Are You Willing to be Bound by the Terms of Your Settlement Agreement?

A recent decision came down from the Appellate Division, which should remind all parties and attorneys of one important factor: settlement agreements are binding and enforceable, and they must be drafted with the utmost clarity to guide (or prevent) future litigation. Moreover, this should encourage those going through a divorce to review- in detail- their settlement agreements and understand what it is they are committing to by way of future expectations.

In the matter of Bermeo v. Bermeo, the Appellate Division addressed a former wife’s request to increase her former husband’s alimony obligation. The facts were relatively straightforward. The parties were marred in 1986. They divorced in 2015. Their judgment of divorce incorporated a Property Settlement Agreement, which set forth the terms of the parties’ divorce, including former husband’s obligation to pay former wife alimony.

As expressly stated in the PSA, the former husband was obligated to pay the former wife alimony in the amount of $4,000 per month, based on his annual gross imputed enhanced base income of $160,000 per year. In addition, former husband was obligated to pay former wife a percentage of supplemental compensation he may receive, including commissions, bonuses, stock options, etc.

The PSA also expressly stated that Neither party shall be able to maintain a similar lifestyle to that which was enjoyed during the marriage… the parties freely and voluntarily waive determination of the joint marital lifestyle at this time.

In 2017, only two years after the divorce, the former wife filed a motion, seeking an increase in her alimony, based upon an imputed income of $220,000 to former husband. Her argument was that former husband was voluntarily underemployed because he was earning less than he earned during the marriage. The trial court found that former husband was actually earning $120,000, not the $160,000 contemplated in the PSA, but he continued to pay alimony based upon the imputed income of $160,000. Moreover, at the time of the divorce, former husband was earning $120,000. Accordingly, if the former wife wanted to challenge former husband’s ability to earn and employment status, she had the opportunity to do so at that time.

Instead, as the Appellate Division noted, she voluntarily entered into a well-negotiated PSA and accepted its terms. She was not under the influence of any drugs or alcohol that would impair her ability to understand the negotiation, and she was not subject to duress, coercion, or threats. Therefore, the Appellate Division upheld the order of the trial court, and found that former wife had not met her burden of showing a change in circumstances to warrant modification of alimony.

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