Be careful what you put in a settlement agreement!

As family law attorneys, we often stress to our clients the importance of well drafted marital settlement agreements.  These documents are meant to be a final resolution of the issues arising out of a divorce, and are treated accordingly by the court when a party asks that they be reassessed or modified.  An important principle that divorce clients always need to keep in mind is that a court will give great weight to the validity and enforceability of a definitive, negotiated agreement that the parties enter into consensually and voluntarily.  As a result, a court is not going to overturn the provisions of a mutual agreement unless it finds that the continued enforcement of its terms is somehow fundamentally unfair to one of the parties due to changed circumstances that have arisen since the time of the divorce. This point was driven home in the recent decision by the Appellate Division in Bermeo v. Bermeo.

In this case, the former wife filed a motion two years after the parties’ divorce seeking to increase the former husband’s alimony obligation.  The parties had resolved their divorce matter through a settlement agreement which had set an alimony obligation for the husband based upon an income level far below what he had previously been earning after he took a much lower paying job on the eve of the parties’ divorce. Rather, his income was based upon his prior five years of earning history.  The parties included terms for “supplemental” alimony to be paid should the husband return to his former earning level, but waived a determination of what the “marital lifestyle” was (i.e., an explanation of the standard of living enjoyed by the parties during the marriage and the specific expenses that comprised this standard of living).

Having not received any of the “supplemental” alimony she expected, the wife was less than pleased.  When she then went back to court claiming that the husband was voluntarily earning less than he was capable of and asking that the court “impute” (i.e., assign or assume) higher income to the husband and calculate alimony based off of this higher number, her motion was denied. In denying the wife’s request, the Appellate Division relied heavily on the fact that the parties had waived a determination of the marital lifestyle, and that the agreement had precisely explained the husband’s earning history and the method by which the parties had arrived at the income to be used for the husband, with the husband continuing to earn this same level of income two years later.

The Bermeo case is instructive in providing a demonstration of the considerable caution that courts will exercise in assessing a request from a party to disturb a negotiated, voluntarily executed settlement agreement when the parties’ circumstances seem to have remained unchanged since the date of the agreement.  While the wife may have hoped, or even truly believed, that the husband would reclaim his former level of compensation, the fact remained that the husband’s income had not changed from that which was reflected in the agreement.  Similarly, because the wife had agreed to waive a determination of the marital lifestyle in the agreement, she had no foundation on which to base an argument that her own financial circumstances had changed.

In short, the takeaway from the Bermeo case is twofold: first, meticulous attention must be paid to the wording of a settlement agreement, as the inclusion—or omission—of particular terms and clauses will prove crucial to the outcome of later challenges to the agreement; second, convincing a court to modify a settlement agreement is no easy task, and a party must prove to the court that circumstances have changed so drastically as to bring the fairness of the agreement into question.

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