J. 52 (1979). "The right to child support belongs to the child . . . ." Pascale v. Pascale, 140 N.J. 583, 591 (1995) (citing Martinetti v. Hickman, supra, 261 N.J. Super. at 512); Patetta v. Patetta, 358 N.J. Super. 90, 94 (App. Div. 2003). A child support obligation may continue while a child is away from home attending school, including college. Patetta v. Patetta, supra, 358 N.J. Super. at 93-95; Raynor v. Raynor, 319 N.J. Super. 591, 613-14 (App. Div. 1999); Martinetti v. Hickman, supra, 261 N.J. Super. at 512-13; Zazzo v. Zazzo, 245 N.J. Super. 124, 131-32 (App. Div. 1990), certif. denied, 126 N.J. 321 (1991). Child support and contribution to school expenses "are two discrete yet related obligations imposed on parents." Hudson v. Hudson, 315 N.J. Super. 577, 584 (App. Div. 1998). Cf. Guglielmo v. Guglielmo, 253 N.J. Super. 531, 548-49 (App. Div. 1992) (parent responsible to pay for more than just college tuition and books).
"In contrast, equitable distribution determinations are intended to be in addition to, and not as substitutes for, [support] awards." Steneken v. Steneken, supra, 183 N.J. at 299. It involves identifying the elements of the marital estate, valuing them as of a particular date, and then determining an appropriate division utilizing various statutory factors. Rothman v. Rothman, 65 N.J. 219, 232 (1974); N.J.S.A. 2A:34-23.1. See Painter v. Painter, 65 N.J. 196, 212 (1974). The guiding principle is to effect a fair and just division of marital assets. Steneken v. Steneken, supra, 183 N.J. at 299. Compare Robertson v. Robertson, ___ N.J. Super. ___, ___ (App. Div. 2005) (slip op. at 7-8) (post-divorce vested stock options not marital assets).
Both marital assets and marital debts are subject to distribution as to marital debts. As to marital debts, we have observed:
The trial court's approach to the allocation of debts is supported by judicial authority. In Schweizer v. Schweizer, 301 Md. 626, 484 A.2d 267 (1984), the court distinguished between marital debts, which are directly traceable to the acquisition of marital property, and nonmarital debts which are not. If marital, the debts are subtracted from the total value of the marital property before distribution. If nonmarital, they are taken into account as a reflection of the party's economic circumstances when the court determines the amount and method of payment of the award. Id. at 637, 484 A.2d at 272. Even if debts are determined to be marital, they could be allocated to one party based upon his or her greater earning potential. See Painter v. Painter, 65 N.J. at 211.
Generally speaking, in dividing marital assets the court must take into account the liabilities as well as the assets of the parties. Finley v. Finley, 422 N.E.2d 289, 295 (Ind. Ct. App. 1981). In other words, if the assets are to be divided between the parties, the debts incurred in obtaining those assets should likewise be allocated between the parties. Hansen v. Hansen, 302 N.W.2d 801 (S.D. 1981). However, it may not be an abuse of judicial discretion to divide the assets of the parties equally without requiring them to share the debts. Levy v. Levy, 277 S.C. 576, 291 S.E.2d 201 (1986).
In a situation such as present here, plaintiff had the burden of establishing the traceable debts. Sharp v. Sharp, 58 Md. App. 386, 398 (1984). However, if the debt resulted because the husband intentionally dissipated marital assets "such intentional dissipation is no more than a fraud on marital rights," and the debt will not be charged to the wife. Ibid.
[Monte v. Monte, 212 N.J. Super. 557, 567-68 (App. Div. 1986).]
See Robertson v. Robertson, supra, ___ N.J. Super. at ___ (slip op. at 14-15) (denial of supporting spouse's requests for a credit of one-half of home equity loan used for marital purposes solely because the supporting spouse "was in a better position to pay the debt" was an abuse of discretion).
a.
Point I - Support
We turn now to Paula's support contentions. In doing so, we recognize that our scope of review is limited to determining whether there was an abuse of discretion. E.g. Foust v. Glaser, 340 N.J. Super. 312, 315-16 (App. Div. 2001); Raynor v. Raynor, supra, 319 N.J. Super. at 605. And, too, we owe deference to the trial judge's factual determinations. E.g., Pascale v. Pascale, 113 N.J. 20, 33 (1988).
Here, the trial judge issued a thorough written opinion which addressed all relevant support factors. Paula asserts numerous erroneous rulings in point I of her brief. With the exception of the trial judge's calculation of Marc's economic circumstances, his income and assets, and his ability to pay, N.J.S.A. 2A:34-23(a)(2),(3) and (b)(1), we have no basis for interfering with the judge's support determinations. However, because we are convinced the conclusions as to Marc's economic circumstances are fundamentally flawed, the support awards must be remanded for reconsideration.
In determining Marc's economic circumstances and ability to pay, the judge limited his consideration to Marc's earned income (his W-2 income and loan repayments from Edell & Associates), and also limited his consideration to only three years (1997, 1998, and 1999). Averaging Marc's earned income for those three years, the judge found that he had an income of $150,000 per year. The trial judge then added $15,000 to that amount to account for personal expenses paid by Edell & Associates, and concluded that Marc had an earned income of $165,000 per year (later reduced to $161,398).
We are convinced the judge made three errors. First, he erred by considering only Marc's earned income--his wages and loan repayments from Edell & Associates. The statute directs trial judges to consider the parties' economic circumstances and abilities to pay, and does not restrict the inquiry to the parties' earned incomes. See N.J.S.A. 2A:34-23(b)(1),(5), (10),(11); N.J.S.A. 2A:34-23(a)(3),(4). Therefore, the trial judge should have considered Marc's economic circumstances as a whole, including, for example, money he derived from capital gains and the invasion of assets. E.g., Steneken v. Steneken, supra, 183 N.J. at 299; Crews v. Crews, supra, 164 N.J. at 27; Miller v. Miller, 160 N.J. 408, 420 (1999); Innes v. Innes, supra, 117 N.J. at 503; Weishaus v. Weishaus, 360 N.J. Super. 281, 289, 291-92 (App. Div. 2003), aff'd in part and rev'd and modified in part on other grounds, 180 N.J. 131 (2004); Hughes v. Hughes, 311 N.J. Super. 15, 34 (App. Div. 1998).
Over the years, Marc received money from a variety of sources, including: wages from various employers; deferred compensation from Budd Larner; income from the sale of stock; income from IRA invasions; income from Hidel Partners; loan repayments from Edell & Associates; and the payment of personal expenses from the account of Edell & Associates. He did not receive money from all of these sources in every year. Some sources were non-recurring. However, taking all monetary resources into consideration, the evidence reflects that Marc's economic circumstances varied little over the years, and he consistently received in excess of $200,000 each year, even during the lean years of Edell & Associates' initial beginning. Limiting an analysis of Marc's available income for support purposes to only W-2 income and income from loan repayments resulted in a conclusion that is not supported by the record.
Had the trial judge considered all of Marc's monetary resources between 1997 and 1999, his calculations for those years would have been significantly different. For example, for 1997, Marc's earned income, as calculated by the judge, was $157,955 consisting of W-2 income of $46,500 and loan repayment amounts from Edell & Associates of $111,455. On the other hand, the records for Marc's 1997 monetary resources reflect: income of $14,308 from Edell & Associates; income of $2500 from IVC; $127,500 received as deferred compensation from Budd Larner; and $123,000 received as loan repayments from Edell & Associates. Consideration of all monetary resources therefore results in a total funds available of $267,308, significantly greater than the $157,955 in earned income found by the trial judge.
Similarly, for 1998, the judge concluded that Marc's earned income was only $48,568. That figure consists only of W-2 reported income. Yet, Marc's income tax return for 1998 reflects earned income of $71,431, plus IRA invasions of $41,246, plus capital gains of $118,093, plus dividends and interest income of $142. This amounts to total monetary resources of $230,912, which is significantly greater than the $48,568 earned income found by the trial judge for that year.
Finally, for 1999, the judge concluded that Marc's earned income was $242,000. However, that included only Marc's W-2 income of $190,853 and loan repayments from Edell & Associates of $51,654. Yet, the record reflects additional money received in 1999 in the form of IRA invasions totaling $72,790. Adding this amount to Marc's earned income results in a total monetary resources of $315,297.
And, indeed, the record reflects that Marc was capable of maintaining a high standard of living throughout, notwithstanding several years of relatively low earned income from Edell & Associates and not the separate households. Had the trial judge calculated Marc's ability to pay and his economic circumstances using all of his monetary resources, and then averaged the figures over the years 1997 through 1998, Marc's monetary resources on an annual basis would be approximately $271,000, and not the $150,000 found by the trial judge.
And, too, we are convinced that the trial judge's focus on only the Edell & Associates years of income prior to the filing of the complaint while ignoring Marc's available resources between 1991 and 1999, was erroneous. This limited income analysis gave a distorted picture of Marc's income history because it addressed Marc's earnings only during the first few years after he opened Edell & Associates. As to this issue, the judge found that, irrespective of the divorce proceedings, a reduction in the marital lifestyle was inevitable due to Marc's reduced income. Yet, despite the parties understanding of the risk of financial uncertainty that resulted from Marc's opening his own firm, the record reflects that Marc always managed to secure, during this time, in excess of $200,000 per year from all monetary resources, consistent with his earnings while employed at large law firms.
Moreover, in making the marital decision to make a career change that might, temporarily, result in reduced marital income, the parties anticipated that that endeavor would ultimately provide equal or greater financial success than Marc's partnerships at Porzio and Budd Larner. Simply put, the trial judge should have viewed Marc's income with "an eye toward the future, since it was to this potential that both parties contributed during the marriage." Guglielmo v. Guglielmo, supra, 253 N.J. Super. at 544. Cf. Steneken v. Steneken, 367 N.J. Super. 427, 440 (App. Div. 2004), aff'd as modified by, supra, 183 N.J. 290 (2005).
Indeed, this expectation has proven to be true. As a result of the Angelos Settlement, Marc will be receiving millions of dollars in counsel fees over a period of five years based upon his work on the Maryland Tobacco Litigation. His involvement in that litigation clearly is based upon the experience and reputation he developed during the course of the marriage. Further, Marc performed many hours of work on the Maryland Tobacco Litigation before he filed for divorce. His ability to pay clearly should factor in this additional, available income stream, as it is substantially derivative of the marriage, irrespective of the fact that Paula may be, also, entitled to some part of the settlement as equitable distribution.
b.
Point I - Equitable Distribution
We now address Paula's equitable distribution contentions raised in point I of her brief. The manner of distribution, as with support determinations, remains within the broad discretion of the trial judge. Borodinsky v. Borodinsky, 162 N.J. Super. 437, 443-44 (App. Div. 1978). Our review is limited to determining whether the trial judge "mistakenly exercised its broad authority to divide the parties' property and whether the result was 'reached by the trial judge on the evidence, or whether it is clearly unfair or unjustly distorted by a misconception of law or findings of fact that are contrary to the evidence.'" Valentino v. Valentino, 309 N.J. Super. 334, 339 (App. Div. 1998) (quoting Wadlow v. Wadlow, 200 N.J. Super. 372, 382 (App. Div 1985)).
In addition to the distribution of the Angelos Settlement, which we will discuss separately, Paula appeals from the equitable distribution of certain marital debts: a home equity loan, the dissipated IRA, 1997 and 1998 tax liens, and the fees incurred in the repossession of Paula's Toyota. We agree that, in certain respects, the distributions of these marital debts and the dissipated IRA are unreasonable and inconsistent with the trial judge's factual findings.
i.
Line of Credit
The record reflects that, during the divorce proceedings, both parties took withdrawals on a home equity line of credit, for which there was a $150,000 limit. When the marital home was sold in June 2000, there was a balance due of $146,373.
Marc was responsible for a large majority of the withdrawals. He deposited those withdrawals into Edell & Associates accounts. Thereafter, he withdrew the money from the law firm as loan repayments to himself, and used the money to pay both family and law firm expenses. He could not state what percentage of the funds went toward marital, as opposed to non-marital, expenses.
By contrast, Paula withdrew only $20,000 from the home equity line of credit and repaid $5000. Therefore, her withdrawals amounted to only $15,000. She used the $15,000 to pay for repairs to the marital home and other family expenses.
Under a pendente lite order dated November 30, 1998, the parties were obligated to pay the home equity line of credit on a 75/25 basis. At some point, however, Marc ceased paying the mortgage and the home equity line of credit. Foreclosure proceedings were commenced. When the house sold, the mortgage and home equity line of credit were paid out of the proceeds of sale.
At the closing, Paula was charged with 50 percent of the home equity line of credit, or $73,187. At trial, she contended that pursuant to the pendente lite order dated November 30, 1998, she should have been charged with only 25 percent and claimed entitlement to a credit of $36,593. The trial judge rejected this claim and ruled that the home equity line of credit should be shared equally between the parties as a joint marital debt. The judge also granted Marc a credit of $7500, which represented half of the $15,000 withdrawal that Paula made during the course of the divorce proceedings.
We are convinced these rulings are inequitable and inconsistent with the factual record. First, as to the $7500 credit granted to Marc, the record is undisputed that the entire $15,000 withdrawn by Paula was used for marital expenses. That debt should be shared by the parties, with neither entitled to any credit.
Second, as to the 50/50 split of the remainder of the home equity obligation, the record reflects that Marc used his home equity line of credit withdrawals only in part for marital expenses. He used an unspecified portion of the withdrawals to pay for non-marital, law firm expenses. It would be inequitable to require Paula to pay a full 50 percent on these withdrawals. Because Marc cannot establish the percentage of the home equity withdrawals used for marital versus non-marital expenses, we are convinced the 75/25 pendente lite split is more equitable than a 50/50 split. The 75/25 split is also more consistent with the parties' practice during the marriage, when Marc paid the large majority of marital debts due to his significantly larger income.
ii.
IRA Withdrawals
In a pendente lite order dated January 8, 1999, the trial judge permitted Marc to withdraw funds from an IRA account in order to meet his support obligations and to pay certain litigation expenses. The judge ruled that the responsibility for taxes and penalties on any withdrawals would be reserved for the final hearing.
Pursuant to this order, Marc took withdrawals totaling $141,822. In the post-trial opinion and order of final judgment, and in his opinion on Paula's motion for reconsideration, the trial judge found that Marc had properly withdrawn approximately $70,000 from the IRA account to meet support obligations. However, the judge found that he had improperly withdrawn $72,790 for non-marital purposes. Ultimately, the judge ruled that the IRA account was a marital asset which should be shared equally by the parties, with Paula receiving a credit equal to one-half of the $72,790 improperly withdrawn by Marc. However, the judge further concluded that the parties should share equally in the tax consequences of the IRA withdrawals. Because the judge concluded that $72,790 of those withdrawals by Marc was improper, there is no basis for imposing the tax consequences arising therefrom upon Paula.
iii.
1997 and 1998 Tax Liens
For 1997, Marc owed $44,694 to the Internal Revenue Service (IRS). He stated that this obligation arose because taxes had not been withheld on the $130,000 in deferred compensation he received from Budd Larner. For 1998, he owed $29,304 to the IRS. He calculated that 48 percent of this tax obligation arose because taxes had not been withheld on his withdrawals from the IRA account. At the time of closing on the marital home, the total of the 1997 and 1998 tax liens was $71,624. The liens were satisfied out of the proceeds of sale of the marital home.
In the post-trial opinion and final judgment of divorce, the trial judge ruled that the 1997 and 1998 tax liens arose out of joint income during the course of the marriage. Therefore, they should be paid equally by the parties out of their shares of the proceeds of sale of the marital home and neither was entitled to any credit.
Paula contends the ruling is unfair because, during 1997 and 1998, the parties were separated and filing separate tax returns. She contends that Marc could have paid the tax obligations for those years, but he chose not to do so.
With respect to the 1997 tax lien, in fact, the lien arose from income Marc earned during the marriage, albeit when the parties were separated and filing separate tax returns. Although Paula contends that the income was not used to pay marital expenses, and instead was improperly diverted to Edell & Associates and/or Mulligan, she did not prove that contention at trial. On the other hand, there is no basis for imposing upon Paula responsibility for the interest and penalties assessed on the 1997 tax obligation, as it was Marc who failed to pay the taxes owed in the time-frame required by law, when he clearly could have done so.
The 1998 tax lien raises different issues. With respect to that lien, the record reflects that 48 percent arose from Marc's IRA withdrawals. While the record is unclear as the source of the remaining 52 percent of the tax lien, it appears that it arose from Marc's sale of stock, because the record reflects no other significant source of income for 1998 except the $71,431 in wages Marc received from Edell & Associates, on which appropriate tax withholdings were made. That sale provided Marc with proceeds of $165,796 and capital gains reported to the IRS of $118,093. The trial judge held that the stock was not a marital asset--it belonged solely to Marc as a gift from his parents. Of the stock proceeds, Marc used $110,000 to purchase a home with Mulligan and not for marital expenses. He stated that the remainder of the stock proceeds was utilized to pay family and firm expenses, although he did not specify what percentage of the remainder went to marital versus non-marital expenses.
Given those circumstances, we see no rational basis for imposing upon Paula any portion of the 1998 tax lien which was attributable to the stock sale, or the interest and penalties arising from the lien, because: (1) the judge held that the stock belonged exclusively to Marc, and (2) he used the proceeds from the sale primarily to purchase a home with Mulligan and for law firm expenses, and not for marital expenses.
iv.
Toyota Repossession Fees
In his post-trial opinion and final judgment of divorce, the trial judge ruled that the $6,833.13 in costs incurred with respect to the repossession of Paula's Toyota must be shared equally between the parties. We see no rational basis for this as the vehicle was repossessed as a result of Marc's noncompliance with pendente lite support orders. It is simply not equitable to impose upon Paula any responsibility for the repossession costs.
c.
Point II - Valuation of Edell & Associations
The parties' joint expert, Gary Trugman, valued Edell & Associates at $200,000. By their stipulation, Trugman's report was accepted into evidence as a joint exhibit, without testimony. In the final judgment of divorce, the trial judge accepted this valuation and awarded Paula 30 percent of the firm's value.
Paula appeals from this aspect of the final judgment, contesting the trial judge's acceptance of Trugman's valuation. She contends that the judge should have rejected the valuation because (1) it was a net opinion, (2) Trugman "blindly" accepted Marc's and Mulligan's assessment of the firm's value, as set by the price Mulligan paid for 49 percent of the firm ($98,000, paid over a period of ten years), which Trugman admitted was not an arm's length transaction, and (3) Trugman failed to calculate the value of "goodwill." Finally, Paula suggests that Mulligan, who provided Trugman with firm records in order to make his valuation, falsified or manipulated those records in order to achieve a low valuation of the firm. We disagree.
In accepting Trugman's valuation, the trial judge made a finding of fact which is entitled to deference on appeal. The finding is supported by the uncontested evidentiary record, and there is no basis for us to reverse. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). See also Hughes v. Hughes, supra, 311 N.J. Super. at 25-26 (trial judge did not err in valuing asset based upon report submitted by parties' joint expert, where both parties stipulated to expert's qualifications and defendant provided no testimony to refute joint expert's conclusions).
Trugman's opinion was not a "net opinion." A net opinion is an expert's bare conclusion unsupported by factual evidence. Buckelew v. Grossbard, 87 N.J. 512, 524 (1981), remanded to 189 N.J. Super. 584 (Law Div. 1983), aff'd o.b., 192 N.J. Super. 188 (App. Div. 1983). In his report, Trugman cited numerous documents upon which his valuation was based. Furthermore, he gave a detailed analysis, which explained the basis for his valuation using an asset based approach. He also provided a reasonable explanation as to why he chose an asset-based approach to valuing the firm. He explained that the alternatives, i.e., valuation method, a market-based approach or an income-based approach, were impractical under the circumstances presented. There was no error in Trugman's selecting an asset based approach to valuation, nor in the trial judge's acceptance of that approach under the circumstances of this case. See Steneken v. Steneken, supra, 183 N.J. at 297-98 (valuation of a closely held corporation is difficult, fact sensitive, and not an exact science; no particular valuation method is mandated, and the most reasonable valuation method will depend upon the circumstances presented).
In any event, at trial, Paula did not object to the admissibility of Trugman's report on the ground that it was a net opinion, nor did she contest Trugman's methodology for valuing the law firm, including his failure to assess the value of goodwill. Therefore, she may not raise these issues for the first time on appeal. See, e.g., Conrad v. Robbi, 341 N.J. Super. 424, 447 (App. Div.), certif. denied, 170 N.J. 210 (2001); Hill v. N.J. Dept. of Corrs., 342 N.J. Super. 273, 293-94 (App. Div. 2001), certif. denied, 171 N.J. 338 (2002). Cf., State v. Harvey, 151 N.J. 117, 202 (1997) (the place to introduce and test the validity of expert testimony is at trial), cert. denied, 528 U.S. 1085, 120 S. Ct. 811, 145 L. Ed. 2d 683 (2000).
And, too, the record does not support Paula's contention that Trugman blindly accepted the valuation of the firm made by Marc and Mulligan. Indeed, he explicitly rejected a market-based approach for valuing the firm, which would have resulted in a present value of $141,000, noting that Mulligan's purchase of 49 percent of the firm, for $98,000 payable over a period of ten years, was not an arm's length transaction. Finally, Paula cites no evidence that Mulligan tampered with the firm's financial records or in any way manipulated those records in order to steer Trugman toward a low valuation of the firm.
d.
Point III - Angelos Settlement
Paula appeals from the equitable distribution of the Angelos Settlement, asserting a number of arguments. We find merit in three of her contentions. First, as she correctly points out, the judge made no relevant findings of fact or conclusions of law, as required under R. 1:7-4. Most significantly, the judge made no findings as to the correct numerical figures to be inputted into Trugman's formula for calculating the tax effected work in progress.
Second, Paula's claims of a denial of procedural due process are well-founded. It is undisputed that the trial judge utilized the numbers provided by Marc ex parte, and without giving Paula an opportunity to challenge those numbers or the calculations. She should have that opportunity.
Third, we agree that the judge erred by uncritically accepting Marc's figures as to the amount of counsel fees that should be subtracted from the Angelos Settlement as compensation to Edell & Associates, Zuckerman, and Baumeister, for the work they performed on the Angelos Litigation. The subtraction of these counsel fee amounts had the effect of reducing the amount available for equitable distribution to Paula. During the divorce trial, Paula contested the reasonableness of Marc's contingency fee arrangement for the Angelos Litigation. Indeed, it was one of the most hotly contested issues of the trial. She argued that a total contingency fee of 45.8 percent was outrageous and unlawful, as it violated the rules of professional conduct. She also contested the reasonableness of the individual components of the contingency fee arrangement: the 12.5 percent going to Baumeister; the 5 percent going to Zucker; and the 28.3 percent going to Edell & Associates.
Paula's arguments against the contingency fee arrangement were necessarily hampered by the fact that the Angelos Litigation was ongoing at the time of the divorce trial. For example, at the time of the divorce trial, the final billing records for the Angelos Litigation were unavailable, and it was unclear how many billable hours that litigation would ultimately consume. Thus, the reasonableness of the Angelos Litigation contingency fee arrangement could not be assessed with finality at the time of the divorce trial. See, e.g., R.P.C. 1.5(a)(4) (one of the considerations in determining reasonableness of fee is "results obtained," which can only be known at conclusion of a case); Attorney Grievance Comm'n of Md. v. Pennington, 733 A.2d 1029, 1036 (Md. 1999) (question of reasonableness of contingent fee agreement must be revisited after fee is quantified or quantifiable and tested against factors enumerated in R.P.C. 1.5(a)).
Perhaps because of this difficulty, the trial judge did not address the issue in his written opinion or the final judgment of divorce. He stated only:
Of particular concern during the course of the litigation was the Angelos [l]itigation. Each side presented experts as to appropriateness of the fee arrangement. After voir dire, the Court rejected [Paula's] expert. [Marc's] expert, Mitchell Baumeister testified in support of the appropriateness of the fee arrangement between [Marc] and co-counsel. The Court concludes that Mr. Baumeister's testimony is of no value to assist the Court in determining this issue. Mr. Baumeister is himself involved in the fee arrangement as he represents plaintiff in this litigation, is a long-term friend of [Marc's] and most importantly, he candidly admitted he had no knowledge of the Maryland regulations relating to contingency fees. The Court, therefore, concludes that there exists a contractual fee arrangement between [Marc] and other counsel and declines to enter a finding as to whether the arrangement is appropriate or inappropriate. The Court simply acknowledges that it is an existing contractual arrangement, to which [Marc] is bound.
[Emphasis added.]
But clearly, Marc's binding obligation to the terms of his agreement does not resolve Paula's legitimate right to challenge its reasonableness vis- -vis a fair and equitable distribution to her of this marital asset. In valuing marital assets for equitable distribution purposes, courts are not bound by a spouse's contracts with third parties. For example, in Bowen v. Bowen, 96 N.J. 36, 45-48 (1984), the Court held that, in valuing the defendant husband's interest in a closely held corporation for equitable distribution purposes, the lower court was not bound by a buy-sell agreement between the corporation's three stockholders.
Similarly, in Castriota v. Castriota, 268 N.J. Super. 417, 419-22 (App. Div. 1993), the husband violated an equitable distribution agreement contained in the divorce judgment, and the wife moved to compel him to turn over his stock in a closely held corporation for the purpose of an execution sale, in order to satisfy the judgment. We held that the wife could execute judgment upon the husband's shares, notwithstanding the fact that securities were subject to an absolute prohibition against their alienation. Id. at 422. We held that an unqualified restraint on the transfer of securities was unreasonable and contravened public policy. Id. at 419, 422-25.
Finally, in Firmani v. Firmani, 332 N.J. Super. 118, 121-25 (App. Div. 2000), we held that a husband's fraudulent conveyance of property to a family partnership, in order to avoid enforcement of the equitable distribution provisions of a divorce judgment, could be vacated under the Uniform Fraudulent Transfer Act, N.J.S.A. 25:2-20 to -33. Cf., Lepis v. Lepis, supra, 83 N.J. at 148-49 ("contract principles have little place in the law of domestic relations," and courts will enforce spousal agreements only to the extent they are fair and equitable).
Thus, for equitable distribution purposes, the trial judge was not bound by the contingency fee arrangements made in the Angelos Litigation. The judge should have examined the reasonableness and legality of these agreements, and the degree to which they constituted an inappropriate attempt to shield marital assets from equitable distribution.
We are, also, convinced that the trial judge erred in accepting Marc's allocation of 28.3 percent of the Angelos Settlement as a contingency fee payable to Edell & Associates for the work performed on the Angelos Litigation. The Angelos Litigation was a suit designed to recover Edell & Associates' rightful share of the $150 million in counsel fees awarded to the Angelos Firm in the Maryland Tobacco Litigation. The Angelos Litigation was a straightforward contract dispute. The questions raised were: did the Angelos Firm promise to compensate Marc on a contingent fee basis in the Maryland Tobacco Litigation, and, if so, in what amount? The only unique factors were the high profile of the case, the parties involved, and the amount of money at stake. The Angelos Litigation was not a "complex commercial case," with complex issues of fact and law, as argued by Marc.
The Angelos Settlement proceeds are nothing more than the counsel fees earned by Edell & Associates for its work on the Maryland Tobacco Litigation. It is undisputed that Paula is entitled to equitable distribution of the Angelos Settlement because the underlying suit upon which counsel fees were earned, the Maryland Tobacco Litigation, was ongoing at the time Marc filed for divorce. See, e.g., Erlanger v. Erlanger, 364 N.J. Super. 449, 451-52 (Ch. Div. 2003) (attorney's contingency fee that has not yet been realized is subject to equitable distribution).
Indeed, at the very latest, Edell & Associates began work on the Maryland Tobacco Litigation in March 1996, two years before Marc filed the divorce complaint in March 1998. Moreover, the Maryland Tobacco Litigation was largely concluded in the summer of 1998, when settlement negotiations had become serious. This was just four months after Marc filed for divorce.
Also, significantly, the large majority of work performed on the Maryland Tobacco Litigation was performed while Marc was the sole owner of Edell & Associates, before Mulligan joined the firm. Mulligan did not purchase her 49 percent of Edell & Associates until August 1998, one month after the Maryland Tobacco Litigation had been settled in principle. Therefore, we perceive no reasonable basis for Mulligan to share in 28.3 percent of the Angelos Settlement proceeds (as a contingency fee to Edell & Associates in the Angelos Litigation), to the exclusion of Paula.
The Angelos Litigation was commenced on February 1999, after Mulligan had purchased a 49 percent share of Edell & Associates. Edell & Associates, both Marc and Mulligan, are entitled to compensation for the hours expended on the Angelos Litigation to recover the fee Marc had earned in the Maryland Tobacco Litigation. By expending hours on the Angelos Litigation, the firm could not expend those hours on other fee-producing cases. But the 28.3 percent contingency fee is, to us, per se unreasonable under the circumstances.
On remand, for purposes of the Trugman formula, the counsel fee awarded to Edell & Associates for its work on the Angelos Litigation should be calculated on an hourly basis. In other words, the formula should be as follows:
$2,700,000.00 Gross Settlement
(1st installment payment)
- [ ] 1/2 Baumeister reasonable Expenses
- [ ] Zuckerman reasonable Expenses
[ ] Net Settlement
- [ ] Baumeister reasonable counsel fee
- [ ] Zuckerman reasonable counsel fee
- [ ] E&A reasonable hourly fees incurred on
Angelos litigation
[ ] Net Settlement Proceeds to E&A
Paula's share of the "Net Settlement Proceeds to E&A" should be 6.66 percent of that amount, as provided for under Trugman's formula.
As to the $768,000 paid by the Angelos Firm to Edell & Associates prior to the Angelos Settlement, we comment as follows. During the divorce proceedings, Paula was aware of the pre-settlement payments from the Angelos Firm to Edell & Associates. Therefore, her argument on appeal that Marc withheld information about these payments, is factually inaccurate.
While the $768,000 was earned on the Maryland Tobacco Litigation during the course of the marriage and therefore, was subject to equitable distribution, it was in fact considered by Trugman when valuing Edell & Associates. The monies were received by Edell & Associates between 1996 and 1999. Therefore, the monies constituted part of the firm's assets at the time of Trugman's valuation in October 2000. Thus, in essence, the $768,000 has already been equitably distributed to Paula by virtue of the court's equitable distribution of Edell & Associates.
We briefly comment on Paula's additional challenge to the Trugman formula itself. In particular, she contends there is no factual basis for using a 40 percent tax rate to calculate the tax effected marital work in progress. She suggests that, while a 40 percent reduction for taxes may have been appropriate based upon the firm's tax returns through 1998, upon which Trugman based his formula, a lower rate may have been appropriate based upon the firm's tax returns between 1999 and July 2002, during which time the firm allegedly experienced a financial downturn. But, the record reflects that Paula was given a full and fair opportunity to contest the Trugman formula during the divorce trial. Instead, she stipulated to the admissibility of the report and did not contest the validity of the formula, nor did she introduce any expert testimony contradicting the formula. Thus, the record supports the trial judge's acceptance of the formula and contains no alternative basis for distributing these marital assets. Certainly, whenever possible, it is appropriate to consider the tax consequences when making an equitable distribution of marital assets. Orgler v. Orgler, 237 N.J. Super. 342, 355-56 (App. Div. 1989). Given the amount of money involved, we do not see a basis for interfering with the 40 percent tax rate Paula accepted at trial.
e.
Point I - Counsel Fees
An "award of counsel fees and costs in a matrimonial action rests in the [sound] discretion of the court." Williams v. Williams, 59 N.J. 229, 233 (1971); Guglielmo v. Guglielmo, supra, 253 N.J. Super. at 544-45; Salch v. Salch, 240 N.J. Super. 441, 443 (App. Div. 1990). Absent an abuse of discretion, we will not interfere. Von Pein v. Von Pein, 268 N.J. Super. 7, 20 (App. Div. 1993).
Relevant factors in determining whether an award of fees is warranted include: (1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (3) the reasonableness and good faith of the positions advanced by the parties; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award. N.J.S.A. 2A:34-23; R. 4:42-9(a)(1); R. 5:3-5(c). See also Williams v. Williams, supra, 59 N.J. at 233; Salch v. Salch, supra, 240 N.J. Super. at 443.
Paula sought $144,000 in counsel fees. The Final Judgment of Divorce awarded only $25,000 in fees. Yet, in his post-trial written opinion, the judge found:
It is clear from the record of this case that [Paula] was repeatedly required to return to Court as a result of the [Marc's] repeated failure to meet his pendente lite obligations. He was found to be in violation of litigant's rights on several occasions by the Court. Although the Court ultimately concluded that the [IVC] stock [gifted to Marc in 1996] was [his], the Court acknowledges that those funds were available to [him] at the same time he was asserting continuing inability to meet his financial obligations pursuant to the pendente lite order and the availability of those funds cannot be ignored.
The record supports the conclusion that much of the pretrial motion practice was caused by Marc's failure to meet his pendente lite support obligations. Indeed, on at least one occasion before trial, he was held in willful violation of a court order and compelled to pay $1500 in Paula's counsel fees. At the time of trial, however, he had not paid those fees. In addition, the record supports the finding that, at the same time, Marc was not meeting his support obligations, he made the decision to utilize a large asset, the IVC stock, to purchase a home with Mulligan. Still further, the record reflects significant difficulties in ascertaining Marc's economic resources for support purposes. As found by the trial judge, these difficulties were caused by Marc's failure to file tax returns for 2000 and 2001, and his decision to commingle his personal finances with those of Edell & Associates and Mulligan. Finally, the record is clear that Marc was at all times in a superior financial position. During the marriage, he was the primary wage earner and he paid the large majority of the marital expenses. Moreover, the parties' financial situations have only become more divergent since the Angelos Settlement. Under these circumstances, we are convinced the award of $25,000 of the $144,000 in counsel fees requested by Paula was an abuse of discretion, not to mention unsupported by any factual findings and conclusions of law.
f.
Summary of A-1695-02T5
In summary, as to point I, we:
(1) reverse the support awards and remand for the trial judge to consider these awards based upon Marc's monetary resources as a whole, for all years provided by the parties at trial, and the Angelos Settlement;
(2) reverse and remand the equitable distribution of the home equity loan, reversing the $7500 credit granted to Marc with respect to the $15,000 withdrawn by Paula, and requiring that the home equity loan be split on a 75/25 basis;
(3) affirm in part, reverse in part, and remand the equitable distribution of the IRA, affirming the ruling that only $72,790 of Marc's IRA withdrawals were improper, but holding that Paula is not responsible for whatever portion of the tax obligation resulted from the $72,790 in improper withdrawals from the IRA, and remanding for a determination as to the appropriate credit to be given to Paula;
(4) affirm in part, reverse in part, and remand the equitable distribution of the 1997 and 1998 tax liens:
(a) with respect to the 1997 tax lien, we affirm the judge's ruling that the tax lien was incurred on marital income and therefore should be shared equally by the parties, except that Paula is not responsible for any interest and penalties assessed on the 1997 tax obligation, and remand for calculation of an appropriate credit to her;
(b) with respect to the 1998 tax lien, reverse the ruling that the lien was incurred on marital income and should be shared equally by the parties; hold instead that Marc should bear the sole burden for the 1998 tax lien except to the extent the taxes were owed on any IRA withdrawals which were properly taken and used to meet his support obligations; hold that Paula is not responsible for any penalties or interest assessed on the 1998 tax obligation; and remand to the trial judge for a determination as to the appropriate credit owed to Paula;
(5) reverse the 50/50 equitable distribution of the Toyota repossession fees and hold that Marc is responsible for those fees, in their entirety, and remand for Paula to be refunded half of the repossession fees; and
(6) reverse the trial judge's award of only $25,000 in counsel fees and remand for reconsideration and further proceedings on this issue.
As to point II, we affirm the Trugman valuation of Edell & Associates and the equitable distribution thereof.
As to point III, we affirm the Trugman formula for determining the "work in progress" valuation. We reverse the calculation of Paula's share and remand for further proceedings consistent with our opinion.
VI.
A-5953-03T5
Paula appeals from the entry of the confidentiality order and the MVP agreement under which the trial judge permitted access to the Angelos Settlement document.
The confidentiality order, entered on November 20, 2002, without due process to Paula, accompanied an order of the same date equitably distributing the Angelos Settlement monies. It prohibited her from disclosing:
this Order and/or the terms hereof, in whole or in part, including without limitation the monetary amount and/or percentage of the payments to be received by [Paula] from [Marc] under the terms of this Order.
The November 20, 2002, confidentiality order also contained a provision under which, if Paula were found to have violated that order, she would be liable to indemnify Marc:
for any and all amounts of monetary damages, penalties, and/or other injuries incurred, sustained, paid, and/or otherwise suffered by [Marc] as a result of and/or caused by any such prohibited disseminations and/or disclosures by [Paula] and/or any of Defendant's Authorized Professionals, including without limitation, the liquidated damages amount of $250,000.00 that [Marc] may be assessed and/or otherwise required to pay to the Law Offices of Peter Angelos, or its successors or assigns, under the confidentiality and non-disclosure terms of the Angelos Settlement Agreement.
As we have said, after filing her appeal from the final judgment of divorce, we granted Paula's motion so that she could move before the trial judge for discovery of the Angelos Settlement, which had not been provided to her, despite the confidentiality order. Also, as we have previously set forth, the remand resulted in the MVP agreement, the pertinent provisions of which we have previously set forth.
Although Paula ultimately entered into the MVP agreement, it was at the direction of the trial judge. Here is what occurred. After the remand, Marc objected to disclosure of the Angelos Settlement papers and countered with a proposal that Paula enter into a confidentiality agreement with Marc comparable to the one he had in the Angelos Settlement. At a hearing on Paula's motion, held on November 7, 2002, Paula's counsel objected to Marc's proposed agreement, which included other things: (1) a fee-shifting provision requires that, if Paula is found to have breached the MVP Agreement, she will be responsible to pay any counsel fees Marc incur in defending himself in proceedings brought by the Angelos Firm for a breach of the Angelos Settlement; and (2) procedural terms Paula must follow if she intended to reveal the terms of the Angelos Settlement.
During the hearing, the trial judge asked Marc's counsel if the Angelos Settlement included a provision comparable to the fee-shifting provision in the MVP Agreement. The attorney responded that she did not know, but stated that "[t]he liquidated damages provision is the same," meaning the $250,000 figure was the same in both agreements.
Similarly, the judge asked Marc's counsel if the Angelos Settlement included a provision comparable to the MVP Agreement's procedures for revealing the Angelos Settlement in court proceedings. The judge asked:
THE COURT: Okay. I guess that what I'm wondering about is that if [Paula] fails to [follow the procedures], doesn't your client also have an obligation under his agreement with Angelos to also raise that issue?
Marc's counsel responded "yes," that Marc was so obligated under the Angelos Settlement.
Finally, and more globally, Paula's attorney expressed concern that Paula was being asked to execute the MVP Agreement without knowledge as to whether its terms coincided with the terms of the Angelos Agreement. Her counsel stated:
[COUNSEL]: You know, all of that stuff that's going on there. My concern, Judge, is that -- let me say this correctly -- that we get this order set out as Your Honor seems to be outlining it here and what happens if I get a confidentiality order -- because that's part of what you're supposed to be releasing to me -- that has terms that now have bound my client, that we knew nothing about, or that he doesn't have any-- the same type of obligation under the confidentiality order. Then that becomes an unfair burden on my client because you're operating in the dark, you don't have a copy of the confidentiality order in front of you.
. . . .
[COUNSEL]: I'm concern[ed] about that --
. . . .
[COUNSEL]: That we could be doing things today, Your Honor could be, and then we're going to see that there aren't similar burdens on [Marc] whatsoever and that he's foisted, unfairly, burdens upon my client that he doesn't have similarly.
Responding to this concern, the judge asked Marc's counsel:
THE COURT: Do you anticipate that that would be the case, once the information is revealed?
[COUNSEL]: No, I do not anticipate that that would be the case.
THE COURT: But you would agree, though, that if it were the case, she would have the right to come back?
[COUNSEL]: She would have the right to seek a modification or even contact me about negotiating a modification order.
At the conclusion of the hearing, the judge ordered Paula to execute a revised version of the MVP Agreement. The revised version contains certain changes, which are not relevant to this appeal. However, the judge did not eliminate the provisions about which Paula complains in this appeal: (1) the fee-shifting provision; and (2) the procedures for disclosing the Angelos Settlement in the matrimonial proceedings. The procedural provisions (Paragraphs 4 and 5), however, were amended to provide that the reasonable fees and costs incurred in connection with any applications to the court would be "equally shared by the parties."
Paula's second remand from us, after receiving the Angelos Settlement document, was unsuccessful. In this respect, the trial judge said:
I'm not going to grant the application of the defendant on the two issues that are before [me]. One is the procedures, and the second is, roughly stated, the remedies. I do believe that [Paula] is in a different position than [Marc] . . . [Marc] has [no] motivation that I can think of why he would disclose this agreement. He's under an obligation to Mr. Angelos, who is the paying party if you will, [Paula] to have separate motivations.
This has been a highly contested divorce litigation that's gone on for several years and has been, in fact, in the Appellate Division for a couple of years. I don't think it's unreasonable to think that if [Paula], for instance, is not successful and I don't mean -- maybe I shouldn't use her name, so let me make that more generic -- why someone in her position -- let me start that again.
Not everybody acts honorably and intentionally with -- not everybody acts honorably in the course of litigation of this nature. I don't think it's unreasonable for [Marc] to ask for two things that he's not obligated to do. One is a procedure, and I think that this is not an unreasonable procedure by which if there is to be a disclosure or a use of the document that it be -- that the party be advised that [Marc] has a chance, perhaps, to object, to suggest to the Court that there's a less -- and I'm not going to use very good English -- that there is a way to deal with the issue without providing as much disclosure as [Paula] provides. I think that's not unreasonable. I don't see it as burdensome. I think it's a safeguard that he's entitled to.
In terms of remedies, I reject the concept that if -- let me go back and make this clear. In terms of the Counsel fee issue on remedies, it seems to me that if the defendant discloses the confidentiality agreement or the settlement itself, that there's really no reason why [Marc] should have to pay for counsel fees of his against her. It's reasonable that she have to pay for that if she's the one at fault.
Whether she does or does not have the ability to pay, which is often -- which is a criteria under this Court's normal analysis of Counsel fees, is not, as I view it, a factor in this kind of litigation. This is a breach of contract kind of issue, and I think he's got a right to get counsel fees, provided he's able to establish by a preponderance of the evidence that she is responsible.
The judge also denied Paula's application for counsel fees and costs incurred in connection with her motion to modify the MVP Agreement. The judge found that the issues raised in the motion were legitimate and serious, and both parties had presented a responsible point of view. Furthermore, Paula had sufficient economic means to bear her own counsel fees.
Paula raises numerous issues relating to the November 20, 2002, confidentiality order and the MVP agreement. Were it necessary for us to decide the propriety of the order and/or the agreement, our review would be governed by the principles applicable to protective orders and discovery of confidential settlement terms. See generally Pressler, Current N.J. Court Rules, comment on R. 4:10-3 (2005) and cases cited therein; Llerena v. J.B. Hanauer & Co., 368 N.J. Super. 256 (Law Div. 2002).
However, the dispute over the order and MVP agreement, prompted by Marc's potential exposure to the Angelos Settlement's $250,000 liquidated damage provision, is moot. The Angelos Settlement provides in part:
The parties acknowledge that the harm associated with public release of the terms of this settlement cannot be quantified, that the harm in such event would flow to LOPA but not Edell, and in the event that the Edell parties, their attorneys, and/or "need to know" persons disclose the financial terms of this Agreement to the public or to persons who then make the terms public, and LOPA can prove by a preponderance of evidence that the Edell parties, their attorneys and/or "need to know" persons to whom disclosure has been made caused the financial terms of this Agreement to become public, the Edell parties shall pay LOPA as liquidated damages and not as a penalty the one-time sum of $250,000. The Edell parties shall have no liquidated damages payment obligation, however, if the source of public disclosure is an instrumentality of the United States or other public agency required to maintain the confidentiality of taxpayer financial information. The Edell parties have disclosed that Marc Edell is in a divorce proceeding, and the financial terms of this settlement may be disclosed in connection with that proceeding. The Edell parties agree to seek to obtain written confidentiality orders from all private parties subject to that divorce proceeding and, in addition, to advise the Court that this settlement is highly confidential, and request, if the financial information set forth herein is relevant to the Court in the divorce settlement, that the Court prepare [its] opinion in such a way that the terms of this Settlement Agreement and the source of funds are not directly disclosed. Nevertheless, if the Court discloses the terms of this Confidential Agreement, and it becomes public, the Edell parties shall not be subject to the $250,000 liquidated penalty.
[Emphasis added.]
The settlement expressly protects both parties from the liquidated damages in the event "the Court discloses the terms of this Confidential Agreement, and it becomes public . . . ." We have disclosed those terms in this opinion. Upon filing, this opinion will become public. Consequently, neither party is liable for the $250K liquidated penalty. There is, therefore, no longer any justifiable need for continued secrecy or threat of potential damages to Marc. As to Paula's appeal from the denial of counsel fees for the second remand proceeding, we see no abuse of discretion in the denial and reject her contentions on appeal without further elaboration. R. 2:11-3(e)(1)(E).
VII.
In A-1695-02T5, therefore, we reverse in part and remand for further proceedings consistent with our opinion. In A-5953-03T5, we dismiss the appeal as moot.
Both of these appeals arise from the parties' protracted divorce proceedings. Listed back-to-back, they have been consolidated for the purpose of a single opinion.
Marc, an attorney known for his work in the field of tobacco litigation, particularly his role in representing plaintiff in Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608, 120 L. Ed. 2d 407 (1992), acted as co-lead counsel with Peter Angelos, a Maryland attorney, who is also part-owner of the Baltimore Orioles, for Maryland in the tobacco litigation. At or near the conclusion of that litigation, which resulted in a settlement of $4.4 billion, Angelos refused to share the contingency fee with Marc. Marc sued Angelos in order to obtain his fair share of the fee. The suit against Angelos (hereinafter Angelos Litigation) resulted in a settlement (hereinafter Angelos Settlement) which contained a confidentiality provision.
This figure is comprised of $97,885 withdrawn from Edell & Associates as "compensation of officers," plus wages earned from teaching at Rutgers School of Law and New York Law School, and wages from International Vitamin Corporation (IVC), a company owned by Marc's family members. During trial, Marc's mother testified that the IVC stock had been gifted to Paula, but there was some dispute as to that and the trial judge found to the contrary.
The adjusted gross income is significantly larger in 1995 than in other years because it includes capital gains of $341,189. Marc stated that these capital gains occurred when IVC went public. He stated that his parents retained the capital gains and paid the tax liability on them; he claimed he received nothing from the transaction.
This figure consists solely of income received from Edell & Associates as "compensation of officers."
Marc was audited by the IRS for tax years 1997 and 1998. The IRS determined that certain of the expenses paid by Edell & Associates should have been treated as income to him. As a result, for 1997, the IRS increased Marc's income by $4847; and, for 1998, the IRS increased his income by $2060.
Marc's federal tax return for 1998 reflects capital gains of $118,093. However, he stated that he realized $165,796 in total proceeds from the sale of stock.
In 1999, Edell & Associates' loan account was reduced from $87,123 to zero. However, Marc could not recall what percentage of that reflected loan repayments to him versus Mulligan. The figure $51,654 comes from an income analysis provided by Gary Trugman, a valuation expert witness. The court accepted Trugman's figure as accurate.
Over time, the firm has developed into more than a plaintiff's personal injury firm. The firm has also taken on hourly rate work, including environmental defense and pharmaceutical defense work, and copyright infringement cases.
Michael Baumeister testified as an expert witness as to the reasonableness of contingency fee arrangements in the Angelos Litigation. He opined that the fee arrangement in the Angelos Litigation was reasonable given the small likelihood of success, the large number of hours involved in litigating the case, and the typical cost of such a case if it were handled on an hourly basis. He also noted Edell & Associates was performing the large majority of the legal work on the case. The trial judge, however, concluded that Baumeister's testimony was of "no value" due to his financial interest in the outcome of the Angelos Litigation, his close personal and professional relationship with plaintiff, and his lack of knowledge regarding Maryland law relating to contingency fees.
This was based upon incomes of $157,955 for 1997, $48,568 for 1998, and $242,000 for 1999.
At trial, Marc testified to having received $165,796 from the sale of IVC stock in 1998. However, the capital gains reported to the IRS was $118,093.
Marc's billing records reflect that he began billing on the Maryland Tobacco Litigation in March 1996. However, the Angelos Firm submitted its representation proposal to the State of Maryland in 1995.
The final settlement was not effectuated until November 18, 1998.
(continued)
(continued)
80
A-1695-02T5
RECORD IMPOUNDED
November 28, 2005
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