Malpractice Award Can Affect Alimony

A New Jersey Superior Court Judge has found that money received by a wife in a legal malpractice settlement stemming from the divorce trial can be used to reduce or eliminate alimony. Moreover, a supported spouse could not pay an excessive amount for a new home and then complain she does not have enough money for savings.

Barbara Crews received a $1.49 million malpractice settlement in March 2003, which netted her $940,000 after counsel fees and expenses. (The case's bizarre journey up and down the court system was triggered at the original divorce trial in 1994, when Barbara Crews' lawyer walked off her case because he said he needed more time for discovery and counsel fees from the husband, which had been ordered but not yet paid, to continue the case.) The judge concluded that the award negated the need for further alimony, since — even at 5% interest — Crews would earn $45,000 annually on that sum, more than the $42,000 in annual alimony. As a result, Crews must pay her ex-husband 13 months of alimony, or $45,500. The ruling ended alimony of $42,000 a year for the wife in Crews v. Crews, which has been in the courts for 13 years and is about to go to the Appellate Division for a fourth time.

The case set new precedent. Crews v. Crews, 164 N.J. 11 (2000) held that the supported spouse's standard of living during the marriage dictates alimony and modifications due to changed circumstances. The supreme court remanded the case to the trial level to determine Crews' standard of living, which could not have been established completely in 1994 because she walked out with her lawyer.

Two years ago, Crews sold the four-bedroom marital home in Ridgewood for $613,000 and bought a $594,000 Paramus townhouse. The judge found that the purchase of an expensive townhouse offset Crews' rights to be compensated for the savings component of the divorce settlement because she could have found a cheaper home and banked $150,000 to $250,000 for retirement. As for the effect of the net $940,000 malpractice award on alimony, the judge said that in computing the earnable yearly interest she must use a 7.3% rate, based upon a formula developed by the Appellate Division in Miller v. Miller, 160 N.J. 408, 422 (1999). That rate produces $68,620 a year. The judge acknowledged it may be difficult to obtain 7.3% today but said her ruling is for the long term, noting that rates will rise again.

Mrs. Crews' attorney is disappointed and noted that an appeal is unnecessary because the appeals panel has retained jurisdiction. Mr. Crews' attorney thinks the decision is fair.

A New Jersey Superior Court Judge has found that money received by a wife in a legal malpractice settlement stemming from the divorce trial can be used to reduce or eliminate alimony. Moreover, a supported spouse could not pay an excessive amount for a new home and then complain she does not have enough money for savings.

Barbara Crews received a $1.49 million malpractice settlement in March 2003, which netted her $940,000 after counsel fees and expenses. (The case's bizarre journey up and down the court system was triggered at the original divorce trial in 1994, when Barbara Crews' lawyer walked off her case because he said he needed more time for discovery and counsel fees from the husband, which had been ordered but not yet paid, to continue the case.) The judge concluded that the award negated the need for further alimony, since — even at 5% interest — Crews would earn $45,000 annually on that sum, more than the $42,000 in annual alimony. As a result, Crews must pay her ex-husband 13 months of alimony, or $45,500. The ruling ended alimony of $42,000 a year for the wife in Crews v. Crews, which has been in the courts for 13 years and is about to go to the Appellate Division for a fourth time.

The case set new precedent. Crews v. Crews , 164 N.J. 11 (2000) held that the supported spouse's standard of living during the marriage dictates alimony and modifications due to changed circumstances. The supreme court remanded the case to the trial level to determine Crews' standard of living, which could not have been established completely in 1994 because she walked out with her lawyer.

Two years ago, Crews sold the four-bedroom marital home in Ridgewood for $613,000 and bought a $594,000 Paramus townhouse. The judge found that the purchase of an expensive townhouse offset Crews' rights to be compensated for the savings component of the divorce settlement because she could have found a cheaper home and banked $150,000 to $250,000 for retirement. As for the effect of the net $940,000 malpractice award on alimony, the judge said that in computing the earnable yearly interest she must use a 7.3% rate, based upon a formula developed by the Appellate Division in Miller v. Miller , 160 N.J. 408, 422 (1999). That rate produces $68,620 a year. The judge acknowledged it may be difficult to obtain 7.3% today but said her ruling is for the long term, noting that rates will rise again.

Mrs. Crews' attorney is disappointed and noted that an appeal is unnecessary because the appeals panel has retained jurisdiction. Mr. Crews' attorney thinks the decision is fair.