And here is the dissenting opinion regarding prenuptial agreements in Gottlieb v Gottlieb, 2016 NY Slip Op 00613 [138 AD3d 30] (1st Dept. January 28, 2016):
"FEINMAN, J. (dissenting)
Resolution of this appeal and cross appeal requires us first to determine whether it is appropriate to decide this dispute on summary judgment, and second to clarify the difference between the defenses of "unconscionability" and "manifest unfairness." In this proceeding, each party to this marriage moved for partial summary judgment: plaintiff argued that the prenuptial agreement in question should be enforced as written; defendant argued that the agreement should be declared unenforceable because, among other reasons, it was the product of overreaching and is "manifestly unfair."
In the order appealed from, the motion court dismissed defendant's first and third counterclaims, which challenged the agreement as a whole and the property distribution provisions in particular, because it found "no dispute over material facts." However, the motion court ordered a trial on the second counterclaim, which challenged the maintenance waiver, on the ground that "not enough facts [had been] presented" to grant either party summary judgment. All three counterclaims, however, turn on the same set of facts, and in order to resolve these three counterclaims in a coherent manner, this Court must first determine whether any material issues of fact are in dispute.
I agree with the majority that all three counterclaims need to be decided on the same facts, but I disagree with its assessment that there are no triable issues at all. While it is certainly possible to cast defendant as impetuous and the negotiations as sober and deliberate, as the majority does, there is a sufficiently compelling alternative reading of the record to warrant a trial on the circumstances surrounding the formation of the prenuptial agreement and whether its enforcement is permissible. By summarily deciding this dispute based on the extant record, there is no real opportunity to evaluate whether any overreaching occurred during the negotiations. The negotiations contained several instances of highly questionable conduct on the part of plaintiff, and given the duty to negotiate marital agreements with the "utmost of good faith" (Christian v Christian, 42 NY2d 63, 72 [1977]), we should not be so quick to excuse such conduct as simply "callous." In addition to plaintiff's conduct during the negotiations, the agreement also contains many troubling terms. On the surface, the agreement provides defendant with a handsome settlement estimated at $1.6 million, plus other benefits. However, the amount of the settlement is only part of the story, and a review of the agreement reveals numerous difficulties that could well support a finding of overreaching and manifest unfairness.
As a threshold matter, we must first resolve whether any overreaching has occurred in the execution of this agreement, and if so, whether the agreement is manifestly unfair as a result. The record does not offer a plain and clear answer to this question, or to whether the maintenance waiver is enforceable, and this case should not be disposed of summarily. Accordingly, I would [*22]deny summary judgment and remand the matter for trial so that the court may evaluate the credibility of the parties and decide all three counterclaims consistently and coherently on a more fully developed record.
The Parties
Plaintiff, now 44, is the founder, Chief Investment Officer, and majority shareholder of a biotechnology hedge fund, Visium Asset Management, with an estimated $3.8 billion of funds under management. He graduated from Brown University with a B.A. in economics and earned a medical degree from New York University. After completing an internship in internal medicine, he pursued a career in finance and worked at three investment firms before founding his hedge fund in 2005. At the time he filed for divorce in 2011, plaintiff earned $54 million in income, and he reported a net worth of $188 million in 2013.
Defendant, now 37, is the full-time caregiver of the parties' two young children, one of whom has special needs. She has been out of the workforce since 2007. She received a B.A. in economics from the University of Pennsylvania and worked at an internet marketing company for one year and then as an analyst at a financial services firm for two years. She later obtained a real estate license, earning commissions on a handful of transactions, and then pursued a teaching certificate in yoga. Defendant is generally in good health but has an autoimmune disorder and suffers from anxiety, depression, and attention deficit disorder. In 2013, defendant earned no income and reported a net worth of $1.5 million.
Background
In September 2003, the parties were introduced at defendant's 25th birthday party and started dating in December of that year. They soon began living together, and after a brief hiatus, they resumed their relationship in November 2004 with the intention of marrying. As discussions of marriage ensued, plaintiff indicated he would not marry without a prenuptial agreement. Defendant did not object, and the parties began discussing the parameters of an agreement based on preliminary terms proposed by plaintiff. The parties later became engaged in September 2005 but did so without an agreement.
One month after the engagement, defendant learned she was pregnant with the parties' first child and told plaintiff she did not want to have children until the parties were married. In response, plaintiff assured defendant that it would not be necessary to terminate the pregnancy because "there was no question" the parties were going to marry, and sign an agreement, by the time the baby was born.
However, after learning that defendant was pregnant, plaintiff modified his proposal and made defendant a new, and lower, offer. After some discussion, defendant accepted. But this reduction by plaintiff was only the first of many more reductions to come, and each time defendant accepted a new lower offer, plaintiff would lower his offer again and ask defendant to agree to his latest terms. As this pattern repeated itself and the baby's delivery date neared, defendant suggested that the parties separately retain counsel and arranged for the parties to jointly see a licensed clinical social worker. The counseling, however, did not help and the negotiations continued to stall following delays caused by plaintiff and his attorney. Then, when defendant was in the third trimester of the pregnancy, plaintiff unexpectedly announced he would [*23]not sign any agreement until after the baby was born, despite his earlier promise to defendant. As a result, the parties did not marry in time, and their first child was born in May 2006.
Several months after the birth of the first child, defendant asked plaintiff to revisit the agreement so that the parties could finally marry. Their discussions resumed, and plaintiff continued to reduce his obligations under the agreement, presenting lower and lower offers to defendant, each less favorable than the last. As the months passed, defendant learned she was pregnant with a second child, despite her use of birth control. Once again, defendant told plaintiff she did not want any more children until the parties married. This time, plaintiff strongly opposed the suggestion of an abortion and threatened to end their relationship. Plaintiff then presented defendant with yet another offer - his 12th - with even less favorable terms. Throughout these discussions, defendant never made a full financial disclosure or produced financial statements indicating his income. As the second pregnancy progressed and the negotiations wore on, defendant instructed her attorney to finalize an agreement in order to end "the nightmare," in spite of her attorney's advice. Within three weeks of learning that defendant was pregnant with a second child, the parties finally executed an agreement and were married a week later at the Office of the City Clerk in May 2007.
The Agreement
The terms of the agreement are described in detail by the majority, and on the surface, the provisions hardly seem unfair or problematic. For example, defendant receives, in the event of divorce, a distributive award of $300,000 for every year of marriage, $150,000 in "spousal support" for every year a child of the parties is under the age of four at the time of divorce, the use of an apartment for as long as a minor child of the parties lives with defendant, and health insurance until the children of the parties are emancipated. However, beneath the surface are many questionable provisions which should be examined at trial.
First, the agreement contains a number of sweeping waivers. Under the agreement, defendant waived her right to spousal maintenance, equitable distribution, counsel fees, interim counsel fees, a distributive award, any pension and retirement benefits, and the right to contest the agreement. The extent of these waivers cannot be overstated. Moreover, the waivers do not even seem to comport with the reality of the party's relationship. Such waivers, especially the waiver to spousal maintenance, "essentially declare[] that [defendant did not need support in case of divorce and would not be] economically disadvantaged by the years of marriage" (Robert Leckey, Contextual Subjects: Family, State, and Relational Theory at 118 [2007]). Here, the parties do not dispute that plaintiff was to be the sole source of family income while defendant raised the children full-time and managed the family's household affairs. In fact, plaintiff actively discouraged defendant from pursuing a career outside the home, going so far as to call her real estate career "a joke" and mocking that he could earn far more in one day than she could in one year. With defendant as the stay-at-home parent and full-time caregiver of the children, it simply cannot be taken at face value that defendant would not be in need of support in case of divorce and would not be economically disadvantaged by the years of marriage. These waivers are difficult to reconcile with the respective roles of the parties during their relationship, and in light of plaintiff's conduct during the negotiations, there are legitimate concerns that the waivers [*24]were procured by overreaching and are manifestly unfair.
Second, the agreement contains an expansive definition of separate property that applies to nearly all property acquired by the parties during their marriage, including income. Even assets that are commingled and pooled during the marriage are to be treated as separate property based on the amount deposited or invested by the party. Moreover, any contribution by a spouse that increases the value of the other's separate property is to be considered a "gift." The agreement also expressly designates the matrimonial home, which plaintiff purchased in his own name for $9.7 million, after the parties had married, as his separate property. While this expansive separate property provision suggests that the parties were self-supporting and would lead financially independent lives, this was never the case, and the agreement fully excludes defendant, the stay-at-home spouse, from sharing in any income earned by plaintiff during the marriage. It is therefore difficult to make sense of the fact that the agreement treats income, which only plaintiff earned, as separate property in light of the distinct family responsibilities assumed by the parties. As for the treatment of non-income property, such as the matrimonial home, the agreement similarly suggests that defendant would not contribute to increasing the value of plaintiff's assets. But here too, the conduct of the parties is entirely at odds with this provision's apparent intention. After plaintiff acquired two adjacent apartment units for $9.7 million, defendant spent more than one year overseeing the combination and renovation of the units. The newly combined units, which became the matrimonial home of the parties, now has an estimated value of $30 million. In spite of defendant's efforts, the agreement leaves her without any property interest in the matrimonial home, let alone to an increase in value equivalent to her contribution, all of which raises doubts as to whether the agreement actually reflects the intentions of the parties at the time of execution.
Third, a significant, and troubling, condition attaches to the housing provision. As the majority notes, defendant is eligible for "rent-free, expense-free luxury housing." However, this entitlement is conditioned on any minor children of the parties residing with defendant. Otherwise, defendant loses the housing benefit and is given 30 days to vacate the apartment. As much as defendant may want the children to reside with her, this provision does not give her a choice in the matter, unless she is willing to give up the housing. This is no real choice, and it would come at a great cost to defendant if, at a later date, she ever wanted to change roles with plaintiff and have the children live with him. As a result of this requirement, defendant will also have less time to devote to her career than plaintiff will have to his. Ultimately, even though defendant benefits from the housing provision (for as long as the children live with her), it is the children of the marriage who are the primary beneficiaries, not defendant.
Fourth, and similar to the housing provision, the payment of what the agreement refers to as "spousal support" is conditional on there being children of the parties under the age of four at the time of divorce. The agreement does not provide any spousal support that is not contingent on the parties having children under a certain age. Since plaintiff filed for divorce eight months after the parties' youngest child turned four, defendant receives no "spousal support" under the agreement. This provision is far less generous than it appears, and in view of the other terms of the agreement and the manner in which it was negotiated, further scrutiny is warranted.
Finally, even when dealing with a distributive award amounting to $300,000 per year of marriage, context is everything. It is important to remember that the purpose of a distributive award is to facilitate the distribution or division of property between divorcing parties. It should not be seen or considered as a form of income or support (see Domestic Relations Law § 236[B][1][b] ["Distributive awards shall not include payments which are treated as ordinary income to the recipient under the provisions of the United States Internal Revenue Code"]; see also Holterman v Holterman, 3 NY3d 1, 11 [2004]). Here, the distributive award was accorded in lieu of equitable distribution, which defendant was required to waive. As mentioned earlier, plaintiff reported a net worth of $188 million in 2013, and even if the distributive award totals $1.6 million after four years of marriage, it is a mere fraction of plaintiff's property. At this stage of the proceeding, we do not need to decide whether equity must intervene, but an imbalance of this magnitude must not be treated lightly, and a trial should determine whether there was any overreaching in the formation of this agreement that led to manifestly unfair terms.
In isolation, no one issue necessarily invalidates the agreement. Prenuptial agreements often include various waivers, custom definitions of separate and marital property, and arrangements tailored to the particular circumstances and needs of the parties. In this instance, however, because it is certainly possible to draw an inference of overreaching that resulted in manifestly unfair terms based on the totality of the circumstances, defendant's counterclaims should not be dismissed at this stage.
Proceedings in the Motion Court
The proceedings in the motion court are summarized by the majority. It must be highlighted, however, that the parties presented starkly different versions of the negotiations in their motion papers.
On the one hand, plaintiff argued that the parties participated in a fair and thorough process which resulted in a generous agreement. He emphasized that the parties had negotiated for well over a year, were each assisted by experienced and independent counsel, had been advised of their rights, fully understood the agreement, executed it voluntarily, and acknowledged in the agreement that the terms were fair and reasonable.
Defendant, on the other hand, described the process as deeply flawed. She alleged that plaintiff substantially changed the bargaining position of the parties, that he put her in the unwanted, precarious position of negotiating as an unmarried mother, and that she relied on plaintiff's assurances in deciding to continue the first pregnancy. She also argued that plaintiff took advantage of her diminished emotional and physical state during both pregnancies, as she was not taking certain medications, and that the negotiations were tainted by plaintiff's "bait and switch" offers, numerous insults and threats, and failure to make a full financial disclosure.
As previously mentioned, the motion court dismissed defendant's first and third counterclaims, but not the second counterclaim challenging the maintenance waiver. On this issue, the motion court decided it would "require evidence and testimony to determine whether the waiver of maintenance was fair and reasonable at the time of execution, when [defendant] was expecting the parties' second child, and/or is unconscionable now. Therefore, this issue can be addressed at trial." In addition, the court awarded defendant $50,000 in interim counsel fees [*25]to defend against plaintiff's motion for exclusive possession of the matrimonial home, and allowed defendant to affirmatively move for exclusive possession of the matrimonial home and for temporary child support.
Arguments on Appeal
Plaintiff appeals to the extent the motion court granted a hearing on the maintenance waiver, awarded interim counsel fees, and denied his motion to dismiss defendant's second counterclaim, and primarily argues that there are no grounds to invalidate any part of the agreement given the waivers it contains.
Defendant cross-appeals to the extent the motion court dismissed her first and third counterclaims seeking to invalidate the prenuptial agreement. In particular, she argues the motion court misapprehended the equitable standard under which she seeks to invalidate the agreement, namely, manifest unfairness, and failed to shift the burden of proving the validity of the agreement onto plaintiff. Defendant also raises arguments related to a fourth counterclaim concerning the purchase price of the apartment in which defendant would reside with the children in case of divorce; however, because defendant disclaimed that her motion is based on fraud and expressly withdrew the fourth counterclaim below, I agree with the majority that these arguments are not properly before us.
Analysis
The majority concludes that there are no substantial issues of fact and resolves this appeal on summary judgment. It finds that defendant has not shown that the agreement is manifestly unfair or that plaintiff engaged in overreaching during the negotiations, and that the maintenance waiver was "fair and reasonable at the time of the making of the agreement" and would "not [be] unconscionable at the time of entry of final judgment" (Domestic Relations Law § 236[B][3][3]).
The extant record does not permit any such determination. As already discussed, there is significant controversy concerning the formation of the agreement, and indeed, the motion court ordered a trial on this issue in connection with the second counterclaim. No factfinder has yet evaluated the credibility of either party's version of the facts surrounding the making of the agreement, and it may well be that a factfinder would find that there was overreaching in the formation of a manifestly unfair agreement or that the maintenance waiver is not enforceable.
As the majority resolves this appeal on summary judgment, its decision reaches the merits. Throughout its analysis, the majority asserts that "manifest unfairness" is distinct from the defense of unconscionability. I fully agree with those assertions, but the difference between these defenses is not readily discernable from the majority's application of "manifest unfairness" to this case. The distinction is relevant in this appeal because defendant expressly does not challenge the agreement on the basis of unconscionability, but rather contends that it is manifestly unfair to her as a result of plaintiff's overreaching. This issue has broad implications and deserves further discussion.
The meaning and significance of the manifest unfairness defense has been the subject of long-standing commentary among members of the bar. Manifest unfairness and unconscionability are terms that are sometimes used interchangeably (see e.g. Luftig v Luftig, 239 AD2d 225, 227 [1st Dept 1997] ["the agreement was not unconscionable. . . [Its] terms are not [*26]so manifestly unfair that equity must intervene to prevent an injustice"], citing Christian v Christian, 42 NY2d at 71), and the resulting ambiguity has left some wondering if manifest unfairness is simply "legal literature" that is "repeated in deference but without consequence" (Elliot Scheinberg, Contract Doctrine and Marital Agreements in New York § 24.2[1] at 799 [2011]), and others observing that "it seems difficult to distinguish between an agreement that is unconscionable' and an agreement which is plainly inequitable'" (Alan D. Scheinkman, 9PT2 West's McKinney's Forms Matrimonial and Family Law § 4:8 at 41), "inequity" being a term Christian employs alongside manifest unfairness (see e.g. Christian at 72 [in reference to agreements "subsisting in inequity"] and id. at 72 and 73 [in reference to "inequitable conduct" of the parties]) that has also been applied in subsequent decisions of this and other courts (see e.g. Cron v Cron, 8 AD3d 186, 187 [1st Dept 2004], lv dismissed 7 NY3d 864 [2006], lv denied 10 NY3d 703 [2008] ["the agreement's housing provisions ... are plainly inequitable"]).
Arguably, it may be time to abandon the pretense that a distinction exists at all between unconscionability on the one hand and manifest unfairness (or "inequity") on the other. However, I would not favor moving in that direction as the distinction is not a matter of mere semantics. What is fundamentally at issue is whether there is a distinct standard of vacatur that uniquely applies to marital agreements (Scheinberg § 24.2), and rather than allow this equitable defense, which we refer to as "manifest unfairness," to be subsumed into the general defense of unconscionability, it is critical that the distinction be clarified and not permitted to vanish. Manifest unfairness serves an important and useful purpose in the matrimonial context, in which "[a]greements between spouses, unlike ordinary business contracts, involve a fiduciary relationship requiring the utmost of good faith" (Christian at 72). It ensures that married and affianced parties participate in a fair process, and it provides relief when agreements are "manifestly unfair to a spouse because of the other's overreaching" (id.).
The difference between unconscionability and manifest unfairness was carefully examined by the Court of Appeals in Christian, an appeal which concerned a separation agreement between two parties whose marriage had broken down. At the time, parties in New York could not divorce under then § 170(6) of the Domestic Relations Law without a valid separation agreement. Although both parties in Christian wanted to divorce and needed their separation agreement to be recognized as valid to do so, the plaintiff still challenged a portion of the agreement "which stipulated that there be an equal division of certain securities" (Christian at 66). Supreme Court declared that the agreement was invalid in its entirety, finding the defendant husband guilty of fraud and overreaching, and in the absence of a valid agreement, the court reasoned it could not grant a divorce and ordered the parties to resume their marital relationship. The Appellate Division reversed and granted a divorce, finding no evidence of fraud or overreaching in the record to invalidate the agreement, but declared that the impugned property provision was "so unconscionable as to be unenforceable" (id. at 71). Although the Court of Appeals expressed similar concerns, it reversed the determination of unconscionability by the Appellate Division and remanded the matter to Supreme Court for a full trial on the property provision in accordance with the equitable standard established by the Court, namely, "manifest unfairness."
In its discussion, the Court noted that the term unconscionability does not actually appear in the case cited by the Appellate Division for that proposition (id.; see also Riemer v Riemer, 48 Misc 2d 873 [Sup Ct, Kings County 1965], affd 25 AD2d 956 [2d Dept 1966], lv dismissed 17 NY2d 915 [1966]). As a result, the Court defined unconscionability in these terms:
"over the years, an unconscionable bargain has been regarded as one such as no [person] in his [or her] senses and not under delusion would make on the one hand, and as no honest and fair [person] would accept on the other' (Hume v United States, 132 US 406, 411), the inequality being so strong and manifest as to shock the conscience and confound the judgment of any [person] of common sense' (Mandel v Liebman, 303 NY 88, 94). Unconscionable conduct is something of which equity takes cognizance, when warranted (see Weirfield Holding Corp. v Pless & Seeman, 257 NY 536; Graf v Hope Bldg. Corp., 254 NY 1, 4; Howard v Howard, 122 Vt 27; 27 Am Jur 2d, Equity,§ 24, pp 549-550; cf. 2 Pomeroy's Equity Jurisprudence [4th ed], § 873, p 1804)"
(Christian at 71).
It is worth noting that nearly all the cases cited by the Court in its review of unconscionability concern commercial transactions (see e.g. Hume v United States, 132 US 406 [1889] [reasonableness of government contractor costs]; Mandel v Liebman, 303 NY 88 [1951] [compensation agreements between agents and principals]; Weirfield Holding Corp. v Pless & Seeman Inc., 257 NY 536 [1931] [unconscionable conduct in mortgage foreclosure proceedings]; see also Graf v Hope Bldg. Corp., 254 NY 1 [1930]; Howard v Howard, 122 Vt 27, 163 A2d 861 [1960] [Vermont action to rescind a settlement agreement in a filiation proceeding]).
The Court then turned to the marital context and discussed separation agreements. The Court observed that "[g]enerally, separation agreements which are regular on their face are binding on the parties," that "[j]udicial review is to be exercised circumspectly," and that where there has been full disclosure and "an absence of inequitable conduct, ... courts should not intrude so as to redesign the bargain" (Christian at 71, 72). The inquiry, however, does not end there, and the Court outlined a set of equitable principles that also apply in the course of reviewing transactions between spouses. As the Court acknowledged on more than one occasion, conjugal parties are not commercial actors: "Agreements between spouses, unlike ordinary business contracts, involve a fiduciary relationship requiring the utmost of good faith" (Christian at 72, citing Ducas v Guggenheimer, 90 Misc 191 [Sup Ct, NY County 1915], affd sub nom. Ducas v Ducas, 173 App Div 884 [1st Dept 1916]). As a result, "[t]here is a strict surveillance of all transactions between married persons, especially separation agreements," and such agreements may be set aside under principles of equity (Christian at 72). It noted that "[e]quity is so zealous in this respect that a separation agreement may be set aside on grounds that would [*27]be insufficient to vitiate an ordinary contract" (Christian at 72). The Court summarized these principles in these terms:
"[t]hese principles in mind, courts have thrown their cloak of protection about separation agreements and made it their business, when confronted, to see to it that they are arrived at fairly and equitably, in a manner so as to be free from the taint of fraud and duress, and to set aside or refuse to enforce those born of and subsisting in inequity"
(Christian at 72).
Having considered the equitable principles relevant to the marital context, the Court then established manifest unfairness as a defense to the enforcement of separation agreements:
"To warrant equity's intervention, no actual fraud need be shown, for relief will be granted if the settlement is manifestly unfair to a spouse because of the other's overreaching. In determining whether a separation agreement is invalid, courts may look at the terms of the agreement to see if there is an inference, or even a negative inference, of overreaching in its execution. If the execution of the agreement, however, be fair, no further inquiry will be made" (internal citations omitted)
(Christian at 73).
In contrast to unconscionability, manifest unfairness is rooted in a long line of matrimonial cases which are cited by the Court (Hendricks v Isaacs, 117 NY 411 [1889] [equity may intervene in transactions between married parties]; Benesch v Benesch, 106 Misc 395, 402 [NY Mun Ct 1918] ["there is a distinction to be drawn between contracts of separation between husband and wife and strictly business contracts. The same strict principles or the same considerations that are applied to or govern the duties of parties to business contracts cannot always govern or be applied to the enforcement of every provision of a separation agreement"]; Hungerford v Hungerford, 161 NY 550, 553 [1900] [contracts between spouses must be "just and fair" and equity intervenes as required]; Cain v Cain, 188 App Div 780 [4th Dept 1919] [spousal support agreement may be set aside upon grounds otherwise insufficient to set aside an ordinary contract]; Scheinberg v Scheinberg, 249 NY 277, 282 [1928] [settlement agreement between divorcing spouses unenforceable at equity if one party "acts unfairly and the other yields to the pressure of circumstances"]; Matter of Smith, 243 App Div 348, 353 [4th Dept 1935] [agreements between divorcing spouses must be "fair and equitable"]; Ducas v Guggenheimer, 90 Misc at 194 ["[courts] have thrown around separation agreements the cloak of their protection to the end that they shall be free from the taint of fraud or duress and that they shall be fair, equitable, and adequate, considering the husband's circumstances"]; Montgomery v Montgomery, 170 NYS 867, 869 [Sup Ct, NY County 1918] ["contracts between husband and wife are only upheld [in equity] where they are fair and equitable"], affd 187 App Div 882 [1st Dept 1919] and [*28]affd 188 App Div 965 [1st Dept 1919]).
It is clear that Christian intended to distinguish manifest unfairness and to establish a standard that is appropriate for reviewing marital agreements. Indeed, many decisions of this Court follow Christian in this regard (see e.g. Goldman v Goldman, 118 AD2d 498, 500 [1st Dept 1986] ["In Christian, the Court of Appeals held that separation and property settlement agreements are reviewable in equity and may be set aside if manifestly unfair to a spouse because of the other's overreaching'"]; see also Cron v Cron, 8 AD3d at 187 [1st Dept 2004] [finding that while a prenuptial was not unconscionable, other provisions were invalid as "plainly inequitable"]). Nevertheless, other decisions simply rely on Christian for the principle of unconscionability and do not apply the manifest unfairness standard or the equitable principles established therein (see e.g. Rowley v Amrhein, 46 AD3d 489, 489 [1st Dept 2007] ["Plaintiff contends that even if the agreement is valid, it is unconscionable. However, nothing in the agreement shocks the conscience"], citing Christian at 71; Kojovic v Goldman, 35 AD3d 65, 69 [1st Dept 2006], lv denied 8 NY3d 804 [2007] ["the concept of unconscionability is reserved for the type of agreement so one-sided that it shock[s] the conscience' such that no [person] in his [or her] senses and not under delusion would make [it] on the one hand, and ... no honest and fair [person] would accept [it] on the other'"], quoting Christian at 71; Smith v Walsh-Smith, 66 AD3d 534, 534 [1st Dept 2009], lv denied 14 NY3d 704 [2010] ["We reject defendant's contention that the prenuptial agreement is unconscionable ... [W]e cannot say that the agreement is so unfair as to shock the conscience and confound the judgment of any [person] of common sense'"], quoting Christian at 71; Leighton v Leighton, 46 AD3d 264, 267 [1st Dept 2007, Nardelli J., concurring in part, dissenting in part], appeal dismissed 10 NY3d 739 [2008] ["the 1986 prenuptial agreement is manifestly not unconscionable, for it cannot be said that it was so unfair as to shock the conscience"], citing Lounsbury v Lounsbury, 300 AD2d 812, 814 [3d Dept 2002]). In some ways, Christian is the buffet option of matrimonial cases. There is something for everyone — many cases cite Christian for the principle of judicial restraint; many others invoke it for the principle of judicial review (compare Golding v Golding, 176 AD2d 20, 22 [1st Dept 1992] with Kojovic v Goldman, 35 AD3d at 71). However, Christian should not be reduced to mean all things to all people, and this appeal highlights the need to review and revisit the meaning and application of "manifest unfairness."
"Manifest unfairness" involves a two-pronged inquiry into the execution and substance of the agreement. First, the contestant must show that the other party overreached in the execution of the agreement. Christian did not define overreaching but referred to two cases. The first, Matter of Baruch (205 Misc 1122, 1124 [Sur Ct, Suffolk County 1954], affd 286 App Div 869 [2d Dept 1955]), a dispute over a prenuptial agreement, defined overreaching in these terms: "we come to the charge of overreaching, which means to overdo matters, or get the better of one in a transaction by cunning, cheating, or sharp practice." The other, Pegram v Pegram (310 Ky 86, 90, 219 SW2d 772, 774 [1949]), noted that "the court will not suffer the wife to be over-reached. It will not sustain a contract that is unfair or prejudicial to her when obtained while she is under her husband's domination." Christian also asserted that overreaching does not require a showing of fraud, and that courts may look at the terms of the agreement to draw an inference or a [*29]negative inference of overreaching in the execution.
This first prong is essentially a procedural inquiry and encompasses the entire duration of the negotiations; it is not limited to the period immediately preceding the conclusion of the agreement. Overreaching may be viewed in terms of bargaining abuses, such as "shrewd manipulations" (Ducas, 90 Misc at 199), as well as threats, intimidation, unfair surprises, exploitation of trust, and deceit (see Robert S. Adler & Elliot M. Silverstein, When David Meets Goliath: Dealing with Power Differentials in Negotiations, 5 Harv Negot L Rev 1, 29 [2000]). Moreover, overreaching may include tactics which, though permissible in the commercial arena, do not belong in negotiations between parties who owe fiduciary duties to each other (see e.g. Ducas, 90 Misc at 196, cited by Christian at 72 ["The courts should require the contract to be the free act of the parties rather than the product of shrewd bargaining by astute intermediaries, however free these bargainings may be from the taint of fraud or duress"]). Compared to unconscionability, manifest unfairness subjects the negotiating process between conjugal parties to a higher degree of scrutiny and does not sanction unscrupulous methods.
If the first step shows an absence of overreaching, the inquiry ends and enforcement cannot be avoided under this defense. However, if the contestant establishes overreaching, the inquiry proceeds to the second step in which the contestant must then show that the agreement is manifestly unfair.
What, then, is manifestly unfair in the context of marital agreements? On this point, Christian does not provide all the answers. As a general principle, the fairness of an agreement ought to correspond to the intention of the parties as expressed in an agreement. The function of contract is to "structure a relationship and channel parties' expectations forward in time" (Leckey at 117), and ordinarily, the intention of the parties is found in the four corners of an agreement (Laurence v Rosen, 228 AD2d 373, 374 [1st Dept 1996]; see also Van Kipnis v Van Kipnis, 11 NY3d 573, 577 [2008] ["As with all contracts, prenuptial agreements are construed in accord with the parties' intent, which is generally gleaned from what is expressed in their writing"]). However, where there has been overreaching, an agreement may not reliably reflect the intentions of the parties, making it more difficult to evaluate whether the parties considered their agreement to be fair.
In the absence of a reliable writing to indicate the intention of the parties, the common law has developed alternatives for determining the fairness of an agreement. In the cases cited by Christian, one method of measuring the fairness of an agreement is the "test of adequacy." For instance, in Ducas, "[t]he test of adequacy is not what constitutes the minimum upon which a person can live. The question is whether the sum is in itself a reasonable one and will permit of a standard of living commensurate with the husband's income and the mode adopted by him when the parties lived together" (90 Misc at 200). Under this approach, fairness is measured against the marital standard of living and is based on the financial means of the overreaching party. Another approach, followed by the Second Department, determines fairness according to the nature and magnitude of any rights waived in light of the disparity in net worth and earnings of the parties (Petracca v Petracca, 101 AD3d 695, 698 [2d Dept 2012]). These methods of determining the fairness of a prenuptial agreement can be helpful; however a better approach [*30]would be one that also considers how well the terms of an agreement align with the conduct of the parties over the course of their relationship as a means of determining what the parties themselves consider to be fair. Terms that may appear to be objectively unfair may nevertheless be considered fair to the parties of an agreement, especially by parties who do not wish to have an economically interdependent relationship. For example, a prenuptial agreement that waives maintenance, narrowly defines marital property, and discourages the commingling of assets would suggest that the parties do not intend to have a relationship of economic interdependence, and if the conduct of the parties is generally consistent with the terms of an agreement, this would support that an agreement is fair to them. But where the expressed terms of an agreement are so divorced from the reality of a party's relationship, such as where there is a severe disconnect between the degree of economic interdependence expressed by the terms of an agreement compared to the conduct of the parties, as may be the case here, it is appropriate for equity to intervene to the extent a party's overreaching has caused the inconsistency. Indeed, in Van Kipnis, the Court of Appeals similarly considered whether the terms of a prenuptial agreement were consistent with the conduct of the parties during their marriage and upheld the prenuptial agreement because they were consistent [FN2]. Contrary to what the concurrence asserts, I am not suggesting that the marital standard of living or the concept of adequacy be the sole criteria for evaluating the fairness of marital agreements.
This review of Christian highlights the distinction between manifest unfairness and unconscionability and seeks to clarify certain ambiguities. However, while agreeing that manifest unfairness is the appropriate standard, the majority, by adopting a much more deferential approach, seems to apply an unconscionability standard instead, which in my view is not correct. But notwithstanding this disagreement, there is no dispute between the majority and the dissent concerning the applicability of Christian's manifest unfairness standard to prenuptial agreements.
My concurring colleague, on the other hand, comes to the novel conclusion, on the basis of "expressio unius est exclusio alterius," and a series of doubtful inferences, that the Equitable Distribution Law essentially superseded the manifest unfairness standard in Christian by "explicitly and implicitly provid[ing] standards by which to determine the enforceability of the various components of prenuptial agreements." There is simply no support for this premise. The interplay between the standards contained in Christian and the Equitable Distribution Law has already been considered by this Court in the past, and in cases where the statutory standard did [*31]not apply, the Christian standard of manifest unfairness has been applied instead (see e.g. Goldman v Goldman, 118 AD2d at 500 ["Although the statutory standard in Domestic Relations Law § 236(B)(3) is inapplicable here, traditional common-law standards do apply to test the validity and enforceability of the agreement. In Christian, the Court of Appeals held that separation and property settlement agreements are reviewable in equity and may be set aside if manifestly unfair to a spouse because of the other's overreaching'. . . In our view, it is appropriate to take into account these common-law equitable factors, notwithstanding the inapplicability here of the broader fair and reasonable [when made] and not unconscionable at final judgment' statutory standard" (internal citations omitted)], citing Christian). The concurrence contends that the reliance on Goldman is misplaced because it was an action to set aside a "reconciliation agreement" to which Domestic Relations Law § 236(B)(3) allegedly does not apply. However, this is incorrect. In Goldman, it was not the type of agreement that made the Domestic Relations Law inapplicable. Rather, it was the type of action that precluded the application of the statute, and since the action brought in Goldman was not a "matrimonial action" as defined by the statute, it was not subject to Domestic Relations Law § 236(B)(3)[FN3]. Either way, it is well settled that to the extent the Domestic Relations Law does not apply to particular provisions of a marital agreement, the traditional common-law standard established in Christian applies instead. Not only is the view of the concurrence not the law, but it also does not follow that the establishment of a statutory standard for certain provisions voids the common-law standard applicable to all other provisions. The Equitable Distribution Law has never been read as superseding Christian, and I see no reason to start reading it that way now.
The concurrence also claims that there is "scant support" for extending Christian, which concerned a separation agreement, to prenuptial agreements, and that the cases that apply Christian "most often" involve separation agreements. There is simply no support for this generalization. Basic research on any legal database clearly shows that for nearly 40 years, Christian has been consistently applied to prenuptial agreements and separation agreements alike by courts at every level, including the Court of Appeals. Indeed, the Court of Appeals has just recently cited Christian in a probate action in which a petitioner contested a prenuptial agreement (see Matter of Fizzinoglia, 26 NY3d 1031 [2015]). Nevertheless, the concurrence still concludes that Christian does not apply to prenuptial agreements or to affianced parties, notwithstanding the overwhelming case law to the contrary.
I agree with the concurrence to the extent it asserts that "when considering property distribution provisions of prenuptial agreements, we must look to the common-law standards." However, I simply do not agree with the common-law standards my colleague applies or the authorities on which he relies. Even though courts at every level have applied the equitable principles established in Christian to premarital and separation agreements for nearly 40 years, the concurrence reaches the conclusion that "it is not appropriate to look to Christian for the current standard for judging the enforceability of prenuptial agreements[]" and that "the use of Christian's standards for judging property provisions is incorrect." Instead, the concurrence would apply the standards applicable for setting aside "any type of contract." To do so would be incompatible with Christian and 40 years of matrimonial law and would abandon the power of the court to do equity when required. And rather than apply matrimonial standards to matrimonial disputes, the concurrence applies commercial standards to matrimonial disputes. For example, my colleague relies extensively on classic contract law treatises such as Williston on Contracts, Farnsworth on Contracts, and Corbin on Contracts and virtually ignores the authorities in the field of matrimonial law. My colleague also relies extensively on commercial cases such as Gillman v Chase Manhattan Bank, 73 NY2d 1, 10 [1988] in support of the unconscionability standard he advances. However, Gillman involved a dispute between Chase Manhattan Bank, N.A. and the creditors of the Jamaica Tobacco and Sales Corp. over a security agreement. This case could not be more removed from the matrimonial context. Nevertheless, the concurrence quotes certain passages from Gillman in which the Court addresses the issue of unconscionability. What the concurrence fails to ever mention is that Gillman involved the application of the Uniform Commercial Code, and the passage quoted by the concurrence concerns § 2-302 of the Uniform Commercial Code, "Unconscionable Contract or Clause." Never before has the Uniform Commercial Code been applied to the matrimonial context. And while the concurrence strongly opposes applying Christian, and four decades of matrimonial case law, to this case because the former concerns a separation agreement and the latter a prenuptial agreement, it is seemingly undisturbed by importing the Uniform Commercial Code and applying Gillman, a commercial dispute over a security agreement, to a prenuptial agreement.
Indeed, there is little support for the views expressed by the concurrence among the departments of the Appellate Division. Most notably, Cioffi-Petrakis, a leading decision of the Second Department that my colleague does not cite, expressly held that "agreements addressing matrimonial issues have been subjected to limitations and scrutiny beyond that afforded contracts in general" (Cioffi-Petrakis v Petrakis, 103 AD3d 766, 767 [2d Dept 2013], lv denied 21 NY3d 860 [2013] [emphasis added] [internal quotation marks omitted]). It describes the heightened scrutiny applicable to marital agreements in these terms: "an agreement between spouses or prospective spouses may be invalidated if the party challenging the agreement demonstrates that it was the product of fraud, duress, or other inequitable conduct" (Cioffi-Petrakis at 767 [emphasis added], citing Christian at 73).
At this stage of the proceedings, it is premature to make any findings of fact as to whether plaintiff engaged in overreaching, and similarly premature to find that there are no issues as to whether the spousal maintenance waiver is unconscionable as applied to present circumstances. [*32]Even in Barocas, a case cited several times by the majority which involves similar issues, the split majority there remanded the spousal support waiver for trial and did not decide that issue summarily (Barocas v Barocas, 94 AD3d 551, 552 [1st Dept 2012], appeal dismissed 19 NY3d 993 [2012] ["Although defendant's waiver of spousal support was not unfair or unreasonable at the time she signed the agreement, given her knowing and voluntary execution thereof with benefit of counsel, factual issues exist as to whether the waiver would be unconscionable as applied to the present circumstances"]). I agree with the majority that certain factors, such as the presence of independent counsel, militate against a finding of overreaching. Moreover, the majority correctly points out that "the mere fact that [plaintiff] did not include his income in his financial disclosure, standing alone, is not a basis to set the agreement aside" and that an agreement cannot be set aside "merely because" it may have been improvident or one-sided. However, far from standing alone, plaintiff's failure to make a full financial disclosure is just one of many indicia of either overreaching or manifest unfairness, including his conduct during the negotiations, the use of dilatory tactics, the many questionable provisions and lopsided distribution under the agreement, the conflicting versions of events surrounding the negotiations, and the inconsistency between the conduct of the parties with the terms of the agreement. In short, there are sufficient indicia in the record to support defendant's defenses and counterclaims to preclude summary judgment.
I strongly disagree with the concurrence's assertion that the relationship between the parties here did not give rise to any mutual fiduciary duties. As the majority highlights, "the parties were engaged, had been living together for more than three years, had a child together, and were expecting another." However, my concurring colleague, who recognizes that "[a] fiduciary relationship may arise where a bond of trust and confidence exists between the parties,'" would hold that this particular relationship does not "correspond closely enough to a married relationship." If the relationship between these parties does not "correspond closely enough to a married relationship," I cannot imagine what would. Moreover, rather than conclude that plaintiff was in breach of his fiduciary duties to defendant, the concurrence takes the extraordinary and troubling position that defendant essentially should have known better than to trust plaintiff, that plaintiff's treatment of her demonstrated the absence of a relationship of trust and confidence, and that the harsh consequence of defendant's allegedly misguided judgment is to deny the recognition of any fiduciary relationship whatsoever. This reasoning puts the cart before the horse and is decidedly out of step with the jurisprudence on fiduciary relationships cited by the majority. It is a mistake of law to assert, as the concurrence seems to reason, that conduct in breach of a fiduciary duty proves the absence of a fiduciary relationship altogether. The obligations attendant to fiduciary duties arise out of the particular nature of the relationship of the parties and are imposed by law. The parties did not have an obligation to enter into a prenuptial agreement, but they did, as fiduciaries, have an obligation of loyalty to each other and an obligation to negotiate with the utmost good faith.
The concurrence also reaches the conclusion that the agreement is not substantively unconscionable because "the facts were disclosed at the time the parties entered into the agreement." However, defendant expressly argues that plaintiff did not make a full financial [*33]disclosure. Because there are triable issues concerning the adequacy of plaintiff's disclosure, the concurrence should not be drawing any resulting legal conclusions at this stage.
There is also no basis whatsoever in the record for the concurrence's assertion that "Mr. Gottlieb indicated to his fiancée that he was not prepared to be generous with her in any way with respect to the emoluments of marital distribution," that "marriage to [plaintiff] required [defendant] to accept a hard bargain," and that he "laid these cards on the table." These arguments were never raised by the parties nor do they even come close to their respective versions of events. On the contrary, plaintiff has contended all along in his submissions that the settlement generously provides for defendant. Plaintiff has never alleged that he "required [defendant] to accept a hard bargain." Also without support in the record is the concurrence's claim that "[m]arriage was a business to [plaintiff], and he let her know that" or the concurrence's unfounded inference that plaintiff somehow communicated this alleged sentiment "not in so many words, but by his conduct." Nowhere in the record is there any support for these claims or inferences. Although this version of events and colorful language may make for interesting reading, it views the record through a prism that examines the record only in the light most favorable to plaintiff.
The concurrence also claims to find a "not-so-veiled hostility to prenuptial agreements" coursing through this dissent. To be clear, I harbor no such sentiment. Rather, the question is simply whether, on the extant record, summary judgment should be denied so that the facts in dispute surrounding the making of the agreement may be determined at trial. I fully agree with my colleague that "the law gives parties the right to opt out of the Equitable Distribution Law," but opting out of the statutory scheme does not also entail opting out of the common law. If it is found that plaintiff did not overreach, that the terms are not manifestly unfair in spite of any overreaching, or that the maintenance waiver is permissible, then those terms should be declared enforceable. The concurrence, however, prefers to exaggerate my position and wonders "whether prenuptial agreements should now be relegated to the dust bin." Such hyperbole is unnecessary. The defense of manifest unfairness intervenes only where the execution of an agreement is tainted by overreaching, and in the absence of overreaching, courts do not inquire further.
Finally, the award for interim counsel fees should not be vacated, and a hearing should not be required to determine what portion of the $50,000 sought by defendant is connected to child-related issues. Plaintiff primarily argues that the agreement bars any award of counsel fees and that defendant provided no documentation in support of her application. "The purpose of interim counsel fees is to level the playing field while litigation is ongoing" (Saunders v Guberman, 130 AD3d 510, 511 [1st Dept 2015], citing O'Shea v O'Shea, 93 NY2d 187, 190 [1999] ["The courts are to see to it that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigant's wallet"]), and it is clear that the playing field between these parties is far from level. Courts possess the discretion to award interim counsel fees, "as justice requires," under Domestic Relations Law § 237(a). The court determined that defendant "lacks sufficient funds of her own to compensate counsel without depleting her assets" and it was well within the discretion of the court to award interim counsel fees to defendant. In the absence of [*34]any finding that the motion court abused its discretion, the award should not be disturbed, especially since this award is interim and subject to adjustment in any final determination.
Conclusion
For the reasons set forth above, I would modify the order of the Supreme Court, to the extent appealed from, by denying plaintiff's motion for summary judgment, reinstating defendant's first and third counterclaims, and remanding for trial on whether the prenuptial agreement should be declared unenforceable in whole or in part.
Footnotes
Footnote 1: The agreement also provided that if the marriage lasted 10 years, and there were no living issue of the marriage at the time of divorce, the husband would purchase, in the wife's name, a one-bedroom apartment in the same location and with the same attributes.
Footnote 2: The wife withdrew the fourth counterclaim during oral argument before the motion court.
Footnote 3: Although not in record on appeal, subsequent motion practice in this Court reveals that, in compliance with his obligation under the agreement, the husband purchased an $8.7 million apartment for the wife and children to live in.
Footnote 4: The wife also complains that her counsel was ineffective for failing to notice both the trust provision and the error about the cost of the apartment. Even if true, that would have no bearing on whether the husband engaged in overreaching. We also reiterate that the wife ignored her counsel's advice not to sign the agreement.
Footnote 5: Contrary to the dissent's view, the fact that the wife oversaw the renovations of the apartment in which the parties ultimately resided has no bearing on the parties' intent at the time the prenuptial agreement was signed. Nor does it call into question the validity of the clear and unequivocal separate property provisions of the agreement.
Footnote 6: We need not decide whether a fiduciary relationship would exist where an affianced couple had little or no relationship prior to executing a prenuptial agreement.
Footnote 7: The concurrence also questions the significance of Christian in light of the subsequent enactment of the Equitable Distribution Law. This argument was not raised by either party on appeal. Moreover, trial and appellate courts throughout the State have consistently applied Christian to marital agreements entered into after the Equitable Distribution Law became effective.
Footnote 8: That statutory provision also makes maintenance provisions subject to the requirements of section 5-311 of the General Obligations Law, which prohibits agreements that relieve either spouse of the support obligation such that the other is likely to become a public charge. Here, there is no claim that the wife runs the risk of becoming a public charge.
Footnote 9: The parties do not challenge on this appeal the court's determination of the child support, exclusive occupancy or discovery issues raised in the motion.
Footnote 10: Because our decision in Anonymous (123 AD3d at 581) was issued after this case was argued, the parties have not addressed the question of whether, despite the waiver, counsel fees for non-child-related matters can be awarded "as justice requires" (id. at 585).
Footnote 1: It is not merely Mr. Gottlieb's negotiating style that negates the existence of a fiduciary relationship between the parties at the time they entered into the agreement. Rather, it is the entire constellation of events in the premarital life of this couple, as reflected in the record, that overwhelmingly demonstrates that Ms. Lumiere Gottlieb could not reasonably have reposed trust in Mr. Gottlieb when she executed the agreement.
Footnote 2: "[W]ith the exception of two jointly owned residences (which were distributed as marital property), the parties did not commingle their separately owned assets throughout their 38—year marriage. We therefore agree with the courts below that the agreement constitutes an unambiguous prenuptial contract that precludes equitable distribution of the parties' separate property, rendering it unnecessary to resort to extrinsic evidence" (Van Kipnis at 579).
Footnote 3: As this Court decided in Goldman, "We agree with Special Term that the second cause of action as couched is legally insufficient. Domestic Relations Law § 236(B)(3) expressly applies to the validity and enforceability of certain agreements "in a matrimonial action," which is defined in Domestic Relations Law § 236(B)(2). This is not a matrimonial action since plaintiff does not seek separation, divorce, annulment, a declaration of the validity or nullity of a marriage, maintenance or a distribution of marital property" (Goldman at 500).
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