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Thursday, March 14, 2013

New York Appellate Court Tosses Prenuptial Agreement Due to Fraudulent Inducement

A Brooklyn-based appellate court recently upheld a trial court ruling (946 N.Y.S.2d 66) that a prenuptial agreement was uneforceable due to fraudulent inducement. The Cioffi-Petrakis v. Petrakis ruling surprised family law experts in New York and nationally because prenuptial agreements like this one generally were seen as unassailable. The Wall Street Journal quotes several prominent divorce lawyers, stating that the ruling is "a game-changer" with "huge implications" that will "be quoted in every single case going forward."

Some appear to contribute the shocking result to Ms. Perakis's lawyer, Dennis D'Antonio, who is a contract litigator and not a family lawyer. Mr. D'Antonio stated told the WSJ that he presented the case as a contract case: "The matrimonial bar tends to do things the way they always did, and they approached the prenup as something you can't challenge," D'Antonio said. "We applied old-fashioned contract law."

Ms. Petrakis alleged that her husband lied to her in order to get her to sign the agreement. Specifically, he reportedly stated that he would tear up the agreement after the couple had a child (the couple had three children together). After she still refused to sign, Mr. Perakis threatened to call the whole thing off 4 days prior to their wedding after Ms. Perakis's parents already had spent $40,000.

The trial court stated the applicable standard as follows: "To sustain a claim for common-law fraudulent inducement, a plaintiff must demonstrate the misrepresentation of a material fact, which was known by the defendant to be false and intended to be relied upon when made, and that there was justifiable reliance and resulting wrong." Ms. Perakis alleged facts sufficient to satisfy that standard. Specifically, the court stated:

"The court credits the wife's testimony...that her fiancé told her 'not to worry' and 'we'll work everything out' to be convincing. Similarly convincing is her testimony that she was told by her fiancé that, 1) if she didn't sign the prenuptial agreement they wouldn't be getting married in a week, 2) that 'everything they get after the marriage would be theirs' and 3) 'after they had a family he would tear up the agreement.' The court concludes that, based on the such promises, the wife called Mr. Hametz to arrange to sign the prenuptial agreement."

The appellate court opinion is rather short. It affirms that contracts may be deemed uneforceable due to fraud or duress but makes no sweeping statements regarding prenuptial agreements. For Ms. Perakis, the result is rather significant. The agreement stated that she would get only $25,000 per year. Her husband reportedly is worth $20 million.

[Heidi R. Anderson]

 

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