Court Opinion Offers Lesson — Why Fully Anticipating What Can Happen in the Future is Key to Drafting Successful Spousal Support AgreementsLeave a Comment
A recent court opinion denied a husband’s request to reduce his spousal support, finding his written agreement with his former wife demonstrated that they anticipated she may start working after their divorce. It is thus important when drafting a Spousal Support provision to think about the potential earning capacity changes of the receiving spouse.
A Property Settlement Agreement (or “PSA”) is an agreement that divides a married couple’s property between the husband and wife when they get divorced. A PSA frequently includes a Spousal Support provision, which sets the amount one spouse agrees to pay to the other, usually for a defined period of time.
But future changes can happen to either party’s circumstances that may warrant a court modifying the Spousal Support payments up or down. In order to do so, there usually must be a “material change in circumstances.” The Virginia Code does not define the phrase “material change in circumstances.” Courts often analyze numerous factors to determine whether there has been a material change in circumstances, including whether the change relates directly to the support award and whether it was foreseeable by the parties.
The Virginia Court of Appeals recently interpreted a Spousal Support in O’Connor v. Shea. There, the court upheld the trial court’s decision not to reduce support. The court also reversed the trial court’s $55,000 attorneys’ fee award to the former wife for incurred fees for opposing the former husband’s motion because the court did not weigh the statutory factors in determining the fee award. Nonetheless, the prospect of losing a motion to lower Spousal Support and potentially paying tens of thousands of fees urges paying close attention to how the spousal support provision is drafted in the first place.
In O’Connor v. Shea, the husband, a lawyer making over a million dollars a year, filed a motion asking to reduce his $18,500 per month spousal support to $10,000 because his wife, who had previously not worked at all, started a job earning approximately $67,000 a year. His motion argued the ex-wife’s new well-paying job – by itself – was a “material change in circumstances” that justified a reduction in his monthly payments. The trial judge not only found no material change in circumstances existed to warrant a reduction in monthly spousal support, but also awarded wife nearly $55,000 in attorneys’ fees.
In evaluating whether there had been a material change in circumstances, the trial judge considered the circumstances at the time the parties signed the PSA. The judge noted the parties utilized vocational experts, and that the PSA specifically stated that the parties considered “earning capacity, obligations, needs and financial recourses of each other[.]” The court found the parties contemplated the wife working in the future and had considered the wife’s earning capacity at the time they entered the PSA. The trial court noted “the parties considered many factors in arriving at a support agreement” and it did not “think anyone entered into this agreement thinking she would never work again[.]”. As such, the trial court ruled that the additional income to the wife did not represent a material change in circumstances.
Regarding the award of attorneys’ fees in Virginia, courts apply the “American Rule” that each party must bear his or her own attorney’s fees absent a statutory or contractual provision. In this case, the basis for awarding attorney’s fees was Virginia Code § 20-99(6), which allows for such an award “as equity and justice may require.” Since the trial court did not make any reference to specific equities in this case, the Court of Appeals remanded the attorneys’ fees award to the trial court, but offered “no opinion” on whether a balance of the equities might support such an attorneys’ fees award.
This case also shows why it is important to consider including an attorneys’ fees provision in a PSA. In this case, if the parties had included a provision in the PSA that each party would bear his or her own attorneys’ fees, the trial court would likely have been precluded from awarding attorneys’ fees because Virginia Code § 20–109(C) limits the court’s authority to the terms of a stipulation or contract signed by the parties.
While it is difficult at the negotiation phase to have complete information about the future earning capacity of your former spouse, along with other future changes, it is important to factor in potential increases in income when agreeing upon any amount of Spousal Support to be paid, and also to consider an attorneys’ fees provision.
A link to the full opinion of the Court of Appeals can be found here: O’Connor v. Shea, Va. Ct. App. No. 1157-19-4, 2020 WL 1262655, at *8 (Va. Ct. App. Mar. 17, 2020)