This is more or less the message of a recent case, Gottlieb v. Gottlieb, in which an appellate court in New York held that a callous, but voluntary, prenuptial agreement could be enforced as written. The modern trend has moved in this direction—toward making parties live with their bargains, even when quite unfair in operation. But another recent case in New York, Cioffi-Petrakis v. Petrakis (2013) had raised the question whether the law’s pro-enforceability stance might be softening. Apparently not.
The Law of Prenuptial Agreements
Although the concept of a prenuptial agreement is a familiar one to most people, it is a relatively new body of law. It was once the decided view of most courts that neither spouses nor those engaged to be married could enter into valid contracts with one another. In either situation, the parties were not to be sufficiently distant to protect their own interests; moreover, the consequences of marriage—during, at divorce, or at death—were elements of the status of marriage that could not be altered by individual couples. It was not for the individual couple to decide, for example, whether property accumulated during the marriage would be shared or whether one spouse might continue to support the other after divorce.
Today, however, prenuptial agreements are routinely enforced, as long as they follow disclosure of financial assets and are predicated on voluntary assent by both parties. This reflects a changing view of marriage (more contract than status) and less willingness to protect would-be spouses from their own bad decisions. This change dates to the 1960s and 1970s, as states adopted no-fault divorce provisions and began to grapple with their effects. Social changes like greater equality for women and a rise in remarriage rates following divorce fueled it as well.
As in many areas of family law, states vary, sometimes significantly, in their regulation of prenuptial agreements. All states agree that it is at least theoretically possible for a couple to enter into an enforceable prenuptial agreement that will dictate, at a minimum, the economic consequences of marital dissolution. The tension among states is whether to apply special standards that account for the unique context in which these agreements are made—between people who are in love, (excessively) trusting, and disbelieving of the possibility that the prenuptial agreement will ever come into play—or standard rules of contract. Given that contract law largely dictates that we leave people to their bargains, even if they have traded a mansion for a peppercorn, the decision whether to apply special or general rules dictates how likely it is that premarital agreements will be enforced.
The law’s biggest shift from skepticism to support came with the promulgation of the Uniform Premarital Agreement Act (UPAA) in 1983, which was adopted by more than half the states. It was superseded in 2012 by the Uniform Premarital and Marital Agreement Act, which has not yet been widely adopted. The thrust of both acts is the same—that prenuptial agreements should be generally enforceable, but subjected by courts to some special scrutiny because the contracting parties are not negotiating at arms length. A spouse can only avoid enforcement under these acts by proving that: (1) the agreement was executed involuntarily; or (2) the agreement was unconscionable when executed and signed without fair and reasonable disclosure of the other party’s financial circumstances.
The Law of Premarital Agreements in New York
New York has not adopted either the original or the revised uniform act. As with many other aspects of family law, the state follows an idiosyncratic approach in this context. Applicable statutes provide for the general enforceability of premarital agreements, but impose both procedural and substantive requirements. Unlike most states, a prenuptial agreement must be in writing and notarized. Moreover, the agreement must be “fair and reasonable” when it is entered into, and “not unconscionable at the time of entry of final judgment.”
As applied to actual cases, this standard is a tough one—at least for the person trying to avoid enforcement of the prenup. In New York, a “strong public policy exists in favor of parties deciding their own interests through premarital contracts, and a duly executed prenuptial agreement is given the same presumption of legality as any other contract.” As an appellate court explained in one case, Anonymous v. Anonymous (2014), a prenuptial agreement “is presumed to be valid and controlling unless and until the party challenging it meets his or her very high burden to set it aside.”
Gottlieb v. Gottlieb
Jacob Gottlieb and Alexandra Lumiere met in 2003, began living together in 2004, and became engaged in September 2005. The path from engagement to wedding was perhaps unusual. They begin immediately discussing a prenuptial agreement, something Jacob told Alexandra he would not marry without. During those discussions, Alexandra learned she was pregnant. She told Jacob she did not want to have a child out of wedlock; he continued to insist that he would not marry without a prenup. There was some effort to rush the agreement—and the marriage—to beat the child’s birth. But the negotiations were rocky, and Jacob’s lawyer advised him not to sign, or marry, until after the child was born.
Several months after the birth of their daughter, the lawyers on both sides began to resume negotiations. Again, negotiations were stalled when Alexandra learned she was pregnant. But this time, the effort to finalize and sign prior to the child’s birth was successful. The parties signed the prenuptial agreement in April 2007, married in May 2007, and became parents for a second time in November that same year.
The crux of the agreement was typical—a waiver of the usual rights upon divorce such as equitable distribution of property and spousal support (at least once there were no children under four). In lieu of the usual rights, the husband agreed to provide his wife upon divorce with $300,000 for each year of marriage (up to 15 years). In the event of the husband’s death, the agreement provided that the wife could receive her elective share (roughly 1/3 of the estate) and that the children would be provided for in trust. They also agreed to divide equally all wedding gifts and property held in both of their names. The agreement also provided that if the marriage produced children, the husband purchase upon divorce an apartment (of a specified type and location) for his ex-wife and children to live in until the children turned eighteen.
Prenuptial agreements don’t matter until the marriage is at an endpoint. That point came for this marriage about five years in. Jacob Gottlieb filed for divorce in August 2012. The wife counterclaimed that the couple’s prenuptial agreement was invalid and unenforceable, and that claim is what has kept them in litigation for almost four years.
Although generally enforceable, prenuptial agreements can be invalidated if one party can show it “to be the product of fraud, duress, overreaching resulting in manifest unfairness or other inequitable conduct.” The wife’s claim focused on only one potential basis for invalidation: overreaching. To prevail on this claim, she needed to show “overreaching in the execution, such as the concealment of facts, misrepresentation, cunning, cheating, sharp practice, or some other form of deception,” which resulted in an agreement with “terms so manifestly unfair as to warrant equity’s intervention.”
This standard has left in place prenuptial agreements that were executed in harsh circumstances. An agreement was enforced when a man threatened not to go through with the wedding to his pregnant wife if she refused to sign; another was enforced because she didn’t want the wedding to be cancelled. The court in Gottlieb was thus not impressed by Alexandra’s story. It did not believe that she had “no meaningful choice” whether to enter into the prenuptial agreement; indeed, she signed it against the advice of her lawyer. As the court explained, “[w]e cannot set aside the agreement here merely because the husband’s repeated refusal to marry his then-pregnant fiancée without a prenuptial agreement might be viewed by some as callous.”
Alexandra pointed to some facts alleged to support a claim of fraud, but the court did not agree as to their significance. Although she alleged he knew and failed to correct a typo in the agreement (stating that he had to purchase an apartment worth no more than 20 percent of comparably sized apartments, when the parties had verbally agreed to 120 percent), Jacob agreed to be bound by the intended value rather than the written word. She also claimed that he had been deliberately unclear about the promised trust for his children in the event of his death, but since that clause had no effect on Alexandra’s rights upon divorce, the court deemed any alleged misrepresentation irrelevant.
The court therefore concluded that Jacob did not engage in overreaching sufficient to call the agreement’s validity into question. Under prior cases, the court need not, then, have considered whether the agreement was “manifestly unfair.” But because the dissent argued that it was, the majority addressed this issue as well. (The dissent constructs a compelling narrative of unfairness and overreaching to support its argument for a trial on remand.) Given that the agreement provided the wife with spousal support until the younger child reached age four; “free luxury housing” until the children turn 18; half of all jointly titled assets; and $300,000 per year of marriage, the court concluded that the agreement did not reach that standard. The court “cannot invalidate the agreement merely because the husband has more than enough assets to give the wife additional funds. . . . The wife bargained for the benefits she would receive in the event of a divorce, and we decline to undo the agreement merely because she may now, in retrospect, view her choices as having been improvidently made.”
Although the circumstances surrounding execution of this agreement may seem—and in fact be—harsh, they are par for the course in prenuptial agreement law. By their very nature, prenuptial agreements often involve great disparities in wealth and execution under pressured conditions. The job of courts is to implement legislative policy, which means drawing the line between the grossly unbearable and the merely distasteful agreements. And whether this is a proper application of the law or not, this woman was facing an uphill battle because she walked away with millions at her disposal, almost no personal responsibility for the cost of raising her children, and a free (nice) place to live. To the extent heartstrings play any role in law, they were not playing here.
Perhaps the real question here is why these parties couldn’t have found their way to a settlement—and liberation from one another—in the last four years. With a net worth of $188 million, and co-responsibility for two children, perhaps the husband could have offered enough to fend off the challenge to the prenup. But divorce breeds a special kind of contempt—and litigiousness—that may have plagued these parties, as it does so many others. It seems like there must be a better way. Mediator, anyone?