The Payment of Child Support When Children Are in College

In almost all cases, one parent pays child support to the other parent after a separation, a divorce or a dissolution. In some of those cases, the child support is paid pursuant to the New Jersey State Child Support Guidelines and in other cases, the child support is calculated by applying ten statutory factors. The statutory factors in non-Guidelines cases can be found in the Child Support Section of this Blog.

In New Jersey, parents of children who attend college are legally obligated to contribute towards the costs of college. In most cases, they are also legally obligated to continue paying child support, although not necessarily in the same amount when the child lives at school. In fact, the New Jersey State Child Support Guidelines specifically do not apply to child support orders when a child lives away from home, even if the prior child support payments were paid in accordance with the Guidelines. This is because the assumptions which underlie the Guidelines no longer apply when the child resides on campus and participates in a school sponsored room and board program.

While this has always been the law in New Jersey, a very recent decision of the New Jersey Appellate Court held that because “there is no presumption that a child’s required support lessens because he or she attends college,” each case must turn on its own facts and circumstances. The Court cited several reasons why the move to college does not automatically mean that the need for child support decreases. First, although it is true that room and board costs at home may decrease, the same costs will be incurred at college. Second, there will be new costs which the child has not previously incurred, such as registration fees, lab costs, books, computer costs and the like. Third, there is a continuing need to maintain the fixed costs of the child’s home for his or her return during school breaks and vacations. Fourth, some expenses remain no matter where the child lives. These include transportation, furniture, clothing, personal care items, telephone charges, insurances, entertainment and spending money. Thus, although the Guidelines will no longer apply in the determination of the amount of child support to be paid on behalf of a college student who lives away from home, that does not mean that there is not a continuing need for and a commensurate obligation to pay child support. Although not explicitly stated, it has also been the law in the State of New Jersey that children must apply for all available loans, grants, scholarships and work-study opportunities. Although these are increasingly difficult to obtain, the availability and receipt of financial assistance will also have to be considered in the overall decision regarding the continued need for child support to cover the child’s expenses.

The Appellate Court noted the obvious concern that the higher the child support award, the fewer funds will be available for college. It also noted that in some cases it may make more sense for some of the child support to be paid directly to the student. In the Appellate Court opinion, the lower courts are directed to apply the same list of statutory factors as are applied to non-Guidelines support cases, as well as the other facts and circumstances particular to each case, in determining whether child support should continue to be paid, and in what amount, when a child leaves for college. The Court also recognized that in the absence of an agreement between the parents, there may be a need for a plenary hearing to determine the parties’ respective incomes, the child’s needs, the child’s contribution or other materially disputed items.


Accident Crossing Busy Street To Work Site Is Compensable Where County Paid For Parking And Designated Parking Spot

In Hersh v. County of Morris, A-1442-10T4 (App. Div. July 24, 2012), the Appellate Division affirmed an award for claimant,Cheryl Hersh, who worked for Morris County. For the first two years she worked for the County beginning in 2002, the County paid for parking at a private lot located behind her work site at the Administration Building. Then the County assigned her free parking at a private garage on Cattano Avenue, two blocks from the Administration Building.

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Arbitration: Another Alternative to Divorce Mediation of Litigation

For parties who wish to resolve their divorce outside of Court but cannot reach a settlement on their own or with the assistance of a mediator, arbitration provides a viable alternative. The arbitrator, who is typically an attorney or a former judge, makes either a non-binding or a binding determination as to how the case should be resolved. The determination is based upon the information the parties present to the arbitrator in much the same fashion as the parties would present evidence and testimony to a Judge during trial. Parties who select arbitration have the freedom to select the arbitrator, set their own schedule, and conduct the proceedings in private as opposed to a public courtroom.

Although the arbitration process is less formal than a courtroom trial, the process is still regulated by certain procedural rules that are collectively known as the Uniform Arbitration Act. Typically, the parties each have an attorney represent them throughout the process. The first step in the process is for the attorneys to agree to an arbitrator or multiple arbitrators to serve as a panel. If the parties have a prior agreement to proceed with arbitration, the Act states that the parties must follow the method set forth in their agreement regarding how the arbitrator will be selected. If the parties do not have a prior agreement or if the method in the agreement fails, the parties may apply to the Court to appoint an arbitrator.

Once an arbitrator is selected or appointed, the Act provides the arbitrator with the discretion to conduct the arbitration in “such manner as the arbitrator considers appropriate for a fair and expeditious disposition of the proceeding.” The arbitrator has the authority to hold conferences with the parties, issue subpoenas for witnesses and the production of records, and permit depositions and discovery. The Act states that the extent of the discovery exchange between the parties is determined by the arbitrator after taking into account the needs of the parties and the “desirability of making the proceeding fair, expeditious, and cost effective.” This provides the arbitrator with the freedom to conduct the proceedings as he/she sees fit.

After the arbitrator hears the testimony of the parties and their witnesses and reviews the submitted evidence, the arbitrator makes a determination on all outstanding issues in the case. As stated previously, arbitration can be either binding or non-binding as agreed to by the parties before it begins. The parties can also agree to submit all issues to the arbitrator or just one specific issue, e.g. alimony. The Act requires the arbitrator to make a record of the decision, to authenticate it, and to provide notice of the final decision to the parties. After the parties receive notice of the decision, their attorneys may file a summary action with the Court for an order confirming the arbitrator’s decision. The order is docketed and enforceable as if the matter had been resolved through the Court system.

The length of the arbitration process will vary depending on the circumstances of each case and the amount of discovery and witnesses that are needed, but arbitration will almost always provide a faster resolution than if the parties waited for a trial, conducted the trial and then waited for the decision to be issued by a Judge. While the less formal atmosphere and faster track is appealing, it is important to remember that arbitration also requires a certain degree of cooperation between parties in order to select an arbitrator and determine which issues to submit to arbitration. Not all cases are suitable for arbitration, and it is important to discuss the decision with your attorney before agreeing to proceed with arbitration.


Town Wins Workers’ Comp Case by Proving Employee Engaged in Fraud in not Revealing Prior Medical Condition

The Judge of Compensation and Appellate Division found that the employee was entitled to no benefits based on his violation of the New Jersey Fraud Act

In Johnnie Jackson v. Township of Montclair, A-2212-11T2 (App. Div. July 5, 2012), the claimant injured his knee while moving large boxes of books at the Montclair Public Library on August 4, 2008.

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The Equitable Distribution of Stock Options

Employee stock options are considered marital assets that are subject to equitable distribution. These include both vested and unvested stock options. Even stock options awarded shortly after the divorce complaint was filed are considered subject to equitable distribution if they were awarded as a result of efforts expended during the marriage. On the other hand, if the options were awarded shortly after the marriage ended but are incentives for future performance (i.e. to keep the employee spouse at the company) then they are not eligible for equitable distribution.

The issue as to whether stock options obtained after the divorce complaint was filed were awarded for past performance or for future performance is often an issue in divorce cases. Usually the documents granting the options do not spell out the reason(s) for the award, which must then be inferred from the nature of the employment and the other facts of the case.

The speculative nature of a stock option’s value makes it one of the most difficult assets to value at the time of the divorce. This is because it is impossible to predict the exact future value of the stock at the time the option will be exercised, which may be years later; in fact, there is no guarantee that the option will be worth anything at all at the time that it becomes exercisable.

There are two methods for equitably distributing stock options. The first, and by far less common, method is the Present Value Method which utilizes a mathematical formula to try to calculate the present value of the stock options. The most widely accepted present value formula is the Black-Scholes formula which combines a variety of factors, such as the exercise price of the stock, the share price on the valuation date, the length of time until maturity, interest rates and a standard deviation formula to account for the volatility of the share price.

The Present Value Method allows the parties to divide the value of the stock option(s) at the time of the divorce, with the non-employee spouse receiving monetary compensation (or an equivalent offset of assets) for his/her share of the other party’s stock options. The benefit of using the Present Value Method is the finality of the distribution of the stock options at the time of the divorce. The downside is the cost of having the options valued as well as the speculative nature of the Present Value Method as it applies to stock options. In fact, some state courts have held that the speculative nature of stock options makes them unsuitable for present value calculations.

The more common approach to dividing stock options is the Deferred Distribution Method. Using this method, the parties’ Marital Settlement Agreement or the Final Judgment of Divorce contains language which imposes a “Constructive Trust” over the non-employee spouse’s share of the stock options. The Constructive Trust requires the employee spouse to hold the options for the benefit of the non-employee spouse. The employee spouse holds on to the options until they vest, are exercisable (if unvested and/or non-exercisable at the time of the divorce) and non-employee spouse directs the employee spouse to exercise them. It is important that there be language in the Agreement requiring the employee spouse to notify the non-employee spouse prior to the options lapsing. Once the options are exercised, the employee spouse sells the stock and gives the sale proceeds to the non-employee spouse after the payment of taxes at the employee spouse’s tax rate.


Appelate Division Disapproves Dual Capacity Doctrine

Danielle Fry worked as a cook for Palroll Inc., trading as the Lakeside Tavern in Branchville, N.J. Palroll operated the tavern and also owned the building in which it was located. The owners of Palroll were the Rohls.

On April 13, an employee of a bottling company delivered fifteen canisters of soda and one CO2 canister to the tavern. These canisters were placed in a narrow passage near the tavern’s kitchen.

While these canisters were being delivered, Fry was making pasta salad. She walked from the stove through the narrow passage to get some pasta. When she went to return the box of pasta some time later, her right kneecap struck the side of one of the canisters, causing her to fall and suffer injury.

Fry attempted to sue both Palroll and the Rohls, both of whom argued that they were immune from suit because they employed Fry. The Appellate Division noted, “As an employee of Palroll, Fry’s right to recover from her employer for work-related personal injury would ordinarily be limited to claims brought under the Workers’ Compensation Act, N.J.S.A. 34:15-1 to -142. See N.J.S.A. 34:15-8.”

Fry argued that she should be permitted to sue both Palroll and the Rohls in their capacity as landlords of the tavern. The Court disagreed, “However, as we held in Kaczorowska v. Nat’l Envelope Corp., 342 N.J. Super. 580, 592 (App.Div. 2001) (citations omitted), a ‘dual capacity’ approach is ‘disfavored, if not outright disapproved’ in New Jersey.”

The Court went on to note that the claim plaintiff was advancing did not focus on a structural defect in the building itself owned by Palroll and the Rohls.

“Here, the alleged negligence related to a transient condition in the workplace, rather than a structural or similar problem with the building. For that reason, we conclude that Fry’s claims against Palroll and the Rohls are barred by the Act.”

This case is important as it underscores that the so-called “dual capacity” doctrine is not favored in New Jersey law.


The Collaborative Divorce: An Alternative to Mediation or Litigation

In the last blog, I discussed divorce mediation as an alternative to divorce litigation. In that blog, I explained that the primary goal of divorce mediation is to amicably resolve the couple’s divorce, but that mediation often comes with a price tag of open-endedness and a lack of finality. I also explained that the primary goal of divorce litigation is to resolve the divorce with as much finality as possible, but that litigation often comes at the expense of amicability. In recent years, a third alternative, known as a “Collaborative Divorce,” has developed and is starting to take hold in many states. Collaborative Divorces are rare in New Jersey but are expected to increase as people seek alternative methods of dispute resolution.

The Collaborative Divorce method is initiated when each party retains an attorney who has been specially trained to handle a Collaborative Divorce. The parties and their attorneys sign a “Participation Agreement” at the beginning of the process, which prohibits the parties and their attorneys from filing any pleadings with the Court. This takes the threat of litigation out of the process entirely and allows the parties to proceed without the prospect of judicial intervention hanging over their heads.

Once the Participation Agreement is signed by the attorneys and the parties, the process requires all four participants to devote themselves to finding non-adversarial, “win-win” solutions to their divorce-related issues. This is accomplished by each party empathetically addressing the concerns of the other party, rather than each party taking a position based on the law and bargaining from that position. This is referred to as “interest-based” bargaining as opposed to “position-based” bargaining. The job of the attorneys during a Collaborative Divorce is to protect their clients from a legal standpoint while also quelling and redirecting the negative emotions which will inevitably arise during the process.

As is the case in litigation, necessary documents are exchanged during a Collaborative Divorce and the parties are required to fully disclose all of the information necessary to settle their case. Thus, Collaborative Divorces should not be seen as a way to avoid full and complete disclosure by either spouse. Likewise, experts such as forensic accountants, business valuators, property appraisers or custody experts are retained in Collaborative Divorces if necessary. However, in order to retain the non-adversarial nature of the process, a single, joint expert is retained by both parties in those Collaborative Divorce cases which require an expert or experts.

A Collaborative Divorce has many benefits for the right couple in that it retains both the protections of litigation and the cooperative amicability of mediation. On the other hand, most divorcing couples will have to work very hard to make it through the Collaborative Divorce process successfully. While a divorcing couple may at first think that this is the best method for them, in reality many people going through a divorce will find it difficult over the long run to truly empathize with the concerns of the person they are divorcing, let alone put those concerns ahead of their own in order to settle the case. This is especially true in those cases in which one party does not want the divorce in the first place, or one party feels wronged by the other party. This is an important factor to consider in light of the fact that the Participation Agreement requires the parties to retain two new attorneys and start all over, emotionally and financially, if the Collaborative Divorce process fails.

Thus, as is the case with mediation and litigation, this alternative may or may not be right for you, and you should discuss it with as many professionals as necessary before you arrive at a decision as to which method is best in your case.