April 18, 2012
MICHELLE ORR, PLAINTIFF-RESPONDENT,
SEAN ORR, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-892-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 6, 2012 -
Before Judges Messano and Guadagno.
In this post-judgment matrimonial matter, defendant Sean Orr appeals from portions of a November 3, 2010 order that divested him of a 50% interest in plaintiff Michelle Orr's 401(k) and pension plan. He also appeals from the January 10, 2011 order denying his motion for reconsideration. For the reasons that follow, we reverse.
The parties were married in 1989 and divorced on May 18, 2004. The judgment of divorce, which incorporated a property settlement agreement (PSA), contained a section entitled "Pensions/401K's/IRAs" that provided in pertinent part:
The parties agree that they shall split equally Wife's 401K and pension from BASF by way of a Qualified Domestic Relations Order. The Qualified Domestic Relations Order will be prepared, at equal cost to the parties.
To fully comprehend the issues presented, a thorough review of the parties' actions and the extensive litigative history regarding this provision is necessary.
Defendant's January 2003 case information statement valued plaintiff's 401(k) and pension at $90,000. Plaintiff does not dispute this estimate, nor does she challenge defendant's assertions that, after the marital home, her 401(k) and pension comprised the parties' most valuable marital assets, and the division of these assets was a critical component of the negotiations leading up to the signing of the PSA.
On August 17, 2005, plaintiff's counsel at the time, Danielle Bohlen of Heymann & Fletcher, sent defendant's counsel a letter indicating that she had contacted Pension Appraisers Inc. to prepare a Qualified Domestic Relations Order (QDRO) to divide the 401(k) and pension. Bohlen sought defendant's contribution of $527.50, representing half of the quoted fee for the QDRO preparation. She received no response.
On January 25, 2006, plaintiff filed a motion seeking past due child support. She also sought to compel defendant to pay his share of the QDRO fee. By order dated March 3, 2006, defendant was directed to provide plaintiff's counsel "the sum of $527.50 for his share of the preparation of QDRO, upon being provided with copy of application." Defendant was also ordered to pay counsel fees of $1,500 within 60 days.*fn1
On August 28, 2006, Bohlen sent a letter to defendant's counsel noting that defendant had not paid his share of the QDRO fee and Pension Appraisers had raised their rates. She provided an updated fee schedule, indicating that defendant's share of the preparation fee would be $542.50, and requested a check in that amount made payable to Pension Appraisers.
On September 11, 2006, Bohlen sent a follow-up letter indicating that she had learned of another retirement fund that had to be divided, requiring an additional QDRO and an added fee of $172.50. She again requested that defendant forward a check payable to Pension Appraisers. As defendant had not made any payments, his share was $700.
By December 26, 2006, defendant had not paid his share of the QDRO fee and plaintiff wrote to him directly stating that if he did not pay the $700 fee, she would seek a court order allowing her to keep all of the funds in her 401(k) and pension plans. Plaintiff's letter apparently had the intended effect and on January 9, 2007, defendant drew a check in the amount of $700 and forwarded it to plaintiff's counsel. Unfortunately, the check was made payable to Heymann & Fletcher and not to Pension Appraisers, although it bore a legend indicating it represented defendant's QDRO payment. Heymann & Fletcher deposited the check into their trust account on January 10, 2007, but took no further action regarding the QDRO preparation.*fn2
In May 2008 defendant filed a motion seeking to compel plaintiff to prepare the QDRO, noting that he had paid his share of the QDRO preparation fee. Plaintiff, who was no longer represented by Heymann & Fletcher, filed a cross-motion. While all of the pleadings are not before us, the order entered on August 28, 2008 indicates that plaintiff challenged defendant's claim that he paid his share of the QDRO fee. The motion judge ordered defendant to obtain information from plaintiff's former counsel:
Within thirty (30) days of the date of this Order, defendant shall contact the firm of Heymann & Fletcher to determine whether the $700 payment was applied to the preparation of the QDRO. In the event Heymann & Fletcher has not prepared the QDRO, within forty-five (45) days of the date of this Order, the parties shall mutually agree on an attorney to prepare the QDRO. Both parties shall cooperate in the efforts to complete the preparation of the QDRO. The parties shall have ninety (90) days from the date of this Order to procure the QDRO. Failure of either party to cooperate with the preparation of the QDRO may result in sanctions, including but not limited to forfeiture of any claim for distribution.
In a Statement of Reasons accompanying the order, the judge acknowledged that defendant had paid $700 to Heymann & Fletcher, but since he had not paid the counsel fee award, the judge claimed that she was unable to determine whether the $700 was "related to his share of the cost for preparation of the QDRO or payment towards the counsel fee award."
Perhaps realizing the ethical quandary this order presented by directing defendant to obtain information from plaintiff's former counsel, plaintiff's attorney wrote to Heymann & Fletcher on September 29, 2008, inquiring as to the status of the QDRO. On October 27, 2008, Tadd Yearling from Heymann & Fletcher replied that "it appears that Mr. Orr, or his counsel at the time, failed to respond to our request for contribution toward preparation of the QDROs, as required by the PSA." Yearling made no mention of defendant's $700 payment.
The QDRO issue lay dormant for almost two years until defendant filed a motion on July 26, 2010, seeking various relief including "full ownership of the marital retirement and pension accounts." In her certification in opposition to defendant's motion, plaintiff acknowledged that defendant had sent the $700 in response to her request for payment of his share of the QDRO fees, but suggested that Heymann & Fletcher had applied defendant's payment to the outstanding counsel fee award and they were justified in doing so:
Most likely in response to my December 2006 letter. . . Mr. Orr finally sent a check in January 2007 in the amount of $700 to Heymann & Fletcher apparently assuming the firm would procure the QDRO, which it did not, but with good reason: the outstanding [counsel fee] judgment.
She argued that defendant's failure to comply with the August 28, 2008 order should result in the forfeiture of his interest in her 401(k) and pension plans.
By order entered November 3, 2010, a different motion judge denied defendant's motions and awarded plaintiff the entire 401(k) and pension accounts.*fn3 In a statement of reasons accompanying the order, the judge acknowledged that defendant had sent a $700 check in January 2007 but held:
The issue here, as was also addressed in the Court Order of August 26, 2008, is whether or not that [$700] check was applied to the judgment or to pay for the QDRO.
Defendant has not shown that it was Plaintiff's failure to cooperate that he [sic] caused the delay. Defendant has also failed to comply with the Order of August 26, 2008, as this Court still does not know what amount owed the check was applied to.
Where there is a delay, unexplained and inexcusable in enforcing a known right and prejudice results to the other party as a result of the delay, laches applies.
Defendant moved for reconsideration and submitted a certification dated November 23, 2010, from Stephen Fletcher, of Heymann and Fletcher stating:
On or about January 9, 2007 my firm received a check in the amount of $700 from the Defendant, Sean Orr, as his share of the required fee to Pension Appraisers who was to prepare two QDROs necessary to distribute the Plaintiff's 401L and BASF Pension and Mr. Orr's IRA.
Sometime after Receiving Mr. Orr's check, the Plaintiff discharged my firm as her legal representative in this case.
On or about June 14, 2007, my firm was notified that the Defendant had filed bankruptcy and listed my firm as a creditor. As a result of the foregoing, Mr. Orr's $700 was never forwarded to Pension Appraisers to complete the QDRO.
My office has issued a check in the amount of $700 to Mr. Orr on this date refunding to him the QDRO preparation fee.
In spite of clear proof that defendant had complied with his obligation to pay his portion of the QDRO fee four years earlier, the judge denied reconsideration on January 10, 2011. In her statement of reasons she found:
It has been six years since the parties' divorce. It was not until the Defendant lost on his application to this Court that he complied with the Court's order dated August 26, 2008 to ascertain information from Heymann & Fletcher regarding the monies Defendant paid to the firm.
As to the Fletcher certification, the judge found: this is evidence that could have been known at the time of the filing of the original motion. At the time the motion was filed, the Defendant did not present any evidence as to whether the amount paid to Heymann & Fletcher was for the fees owed or for preparation of the QDRO. Defendant's evidence will not be considered as same could have [sic] provided previously.
The defendant filed a timely notice of appeal challenging portions of the November 3, 2010 order as well as the January 10, 2011 denial of his motion for reconsideration.
In allowing plaintiff to retain both her 401(k) and pension assets, the motion judge dramatically altered the parties' settlement agreement as reflected in the PSA and imposed a severe economic sanction against defendant. We review a trial court's imposition of sanctions under the "abuse of discretion" standard. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44 (2001). Abuse of discretion "[a]rises when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002).
We begin by noting that we are not insensitive to the frustrations caused by litigants who ignore court orders, and we recognize the inherent power of the judiciary to "challenge and punish affronts to its authority." In re Daniels, 118 N.J. 51, 58-59 (1990) (quoting In re Yengo, 84 N.J. 111, 130 (1980), cert. denied, 449 U.S. 1124, 101 S. Ct. 941, 67 L. Ed. 2d 110 (1981)). The response to this type of conduct, however, must be measured and appropriate. In East Brunswick Bd. of Educ. v. East Brunswick Educ. Ass'n, 235 N.J. Super. 417, 422 (1989), we held that a sanction "must be fashioned in an amount sufficient to sting and force compliance, but must not be so excessive as to constitute ruinous punishment." The sanction here was punitive, excessive and grossly disproportionate to defendant's conduct.
While defendant initially failed to pay his share of the QDRO fee, there were several complications, not of his making, that contributed to the delay. During the seventeen-month period from the first demand in August 2005 and January 2007 when defendant made the $700 payment, the amount of the QDRO fee and the requested contribution changed three times. In her letter of September 11, 2006, Danielle Bohlen apologized for "confusion on my part" with regard to the number of retirement accounts to be divided.
There can be no dispute that defendant intended that the January 9, 2007 check would be used to pay his share of the QDRO fee. His check was sent less than two weeks after plaintiff's demand for the money, in the exact amount requested, and bore a legend indicating that it represented payment of his QDRO fee. We are at a loss to understand why the first motion judge did not acknowledge this.
The matter became considerably and unnecessarily more complicated with the August 28, 2008 order that compelled defendant to obtain information from plaintiff's former counsel as to how they applied his $700 payment. It is not clear from the record before us whether plaintiff actually contested defendant's payment of the QDRO fee or simply attempted to capitalize on the confusion caused by Tad Yearling's perfunctory response in his October 27, 2008 letter. If plaintiff did challenge defendant's payment, it should have been her burden to contact her former counsel. Moreover, if Heymann and Fletcher misapplied the funds, that error cannot be attributed to defendant. By placing the onus on defendant to account for the actions of plaintiff's former counsel, the order had the effect of plunging defendant into the bramble patch of lawyer-client confidentiality. In her brief, plaintiff attempts to argue both sides of this ethical conundrum, on one hand protesting that the Fletcher certification was supplied "voluntarily by Mr. Fletcher in violation of RPC 1.6 . . . supporting defendant's motion, to the potential detriment of his own client" while also complaining that "[t]here is no reason that defendant could not have obtained the Fletcher Certification previously."
The August 28, 2008 order placed an unreasonable burden on defendant when it should have been apparent that his $700 check was payment of the QDRO fees. Defendant should not have been tasked with sorting out the confusion caused by the actions of plaintiff's former counsel; summarily divesting him of his share in plaintiff's 401(k) and pension for failure to comply with that order was an abuse of the trial court's discretion.
We also find that the judge erred by applying the equitable defense of laches. That doctrine is invoked to deny a party enforcement of a known right where an inexcusable and unexplained delay in enforcing that right prejudiced the other party because of such delay. County of Morris v. Fauver, 153 N.J. 80, 105 (1998). The time constraints for the application of laches "are not fixed but are characteristically flexible." Lavin v. Bd. of Educ., 90 N.J. 145, 151 (1982). The key factors to be considered in deciding whether to apply the doctrine are the length of the delay, the reasons for the delay, and the "changing conditions of either or both parties during the delay." Id. at 152. While defendant was responsible for some delay as previously noted, he submitted his share of the QDRO fee as of January 9, 2007. His inaction up until that point does not constitute the type of inexcusable and unexplained delay that would justify the application of laches.
Moreover, the defense of laches is not available to a party whose own actions caused or contributed to the delay. It is an established rule of equity that a party forfeits the right to claim laches when his or her own actions have contributed to, or caused, the delay. Rolnick v. Rolnick, 262 N.J. Super. 343, 364 (App. Div. 1993). As of January 9, 2007, plaintiff's counsel was in receipt of defendant's payment and she presents no explanation as to why the QDROs were not prepared at that point.*fn4
Finally, laches involves more than mere delay or lapse of time. There must be delay that has been prejudicial to the other party. W. Jersey Title & Guar. Co. v. Indus. Trust Co., 27 N.J. 144, 153 (1958). Here, defendant stood to benefit from the division of plaintiff's 401(k) and pension; any prejudice resulting from the delay was suffered by him.
That portion of the November 3, 2010 order divesting defendant of a 50% interest in plaintiff's 401(k) and pension plan is vacated and the matter is remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.