Breaking Up? In This Economy?

By Vesslin Mitev
New York Law Journal
New York Lawyer
March 6, 2009

Matrimonial lawyers in New York say there is no shortage of legal work in this tough economic climate, as clients with strained finances seek support modifications, settlements and, for some, divorce. The problem, they say, is getting paid.

"It depends upon the financial wherewithal of the client, but people are much more conscious about legal fees," said Allan D. Mantel, a partner in the matrimonial practice at Manhattan's Stein Riso Mantel. "Payments are slower than they have been across the board."

But being up front about what legal services will cost is the best approach to collecting fees at the end of a case, attorneys said.

Rochester solo practitioner June Castellano said that while she has always discussed costs with her clients "frankly and openly," it is "imperative" to do so now.

"I develop case strategy with my clients and find that we are weighing cost implications against likelihood of success more than ever before," Ms. Castellano said.

Rochester solo practitioner June Castellano said that while she has always discussed costs with her clients "frankly and openly," it is "imperative" to do so now.

"I develop case strategy with my clients and find that we are weighing cost implications against likelihood of success more than ever before," Ms. Castellano said.

Eric A. Tepper, a partner in the six-attorney Glenville firm of Gordon, Tepper & DeCoursey, said he has seen more clients seeking either to lower their child support obligations or keep them at current level.

"I have seen an influx of people coming in to seek a modification and usually it's [because] someone has lost their job," said Mr. Tepper. In such cases, he added, it is important to point out to the court that the change in circumstances was beyond the client's control, or that the client has been actively seeking work.

Modification requests are also pouring into the Garden City office of John DiMascio Jr. He has clients who took major pay cuts and are now seeking relief of their court-ordered obligations.

While a court may accept lower payments, Mr. DiMascio said that where parties have signed agreements, a spouse may bring an additional breach of contract suit.

"You have to tell your clients, even if you are successful in getting a downward modification, there is still that threat," said Mr. DiMascio, who practices with his father.

Depending on their financial position, clients either are looking to divorce or hold marriages together until their assets are back in the black.

"We have clients that say, 'When things were going great and my spouse was making a bit of money, I put up with a lot of things, but now I don't want to put up with that kind of behavior anymore,'" said Alton L. Abramowitz of Mayerson Stutman Abramowitz Royer, a nine-lawyer Manhattan boutique. "Or, we have people who say, 'My marriage has been bad for years and now I'm going to go through with a divorce.'"

For some, divorcing when assets have depreciated can be a strategically beneficial move, as a client would end up paying less to his or her spouse.

"A party with substantial assets may think that this might be a good time to go forward with a divorce, particularly if they have assets that are not readily valuable," said Steven J. Eisman, a partner in 55-attorney Abrams Fensterman in Lake Success.

"If you have real estate investments, you can buy your spouse out at a relatively low price," he said.

Passive assets, like real estate or stocks and bonds, are typically valued as of the date of trial, rather than the date an action was commenced, which in some instances dates back several years.

As real estate values have dropped, a growing number of litigants are asking courts to assign valuation dates closer to the trial date, Mr. Eisman said.

In some instances, the market has caused substantial declines in assets in just a matter of months, according to Mr. DiMascio, who said a settlement could potentially change between the time of agreement and when the assets are actually distributed.

"Even if it takes us three months . . . that money may have decreased 30 percent and the clients are still dismayed to find out that they have that much less to live on," he said.

According to Mr. Mantel, more litigants will likely face similar predicaments until the market bounces back and restores some equilibrium. Meanwhile, he said, parties have to be "very realistic" about the current value of their homes and other assets in hammering out a settlement agreement.

Postponing the Split

The financial volatility makes clients with depleted portfolios reconsider whether to move forward with a divorce or just stay married until they can afford to separate and start over.

Solo practitioner Gae H. Polisner of Huntington, who focuses on divorce mediation, said a common refrain among her clients is to wait. Recently, she said she drafted several agreements for clients who deferred executing them until they are in a better financial situation.

"They will just say, 'Forget it, we'll just live like this and figure it out when the economy picks up,'" she said.

But others see this as an opportune time to start over, regardless of the state of their portfolios.

Manhattan attorney Glenn E. Dornfeld, who works almost exclusively in mediation, said the financial crisis has brought him a host of clients seeking amicable ends to marriages, at cheaper costs than litigation.

"A lot of people are feeling like this is a good time to wipe the slate clean and move on, whether it's out of state, or back home with family, they are saying, 'Let's just do this in a way that doesn't cause each other pain,'" Mr. Dornfeld said.

About Those Fees

But whether the task is negotiating settlements, making motions for modifications or spending days in court arguing over equitable distributions, practitioners say collecting fees is more difficult.

"People are fighting over every dollar more, yet there is less money involved," said Stephen Gassman, a partner at the nine-member matrimonial and family law firm Gassman, Baiamonte, Betts & Tannenbaum in Garden City.

Ultimately, that means less money to pay the attorney. Advising a settlement may be the only fiscally sensible option for both the lawyer and the client.

"My collection rates are much higher on those cases that I can settle quickly," Mr. DiMascio said. The longer the case goes on, the greater the chance that there will be bills outstanding, he added.

As assets have dried up, some attorneys have had to change their case management approaches, taking a page out of the mediator handbook and advising settling, rather than litigating to the bitter end.

"This is where counseling comes in, you have to tell people, 'You really have to make matters cost-effective,'" Mr. Gassman said.

Jericho solo practitioner Mace H. Greenfield agreed that it is up to lawyers to work with clients to set up mutually acceptable payment plans. One client has been paying him in $100 increments, twice a month, like clockwork.
"I'll make a deal with anybody, as long as they stick to their terms," Mr. Greenfield said.