129 So. 3d 381
Fla. Dist. Ct. App.2013Background
- Richard and Bernadette Kearney married in 1987, acquired Mainline Information Systems (Mainline) in 1989, and separated in 2007; Bernadette filed for dissolution in 2008.
- In July 2006 Richard had Bernadette sign a postnuptial "Mainline Agreement" purporting to relinquish her interest in Mainline for $3 million paid in three $1M installments.
- The trial court invalidated the Mainline Agreement for lack of full and fair disclosure, misrepresentations, pressure, and overreaching, treating Mainline as a marital asset subject to equitable distribution.
- A later bench trial valued Mainline (fixed at about $48 million) and split its value equally; the court denied Bernadette prejudgment interest and ordered Richard to reimburse her roughly $797,223 for fees spent litigating the Mainline Agreement’s validity.
- Richard appealed the invalidation and denial of credit for previously-ordered temporary fee payments; Bernadette cross-appealed the valuation and denial of prejudgment interest.
Issues
| Issue | Plaintiff's Argument (Kearney) | Defendant's Argument (Kearney) | Held |
|---|---|---|---|
| Validity of the Mainline postnuptial agreement | Agreement was valid; Bernadette consulted counsel and knowingly signed | Agreement invalid due to fraud, misrepresentation, lack of full disclosure, pressure, and unequal bargaining power | Agreement invalidated; trial court findings of overreaching and inadequate disclosure supported by competent, substantial evidence |
| Ratification by retention of payments | Bernadette ratified the agreement by accepting/retaining the $1M installments and using interest | Retention did not constitute ratification while parties remained married and when the funds were arguably marital | No ratification: retaining funds while married and before full knowledge did not affirm the agreement |
| Credit for temporary fee payments ordered earlier | Earlier temporary payments were tentative; final prevailing-party award should not credit those amounts | Partial settlement unambiguously made each party responsible for fees through final judgment, so prior temporary payments should offset final award | Court reversed denial of credit; remanded to credit the ~$800,000 previously advanced by Richard |
| Valuation method and prejudgment interest | Mainline valuation should recognize enterprise goodwill and use income/going-concern methods; prejudgment interest owed on Bernadette’s share | Trial court appropriately exercised discretion in choosing valuation method and denying prejudgment interest given settlement terms covering distributions | Valuation and denial of prejudgment interest affirmed; trial court’s factual valuation choice upheld as supported by competent substantial evidence |
Key Cases Cited
- Casto v. Casto, 508 So.2d 330 (Fla. 1987) (trial courts must scrutinize nuptial/postnuptial agreements because parties are not dealing at arm’s length)
- Hendricks v. Stark, 126 So. 293 (Fla. 1930) (principles of ratification: rescission unavailable if party with full knowledge affirms)
- Erp v. Erp, 976 So.2d 1234 (Fla. 2d DCA 2008) (trial court has discretion in choice of business valuation methods in divorce cases)
- Thompson v. Thompson, 576 So.2d 267 (Fla. 1991) (distinguishes enterprise goodwill from personal goodwill; only enterprise goodwill is divisible marital property)
- Lashkajani v. Lashkajani, 911 So.2d 1154 (Fla. 2005) (nuptial agreements are contracts but courts apply heightened scrutiny and equitable principles in dissolution proceedings)