Prill is a cautionary tale about the financial harm you can cause yourself by entering into a bad post-nuptial agreement. Jane Prill entered into a post-nuptial agreement that was highly one-sided and provided her with a disproportionately small portion of the marital estate. Further, there were quite a few troubling facts concerning the process leading up to the execution of the post-nuptial agreement and the lopsided nature of the agreement. Unfortunately for Jane, the First District affirmed the Circuit Court’s refusal to find the agreement unconscionable, leaving Jane stuck with an agreement that the Circuit Court itself viewed as “not fair.” The problem she faced was that getting out a post-nuptial agreement requires much more than showing the agreement is unfair.
What Is a Post-Nuptial Agreement?
A post-nuptial agreement typically addresses the type of financial and spousal support issues that can arise in a divorce action. A post-nuptial agreement may address, for example, the division of marital property, the allocation of marital debts, waiving interests in various types of property acquired before or during the marriage, and spousal maintenance. While a post-nuptial agreement can closely resemble a marital settlement agreement that resolves a divorce proceeding, a post-nuptial agreement is entered into before a divorce action is filed. Indeed, the parties to a post-nuptial agreement may never get divorced, and the post-nuptial agreement may simply lie dormant. For example, a couple that did not enter into a prenuptial agreement before they got married may decide that they, in fact, should have an agreement that addresses issues such as spousal support and property distribution. In other cases, the spouses may be having marital problems and choose to enter into a post-nuptial agreement to lock in certain financial protections while they try to address their differences. The reasons a couple might want to enter into a post-nuptial agreement are myriad.
Overview of The Facts in Prill
In Prill, the parties had been married approximately 23 years when they entered into the post-nuptial agreement. Jane had held various jobs for short periods of time during the marriage but was primarily responsible for raising the parties’ children. Jane wanted to end her relationship with David and have a fresh start. David wanted Jane to enter into a post-nuptial agreement resolving the financial and support issues that would arise in a divorce. Jane agreed to enter into a post-nuptial agreement which David prepared.
A couple of months after entering into the post-nuptial agreement, Jane filed for divorce, and David filed a motion to have the post-nuptial agreement enforced. At this point, Jane had second thoughts about the post-nuptial agreement she signed, and she argued that the post-nuptial agreement was unenforceable. Specifically, Jane argued that the post-nuptial agreement was both procedurally unconscionable and substantively unconscionable.
What Makes an Agreement Unconscionable?
An agreement is procedurally unconscionable when “significant improprieties during the formation of the agreement . . . deprive a party of a meaningful choice.” To meet this high standard, a party will typically have to prove duress, fraud, “interference with a party’s ability to secure meaningful legal advice, or when one party could not “fairly be said to have been aware” of what the agreement contained. An agreement is “substantively unconscionable” when it is “so unfair that the court cannot enforce it consistent with the interests of justice.” This requires more than simply showing the agreement is unfair.
At a hearing on the enforceability of the Prill’s post-nuptial agreement, the parties presented conflicting evidence, but a few facts stand out in the First District’s decision. First, Jane wanted to end the parties’ marriage and move out of the marital residence. Second, Jane did not hire an attorney but did speak with two attorneys before she signed the post-nuptial agreement. Indeed, one of the attorneys told her not to sign the agreement, but she nonetheless signed the agreement because she wanted to cut her ties with David and apparently viewed signing the post-nuptial agreement as a critical step in that plan.
The fact that Jane spoke with two attorneys but did not hire one was a significant weakness in her procedural unconscionability claim. Jane testified that she did not hire an attorney because of threats she received from David. These threats included David’s saying:
(a) he would fight Jane for custody, and she would not see the parties’ children if they had to go to court,
(b) he would not agree to any changes in the post-nuptial agreement he prepared, and they would have a long a drawn-out fight in court if she did not sign the agreement, and
(c) he “dictated the degree of involvement he would accept from any attorney she sought to hire.”
Third, Jane testified that David bombarded her with spreadsheets distributing marital assets and that she felt pressured to sign the post-nuptial agreement. It does not appear that evidence was introduced at the hearing showing that the “spreadsheets” David sent to Jane contained false information.
Finally, Jane argued that David misrepresented the value of certain stock options and the existence of various debts. David had at one point sent Jane a text message in which he stated that the stock options had a value of roughly $2.3 million. According to the terms of the parties’ post-nuptial agreement, David kept the stock options. If the options were, in fact, worth $2.3 million, the agreement would have allocated to David an overwhelming share of the marital estate. At the hearing, however, David testified that the options had no value. If David’s testimony was accurate, Jane would receive approximately 25% of the marital estate. Jane did not submit an expert valuation of the stock options.
Problem #1: Failing to Prove Procedural Unconscionability
The First District affirmed the Circuit Court’s decision that Jane did not present sufficient evidence to show procedural unconscionability. The Circuit Court was not convinced that Jane was forced to sign the post-nuptial agreement prepared by David, and the First District refused to reject the Circuit Court’s factual determinations.
The First District agreed with the Circuit Court that Jane wanted to end her relationship with David and have a fresh start. Indeed, the First District stated that “Jane’s desire to end the marriage was the overriding consideration in her signing the post-nuptial agreement and not that she signed the agreement under duress.”
Jane also failed in convincing either court that David prevented her from hiring an attorney. While David allegedly told Jane he would not negotiate with any attorney she hired, this did not actually prevent her from retaining an attorney. Jane failed to convince the First District that she was unable to walk away from the agreement, hire an attorney, and file for divorce. Indeed, Jane spoke with two attorneys, and one told her not to sign the agreement. It appears the First District and the Circuit Court viewed these facts as showing that Jane did not want an extended fight with David and simply wanted to sever her ties with David quickly, regardless of the consequences.
Jane did testify that David threatened she would not see her children if she did not sign the agreement. The Circuit Court, however, did not find Jane’s testimony on this issue to be credible, given the “ample evidence showing Jane wanted to get out of the marriage and be on her own.”
It appears from the decision that shortly after she signed the post-nuptial agreement, Jane recognized she made a bad mistake. Courts, however, will not necessarily help you get out of a bad agreement when you could have taken actions to protect yourself. In Illinois, there exists a strong policy favoring the settlement of litigation, which includes post-nuptial agreements that are a type of settlement agreement. As a result, courts look critically at claims that the court should ignore a settlement agreement the parties entered into.
An important step you can take to protect yourself from an unfair post-nuptial agreement is speaking with an experienced domestic relations attorney before you sign the agreement. It is important to get proper advice as to your rights and the actions you can take to protect yourself from an intransigent spouse that wants to push you into an agreement that is not in your best interests. It is even more important to contact a domestic relations attorney if your spouse threatens custody litigation because you will not sign a financial settlement agreement. A spouse making such a claim actually undermines any future demand for custody.
Problem #2: No Evidence of Substantive Unconscionability
The First District concluded that Jane “received roughly a quarter share of the marital estate’s value.” The court recognized that this was not a fair agreement, particularly given the length of the parties’ marriage and Jane’s role as a homemaker for much of that time. The First District, however, made clear that the law does not protect a spouse from an unfair agreement that they voluntarily entered into.
There was a significant issue, however, as to whether Jane actually received a quarter of the marital estate. This issue turned on whether David owned stock options worth roughly $2.3 million. When the court determined that Jane received roughly a quarter of the marital estate’s value, it excluded the stock options from that calculation because Jane did not provide any competent evidence as to the value of those options. This was a serious evidentiary omission in Jane’s case. The First District recognized that if the stock options were, in fact, worth $2.3 million, this one fact could have had a significant impact on its analysis.
The evidence that the stock options were worth roughly $2.3 million came from a text message that David had sent to Jane. David would later testify that his statement was not true and that the options had no value. While this created a credibility issue for David, it did not resolve the issue of what the stock options were actually worth. The First District pointed out that Jane did not have any type of expert valuation of the options. Given that lack of a competent valuation of the stock options, the First District concluded that it had “no basis from which to conclude that David’s retention of those options should be considered when evaluating the conscionability of the agreement.”
The decision in Prill highlights the need for competent valuations of complex assets like the stock options David held. A detailed valuation study is not needed for every marital asset held by a married couple, such as assets with a readily calculable value or more complex assets that clearly represent only a small portion of the marital estate. The stock options held by David, however, would have constituted a significant percentage of the marital estate in Prill if they, in fact, had the value David claimed they had in his text to Jane. If there was a credible reason to believe the stock options had such a value, a valuation might very well have been appropriate. Without a valuation, a party faces the real risk that the court will view the unvalued asset at zero. This is what happened in Prill, and the First District agreed with the Circuit Court’s decision to value the stock options at $0, which seriously undermined Jane’s substantive unconscionability claim.
Two big takeaways from the decision in Prill are as follows:
- It is important to get sound legal advice before entering into a post-nuptial agreement because you may not be able to get out of the agreement.
- Getting a proper valuation of a complex asset with an uncertain value is important, particularly when the asset could represent a sizable portion of the marital estate.
Considering a Post-Nuptial Agreement? We Can Help.
A well-crafted post-nuptial agreement can offer protections and assurances to couples who are concerned about dividing assets or parental responsibilities if their marriage should end. But a post-nuptial agreement that heavily favors your spouse could result in irreparable financial harm once it has been signed because there is an extremely high standard for proving unconscionability and having the agreement thrown out. If you are considering a post-nuptial agreement, or your spouse has presented you with one, it is strongly recommended that you consult with a knowledgeable domestic relations attorney. The Law Offices of George M. Sanders, P.C. has helped many Chicago area clients with post-nuptial agreements, and we are available to discuss your case as well. Please reach out to us today via phone or our online contact form to learn more.