richard kearney, petitioner, - supreme court...kearney (former wife), supplies the salient facts...
TRANSCRIPT
THE SUPREME COURT OF FLORIDA
Case No. SCl 4-307 L.T. Case Nos. 1Dl2-754; 2008-DR-3117
On Petition for Review of a Decision of the First District Court of Appeal
RICHARD KEARNEY,
Petitioner,
v.
BERNADETTE KEARNEY,
Respondent.
RESPONDENT'S ANSWER BRIEF OPPOSING JURISDICTION
KELSEY APPELLATE LAW FIRM, P.A.
Susan L. Kelsey (FBN 772097) PO Box 15786 Tallahassee, FL 32317 Ph. (850) 681-3511 [email protected]
NOVEYLAW Jerome M. Novey (FBN 0128755) Shannon L. Novey (FBN 0172730) Christin F. Gonzalez (FBN 0091114) 851 East Park A venue Tallahassee, FL 32301 Ph. (850) 224-4000 j [email protected] shannon.novey@novey law .com christin. gonzalez@novey law. com
Counsel for Respondent
Filing # 11162281 Electronically Filed 03/10/2014 04:48:51 PM
RECEIVED, 3/10/2014 16:54:04, John A. Tomasino, Clerk, Supreme Court
TABLE OF CONTENTS
TABLE OF AUTHORITIES .............. .. ..... ... ................................. ... ........................... ii
STATEMENT OF THE CASE AND FACTS .............................. ... .. ... .................. .... 1
SUMMARY OF THE ARGUMENT ............................................ .......................... 4
ARGUMENT AND AUTHORITIES ...................................................................... 5
I. THERE IS NO CONFLICT WITH FARNHAM ON RATIFICATION . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . .. .. .. .. . . . . . .. .. .. . . . . . .. . . . . .. . . .. . . .. . . .. . ........ 5
II. THERE IS NO CONFLICT WITH CASTO ON THE EFFECT OF ADVICE OF COUNSEL . .. . .... ...... ...... ..... . . .... .. .. ...... .... .................. . ..... ........... .. ......... 8
CONCLUSION .......................................................... ................................................. 9
CERTIFICATE OF SERVICE .................................................................................. 10
CERTIFICATE OF TYPEFACE COMPLIANCE ................................................... 10
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TABLE OF AUTHORITIES
PAGE(S) CASES
Bakos v. Bakos, 950 So. 2d 1257 (Fla. 2d DCA 2007) ....................................... 6
Ball v. Yates, 29 So.2d 729 (Fla. 1946) ........................................................ 7
Casto v. Casto, 508 So.2d 330 (Fla. 1987) ................. ................. ...... 4, 5, 6, 7, 8, 9
Farnham v. Blount, 11 So. 2d 785 (Fla. 1942) .............................................. 4, 5, 6, 7
Frankenmuth Mutual Ins. Co. v. Magaha, 769 So. 2d 1012 (Fla. 2000) .................. 7
Grammage v. Turner, 206 So. 2d 252 (Fla. 2d DCA 1967) ..................................... 7
Herald v. Hardin, 116 So. 863 (Fla. 1928) ............................................................... 8
Kearney v. Kearney, 129 So. 3d 381 (Fla. 1st DCA 2013) ................... 1, 2, 3, 4, 5, 7
Lashkajani v. Lashkajani, 911 So. 2d 1154 (Fla. 2005) ............................ ... 4, 5, 6, 7
· Oxford Lake Line v. First Nat 'I Bank, 24 So. 480 (Fla. 1898) ................................. 7
Rosen v. Rosen, 696 So.2d 697 (Fla. 1997) ................................................ 5
Williams v. Williams, 939 So. 2d 1154 (Fla. 2d DCA 2006).......................... 8
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STATEMENT OF THE CASE AND FACTS
Petitioner, RICHARD KEARNEY, (former husband), has omitted from his
brief numerous material facts on which the First District expressly relied in
rejecting the former husband's arguments. Respondent, BERNADETTE
KEARNEY (former wife), supplies the salient facts here, as set forth on the face of
the district court's opinion. Kearney v. Kearney, 129 So. 3d 381 (Fla. 1st DCA
2013).
The former husband misrepresented to the former wife that the Agreement
he presented to her shortly before he moved out of the marital home was essential
for a recapitalization of the marital business, Mainline Information Systems, Inc.
(Slip Op. at 5) None of the other parties to the contemplated recapitalization ever
suggested the former wife needed to relinquish her interest in Mainline. (Id. at 6).
In fact the real purpose of the proposed transaction was to provide the former
husband $100 million in cash, leaving only $3.9 million for company use - which
he did not disclose to her. (Id.) He never told her that the purpose of the Agreement
was to buy out her ownership interest in Mainline or to settle the division of this
marital asset in the event of a divorce. (Id. at 5; 6 n.4) At the time he asked her to
sign the document giving her $3 million, the company was valued at $231 million.
(Id. at 9 n.8) The former husband told her (falsely) that if she did not sign, he
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would have to sell stock in Mainline. (Id. at 8) He knew she would sign anything
he asked her to sign. (Id.)
The former husband told the former wife to seek legal advice before signing
the Agreement. (Id. at 5). But, he then told her "not to heed any advice counsel
might give not to sign; he told her that lawyers would try to talk her out of signing
the agreement because they would not understand what it was intended to
accomplish." (Id. at 5) The district court noted that the former husband "had
'inoculated' her against any advice from independent counsel by telling her the
advice would be the product of their lack of understanding." (Id. at 8) The first
lawyer she consulted testified that she was being pressured to sign the document
and was concerned about the former husband's reaction. (Id. at 4 n.2) He
withdrew from representing her because he did not think she was competent to sign
the document. (Id.) The second lawyer did not know she had already consulted
another lawyer. (Id.) A psychologist testified that the former wife signed because
she believed the document was necessary for Mainline business purposes and that
she believed everything the former husband told her. (Id. at 5 n.3) The trial court
found that the former wife was unwilling to accept the lawyers' advice because of
misrepresentations by the former husband. (Id. at 6 n.4)
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The former wife had very limited knowledge about the parties' marital
assets, which encompassed more than 80 different legal entities and taxable
entities. (Id. at 6 n.5; 7 n.6) Nevertheless, the former husband provided her only a
six-page financial disclosure, which the trial court found was inadequate to convey
an understanding of the parties' financial holdings (id. at 7 n.6), and which was
incomplete and affirmatively misleading (Id. at 7):
[T]he husband misstated in significant and material respects the identity, nature, and value of the parties' other (non-Mainline) marital assets (overstating the value by approximately 40% or $14 million, thus exaggerating their significance-and understating Mainline's significance-in the overall distribution scheme). On the other hand, the husband's financial statement omitted significant sums payable to the husband individually, including notes and receivables aggregating approximately $6.5 million. In addition to other misinformation about Mainline's worth, Mr. Kearney's financial statement misstated the income he received from Mainline: He revised a financial statement prepared by his accountant to reduce his stated income (total compensation by Mainline) from in excess of $6 million annually to approximately $712,000 annually.
The district court noted that the record supported the trial court's finding that
the former wife "had no information as to the misrepresentations and
misstatements in the Agreement until after she initiated a divorce proceeding." (Id.
at 13 n.11) The court found that "the Mainline Agreement was not valid, the funds
were marital assets, and Ms. Kearney had a right to possession of the funds [paid
as ostensible consideration for her signing the agreement] at least as great as Mr.
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Kearney's right to possession of the funds. That Ms. Kearney did not 'return' the
funds after she asserted the right to rescind the Mainline Agreement does not
dictate a finding that she ratified the Mainline Agreement." (Id. at 16) The district
court's opinion set forth the extensive factual basis for its ruling in over fourteen
(14) pages containing twelve (12) detailed footnotes. The panel was unanimous in
rejecting the former husband's arguments on the facts presented, just as two
different circuit judges had done in detailed and very lengthy orders. (Id. at 2, 3)
SUMMARY OF THE ARGUMENT
This Court lacks jurisdiction to review the First District's decision based
upon conflict with either Farnham v. Blount or Casto v. Casto. The First District
properly applied Florida law on marital agreements as set forth in Casto v. Casto,
508 So.2d 330 (Fla. 1987).
As this Court has repeatedly recognized, marital contracts require careful
scrutiny because they are not arm's length transactions. Lashkajani v. Lashkajani,
911 So. 2d 1154, 1158-59 (Fla. 2005); see also Casto, 508 So. 2d at 334.
Nonetheless, former husband continues to incorrectly advocate for application of a
test devoid of the factors set forth in Casto. The first test under Casto is whether
assent to a marital agreement was procured through coercion, duress, overreaching,
misrepresentation, fraud, or deceit. The First District properly applied this test to
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affirm two trial court decisions that former husband provided misleading and
inaccurate information, intentionally omitted and falsified material information,
and interfered with and manipulated the former wife's decision-making and legal
consultation process.
The First District's decision in Kearney properly applied Casto and
Lashkajani and is not contrary to Farnham. The facts of Farnham are so disparate
that it does not even apply here. See Lashkajani, 911 So. 2d at 1159 ("Although
contract principals play a role in dissolution proceedings, courts must remember
that proceedings in chapter 61 are in equity and governed by basic rules of fairness
as opposed to the strict rule of law.") (quoting Rosen v. Rosen, 696 So. 2d 697, 700
(Fla. 1997)). The District Court made it very clear that its decision rested on the
extensive factual record of fraudulent misrepresentations and omissions by the
former husband. Accordingly, there is no conflict with Casto or Farnham, and
therefore this Court lacks jurisdiction.
ARGUMENT
I. THERE IS NO CONFLICT WITH FARNHAM ON RATIFICATION.
There is no conflict with Farnham v. Blount, l l So. 2d 785 (Fla. 1942).
Farnham does not even apply here. It was a real estate case involving the actual
knowledge of borrowers who lived on the subject property for years before
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alleging misrepresentations in the earlier purchase transaction. 11 So. 2d at 789. It
was not a dissolution case, not a pre- or post-nuptial case, and has never been cited
in any such case. It was a commercial contract case that recognizes the possibility
of imputed or constructive knowledge as the basis of a waiver or ratification, but
only after actual knowledge of fraud has been obtained, or knowledge of "facts and
circumstances from which such knowledge would be imputed to him." Id. at 788
89. Farnham does not hold that imputed knowledge can effect a ratification of a
postnuptial agreement absent actual knowledge of fraud or the ability to discern it.
Under Florida law, even though a nuptial agreement is a contract and subject
to contract interpretation principles, the particular context demands that fairness
factors continue to apply to the question of ratification. Casto v. Casto, 508 So. 2d
330, 334 (Fla. 1987) ("Courts, however, must recognize that parties to a marriage
are not dealing at arm's length, and, consequently, trial judges must carefully
examine the circumstances to determine the validity of these agreements");
Lashkajani v. Lashkajani, 911 So. 2d 1154, 1158-59 (Fla. 2005) (noting there is a
"vast difference" between commercial contracts and nuptial contracts); see also,
e.g., Bakos v. Bakos, 950 So. 2d 1257, 1259-60 (Fla. 2d DCA 2007) (whether
postnuptial agreement entered after six years of marriage constituted ratification of
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prenuptial agreement entered one day before wedding must be analyzed using
Casto factors).
The First District's decision in Kearney properly applied Casto and
Lashkajani and is not contrary to Farnham. The District Court made it very clear
that its decision rested on the extensive factual record of fraudulent
misrepresentations and omissions by the former husband, which worked to deprive
the former wife of any ability to make a properly informed decision. She could not
ratify a fraud that she did not know was a fraud. See Grammage v. Turner, 206 So.
2d 252, 255-56 (Fla. 2d DCA 1967).
The District Court's reference to "full knowledge" (Slip op. 13 n.11 ), is only
one part of the Court's entire fact-based analysis of this issue, and does not
announce as a new rule of law that constructive or imputed knowledge is never
possible in a dissolution context. Rather, the analysis and the holding are entirely
consistent with precedent. This Court has consistently held that a person cannot
ratify acts of his agent or fiduciary without full knowledge of all material facts. See
e.g,. Frankenmuth Mutual Ins. Co. v. Magaha, 769 So. 2d 1012, 1022 (Fla. 2000);
Ball v. Yates, 29 So.2d 729, 732 (Fla. 1946); Oxford Lake Line v. First Nat 'I Bank,
24 So. 480, 483 (Fla. 1898). The possibility of imputed or constructive knowledge
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recognized in Farnham is fact-dependent, and the necessary facts were not present
here. There is no conflict, and therefore this Court lacks jurisdiction.
II. THERE IS NO CONFLICT WITH CASTO ON THE EFFECT OF ADVICE OF COUNSEL.
There is no misapplication (or other) conflict with Casto v. Casto, 508 So.
2d 330 (Fla. 1987), with respect to the former wife's consultation with legal
counsel. The Court in Casto observed that a spouse who executes a nuptial
agreement against advice of counsel, "without being affected by duress," should
not be allowed to repudiate the agreement. 508 So. 2d at 334. Casto does not,
however, purport to state an absolute, strict-liability rule that a consultation with
counsel will always defeat repudiation. Rather, Casto allows repudiation when the
facts surrounding the consultation demonstrate interference with the effectiveness
of the consultation, as was the undisputed situation in both Casto and this case. Id.
at 332-335 (invalidating an agreement despite wife's consultation with two
attorneys where conduct of the husband interfered with wife's ability to voluntarily
consent). The former husband's undisputed course of interference with the former
wife's consultation with counsel satisfies the definition of "duress" under Casto.
See Williams v. Williams, 939 So. 2d 1154, 1157 (Fla. 2d DCA 2006) (quoting
Herald v. Hardin, 116 So. 863, 864 (Fla. 1928)). Just as in Casto, the issue before
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the court in Kearney was not one of competency of counsel but of the conduct of
the former husband.
In addition, the standard set forth under the first part of Casto is disjunctive.
It does not tum on duress alone. In addition to duress, the facts of this case
supported findings of fraud, misrepresentation and overreaching by the former
husband. Any legal advice the former wife received was undermined by her
former husband's statements that the lawyers would not understand the
circumstances and she should ignore them. He knew she would do whatever he
told her to do, and the lawyer she first consulted testified that the former husband
was pressuring her to sign regardless of legal advice to the contrary. These facts
were material, and, like the situation in Casto, prevented the former wife from
receiving effective advice from her counsel and caused her to involuntarily enter
into the Agreement.
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CONCLUSION
The former wife respectfully urges the Court to deny review because there is
no conflict, and therefore the Court lacks jurisdiction.
Respectfully submitted this 1 Ot11 day of March, 2014.
KELSEY APPELLATE NOVEYLAW LAW FIRM, P.A.
Isl Susan L. Kelsey Isl Shannon L. Novey Susan L. Kelsey (FBN 772097) Jerome M. Novey (FBN 0128755) P.O. Box 15786 Shannon L. Novey (FBN 0172730) Tallahassee, FL 32317 Christin F. Gonzalez (FBN 0091114) Ph. (850) 681-3511 851 East Park Avenue [email protected] Tallahassee, FL 32301
Ph. (850) 224-4000 J [email protected] [email protected] christen. gonzalez@novey law. com
Counsel for Respondent
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and accurate copy of the foregoing was
furnished by e-mail to appellate counsel for the Appellant, Cross-Appellee, Peter
D. Webster and Christine Davis Graves, Carlton Fields, P.A., 215 S. Monroe St.,
Suite 500, Tallahassee, FL 32301 (pwe [email protected],
[email protected]; [email protected], twalker@carltonfields.
com; and [email protected]); and to trial counsel for the Respondent/Cross-
Appellee, Fred F. Harris, Jr., Greenberg Traurig, P.A., 101 E. College Ave.,
Tallahassee, FL 32301 ([email protected]), this 10th day of March, 2014.
/s/ Susan L. Kelsey Attorney
CERTIFICATE OF TYPEFACE COMPLIANCE
I HEREBY CERTIFY that this Brief was prepared using Times New Roman
14 point type, a font that is proportionately spaced and in compliance with Florida
Rule of Appellate Procedure 9.210.
/s/ Susan L. Kelsey Attorney
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