October 22, 2007
THOMAS D'ALESSIO, PLAINTIFF-APPELLANT,
SUZANNE D'ALESSIO, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Hudson County, FM-09-1855-91.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 25, 2007
Before Judges Collester, Sabatino and Lyons.
Plaintiff ex-husband Thomas D'Alessio appeals an order denying his motion for reimbursement of funds paid to his ex-wife Suzanne D'Alessio (k/n/a Edone) and from the award of counsel fees. We affirm.
Thomas and Suzanne married on March 31, 1974, and divorced in August 1991. Incorporated into the judgment of divorce was a property settlement agreement (PSA), under which Thomas was to pay Suzanne $125,000 as equitable distribution in annual installments of $14,285. Thomas also agreed to convey property in Nutley to Suzanne and to pay the first and second mortgages. As security for these obligations Thomas gave a first and second mortgage on property in Manahawkin held in his father's name. But after making payments totaling only $26,851, Thomas ceased making further payments and refused to satisfy the remaining sum due to Suzanne under the PSA. In response, Suzanne foreclosed on the Manahawkin property. Thomas delayed the foreclosure until his petition for certification was denied by the Supreme Court. When the matter proceeded to sheriff's sale, Thomas then satisfied the entire remaining amount due under the PSA.
In 1994, Thomas was convicted in federal court of extortion, bribery, and money laundering and sentenced to a prison term of forty-six months imprisonment. The trial revealed hidden assets and bank accounts that were unknown to Suzanne when she negotiated and executed the PSA in 1991. Suzanne moved to reopen the divorce judgment and the PSA as to the amount of equitable distribution, and her motion was granted on January 12, 1996. On August 7, 1996, the Family Court judge entered an order directing Thomas, through his counsel, to produce all documents requested by Suzanne in her earlier notice to produce by August 9, 1996. The order further stated that if Thomas failed to do so, Suzanne would receive a judgment against Thomas for $300,885.50 and a one-half interest in all of Thomas' interests in properties held in his father's name. Thomas failed to comply with the order, and on September 16, 1996 order was entered modifying the final judgment of divorce, increasing Suzanne's share of equitable distribution by $313,805.50, plus the one-half interest in the property interests.
By that time Thomas was receiving retirement benefits through the Police and Firemen's Retirement System (PFRS). On March 26, 1997, the court ordered the PFRS to withhold fifty percent of Thomas' gross monthly retirement allowance and turn it over to Suzanne up to the amount of $203,857.77, the remaining portion of equitable distribution owed to Suzanne as modified by the September 16, 1996 post-judgment award. Suzanne was taxed on the benefits she received, and she moved before the court to extend the payments from PFRS to compensate for the total amount of additional taxes assessed to her. Accordingly, on August 22, 2000, an order was entered extending the payments to Suzanne until she also recouped the tax consequences. The order further awarded counsel fees and costs to Suzanne for the post-judgment litigation in the amount of $153,093.08, which was subsequently reduced by consent to $75,000.
After many delays the parties and counsel met on October 21, 2002. By that time Thomas had instituted a legal malpractice action, asserting that his former attorneys negligently failed to comply with the earlier discovery order of August 7, 1996, resulting in the additional sum he was required to pay to Suzanne as equitable distribution. Thomas offered to pay the remaining amount due as equitable distribution, the taxes paid and owed by Suzanne as a result of the distribution of his pension benefits, and the $75,000 legal fee award, plus post-judgment interest, out of any future proceeds of his legal malpractice action. But the spirit of compromise was soon squelched by a dispute over the amount of the tax payment to Suzanne, and no settlement agreement or consent order was executed.
On December 31, 2003, the PFRS prematurely ceased payments to Suzanne from Thomas' retirement benefits because the equitable distribution award had been satisfied. Suzanne obtained an order on June 7, 2004 holding Thomas in violation of litigant's rights for failing to comply with the terms of the August 22, 2000 order requiring continued payment from the PFRS to recoup the tax consequences of the pension distribution and the taxes to be assessed on the remaining amount owed to her, and for Thomas' failure to satisfy the earlier counsel fee award. The court ordered a hearing to determine the tax implications on the pension income received. Meanwhile, the Division of Pensions and Benefits received the June 7, 2004 order and resumed the payments to Suzanne in July 2004.
Once again the parties sought to amicably resolve the post-judgment financial issues, including the award of attorneys' fees. Thomas discovered that he had made two equitable distribution payments under the PSA in 1992 and 1993, totaling approximately $27,000, for which he had not received credit, and sought adjustment in the remaining amount of equitable distribution owed to Suzanne. Because of the delay in settling the post-judgment financial issues, the payments to Suzanne continued and resulted in an overpayment of her tax credits. She sought an offset against the amount overpaid toward the outstanding counsel fee award, which had now increased to over $90,000 because of accumulated interest. Thomas refused to agree to the setoff, arguing that Suzanne should return the amount of overpayment and that any credit to Suzanne should come from the future proceeds of his pending legal malpractice action.
Thomas filed a motion on June 14, 2006, seeking enforcement of his rights under the May 15, 2005 consent order to reimbursement of his overpayment, totaling more than $50,000, plus an additional $50,123 for interest. Suzanne filed a cross-motion seeking to offset the $50,000 overpayment against the $93,000 of counsel fees pursuant to the court's earlier award. Both sides sought a counsel fee award with respect to the motion and cross-motion.
On August 4, 2006 Judge Maureen B. Mantineo denied the relief sought by Thomas and granted Suzanne's request that the monies due to Thomas from the overpayment be offset against the earlier counsel fee award. Judge Mantineo also awarded Suzanne an additional counsel fee of $2,500 based on her successful cross-motion and the denial of Thomas' cross-motion. Thomas now appeals that order.
Thomas contends that his pension benefits cannot be used to pay an attorney's fee award because of the anti-alienation provision of the Employee Retirement Income Security Act (ERISA), which requires approved pension plans to prohibit benefits from being assigned or alienated. The relevant portions of ERISA read as follows:
(d) Assignment or alienation of plan benefits.
(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.
(3)(A) Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph
(1) shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.
(B) For purposes of this paragraph--
(i) the term "qualified domestic relations order" means a domestic relations order--
(I) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, and
(II) with respect to which the requirements of subparagraphs (C) and (D) are met, and
(ii) the term "domestic relations order" means any judgment, decree, or order (including approval of a property settlement agreement)
(I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and
(II) is made pursuant to a State domestic relations law (including a community property law). [Employee Retirement Income Security Act § 206(d), 29 U.S.C.A. § 1056(d).]
Thomas is correct that distribution of funds from a pension plan may not be used to satisfy an attorney's fee award. However, his argument ignores the fact that no pension benefits are being used to pay attorney's fees. The amount required to satisfy the court's counsel fee award has already been distributed to Suzanne, and it is from that money that the offset is made. The anti-alienation provision protects pension funds only while they are held by the ERISA trustee or plan administrator, and not after they have already been paid to a beneficiary. Trucking Employees of N. Jersey Welfare Fund, Inc. v. Colville, 16 F.3d 52, 55 (3d Cir. 1994); Robbins v. DeBuono, 218 F.3d 197, 203 (2d Cir. 2000), cert. denied, 531 U.S. 1071, 121 S.Ct. 760, 148 L.Ed. 2d 662 (2001); Wright v. Riveland, 219 F.3d 905, 919-21 (9th Cir. 2000). Put another way, ERISA's anti-alienation provision prohibits direct or indirect arrangements whereby a party acquires a right or interest enforceable against the plan and the plan's benefit payment, which is payable to the participant or beneficiary. See Johnson v. Johnson, 320 N.J. Super. 371, 379-80 (App. Div. 1999).
Here Judge Mantineo's order did not give Suzanne any right against pension benefits held in the plan. Suzanne received plan monies as a beneficiary of fifty percent of the distributions pursuant to a domestic relations order. No pension benefits held in the plan are being improperly alienated. It is Suzanne, and not the plan, who is paying her attorney, using monies she received under the domestic violence order for a judgment held by her as Thomas' ex-wife. Suzanne has an obligation to her attorneys and has chosen to satisfy it with funds obtained from her claim against Thomas. Should Suzanne not pay the money to her attorneys, she, and not Thomas or the plan, would be the one liable to them.
Therefore, the ERISA anti-alienation provision presents no hindrance to the setoff ordered by the trial court. The fact is that Suzanne owes Thomas about $50,000, and he owes her a little more than $90,000. There is a mutuality of obligation for the use of the common law right of setoff in these circumstances, and ERISA presents no obstacle.
Thomas' argument that the May 18, 2005 consent order provides that Suzanne's attorney's fees judgment was to be satisfied solely from his anticipated legal malpractice settlement or recovery misstates the court's order. Nothing in the order prohibits Suzanne from collecting the judgment in any lawful fashion. The order simply gives her a first lien on any recovery. Nowhere does it state that this was to be the exclusive source for payment of the award. Indeed, it would hardly be prudent for Suzanne to limit the means of collecting a debt to her to the vagaries of legal malpractice litigation.
Finally, Thomas argues that Suzanne should not have been awarded attorneys' fees on her cross-motion because he was well within his rights to seek reimbursement for the overpayment made to Suzanne. We disagree. Counsel fee awards are within the discretion of the motion or trial court, and will not be disturbed on appeal absent a clear abuse of this discretion. Chestone v. Chestone, 285 N.J. Super. 453, 468 (App. Div. 1995). In this instance Suzanne successfully argued for a setoff of the amounts owed to each party. There was no abuse of discretion.
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