"All you need is a dollar and a dream." Mega Millions. Powerball. Pick-6. State lotteries all over the country encourage people to pluck down their dollars for the dream of possibly winning a fortune and being financially set for the rest of their lives. However, for one Michigan man, that "dream" may have been considered more of a nightmare when he was directed in his divorce case to turn over to his ex-wife $15 million, nearly one-half of the net, after-tax amount he received after winning an $80 million Mega Millions jackpot in 2013. That decision was recently affirmed by the Michigan Court of Appeals in Zelasko v. Zelasko (Docket No: 342854 decided June 13, 2019).

Why the husband may have considered a lottery jackpot to be a "nightmare" included the fact that the parties married in 2004, separated in 2008, filed a divorce complaint in 2011—almost two years before the winning lottery ticket was purchased—and where the wife had been the primary breadwinner, earning roughly three times what the husband earned. Why such a result? Most critically, under Michigan law, "marital property" subject to equitable distribution in a divorce includes all property acquired from the date of marriage until the date of entry of the divorce decree. Hence even property acquired after a separation or divorce complaint is filed is considered marital property in Michigan. Since these parties' actual divorce did not become final until 2018, the lottery winnings of 2013 were still considered marital property.

Among the other reasons this significant award to the wife was affirmed on appeal included: (1) the determination was made by an arbitrator during a binding arbitration process which had been agreed upon by the parties, with the ability to challenge such rulings being statutorily limited; (2) the arbitrator's ruling that such a division was fair and equitable, opining that the winning lottery ticket was probably not the first lottery ticket the husband purchased during the marriage and that as losses throughout the marriage were incurred jointly, winnings should also be shared jointly; and (3) the dollar spent for the ticket was arguably marital money and as such a joint investment.

Beyond this, the husband had not engendered much sympathy since he allegedly failed to contribute any money for the support of the parties' three children. The Michigan Court of Appeals noted that after a determination is made as to which assets are to be considered marital property, the marital estate is to be apportioned between the parties in a manner that is equitable in light of all the circumstances, considering and weighing various factors in doing so.  In this case, the court concluded that the husband had not made a showing that the arbitrator failed to apply controlling law to the question of the whether that lottery winnings were includable in the marital estate, or that the arbitrator's division of the marital estate was inequitable in any way. Notwithstanding this ruling, I was still left with a feeling this result was less than "equitable," particularly given the short term marriage, the lengthy separation, and financial disparity. Were these lottery winnings acquired five years post-separation and two years post-complaint truly the product of a joint undertaking akin to a partnership, one of the principles upon which the concept of equitable distribution is based? Rothman v. Rothman¸65 N.J. 219 (1974)

After taking a deep breath, I questioned whether a similar result would be reached by the courts here in New Jersey. Confronted by the same set of circumstances as Zelasko, the answer would basically be no. Under N.J.S.A. 2A: 34-23(h) a court may "effectuate an equitable distribution of the property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage or civil union." While the statute does not define "during the marriage," the New Jersey Supreme Court, starting with Painter v. Painter, 65 N.J. 196 (1974), and in other cases which followed, held that for purposes of determining what property will be eligible for distribution the period of acquisition should be deemed to terminate the day the complaint for divorce is filed. In so doing the court in Painter rejected as unworkable use of the date a divorce judgment (as was the case in Michigan), or the date of an irretrievable breakdown of the marriage, as terminal points for determining what assets are marital assets subject to equitable distribution.

The court noted that while the terminal point would seem to be the day the judgment of divorce is granted if the statute was read literally, such an interpretation presented practical obstacles, including a necessity for bifurcated trials or duplicitous hearings in most cases, given the impracticality of introducing evidence as to the value of assets determined as of that day.  Further, the court questioned how one would be able to establish with any reasonable precision when a breakdown of the martial relationship became irretrievable or even when a cause of action for divorce first arose. Obviously there has been a plethora of case law since Painter dealing with the impact of spurious complaint filings, physical separation whether accompanied by written agreements or not, etc.; however, the general rule in New Jersey is that for an asset to be considered marital property eligible for equitable distribution, the property had to have been acquired prior to the divorce complaint being filed. Therefore, if the Zelaskos had divorced in New Jersey, the lottery winnings acquired two years post-complaint would not have been subject to equitable distribution. Too bad for Mr. Zelasko, and great news for his former wife, that they were divorced in Michigan.

However, to be clear, lottery winnings acquired during the marriage are subject to equitable distribution in New Jersey. These issues were directly considered in a set of decisions rendered in the matter of DeVane v. DeVane. In that case the parties were married in 1974. The husband was employed as an iron-worker at the time of marriage and remained so employed until Oct. 2, 1987. The wife was employed as an office worker at the time of the marriage, stopped working before the birth of the parties' first child, and returned to work as an office worker in 1985. In the interim, the husband had been the sole financial support of the family. On Oct. 1, 1987, the wife won $3.6 million in the New Jersey Lottery, payable over 20 years. On the following day, the husband quit his job, and did not return to work, although the wife still continued in her employment.

A complaint for divorce was filed in October of 1990. The husband subsequently brought an application asking the court to make a pre-trial determination as to whether the present and future annual installment payments of the New Jersey State Lottery winnings payable to the wife were an asset of the marriage subject to equitable distribution, and if so to allocate the percentage attributable to each spouse for equitable distribution purposes. In DeVane v. DeVane, 260 N.J. Super. 501 (Ch. Div. 1992), the trial court determined that these lottery winnings, acquired approximately three years prior to the divorce complaint being filed, were a marital asset subject to equitable distribution. However, the court declined to make a pre-trial determination as to its percentage allocation, viewing same as premature, and of being an inappropriate request to resolve equitable distribution piecemeal without regard to the contributions of each party to the marriage, the statutory factors, and other equitable principles, which necessitated a trial to fully address.

After a five-day trial, the court concluded that the lottery proceeds should be shared equally between the parties. In doing so, the court examined cases from other jurisdictions which subscribed to the "windfall" theory (an asset coming into being by purely fortuitous events) and dividing such winnings equally without reference to the statutory or common law factors governing equitable distribution. However, the court also chose to evaluate the factors set forth in N.J.S.A. 2A: 34-23.1, and in doing so concluded that an equal distribution of the proceeds was also the equitable thing to do. The wife appealed from this determination.

In DeVane  v. DeVane, 280 N.J. Super. 488 (App. Div. 1995), the appellate division first reaffirmed that these pre-complaint lottery winnings were unquestionably a marital asset. However, in regard to their allocation, the court observed that two distinct rules emerged concerning the manner in which lottery winnings should be distributed between the parties. One rule emphasized that the asset was a windfall, was not created due to the efforts of either party, and therefore should be divided equally. The other rule held that a court should apply the factors guiding the equitable distribution for all other asserts to arrive at an appropriate distribution. The appellate division opted for this latter rule as being more consonant with the principles governing equitable distribution in this state. Even though the trial court had also referenced the "windfall" rule, its application of statutory factors as well, in support of its decision to equally divide the lottery winnings, led to the appellate court's affirmance of that determination.

However, while Mr. Zelasko's lottery winnings acquired post-complaint may not have been considered marital property subject to equitable distribution under New Jersey Law, they would not be immune from consideration by the court on other issues in a divorce matter. Lottery winnings, or the income therefrom, could certainly be a factor in determining issues of alimony. While the marital standard of living may have been established before the lottery winnings, they obviously bear upon a spouse's ability to fund that lifestyle. More importantly, since children of the marriage are not necessarily limited to the marital lifestyle, but are also entitled to share in the "good fortune" of their parents (i.e., Zazzo v. Zazzo, 245 N.J. Super. 124 (App. Div. 1990)), lottery winnings could dramatically impact the level of child-related obligations, even to the extent they may indirectly benefit the other parent (i.e., Loro v. Colliano, 354 N.J. Super. 212 (App. Div. 2002)). Even in New Jersey, Mr. Zelasko would not have been able to keep the "dream" all to himself.

Kevin M. Mazza is a partner in the Law Offices of James P. Yudes, in Springfield.