NJ & CT News

NEW JERSEY

Attorney Denied Fees for Non-Divorce-Related Services

In May, a two-judge Appellate Division panel upheld the denial of fees to attorney Curtis Romanowski for services he provided to a divorcing client that were outside the scope of the retainer agreement. Although the retainer agreement in the divorce case specifically said it did not cover domestic violence actions, the attorney claimed that he and his client had entered into an oral agreement that required her to pay him for coaching her in the domestic violence action. The client, who handled appearances in the domestic violence case herself, told the lower court that Romanowski had said he would seek payment for the domestic violence case assistance only from her husband. She eventually dropped the domestic violence case, however, as well as the divorce case, because she had decided to reconcile with her husband.

In Romanowski v. Mace, A-4135-07, the appellate panel agreed with the lower court that the attorney was entitled only to the $1,692 (in addition to the retainer of $5,000) attributable to the divorce proceedings, and not the $9,500 he sought in payment for his assistance in a domestic violence case. The lower court had based its decision in large part on New Jersey's Rule 5:3-5, which requires retainer agreements discussing fees in matrimonial actions to be in writing. Romanowski argued on appeal that R. 5:3-5 should not apply in the case, because that rule pertains to matrimonial rather than domestic violence actions. The appellate panel, however, reasoned that the exigency typically present in domestic violence cases, which make a written retainer impracticable, did not apply to this action. In addition, this domestic violence agreement should have been in writing because most of the services Romanowski billed for were not divorce-related. Concluded the judges, “The failure to prevail on a fee claim such as this informs both the bench and bar of the danger of supplementary oral agreements and the benefits of written retainer agreements, especially in the family practice.”

CONNECTICUT

Public Policy Does Not Negate Interest Payment Provision in Agreement

The Appellate Court of Connecticut recently overturned a decision striking a provision of a divorced couple's stipulation for judgment that provided for a payment of interest if property division monies were paid late to the wife, because Connecticut's public policy concerns did not trump the state's interest in encouraging settlement of family matters.

The divorcing parties in Dougan v. Dougan, 114 Conn.App. 379 (Conn.App. 5/19/09), entered into a stipulation for judgment in June 2005, which was found “fair and equitable” by the court and incorporated by reference into the dissolution of marriage. Both parties were represented by experienced counsel during the negotiations leading to the stipulation, and an agreed upon attorney mediator helped them reach the settlement. The stipulation included a complete distribution of their nearly $80 million in assets. As part of that property division, the plaintiff husband agreed to pay the defendant $15,325,000, in two installments of approximately $7.5 million. The stipulation also contained a provision stating that, should the husband fail to pay these amounts on time, interest would accrue at a rate of 10% per year.

When payment was made late, the wife moved for enforcement of the stipulation, asking that the husband be made to pay her interest. The husband countered that, according to Bellemare v. Wachovia Mortgage Corp., 284 Conn. 193 (2007), the agreement was void as against public policy. Bellemare held that “a term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid.” The lower court found the term invalid as against public policy, and the wife appealed.

On appeal, the court noted that, although the lower court's interpretation of public policy concerns was not incorrect, there are competing public policy concerns surrounding the dissolution of marriages. Case law and statutory law encourage parties to negotiate, and for the parties and the courts to strike the delicate balance required to achieve fairness in each individual case. As long as both parties are represented by competent counsel, there is no fraud or mistake, and the court determines the agreement is fair and equitable, the general public policy prohibiting the imposition of a
penalty for failure to perform in accordance with a contract need not apply.

In the Dougan case, the husband's failure to pay on time gave him the use of $7.5 million for a year. As an investment banker with large financial holdings, he could have paid on time, and he understood that failure to timely pay would result in his having to pay 10% in interest per annum. “In the present case,” stated the court, and “considering the totality of the circumstances and current societal expectations, public policy weighs in favor of enforcing the agreement.” Thus, the court reversed.

NEW JERSEY

Attorney Denied Fees for Non-Divorce-Related Services

In May, a two-judge Appellate Division panel upheld the denial of fees to attorney Curtis Romanowski for services he provided to a divorcing client that were outside the scope of the retainer agreement. Although the retainer agreement in the divorce case specifically said it did not cover domestic violence actions, the attorney claimed that he and his client had entered into an oral agreement that required her to pay him for coaching her in the domestic violence action. The client, who handled appearances in the domestic violence case herself, told the lower court that Romanowski had said he would seek payment for the domestic violence case assistance only from her husband. She eventually dropped the domestic violence case, however, as well as the divorce case, because she had decided to reconcile with her husband.

In Romanowski v. Mace, A-4135-07, the appellate panel agreed with the lower court that the attorney was entitled only to the $1,692 (in addition to the retainer of $5,000) attributable to the divorce proceedings, and not the $9,500 he sought in payment for his assistance in a domestic violence case. The lower court had based its decision in large part on New Jersey's Rule 5:3-5, which requires retainer agreements discussing fees in matrimonial actions to be in writing. Romanowski argued on appeal that R. 5:3-5 should not apply in the case, because that rule pertains to matrimonial rather than domestic violence actions. The appellate panel, however, reasoned that the exigency typically present in domestic violence cases, which make a written retainer impracticable, did not apply to this action. In addition, this domestic violence agreement should have been in writing because most of the services Romanowski billed for were not divorce-related. Concluded the judges, “The failure to prevail on a fee claim such as this informs both the bench and bar of the danger of supplementary oral agreements and the benefits of written retainer agreements, especially in the family practice.”

CONNECTICUT

Public Policy Does Not Negate Interest Payment Provision in Agreement

The Appellate Court of Connecticut recently overturned a decision striking a provision of a divorced couple's stipulation for judgment that provided for a payment of interest if property division monies were paid late to the wife, because Connecticut's public policy concerns did not trump the state's interest in encouraging settlement of family matters.

The divorcing parties in Dougan v. Dougan , 114 Conn.App. 379 (Conn.App. 5/19/09), entered into a stipulation for judgment in June 2005, which was found “fair and equitable” by the court and incorporated by reference into the dissolution of marriage. Both parties were represented by experienced counsel during the negotiations leading to the stipulation, and an agreed upon attorney mediator helped them reach the settlement. The stipulation included a complete distribution of their nearly $80 million in assets. As part of that property division, the plaintiff husband agreed to pay the defendant $15,325,000, in two installments of approximately $7.5 million. The stipulation also contained a provision stating that, should the husband fail to pay these amounts on time, interest would accrue at a rate of 10% per year.

When payment was made late, the wife moved for enforcement of the stipulation, asking that the husband be made to pay her interest. The husband countered that, according to Bellemare v. Wachovia Mortgage Corp. , 284 Conn. 193 (2007), the agreement was void as against public policy. Bellemare held that “a term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid.” The lower court found the term invalid as against public policy, and the wife appealed.

On appeal, the court noted that, although the lower court's interpretation of public policy concerns was not incorrect, there are competing public policy concerns surrounding the dissolution of marriages. Case law and statutory law encourage parties to negotiate, and for the parties and the courts to strike the delicate balance required to achieve fairness in each individual case. As long as both parties are represented by competent counsel, there is no fraud or mistake, and the court determines the agreement is fair and equitable, the general public policy prohibiting the imposition of a
penalty for failure to perform in accordance with a contract need not apply.

In the Dougan case, the husband's failure to pay on time gave him the use of $7.5 million for a year. As an investment banker with large financial holdings, he could have paid on time, and he understood that failure to timely pay would result in his having to pay 10% in interest per annum. “In the present case,” stated the court, and “considering the totality of the circumstances and current societal expectations, public policy weighs in favor of enforcing the agreement.” Thus, the court reversed.