On December 12, 2008, the Appellate Division released a reported decision in the case of Rogers v. Gordon which addressed the enforceability of a pre-statute prenuptial agreement. To review the full text of the case, click here. The case is interesting because it addresses again the standards to be applied to an agreement signed before the enactment of the Uniform Premarital Agreement Act in NJ.
In this case, the parties entered into a prenuptial agreement as a young couple. The wife was a graduate of the Wharton School of Business and came from a wealthy family. The husband was a high school graduate working for the Postal Service.
The parties married in 1981, had four children and were married for more than 24 years before the wife sought a divorce. During the marriage, the wife went to work for her father’s business, which she eventually purchased from him during the marriage. In 1990, the husband left the Postal Service to work as a machine operator for the business. In 2002, he was promoted to plant supervisor. Not surprisingly, when the divorce commenced, he was demoted to a machine operator again. The trial court made a finding that at the end of the divorce, there was not a "snowball’s chance" that he was going to keep the job given the wife’s intense animosity for him evidence during the trial. In fact, the judge found her to be totally incredible regarding this topic.
At the time of the divorce, the husband’s income was $63,000 – the wife’s was more the $600,000.
The Uniform Premarital Agreement Act was enacted in NJ in 1998 and applies to all agreements entered into after its enactment. As such, because the agreement in this case was entered into prior to the Act, the Court had to apply the case law from prior to the act.
In citing the Marschall case, the court noted that there was a three prong test for enforceability, as follows: 1) there was full financial disclosure; 2) that the party sought to be bound knew and understood the terms and conditions and 3) that the agreement, be fair and not unconscionable, ie. that it not leave a spouse a public charge or close to it, or with a lifestyle far below what was enjoyed before or during the marriage.
The court also cited the D’Onofrio case which said that the alimony provisions in the agreement need not cover all contingencies because the Lepis or change of circumstances standard would apply.
The trial judge felt it irrelevant to look at the pre-marriage lifestyle given the passage of time. The judge found that the agreement was unconscionable and set aside the entire agreement.
An interlocutory appeal was taken by the wife and joined by the husband. The Appellate Division reversed the Order to the extent that it set aside the entire agreement. As to the assets, the husband knew that the wife would likely be wealthier than him at the time of a divorce given her family wealth, etc.
However, the Appellate Division accepted the decision of the trial court as to alimony – but modified it. The reason for this is that the husband had yet to be fired by the wife. As such, the Appellate Division modified the trial court’s conclusion to allow defendant to seek alimony if and when he demonstrates substantially changed circumstances under the standard articulated in Lepis v. Lepis, 83 N.J. 139 (1980).
Of note, the Appellate Division rejected the wife’s claim that the court had to determine the issue of unconscionability when the agreement was executed, as opposed to when it was enforce.
Under all of the circumstances in this case, the Agreement did what it was supposed to do – that is, protect the family wealth. However, given the time of execution (i.e. pre-act), the wife may ultimately have to pay alimony if she terminates the husband. Post-act, she may not have had to pay alimony at all.