Post-Divorce Earnings Fair Game Thanks to $35 Million Ruling
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Post-Divorce Earnings Fair Game Thanks to $35 Million
Ruling
Tim O'Brien
New Jersey Law Journal
08-18-2004
It took a decade, but Adele Ciasulli has won what
appears to be the biggest divorce award from a judge in
New Jersey history, $35.8 million plus alimony and fees
for her lawyers and experts.
The win by her attorney, Paul Rowe, is also notable for
another reason: Essex County Superior Court Judge James
Convery made a rare departure from the rule of valuing
marital assets at the time of the divorce filing.
Instead, the judge found the wife entitled to some of
the huge growth of her husband's business eight years
after she filed her complaint. Convery said the
increase was largely due to the economic boom, not the
husband's management acumen.
In Ciasulli v. Ciasulli, FM-07-201-95, Convery also
blasted the defendant husband, car dealer Robert
Ciasulli Jr., for litigation strategies he
characterized as being in bad faith.
Specifically, the judge attacked Ciasulli for hiring a
valuation expert with the sole motive of undervaluing
his business to deprive his wife of her fair share of
the equitable distribution. That is why, the judge
said, he was awarding plaintiff Adele Ciasulli counsel
and expert fees.
The judge, in fact, ruled against Ciasulli on almost
every argument, and accused him of concocting a story
that the 50 percent interest of the business he had by
1983 was gifted to him by his father, who founded the
business. Gifts are exempt from equitible distribution
in a divorce.
The judge said the evidence was clear that Ciasulli
earned his 50 percent share by working tirelessly for
his father for more than 20 years, and by putting up
some cash to boot. When his father died in 1984,
Ciasulli exercised an option to buy the remaining 50
percent from his father's estate, court papers show.
Ciasulli, 61, was out of the country last week and not
available to comment, according to an assistant in his
office. The value expert whose testimony the judge
found to be "incredulous," David Duryee of Moss Adams
of Seattle, is retired and could not be reached, Moss
Adams marketing chief Karen Kenyon said Friday.
Ciasulli's attorney, Francis Donahue of Donahue, Hagan,
Klein & Newsome in Short Hills, N.J., was on vacation
and unable to be reached, according to his office.
In finding that the economy was the main factor in the
business' growth, Convery did give car dealer Ciasulli
some credit for "better" managing his dozen or so
dealerships during the go-go years of 1994 through
2002, awarding him 65 percent of the increased value.
Still, with Bob Ciasulli Auto Group of Little Falls
growing in net value by $28.69 million during those
eight years, Adele Ciasulli's 35 percent garnered her
an extra $10.04 million.
A FAMILIAR PRECEDENT
Plaintiff lawyer Rowe, of Woodbridge, N.J.'s Greenbaum,
Rowe, Smith, Ravin, Davis & Himmel, was well prepared
to argue for the post-complaint valuation because he
was in the case that set the precedent, Goldman v.
Goldman, 248 N.J. Super. (App. Div. 1994). There, the
court recognized there can be special circumstances
that call for using a later date to value a spouse's
business to achieve equity.
Rowe, in fact, lost Goldman, which also dealt with a
husband who owned a car dealership. Rowe represented
the wife who tried unsuccessfully to have the value
date remain at the time of the filing because the
business had subsequently dissolved.
But Superior Court Judge Herbert Glickman, who handled
the 1991 trial, found that the husband made a good
faith effort to save the business by pouring in other
family investments, only to lose everything. So
Glickman used a later date, resulting in the wife
getting no distribution from the car operation. An
appeals court agreed.
In Ciasulli, decided in an 85-page opinion by Convery
on July 30, the circumstances were the opposite.
After Adele Ciasulli filed for divorce, ending a
30-year marriage on July 1, 1994, BCAG's business took
off. With 16 dealerships at the time, the company's
revenues jumped by 23 percent from 1994 to 1995, and
continued to grow in sales and profitability at a
lesser pace up to mid-2002. The expert for Adele
Ciasulli estimated that the stockholders' equity for
BCAG grew from $4.93 million in 1994 to $17.5 million
in 2002.
More important, Ciasulli, the sole stockholder,
reported a gross income for 1994 of $144,180, jumping
to $1.36 million by 1996, $3.32 million by 1998, $8.6
million for 1999 and 2000; and $10.69 million for 2001
with unearned income included.
The business prospered even though fewer cars were sold
in 2001 than in 1994 because the dealerships were
pushing up profit margins by selling popular cars in
good locations during a time of low inflation, low
interest rates, manufacturer's incentives and eager
buyers, the judge concluded.
PASSIVE V. ACTIVE ASSETS
Convery, at Rowe's urging, also applied another
precedent, Savone v. Savone, 230 N.J. Super 482 (App.
Div. 1990), which drew the distinction between "active"
and "passive" assets. Passive assets are those whose
value fluctuations are based on market conditions, such
as art or real estate. An active asset involves
contributions and efforts that directly increase the
value, such as a business.
The judge accepted the opinion of the wife's value
expert, Allen Winters of Rosenfarb Winters & Co. of
Roseland, N.J., who argued that most of the growth was
not due to Ciasulli's management but to the economy and
related factors, such as having the right brands and
locations.
Moreover, he noted that Ciasulli had been able to use
$7.5 million from the 1997 sale of a dealership that he
did not include in the marital assets -- though the
judge did -- and also had use of millions of dollars in
real estate, some for investment but most for his
dealership locations.
The result, Convery found, was that Ciasulli was able
to pull out a total of $41 million from his operation
during those eight years while Adele Ciasulli was
waiting for her day in court.
The trial did not start until March 2003 because
longstanding efforts at settlement talks, including use
of a mediator, failed. It ended in October 2003 after
34 days of testimony.
Convery ultimately accepted plaintiff expert Winters'
opinion that there were "overwhelming factors" showing
that the increase in value was more passive than not.
That was partly because Ciasulli continued doing the
same thing, and in fact, sold dealerships but did not
buy any new ones during the eight years.
RICH LIFESTYLE
Rowe, who tried the case with fellow partners Mark
Sobel and Jacqueline Printz, says "there certainly have
been bigger divorce actions but they were always
settled before the end of a trial." He adds, "We could
not settle this case. There are many successful men who
don't accept the reality of equitable distribution."
Both sides were arguing over a huge pot. Bob Ciasulli's
business eventually reached sales of more than $360
million, and the couple lived large.
There was dinner with Prince Rainer; the Grand Prix
with Mario Andretti; a box at Giants stadium for Jets
and Giants games; a box at the PNC Bank Arts Center;
vacations at five-star hotels on the French Riviera and
first-class seats on the Concorde; and more than $9,000
a year spent on a pet of Adele Ciasulli.
Their shore home on the water in Mantoloking, N.J., has
10 bedrooms; seven baths; a dock with slips for four of
their boats, including a 33-footer and a 22-footer with
a captain; and servants, private schools and camps for
their two sons. The shore home and boats were in the
name of one of the business entities.
When they married in 1964, Ciasulli was driving a parts
truck for his father's business while his wife was a
clerk at Prudential Insurance Co. Gradually, he learned
the business and became a trouble-shooter for his
father. In 1979, after what his father called "hard
bargaining," he dropped plans to buy his own dealership
and stayed on with his father, helping to grow the
business.
Convery rejected Ciasulli's testimony that he was given
37.5 percent of the business, or half of his father's
75 percent share, around 1979. Rather, he pointed out
that Ciausulli conceded that he bargained with his
father and that he put in "sweat equity" for all those
years.
"The raising of the gifting issue was not an honest
mistake as to one's rights and duties and required
discovery and a trial resulting in a finding that there
was clearly no evidence to support the defendant's
attempt to immunize part of BCAG from equitable
distribution," the judge wrote.
Convery further blasted Ciasulli for initially
submitting a report of his net worth at the time the
divorce papers were filed -- mid-1994 -- at $47
million, only to revise that to $19.6 million six
months later.
The judge went on to chide Ciasulli for using an expert
that folded the real estate values of the dealerships
into the auto sales business while most experts, the
judge found, separated out real estate. The result of
folding the real estate values into the operating
business was to lower the overall valuation of
Ciasulli's assets.
The $38.8 million judgment awarded to Adele Ciasulli
will be deducted by $700,000 she has received by court
order. Ciasulli has also been paying her $10,000 a
month for the past nine-plus years, and has been buying
her two new, fully insured cars annually. He has also
been maintaining all their properties.
As for alimony, Convery awarded her $26,000 a month for
living expenses. But the judge made clear that when
Ciasulli produces a "fully disclosed financial
equitable distribution pay plan," alimony could be
reduced or eliminated. The judge further ordered
Ciasulli to pay his ex-wife $2.5 million by late next
month as the first payment.
Ciasulli told the court he has spent $8.66 million on
professional fees and litigation costs and has paid
three-fourths of the mediator's $94,950 bill. That
includes $1.83 million in legal fees he has paid for
his ex-wife.
Rowe expects to file an application for the balance of
fees soon.