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A Business Litigator’s Guide to Litigating Marital & Premarital Agreements

Mon, 08/27/2018 - 09:54 -- admin25

by Victor D. Vital and Elizabeth C. Brandon

When company owners and business executives need family law services, their first call is often to their retained lawyer: a business litigator. If the business litigator agrees to assist with the family matter, he or she will be well-served to team up with a family law specialist who can help identify and navigate the differences between family and commercial litigation. This is especially true when it comes to litigating marital and premarital agreements, which, although they constitute enforceable contracts, cannot be treated like contracts in the business tort context.

Under Texas law, marital and premarital agreements are unique statutory creatures that are governed by the Texas Family Code. Under the Family Code, there are two important points that business litigators must know. First, marital and premarital agreements are enforceable without consideration. Tex. Fam. Code §§ 4.002, 4.104. Second, there are only two defenses to their enforceability: a marital or premarital agreement is not enforceable if it was (1) signed involuntarily, or (2) unconscionable when signed and signed without receiving fair disclosure of the other party’s property. Id. §§ 4.006, 4.105.

The involuntariness defense can embrace concepts from other contractual defenses often asserted in business tort disputes. Sheshunoff v. Sheshunoff, 172 S.W.3d 686, 695–96 (Tex. App.—Austin 2005, pet. denied) (declaring that traditional common-law defenses “could bear upon the ultimate determination of voluntariness”). For example, in Moore v. Moore, the Dallas Court of Appeals explained that evidence of fraud and duress may provide proof of involuntariness, even though fraud and duress are not themselves defenses to the enforceability of a marital or premarital agreement. 383 S.W.3d 190, 195 (Tex. App.—Dallas 2012, no pet.). The court in Moore also stated that a number of factors may impact a finding of involuntariness, including: (1) whether a party has had the advice of counsel; (2) misrepresentations made in procuring the marital agreement; (3) the amount of information provided pre-execution; and (4) whether information was withheld. Id.

The unconscionability defense, for its part, has two prongs. First, the court will decide as a matter of law whether the agreement was unconscionable when signed. Tex. Fam. Code §§ 4.006(b), 4.105(b). Although aspects of the unconscionability defense will be familiar to business litigators, courts will consider factors specific to family law, such as “the maturity of the individuals, their business backgrounds, their education levels, their experiences in prior marriages, their respective ages, and their motivations to protect their respective children.” Marsh v. Marsh, 949 S.W.2d 734, 739 (Tex. App.—Houston [14th Dist. 1997, no writ). If the court finds that the marital or premarital agreement is unconscionable, then the trier of fact must determine whether the agreement is unenforceable under the second prong. The agreement is unenforceable under the second prong if the party against whom enforcement is sought proves that, before signing the agreement, he or she:

  1. was not provided fair and reasonable disclosure of the property or financial obligations of the other party; and
  2. did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
  3. did not have and reasonably could not have had adequate knowledge of the property or financial obligations of the other party.

Tex. Fam. Code §§ 4.006(a)(2), 4.105(a)(2); see Texas Pattern Jury Charge, Family & Probate §§ 207.2C, 207.3C.

Drafting Counsel

Lawyers who represent clients in negotiating and drafting marital and premarital agreements can take steps to ensure the agreements survive future litigation in the event of an enforceability challenge. From the outset, both parties should be represented by separate, independent counsel, with family law experience and qualifications. The drafting lawyer should keep a detailed inventory of all documents and information regarding the property that the parties disclosed and/or exchanged throughout the negotiation process before execution of the agreement. Doing so ensures a well-documented record of the fair and reasonable disclosure of property information.

Litigation Counsel

Lawyers who represent clients in litigating the enforceability of a marital or premarital agreement should endeavor to interview both the client and the client’s drafting lawyer early to understand the facts surrounding the execution of the agreement. The litigating lawyer should also obtain the drafting lawyer’s complete file on the client, as well as serve a subpoena duces tecum to the opposing party’s drafting lawyer to obtain their complete file. The issue of privilege has to be navigated—e.g., dealing with and litigating the offensive-use doctrine. Finally, business litigators seeking to uphold the enforceability of a marital or premarital agreement should utilize summary judgment practice to resolve the purely legal question of the Family-Code unconscionability defense to narrow the scope of issues to voluntary execution.

Victor D. Vital and Elizabeth C. Brandon are partners at Barnes & Thornburg LLP. They can be reached at victor.vital@btlaw.com and ebrandon@btlaw.com, respectively.

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