Prior to the walk down the aisle for the happiest day of their lives – to that point – many hopeless romantics decide (or are required by their parents) to get a prenuptial agreement which set forth many of their rights and responsibilities in the event of death or divorce. Typically, a prenuptial agreement has provisions wherein one or both parties knowingly waive rights that they would otherwise have upon death or divorce if there was no prenup. Put another way, a person may get no or less alimony, may get less equitable distribution, may not share in family businesses or trusts and/or the trust income wont factor into an alimony calculation, etc. We have blogged many times about what prenuptial agreements do, and who should get them and why, so this post wont really get further into that.
Rather, I am sure that most people, after they have gone through the trouble of entering into the prenup (at least the party with something /more to protect), believe that at the time of the divorce, it will go smooth and easy, at least with regard to the issues covered by the prenup. And yet, that is seldom the case. There are two major reasons for that? The person on the short end of the prenup, almost reflexively moves to set aside the prenuptial agreement. More importantly, instead of dealing with this threshold issue as soon as it is raised, many judges will kick the can down the road and deal with it during a final adjudication of the case, or at least many months or years down the road forcing the parties to engage in potentially wasteful discovery, mediation, etc..
In many cases, the difference in the outcome of the case can be tremendous based upon whether the prenuptial agreement is enforced or not. Worse yet, parties are forced to spend money on legal and expert fees, doing discovery and evaluating businesses and/or other property that is not subject to equitable distribution if he agreement is enforced.
In a typical case where a prenup is involved, the parties initial pleadings seek to enforce the prenup on one side and to set it aside on the other. Now the standard to set aside a prenuptial agreement is difficult. statute provides that a premarital agreement is enforceable unless the party seeking to set aside the agreement proves by clear and convincing evidence that:
- the party execute the agreement involuntarily; or
- the agreement was unconscionable at the time enforcement was sought (though for pre-Amendment prenups, the court must look at unconscionability at the time of enforcement too); or
- that party, before execution of the agreement:
(1) was not provided full and fair disclosure of the earnings, property and financial obligations of the other party;
(2) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or the financial obligations of the other party beyond the disclosure provided;
(3) did not have, or reasonably could have had, an adequate knowledge of the property or financial obligations of the other party; or
(4) did not consult with independent legal counsel and did not voluntarily and expressly waive, in writing, the opportunity to consult with independent legal counsel.
4. the issue of unconscionability of a premarital agreement shall be determined by the court as a matter of law.
Moreover, an agreement is unconscionable, if the agreement would: (1) leave the spouse without the means of reasonable support; (2) would make the spouse a public charge; or (3) would provide a standard of living far below that which was enjoyed before the marriage.
Very rarely do you see the initial pleading to set aside a prenup plead the issue with any particularity. In fact, most of the the time, you see the request to set the agreement aside as part of the “Whereas” clause with the other prayers for relief (alimony, child support, equitable distribution, resumption of maiden name, fees, etc.) In fact, under New Jersey law, if you are alleging fraud, it must be plead with particularity.
Often, at the first Case Management Conference or otherwise when this is raised to the court, I hear “I need discovery to determine if there was full disclosure, or determine if there is fraud” though I don’t really believe that that is the standard. How can a party on one hand plead to set aside an agreement, and on the other hand, say that they require discovery to decide if they can prove that the agreement should be set aside? But it happens all of the time and judges allow it even though the agreements often include waivers on getting valuations or business appraisals, waivers of getting further discovery, waivers of getting proofs regarding the values included in the balance sheet provided with the agreement.
When there are businesses involved, this gets worse because parties have to spend tens if not hundreds of thousands of dollars evaluating a business for nothing. Not only that, they have to evaluate it at two dates – the date of the marriage and the date of Complaint, to determine the increase in value that may not even be subject to distribution if the agreement is upheld.
Now, I am not saying that there shouldn’t be discovery regarding the enforceability of the agreement. If the court is going to have a plenary hearing to determine the validity of the agreement, there probably must be some discovery as to the issues pertinent to the agreement – though not a hail mary, fishing expedition – to mix metaphors – trying a find any little thing that might justify calling the agreement into doubt to force the party relying on the agreement to pay more.
Aside from the cost of discovery, often you will see pendente lite support motions made and entertained when the agreement specifically provides a waiver of both pendente lite support and alimony. In those cases, if the pendente lite support exceeds what is payable under the agreement, the case never settles because why would the person receiving the support that they may not be entitled to want to give it up? While the judge will typically say that the the support is “without prejudice” and the payor will be entitled to a credit if the agreement is enforce, good luck with actually getting that credit – especially if the credit exceeds the ultimate payout to the other side.
In my opinion, when the issue is joined, the court should immediately address it at a case management conference and either order discovery and a plenary hearing, or require the party objecting to file a motion to set the agreement aside, pleading the reasons with particularity. Once the judge hears that motion, she/he could decide whether discovery and to what extent discovery is proper. Otherwise, the process can become one where the parties can spend tens or hundreds of thousands of dollars over non-issues, as well as wasting the parties’ and the court’s time.