California Prenup Basics

Although it may not seem romantic, investing in an enforceable premarital agreement can be one of your smartest wedding preparations.  Statistics show that the national divorce rate is about 50%.  In California, it’s about 60%.

Public Policy on Premarital Agreements

Premarital agreements, commonly known as “prenups”, are governed by the Uniform Premarital Agreement Act (UPAA), codified in California by Family Code §1600 et seq.  In fact, forty-eight states have codified the UPAA into their statutes, showing that general legislative policy supports premarital agreements.  While some critics still contend that premarital agreements encourage divorce, California courts tend to view them as mutual, voluntary agreements between spouses (in advance of actual marriage) “intended to foster or perpetuate conditions that will help preserve a forthcoming marriage.”

Enforceable Terms of a Premarital Agreement

Under California law, prospective spouses may contract as to the following issues:

  • Property rights upon separation, divorce, death or the occurrence/non-occurrence of any event;
  • The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
  • The execution of other arrangements to carry out the provisions of the premarital agreement;
  • The ownership rights and benefits from a life insurance policy;
  • The choice of law governing the construction of the agreement; and
  • Any other matter that does not violate public policy or constitute a crime.

Prospective California spouses may NOT contract terms that:

  • Waive the obligation of mutual respect, fidelity and support between spouses during marriage;
  • Waive full disclosure obligations;
  • Agree to pay for domestic services or companionship;
  • Dictate the religious upbringing of children;
  • Waive or limit the statutory right of child to receive support from each parent;
  • Provide large conditional payments or other terms that might tend to promote divorce; or
  • Provide penalties for “fault” during marriage.

Requirements for a Valid Premarital Agreement

In order for a premarital agreement to be enforceable, both prospective spouses must enter the agreement voluntarily.  “Voluntarily” means several things.  First, it means that each party is an adult (or emancipated minor) and has mental capacity to contract. Second, prospective spouses may not subject the other to fraud, menace, duress or undue influence.

Each prospective spouse must provide fair and full disclosure of the existence and valuation of their assets, debts, income and expenses to the other prospective spouse.  Each spouse must have at least seven calendar days to review the premarital agreement before signing it.

Premarital agreements must be in writing, signed by both parties, and cannot be unconscionable.  “Unconscionability” refers to elements of oppression, unfair surprise or unreasonable one-sidedness. Unconscionability is assessed at the time of execution, except for issues of spousal support, which are also assessed at the time of challenge to enforcement.

Under California law, each spouse must either obtain independent counsel to advise them of their legal rights, or waive the right of independent counsel in a separate written waiver after being fully advised in writing of the rights and obligations that they may be giving up by entering into a premarital agreement.

Effectiveness of a Premarital Agreement

A premarital agreement becomes effective and is conditional upon the eventual marriage of the parties.  Therefore, if parties decide NOT to marry, the premarital agreement is enforceable only to the extent necessary to avoid an inequitable result.  After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by both spouses.

The information contained in this article is intended as general information and does not constitute legal advice.  If you are considering entering into a premarital agreement, you and your prospective spouse should consult with independent legal counsel in the state whose laws you want to govern your agreement.

Lisa Fiance, Esq. is a licensed California attorney, formally trained mediator, and the owner of Epiphany ADR.  Submit the form below to learn more about CA premarital agreements.Epiphany Head Shot (700 kb)

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A Lesson on Settlement Negotiations

As originally reported by California’s leading legal journal The Recorder, the case of Hernandez v. Schaefer Ambulance Services Inc., BC451751 (L.A. Super. Ct., filed Dec. 22, 2010) has become a classic example of how NOT to settle a case.

Summary of the Case

While transporting patient Pablo Valdez Hernandez from an El Centro hospital to a psychiatric facility in San Diego, EMTs left the patient’s left arm unrestrained because he was non-combative.  While travelling west on Interstate 8, one EMT heard a buckle hit the floor and, as he reached back toward the patient, Hernandez leapt out of the moving vehicle onto the freeway.  According to Hernandez’ attorney, C. Michael Alder of AlderLaw PC, the ambulance company’s negligence in failing to adequately secure Hernandez resulted in severe and permanent brain injury to his client.

The Botched Hallway Negotiations

Alder took the case to trial in January 2012, asking for $21 million in damages.  Before closing arguments, defense attorney James E. Siepler of Pollard, Mavredakis, Cranert, Crawford & Stevens offered to settle for $1.25 million, but Alder turned it down.  After only four hours, the jury announced that they were prepared to deliver a verdict.  The short deliberation indicated that it was likely the verdict would be for the defense.

Alder, worried that his client would get nothing, made a last-minute hallway settlement attempt.  The defense, however, was now only willing to settle for $200,000.  After several rounds of offers and counter-offers, Alder finally secured an oral agreement to settle the case for $350,000.  After a sidebar conference, Los Angeles Superior Court Judge Michael Johnson announced to the court that a settlement had been reached and released the jury for comments.  In the moments after, Siepler asked to put the settlement on the record, but it didn’t happen because plaintiff’s attorneys were already following the jury out into the hallway… where they were shocked to learn that the jury had been prepared to offer the plaintiff a $9 million dollar verdict.  At that point, Judge Johnson later stated for the record, “all hell broke loose”.

The Post-Trial Battle

Now the parties are locked in a bitter post-trial battle.  At a hearing on April 25th, the defense requested a dismissal with prejudice, accusing Alder of “egregious misconduct” in that he either falsely told the court that the parties had reached settlement or later falsely told the court that he did not have his client’s authority to settle.

Alder admitted that he made a mistake accepting a settlement offer without his client’s consent, but claims it was an honest one that resulted from the time pressure to obtain some kind of settlement for his client before the jury returned.  “It was a chaotic event and it didn’t go well,” Alder said, “but there was no fraud”.

At the conclusion of the hearing, Judge Johnson found no “egregious misconduct” that required dismissal of the case and ordered a retrial in January 2013.  He also granted the defense the opportunity to amend its answer and file a counterclaim regarding the settlement negotiations.  Johnson is now taking fire for allowing a retrial that appears to prejudice the defendant, since the plaintiff could use the first jury’s results to either amend their complaint to a higher demand or as the gauge for a new round of negotiations.  As the defense puts it, “If plaintiff is allowed to get away with such gamesmanship in this case, there is nothing to prevent any plaintiff’s counsel from testing the waters with one jury, settling the case without authority from the client, interviewing the jurors to see which way they actually were leaning, and then repudiating the settlement and seeking a retrial”.

Lessons Learned

While we wait to see what will happen with the retrial of Hernandez v. Schaefer Ambulance Services, here are some valuable tips that can help you and your client now.

Perform Accurate Case Valuation

Approach negotiations with the expectation that the case will proceed to trial.

    • Know the strengths of your case.  What elements need to be proved for each claim made?  What evidence is required to support each element?  Where will each piece of evidence come from?
    • Acknowledge the weaknesses of your case.  While you will present a strong case, the other side will also present their most vigorous defense. What affirmative defenses were made?  What viable claims might the other side have to support those defenses?  How can you best refute those claims?
    • Gather all the information you can.  Participate in mediation or conduct discovery that helps you understand all of the facets and aspects of your case, even those that might not be readily apparent.
    • Be confident but practical.  Each side should theoretically be willing to settle for their estimation of the likely judgment plus/minus the cost tolitigate.  Let’s look at an example:
      • Plaintiff thinks there is a 60% chance that he can get a $1 million settlement, but it will cost him $300,000 to litigate the matter.  Therefore, plaintiff should be willing to settle for anything over (60% * $1 million) – $300,000 = $300,000.
      • Defendant thinks there is a 40% chance that plaintiff can get a $750,000 verdict, but it will cost the defendant $200,000 to defend against the lawsuit.  Defendant should be willing to settle for anything less than (40% * $750,000) + $200,000 = $500,000.
      • Based on the analysis above, this case should probably settle anywhere between $300,000 – $500,000.

Make Sure You Have Authority to Settle

An attorney must be specifically authorized to settle and compromise a lawsuit; the relationship with the client does not provide an implied authority to bind the client to a settlement. Levy v Superior Court (1995) 10 C4th 578, 586, 41 CR2d 878. See Gauss v GAF Corp. (2002) 103 CA4th 1110, 127 CR2d 370; 6 Witkin, California Procedure, Proceedings Without Trial §120 (5th ed 2008); California Trial Practice: Civil Procedure During Trial §16.33 (3d ed Cal CEB 1995).

Get Your Settlement in Writing

California Code of Civil Procedure (CCP) §664.6 requires that settlement agreements either be “in a writing outside the presence of the court or orally before the court” in order to have a judgment granted pursuant to the settlement terms.  To ensure its enforceability, make sure that your settlement is in writing or is entered into the court record.

Be Honest

California Rule of Professional Conduct (RPC) 5-200 prohibits attorneys from “deceiving the court, opposing counsel, or an opposing party by making false statements or misleading statements or failing to disclose a material fact when disclosure is necessary to prevent a fraudulent or criminal act”.  Lawyers may be subject to discipline for engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.

Keep It Confidential

Keep offers and counter-offers confidential by presenting them within the context of mediation.  Last-minute panic, caused by presumptions about what the jury will or will not award, can lead to rushed negotiations that are not in the client’s best interest.  All conduct, statements and materials prepared for the purpose of mediation remain confidential after the mediation concludes, offering the most private forum available for negotiation discussions.

Lisa Fiance, Esq. is a licensed California attorney, formally trained mediator, and the owner of Epiphany ADR.

[The Recorder], [The National Law Journal], [Judicial Hell Holes], [Red Law LLP]

Collaborative Divorce FAQ’s

1. What is collaborative divorce?

Collaborative divorce is a family law process in which a couple who has decided to end their marriage is guided by their respective attorneys, and sometimes other specialists, to reach a mutually agreeable divorce settlement involving spousal maintenance, child custody and/or property settlement issues.

The collaborative process is also appropriate for parents who share custody, couples who want prenuptial contracts, as well as probate, employment, intellectual property and personal injury disputes.

2. How does it work?

First, both attorneys should be trained in the collaborative process. The couple signs a “Participation Agreement” that shows mutual commitment and disqualifies their attorneys from representing them should the matter later go to court.

Through a series of meetings, the couple determines and prioritizes their respective needs and interests. The couple may choose to have child therapists, divorce coaches, accountants or spiritual advisors present to offer guidance. Or, the couple may choose to have no one other than their attorneys present. They then work together to make financial arrangements, share responsibilities and/or coordinate schedules as necessary.

3. What if we change our minds?

If a couple decides to resolve their divorce issues, they may postpone the divorce without any papers having been filed in court. The cost of the process, the impact on the family, and the risk of publicity are all significantly minimized.

4. What if we try it and it fails?

Collaborative divorce is successful because it uses cooperative negotiation. However, collaborative divorces can still fall apart. A couple may reach impasse and decide to take their divorce to court. When this happens, both parties’ attorneys must withdraw from representation. The emotional and financial impact of starting over with new attorneys to litigate the matter is one incentive to seeing things through to the end of a collaborative divorce.

5. Are certain kinds of situations NOT good for collaborative divorce?

Situations that involve domestic violence, addiction, untreated mental illness or intention to cause emotional or financial pain are not good candidates for collaborative divorce and may be better suited to arbitration or litigation.

Avoiding a Sensational Divorce

The news is full of celebrity couples on the brink of divorce, including the latest victims Tiger and Elin Woods and Sandra Bullock and Jesse James.  While you may not be a celebrity, the same concepts that can help make these high profile divorces less public and painful can apply to anyone considering divorce.

The latest solution for divorcing couples is called collaborative divorce.  Collaborative divorce allows the divorcing parties to control the process and terms through a non-confrontational process, rather than proceeding through the notoriously bitter and expensive process of divorce litigation.

The Litigation Process

In litigation, each side’s attorney performs countless hours of financial research, and waits for the other side to produce their results of countless hours of research.  Parties file aggressive motions and petitions against the other, essentially “going to war” with the goal of causing as much emotional and financial injury to the other person as possible. In the end, there are relatively few forms to fill out, yet a divorce can drag on for years, all at the expense of the parties who are each trying to move on and start over.

And all too often, divorce attorneys are unaware or simply don’t care that the typical “adversary” style that works so well in the courtroom is actually fueling the fire of the already existing dispute.  Or are they unaware?  Arguably, it may be in a divorce attorney’s self interest to allow a divorcing couple to fight on indefinitely, since the attorney is being paid an hourly rate and the couple “needs to work out their issues” in order to find closure.  Of course, attorneys have ethical obligations to perform competently and diligently, and an ethical lawyer will not intentionally drag out a case for the sake of a higher fee.

The Collaborative Divorce Process

In collaborative divorce, parties agree at the outset not to take the divorce to court. The collaborative process emphasizes cooperation instead of confrontation, and problem solving instead of fault finding.  Parties agree to avoid confrontation for the sake of reaching a mutual agreement that leave their fates in their own hands, instead of in the hands of a judge.

Assisted by a trained collaborative attorney, the parties then mediate their financial, property and custody issues, and negotiate the settlement they want presented to the judge. Parties can agree to have any number of financial, emotional or spiritual advisors present to help, or parties may choose to use a single financial advisor to help maintain confidentiality of financial assets.

Benefits of Collaborative Divorce

  • Private and confidential – keeps private issues out of the public eye
  • Fast and flexible – couples decide how fast the divorce proceeds and who else is involved
  • Affordable – there is no need for a divorce to drag on for years
  • Reduces stress – benefits the adults involved AND their children
  • Parties control it – any settlement must be agreeable to both people
  • Forward-focused – focuses on solutions that allow both parties to move on
  • Positive – allows a peaceful ongoing relationship if parties so choose

Consequences of Taking a Divorce Public

  • Charlie Sheen & Denise Richards – This couple’s initially amicable divorce suddenly derailed when the media picked up on Sheen’s hateful emails and voicemails to Richards.  In response, Richards filed court papers publicly claiming that Sheen was physically abusive and addicted to gambling and porn. The couples’ two children were caught in the middle. Two years after starting the divorce, the couple settled for an undisclosed amount.
  • Christy Brinkley & Peter Cook – After ten years of marriage, news broke of Cook’s affair with a teenager he met in a toy store and this couple was headed for divorce court to resolve issues of child custody.  Cook hired a psychiatrist to say that Brinkley was “consumed by rage”. The report, however, showed that Brinkley should still get full custody of the couple’s two children. Brinkley, in turn, claimed that Cook was addicted to porn. The end result was a settlement for $2.1 million for Cook, with custody going to Brinkley, but the lasting effect on the two kids may not be known for years.
  • Paul McCartney & Heather Mills – After only four years of marriage, this couple announced plans to split in 2006.  Tabloids seized the opportunity to research Mills’ past, alleging that she was a prostitute and a gold-digger. In response, Mills accused McCartney of emotional and physical abuse.  A bad move, given the outpouring of public support for him that resulted.  Mills, however, still walked away with a settlement worth over $48 million.
  • Tricia Walsh (the YouTube Divorce) – When her husband Philip Smith, President of Broadway theater owners The Shubert Organization, “unfairly evicted” her from their Park Avenue apartment, Walsh decided to air her grievances in a 6 ½ minute YouTube video. The video publicly discussed the couples’ prenuptial agreement and described embarrassing private details about the couples’ sex life.  Three months later, a judge granted the husband a divorce based on cruel and inhuman treatment and blasted Walsh for her “calculated and callous campaign to embarrass and humiliate her husband”. Walsh received $750,000 but the eviction was upheld.