New York Court Rejects Challenge to Validity of Marital Settlement Agreement; Rules that Husband's Waiver of Attorney's Fees is Enforceable
Under New York law, there is a strong presumption that marital agreements are valid. The vast majority of litigants who seek to challenge the validity of a duly executed marital settlement agreement find that their challenges are quickly dismissed by the courts. The legal standard that is applied by New York judges in evaluating a challenge to the validity of a marital settlement agreement was summarized by New York’s First Department Appellate Division as follows:
An agreement will only be deemed unconscionable, and thereby set aside, if the inequality is ‘so strong and manifest as to shock the conscience and confound the judgment of any [person] of common sense.’”
McCaughey v. McCaughey, 612 N.Y.S.2d 579 (1st Dept. 1994)(quoting Mandel v. Liebman, 303 N.Y. 88 (1951).
Last month, the Supreme Court in Westchester County applied principal that separation agreements are presumptively valid and enforceable in its decision in the matter F.C. v. R.B. The case involved an open court stipulation (i.e., a stipulation of settlement that was read into the record in a court proceeding) in which the husband waived his right to seek attorney fees in connection with the parties’ custody dispute. The husband subsequently alleged that he should not be held to his waiver because it was based upon the wife’s misrepresentations in her statement of net worth regarding her income.
In rejecting the husband’s claim, the court noted in its decision that it was incumbent upon the husband to investigate the accuracy of the financial representations set forth in the wife’s submissions. The court ruled that the husband’s failure to investigate “the accuracy of the income and asset items listed on the body of the [statement of net worth]” constituted an omission that “dooms” his claim of fraud.
The decision contains the following conclusion, which should give notice to both litigants and their attorneys about the importance of conducting due diligence: “the law will not protect those who purport to be so blind to facts presented to them that they refuse to see what has been faithfully revealed, or to investigate when so prompted.”
The court also noted that even if the husband relied on the alleged misstatements contained in the wife’s statement of net worth, his reliance was unreasonable. According to the court, there was ample indication that the amounts set forth on the wife’s statement of net worth were inaccurate because attachments to the statement contained conflicting information. The court ruled that the husband should have been alerted to the inaccuracies, and, at a minimum, conducted his own investigation.
The decision in F.C. v. R.B. is consistent with the rulings that other New York courts have issued in similar cases. Even where a part to a separation agreement can establish that their former spouse misled them about financial matters, the courts are overwhelmingly likely to find that it was unreasonable to rely on that misrepresentation.
Marc A. Rapaport
January 4, 2013
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