Opinion
No. 66219/2022
01-09-2024
S.D., Plaintiff, v. A.D., Defendant.
MOST & SCHNEID counsel for pltf EVAN WIEDERKEHR ESQ counsel for deft
Unpublished Opinion
MOST & SCHNEID counsel for pltf
EVAN WIEDERKEHR ESQ counsel for deft
Robert S. Ondrovic, J.
The following papers were considered in connection with the plaintiff's motion for an award of counsel fees and the defendant's cross motion for an order directing the plaintiff to equally share responsibility for a Small Business Administration (hereinafter "SBA") loan:
PAPERS / NUMBERED
Order to Show Cause, Affidavit of Plaintiff, Attorney Affirmation, Memorandum of Law, Exhibits 1 - 35 1 - 39
Notice of Cross Motion, Affidavit of Defendant in Opposition and in Support of Cross Motion, Exhibits A - O 40 - 56
Reply Affidavit of Plaintiff, Exhibits 36 - 45 57 - 67
By stipulation of settlement, which was so-ordered by the Court on September 5, 2023, the parties resolved all ancillary issues related to this divorce action with the exception of the plaintiff's request for an award of counsel fees and the defendant's request for an order directing the plaintiff to pay a one-half share of the remaining balance owed on an SBA loan incurred during the marriage by an entity of which he is the sole owner/officer. The parties waived the right to a hearing on these issues, which would be determined on the basis of papers.
The plaintiff's motion
In an affidavit in support of her motion, the plaintiff requests an award of counsel fees in the amount of $90,000. She averred that during the last few years of the marriage, the defendant began to "hide retirement investments" and transfer monies into "private equity investments" and a cannabis business. The plaintiff asserted that throughout this litigation the defendant was not forthcoming about his assets, as evidenced by the "ever changing list" of his holdings, which caused unnecessary delay and excessive legal fees. She asserted that she incurred more than $30,000 of legal fees during the last 2 ½ months of drafting and negotiating the final stipulation.
NYSCEF Doc No 43 at ¶ 3
id. at ¶ 21
The plaintiff emphasized that the defendant used pre-commencement marital assets to retain counsel and an accounting firm in preparation of divorce. More specifically, she noted that the defendant paid a $30,000 retainer to Johnson & Cohen LLP, a $25,000 retainer to Auerbach Law Group, P.C. (hereinafter Auerbach), and a $15,000 to Buonamici & LaRaus LLP (hereinafter LaRaus). The plaintiff argued that the defendant's claim that he had to use marital assets to cover living expenses is not credible given that the defendant, who is employed by his brother, earns an annual salary of $200,000 and has historically earned an annual cash bonus of $250,000 from a trust fund owned by his brother. The plaintiff stated, upon information and belief, that in 2021, the defendant received approximately $800,000 from the sale of stock, yet still claimed that he was forced to deplete marital assets to pay the parties' expenses. She asserted that it was virtually impossible to trace the defendant's assets because of the many transfers and other transactions effectuated by him.
The plaintiff contended that the defendant is a "bully" and "impossible to deal with." She emphasized, among other things, that the defendant went through more than three sets of lawyers, was unwilling to pay the majority of her dental bills, and refused to pay the mortgage the month prior to the stipulation being signed despite being cautioned to preserve the status quo. The plaintiff stated that the defendant has not reimbursed her for the cost of this semester's college tuition for two of the children and has not paid support since August 2023. She asserted that the defendant unreasonably refused to agree to pay the cost of tuition above the SUNY cap despite that two of the children are enrolled in private colleges and the youngest child is expected to as well. The plaintiff also stated that at the last minute, the defendant refused to close on the sale of the New Jersey residence unless she agreed to a shorter duration of maintenance. She contended that she signed the stipulation in August 2023, after more than 10 redlined drafts were exchanged, only to receive further handwritten changes from the defendant. The plaintiff noted that she paid a retainer of $10,000 to her attorneys from the parties' joint Chase account, $33,915.85 from her share of the proceeds from the sale of the New Jersey residence, and incurred $20,000 in credit card debt.
id. at ¶ 15
In a supporting affirmation, the plaintiff's attorney argued that the defendant is indisputably the monied spouse, his unreasonable conduct prevented a timely resolution of the matter, and he was intentionally evasive about his assets. She stated that after numerous drafts of the stipulation had been circulated, wherein the plaintiff agreed to waive any interest in the defendant's "business interests," a defined term therein, the defendant belatedly disclosed in mid-August 2023, the issue related to the SBA loan. The plaintiff's attorney asserted that the plaintiff was forced to use a portion of her equitable distribution to pay $33,915.85 toward her counsel fees and currently owes her firm $58,885.47.
In a memorandum of law, the plaintiff added that the disparity in income between her and the defendant is significant, she was a homemaker during the marriage, and began working as a nursery school aide after the commencement of this action. She emphasized that the defendant depleted all marital savings and checking accounts and that she used her share of the proceeds from the sale of the marital residence to pay down the mortgage so that the youngest child could remain in the home during his last year of high school.
The defendant's opposition and cross motion
In an affidavit in opposition to the plaintiff's motion and in support of his cross motion, the defendant asserted that he never delayed in responding to the plaintiff's inquiries about his financial transactions and readily provided disclosure during discovery, was transparent that his monthly income of approximately $9,000 was insufficient to pay the parties' living expenses - which included two mortgages and a HELOC - and the plaintiff refused to secure employment during the marriage and contribute financially toward household expenses.
The defendant claimed that prior to the commencement of this action, he hired the son of one of the plaintiff's friends to provide an analysis of the parties' holdings and investments "for Plaintiff's benefit." He asserted that he never concealed any marital assets from the plaintiff and provided unfettered access to the entire marital estate. The defendant stated that the handwritten changes made to the last draft of the agreement were reasonable and appropriate. He stated that contrary to the plaintiff's contention, Auerbach was retained nine months prior to the commencement of this action for the benefit of both parties "to facilitate an intelligent division of assets with minimal financial prejudice to the assets and financial estate." The defendant stated that the only reason he changed counsel and retained LaRaus was "to advance the matter to settlement" since the plaintiff's attorney indicated that she could not work productively with his then counsel. He asserted that despite his efforts toward settlement, the matter languished and he expended approximately $102,000 during the action toward the payment of the mortgages, taxes, insurance, and utilities for their two homes.
id. at ¶ 5
id. at ¶ 7
id. at ¶ 9
The defendant submitted billing invoices from his current counsel, who was retained in February 2023, reflecting that the defendant incurred the total amount of $31,691. He asserted that the fees incurred by the plaintiff were excessive and unnecessary, and he was required to provide the same information to the plaintiff's counsel multiple times during the litigation due to her own confusion regarding his investments during the marriage. The defendant emphasized that the plaintiff received in equitable distribution a one-half share of all of his investments made during the marriage and retirement accounts, and he readily agreed to equally divide the $1.3 million of net proceeds from the sale of the parties' New Jersey residence. He denied that the closing on the sale of the New Jersey residence was held up due to any conduct on his part and asserted that the parties would have realized an additional $800,000 had the plaintiff agreed to sell the home a year prior when he implored her to do so. With respect to the marital residence, the defendant asserted that he agreed to the plaintiff's unreasonable demand that he defer the sale of the home even though the youngest child is a senior at Stepinac and will be leaving for college in August 2024.
The defendant explained that the reason he attempted to reduce the spending limit on the plaintiff's American Express card during the action was because he could not afford to continue paying for her excessive spending habits while also paying all living expenses. He asserted that he is not the monied spouse, the marital asserts were equally divided between the parties, his bonus of $125,000 is discretionary, and he is obligated to pay approximately $79,000 per year in combined maintenance and child support on an annual income of $200,000, while also being responsible for 80% of the children's add-on expenses. The defendant asserted that during the action the plaintiff obtained employment as a pre-school assistant earning approximately $27,000, noting that she would earn more income working full-time earning minimum wage.
With respect to the SBA loan, the defendant argued that it was originally incurred in June 2020, by Zenon Capital Advisors, LLC, more than two years prior to the commencement of the action, and has a current balance of $79,555. He asserted that the funds were used to pay family expenses and "[n]o loan proceeds were used for investments." The defendant emphasized that he is personally liable for payment of the loan, which is secured by the marital residence. He asserted that it is meaningless that the loan was taken by Zenon Capital Advisors, LLC since that entity "never had revenue," and the plaintiff is receiving a one-half share of "all holdings and assets in the name of all corporate entities [he] formed during the marriage such as dividing the two Zenon Partners IRA, Zenon 401K Trust Roth and two Zenon 401K Trust accounts." According to the defendant, the SBA loan "is no different than a credit card liability or any other debt incurred by the parties during the marriage.
id. at ¶¶ 31-32
id. at ¶ 33
The plaintiff's opposition and reply
In further support of her motion and in opposition to the defendant's cross motion, the plaintiff argues in her affidavit that Auerbach was retained solely by the defendant "to aid in Defendant's prelitigation plan." She asserted that she never had any contact with Auerbach and attached an email communication between Auerbach and her attorney as evidence that Auerbach only represented the defendant's interest and was involved in issues related to the divorce. The plaintiff stated that the defendant has continued to act in bad faith since the signing of the stipulation and has failed to comply with his obligations thereunder, including his obligations to pay $13,642.66 in support for the months of September and October 2023, and arrears in the amount of $4,606.
NYSCEF Doc No 106 at ¶ 3
The plaintiff claimed that she did not work outside of the home during the marriage because she has "always been the only parent involved in our three sons' lives." She stated that she has no prior work experience and is currently earning an annual salary of approximately $27,000. With respect to the SBA loan, the plaintiff emphasized that the defendant incurred that debt without having any discussion with her, he provided no information or documentation substantiating his unsupported claim regarding how the monies were used, and the defendant took out a business loan on behalf of a business that likely did not qualify for that type of loan. The plaintiff argued that she waived her interest in Zenon Capital A
id. at ¶ 10
ANALYSIS
"In a matrimonial action, an award of an attorney's fee is a matter committed to the sound discretion of the trial court" (Vitale v Vitale, 112 A.D.3d 614, 614-615 [2d Dept. 2013]). "'In exercising its discretionary power to award counsel fees, a court should review the financial circumstances of both parties together with all the other circumstances of the case, which may include the relative merit of the parties' positions'" (Montoya v Montoya, 143 A.D.3d 865, 865 [2d Dept. 2016], quoting Badawi v Alesawy, 135 A.D.3d 793, 795 [2d Dept. 2016]). "The court may also consider 'whether either party has engaged in conduct or taken positions resulting in a delay of the proceedings or unnecessary litigation'" (Fredericks v Fredericks, 85 A.D.3d 1107, 1108 [2011], quoting Prichep v Prichep, 52 A.D.3d 61, 64 [2d Dept. 2008]). "At that point, the court is in the best position to determine whether counsel fees should be charged to the moneyed spouse, or charged to the less moneyed spouse as an offset against the equitable distribution award ultimately received, or divided between the parties" (Duval v Duval, 144 A.D.3d 739, 743 [2d Dept 2016]). As stated above, the parties waived a hearing on this issue, and agreed to submit their arguments regarding a final award of counsel fees on papers.
Under the circumstances of this case and upon a consideration of all relevant factors, including the disparity in the parties' incomes, each party's future earning potential and their access to financial resources, the merits of the parties' respective positions, the extent to which the defendant's antagonistic conduct contributed to a delay in the resolution of this action, and the equitable distribution awarded under the settlement agreement, the Court grants the plaintiff's request for an award of reasonable counsel fees to the extent of awarding her the amount of $72,000, to be paid by the defendant to the plaintiff's attorney within 45 days of the date of this decision and order.
Contrary to the defendant's contention, he is the monied spouse even taking into consideration the plaintiff's income from employment of approximately $27,000 and her receipt of maintenance from the defendant in the amount of $30,670.92 per year (for a period of 9 ½ years), and that she received a one-half share of the marital assets in equitable distribution. In addition to the defendant's annual income of $200,000, the defendant receives an annual cash bonus, which was in the amount of $250,000 prior to the divorce, but was inexplicably reduced to $125,000 post-commencement. Although the defendant highlights that the bonus is discretionary, he does not identify any year in which he did not receive a bonus.
In addition, the plaintiff has set forth several instances wherein the defendant's hostile conduct caused her to require attorney intervention and incur additional fees. The Court rejects the defendant's claim that Auerbach was retained on behalf of both parties. The retainer agreement, which was signed only by the defendant, makes clear that Auerbach was retained by the defendant to "provide legal counsel and advice to [him] in connection with certain estate planning matters" and that the firm would "provide such advice and counsel to [him] and [his] matrimonial attorney, if and when retained" to aid in "an amicable resolution of your marriage." An email between Auerbach and the plaintiff's counsel demonstrates that Auerbach referred to the defendant as "[its] client," advocated on his behalf, and assisted the defendant in completing his statement of net worth.
NYSCEF Doc No 48
NYSCEF Doc No 108
While the plaintiff claims that the defendant was evasive about his financial holdings, the defendant claims that the plaintiff's attorney repeatedly requested the same financial disclosure due to her confusion concerning his investments. Nevertheless, the Court, in reaching its determination, has considered that the billing invoices submitted by the defendant demonstrate that he incurred $31,691 in counsel fees between February 2023 and September 2023, whereas the plaintiff incurred double that amount over the same time period.
Turning to the defendant's cross motion, the evidence demonstrates that the SBA loan was taken out by Zenon Capital Advisors LLC, an entity solely owned by the defendant, two years prior to this action in June 2020, in the original amount of $53,400. There is no evidence whatsoever supporting the defendant's self-serving statement that the funds were used to pay the parties' living expenses during the marriage such that the plaintiff should be held responsible for a one-half share of that debt. Moreover, the defendant acknowledges that in April 2022, approximately six months prior to the commencement of this action, he modified the loan by quadrupling the original amount of the debt from $53,400 to $216,500, notwithstanding his own admission that the parties were already contemplating divorce at that time, as evidenced by his retention of Auerbach in January 2022. Based on the foregoing, the Court is not persuaded that the plaintiff should share in the responsibility of the repayment of the SBA loan.
Accordingly, it is, ORDERED that the plaintiff's motion seeking an award of counsel fees is granted to the extent that the plaintiff is awarded the amount of $72,000, to be paid by the defendant to the plaintiff's attorney within 45 days of the date of this decision and order; and it is further, ORDERED that the defendant's cross motion seeking an order directing the plaintiff to equally share responsibility for the repayment of the SBA loan is denied; and it is further, ORDERED that all other relief requested and not decided herein is denied.