Appellate Court Permits Invasion of Retirement Accounts to Enforce Child Support Orders

On May 7^th, the Appellate Division of the New Jersey Superior Court issued an important decision in the case of Orlowsky v. Orlowsky, ruling that federally-protected retirement plans can be invaded to pay child support arrears and college tuition expenses, as well as attorney and expert fees.

In this case, Mr. Orlosky created a tortured history of litigation by repeatedly filing meritless motions against his former wife while failing to comply with multiple child support orders.

Finally, the judicial system had enough and ordered that a Qualified Domestic Relations Order, which functions as a limited exception to federally-protected retirement plans, could be utilized to pay child support arrears and other child-related expenses, as well as attorney and expert fees, from Mr. Orlowsky’s retirement account. The court explored federal law and relied upon out-of-state rulings to support its decision. While some of the court’s findings were legally technical, the takeaway is that Qualified Domestic Relations Orders will be increasingly utilized as a remedy in family law cases when other alternatives are unavailable.

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LIVE-IN CHILDCARE PROVIDERS QUALIFY AS “HOUSEHOLD MEMBERS” UNDER THE PREVENTION OF DOMESTIC VIOLENCE ACT

Hot off the press!  A published (precedent setting) trial court decision, E.S. v. C.D. confirms that live-in childcare providers qualify as household members under the Prevention of Domestic Violence Act (“PDVA”).  What does this mean?  A restraining order can be entered against an employee who has lived with their employer even though the parties do not have a familial relationship, the economic relationship has ended, and the employee may not have an expectation of continuing contact or relationship with the employer once the financial relationship ends.  To put it simply:

“That a person receives a monetary benefit from engaging in a relationship does not automatically disqualify that person from seeking relief under the PDVA… Analogously, that a victim had provided an economic benefit to a defendant should not automatically disqualify the victim from seeking relief under the PDVA.”

In E.S. v. C.D., the trial court held that the plaintiff/mother was entitled to a restraining order against the defendant/nanny who she previously employed.  The parties had a financial relationship for approximately seven months during which the defendant resided in the plaintiff’s home.  During that period, the defendant assaulted the plaintiff’s child.  It also turned out that the defendant applied for the nanny position under an alias.  Needless to say, the defendant was fired.  For two months after being fired, the defendant repeatedly called and texted the plaintiff.  The defendant also threatened to lie to the child’s father in order to cause the plaintiff to lose custody.  Thus, the defendant allegedly committed the predicate acts of  harassment, cyberharassment and terroristic threats.  Importantly, nothing happened between the firing and the timing of the restraining order that would have caused this heightened contact on part of defendant.

Even though the above actions sound egregious on their face, the plaintiff may not  have automatically been entitled to a restraining order.  The court first had to determine whether the defendant qualified as a household member under the PDVA.   In doing so, the court reviewed the household member factors listed in a prior Appellate Division decision of Coleman v. Romano, which are:

1. The nature and duration of the prior relationship;
2. whether the past domestic violence relationship provided a special opportunity for abuse and controlling behavior;
3. the passage of time since the end of the relationship;
4. the extent and nature of any intervening contacts;
5. the nature of the precipitating incident; and
6. the likelihood of ongoing contact or relationship

The court found that the defendant resided with plaintiff for seven months and had insight into the child and plaintiff’s nature, making them vulnerable to attacks by the nanny.  The court also noted that “the likelihood of contact has been heightened over the twelve years since the Coleman decision, in light of the use and popularity of cell phones, texting and social media.”  In addition to Coleman, the court turned to S.Z. v. M.C., which we have blogged about, noting that a plaintiff was entitled to a restraining order against a bookkeeper who resided in the home.

Ultimately, the court found:

“Victims of domestic violence come from all social and economic backgrounds. It was the intent of the legislature that victims of domestic violence are afforded the maximum protection from abuse the law can provide. N.J.S.A. 2C:25-18. Notwithstanding the economic relationship of the parties, plaintiff and defendant are former household members. As such, plaintiff is a protected party under the PDVA.”

While this analysis may seem simple, especially in light of the defendant’s actions, the decision leaves us with food for thought.  The court specifically stated that the defendant may not have had an expectation of “ongoing contact or relationship” following her termination by the plaintiff, but noted that the defendant (nanny) was not the victim.  This begs the question of whether the defendant would have been entitled to a restraining order against plaintiff if it was the plaintiff who allegedly committed predicate acts after they stopped residing together (in the plaintiff’s home) and the financial relationship ended.

That question is for another day.  For now, the takeaway is the expansion of the “household member” definition that was previously expanded in Coleman, and which provides victims of abuse with broad protections.

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Lindsay A. Heller is an associate in the firm’s Family Law practice, based in its Morristown, NJ office. You can reach Lindsay at 973.548.3318 or lheller@foxrothschild.com.

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Divorce, Suicide, and Life Insurance

In a decision approved for publication on May 6 entitled Woylas v. Greenwood Tree Experts, Inc., the New Jersey Supreme Court upheld a claim by Christina Woylas against her former husband Timothy’s estate following his suicide.

By way of background, Timothy and Christina entered into a Marital Settlement Agreement upon their divorce which obligated Timothy to pay alimony and child support for twelve years secured by life insurance in the event of his premature death. Two years later, Timothy committed suicide which negated the life insurance company’s obligation under the policy’s suicide exception.

Christina proceeded to sue Timothy’s estate, claiming it is liable because Timothy had breached their Agreement. After the trial court and appellate court agreed with her position, the administratrix of the estate petitioned the New Jersey Supreme Court, which also upheld the rulings. Since the amount of Timothy’s obligations exceeded the value of his estate, the Court ordered the entire proceeds of the estate to be turned over to Christina.

By being approved for publication, the decision assumes precedential value and guidance to lawyers in terms of drafting precise Marital Settlement Agreements to ameliorate such problems as described above.

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Charming Charlie Bankruptcy: Retailer Files for Second Chapter 11 Bankruptcy

Charming Charlie, the teen jeweler and accessory retailer, filed its second Chapter 11 bankruptcy case in less than two (2) years this morning in Delaware under docket number 19-11534.

This Chapter 22, which is the filing of two (2) Chapter 11 bankruptcies in a short period of time, appears to mark the end of the retailer. It lists in its filings that it has plans to close all 261 stores. The company emerged from its prior Chapter 11 bankruptcy, where it shed about 100 stores, only 14 months ago. According to USA Today, the company expects to vacate its stores by August 31, 2019.

Charming Charlie was on our top retailers to watch for a bankruptcy filing blog, which was also picked up by the National Law Review.

If you have a Charming Charlie lease in your center, Stark & Stark’s Shopping Center & Retail Development Group can help.

Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the Eastern District of Missouri, District of New Jersey, Southern District of New York, District of Delaware, District of Minnesota, and the Western and Eastern Districts of Pennsylvania regarding a variety of issues.

Our Group has been counsel to landlords and trade creditors in the Mattress Firm, Toys “R” Us, Payless, Eastern Outfitters (EMS Part 2), EMS, Golfsmith, RadioShack, General Wireless (RadioShack 2), Gander Mountain, A&P, Joyce Leslie, rue21, Central Grocers, and Sports Authority chapter 11 bankruptcy cases.

For more information on how Stark & Stark can assist you, please contact Thomas Onder, Shareholder, at (609)219-7458 or tonder@stark-stark.com or Joseph Lemkin at (609)791-7022 or jlemkin@stark-stark.com.

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So, You Think You Don’t Have to Share That Inheritance?

One of the more complex issues we see when addressing alimony and equitable distribution relates to inherited assets and the money (distributions, investment experience, interest, etc.) that emanates from them.  Under New Jersey law, inherited assets remain the exempt, separate property of the spouse who inherited same.  It cannot be distributed in whole or in part to the other spouse in the event of a divorce.  See N.J.S.A. 2A:34-23(h).

However, there is an exception to every rule.  If an asset is commingled with a marital asset, then it loses its exempt character.  For example, if Husband received $100,000 from an inheritance and he deposited into the joint bank account he shares with his Wife, then that inherited money is no longer exempt because it was commingled with a marital asset.  Depending on how much time has passed since the inherited money was deposited, and based on other factors, there may be an argument that the account itself should not be split 50/50 based on the deposit of the inherited money.  But by commingling the funds, the Husband has lost the clear-cut argument that the inheritance is not to be shared by his Wife.

Importantly, even if an inherited asset is immune from equitable distribution, this does not mean it is unavailable for support purposes.  A court could consider the existence of the separate, exempt asset, and the income generated therefrom , for purposes of determining appropriate support.

The recent unpublished (non-precedential) decision of Rosen v. Rosen provides a straightforward example of this issue in practice.  In Rosen, the Husband received a significant inheritance during the marriage, in the form of a Trust.  He received this inheritance together with his brothers, and eventually they converted the Trust into an entity they called “Leonard Rosen Family, LLC.”  During the marriage, the Husband took distributions from the entity, which he would at times deposit into accounts he shared with the Wife, or use for expenses he shared with his Wife.  However, the Wife herself held no ownership interest in Leonard Rosen Family, LLC.  This is the critical fact.  While the Husband commingled certain funds generated from the entity, the Wife never obtained an ownership interest and it remained his separate property, or so he believed.  The trial judge did not agree with the Husband, and awarded the Wife an interest in the distributions the Husband would take from the entity in the future, as and for her equitable distribution of this asset.

However, the Husband ultimately and correctly prevailed.  The Appellate Division reversed the trial judge’s ruling and agreed with the Husband that because his ownership interest in the entity was derived from an inheritance, his interest in that entity and in any income generated from it was not subject to equitable distribution.  In reaching its decision, the Appellate Division relied upon one of the seminal New Jersey Equitable Distribution cases, Painter v. Painter, which held that:

[T]he income or other usufruct derived from [exempt] property, as well as any asset for which the original property may be exchanged or into which it, or the proceeds of its sale, may be traceable shall similarly be considered the separate property of the particular spouse.

Painter v. Painter, 65 N.J. 196, 214 (1974).

The Appellate Division (and the Husband himself) did acknowledge that certain income generated from the exempt property had been commingled, and that there were – to put it simply – “no backsies.”  The money that the Husband had placed in joint bank accounts that had emanated from the exempt entity could not be recalled by the Husband, nor did he ask for it to be.

Finally, the Appellate Division acknowledged the prior case law (Miller v. Miller, 160 N.J. 408 (1999) and Aronson v. Aronson, 245 N.J. Super. 354 (App. Div. 1991)), which held that income from separate property can be considered in determining an alimony award.  However, the Court did not delve into this analysis in any greater detail, as the Wife did not seek alimony in this particular case.  One interesting issue that could conceivably arise related to alimony relates to the marital lifestyle.  If you have a case where the recipient of alimony claims that (s)he cannot meet the marital standard of living, but subsequently the payor receives an inheritance, there could be a sufficient change of circumstances that enables the recipient to seek more support to allow him/her to live closer to the marital lifestyle.  After all, the other spouse now has the ability to do so as a result of inheritance.

All of the above are important factors to consider when you or your client is lucky enough to have benefited from an inheritance or a trust during the marriage, or after.

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Jessica C. Diamond is an associate in the firm’s Family Law Practice, resident in the Morristown, NJ, office. You can reach Jessica at (973) 994.7517 or jdiamond@foxrothschild.com.

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Iancu v. Brunetti: The Best Defense is a Great Offense

This month, the Supreme Court struck down 25 U.S.C. § 1052(a) of the Lanham (Trademark) Act of 1946, which prohibited federal trademark registration of “immoral or scandalous” marks for goods and services, on the grounds that it violated the First Amendment’s Free Speech Clause as impermissible viewpoint-based discrimination due to its favoring of certain ideas over others.

Section 2(a) of the Trademark Act, 15 U.S.C. §1052(a), states that no trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it “[c]onsists of or comprises immoral, deceptive, or scandalous matter …” The trademark at issue in the case was “FUCT,” a streetwear brand, which the U.S. Patent and Trademark Office (“PTO”) and the Trademark Trial and Appeal Board found to be “unregistrable” because it was “highly offensive” and “vulgar” with “decidedly negative sexual connotations.” What constitutes “immoral” or “scandalous” is highly subjective and differs among cultures, norms, ethnicities, and individuals. Therefore, the Supreme Court found that “the statute, on its face, distinguished between two opposing set of ideas: those aligned with and those hostile to conventional moral standards, those inducing societal nods of approval and those provoking offense and condemnation.” The law, however, cannot disfavor offensive ideas and discriminate based on viewpoint, in violation of the First Amendment.

The PTO attempted to argue why the two provisions (immoral v. scandalous) should be classified differently, but the Court said the “scandalous” bar was just as much of a violation of the Constitution as the “immoral” bar. The PTO also offered to only reject trademarks that were lewd or profane in “mode of expression,” while remaining neutral on underlying viewpoints. They based this distinguishing category on the fact that the First Amendment “does not prohibit Congress from making vulgar terms and graphic sexual images ineligible for federal trademark registration.” Justice Kagan, writing for the majority, rejected such a course of conduct because it would mean the Court would have to fashion a new statute different than what Congress had intended. While the Court is empowered to narrowly interpret an unclear statute to avoid striking it down as unconstitutional, the majority opinion did not find anything unclear about the trademark prohibition language.

The three Justices who dissented from the majority opinion would have split up the statutory provision in question, deeming the ban on “immoral” material unconstitutional while reading the “scandalous” bar separately and narrowly as a constitutional, viewpoint-neutral ban on truly vulgar trademarks. Justice Sotomayor particularly urged against “permit[ing] a rush to register trademarks for even the most viscerally offensive words and images that one can imagine.” Justice Roberts chose to focus on a more holistic weighing of the rule, being that federal trade and service mark applicants who were denied federal registration based on the immoral or scandalous provision could still use the mark without federal registration, resulting in no restricted speech. The Justices did wrestle with whether striking down the provision would mean that the PTO would be obligated to register trademarks encompassing the most offensive of racial slurs.

The Court’s ruling means that the PTO is no longer permitted to refuse registration of an applied-for mark on the grounds that it consists of curse words or other offensive material. This is a long awaited victory for those who criticized the “immoral or scandalous” prohibition on the basis that moral judgments were not compatible with a trademark statute. But Justice Kagan, writing for the majority, refused to take a stance on the issue of the possible constitutionality of a future law limited merely to lewd, sexually explicit, and profane marks. So, it is possible Congress could respond to the decision with a statute limiting the registration refusal to such offensive marks.

The holding was not entirely surprising for many commentators. In 2017, the Supreme Court in Matal v. Tam held that another Trademark Act provision prohibiting registration for disparaging trademarks (the mark in question was “THE SLANTS”), violated the First Amendment. Under the disparagement clause, marks that were “positive” about a person were eligible for registration while “derogatory” ones were not, which was the “essence of viewpoint discrimination.” The Court reasoned that the disparagement clause constituted viewpoint discrimination since it directly regulated the expressive component of a trademark, and the government could not discriminate on the basis of viewpoint. Using a heightened form of scrutiny against the disparagement clause, the PTO could not offer a substantial interest in preventing speech expression of ideas that offend. Many scholars borrowed from Matal’s reasoning and analyzed Brunetti in a similar fashion. It will be interesting to see if Congress responds with a narrower prohibition, limiting only “lewd, obscene or profane” marks.

For now, the disparaging, immoral, and scandalous mark restrictions have been lifted and the gates are open for previously unsuccessful applicants and those looking to register offensive marks.

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