(The purpose of this article is to prepare the litigant (or soon-to-be litigant) for a certain type of situation which may arise during the course of a divorce or other family law matter.)
What are “stipulations of settlement put on the record” and why should you avoid them? Not all contracts need to be read or signed by you in order to be binding and enforceable. A “stipulation of settlement put on the record” is one such contract. Unlike written contracts, stipulations of settlement put on the record do not provide you, the litigant, with enough time to review and understand matters that will affect your financial future and the future of your children. By understanding what a stipulation of settlement put on the record is and how it arises, you will be better able to protect yourself later on.
To better appreciate how this dangerous type of contract comes about, let’s do a little thought experiment and pretend to buy a car. (For present purposes, we’ll assume that this kind of purchase does not need to be in writing.) After shopping around, you walk into the salesperson’s office to purchase a car. While being audio taped, the salesperson verbally informs you of all the detailed costs, payment schedules, provisions, rights, responsibilities, disclaimers, waivers, penalties, and indemnification clauses of the contract. After the salesperson has been talking for quite a while, the salesperson asks whether you understand all of the terms and provisions that you were just verbally informed about. You are asked whether you find the terms satisfactory. You are asked whether you have any questions. You are asked whether you consent to the agreement. You will not be able to review the written terms of what the salesperson just informed you about until some future time after it has been put into writing. Nor will you be able to change the terms after reviewing it in writing.
Would you buy a car under these circumstances, or would you insist on reviewing the written contract before buying the car? Do you think lawyers or judges would buy a car under such circumstances, or would they also insist upon reviewing a written contract beforehand? If you answered “no” to the first half of each question and “yes” to the second half of each question, your instincts are intact and working perfectly well.
But now let’s see what happens, and what may very well happen to you, when this type of verbal contract prowls our halls of justice. Instead of going into a salesperson’s office, you go to court. While waiting for your case to be called by the judge, or after appearing before the judge who tells you and your spouse to try to settle, you find yourself involved in extensive ongoing settlement discussions and negotiations back and forth in the hallway outside the courtroom. The case is called, or called again, before the judge. You, your spouse, and the lawyers are ushered into the courtroom before the judge. In addition to a court officer, there is either a court reporter (stenographer) or a recording device recording what is being said. One of the attorneys proclaims that the parties have reached an agreement. (Maybe you were unable to work everything out with just the attorneys, and the judge helped you and your spouse along the way to reach an agreement.) Hopefully, the attorney’s statement will not come as a surprise to you. The judge asks which attorney is going to “put the stipulation of settlement on the record”, meaning, which attorney is going to verbally state the terms of the agreement so that everyone can hear it, and it can be recorded.
One of the attorneys then begins to state what you and your spouse supposedly agreed to in the hallway and/or with the judge’s assistance, on issues ranging the gamut of grounds for divorce, child custody and visitation (including a very detailed parenting plan), basic child support and child support “add ons” (such as medical insurance, uninsured medical expenses, child care, educational expenses and/or life insurance), spousal support, the division of property including real estate, businesses, collectibles, personal property, retirement accounts, and other assets, the allocation of debts, attorney’s fees, and so on.
Although at the outset you were told by the judge to listen very carefully to what is being said, you discover that the other attorney or the judge often interrupts with questions, requests for clarification, and/or “off the record” discussions (meaning, the court reporter or recording device is not recording what is being said at the time until the judge says the case is “back on the record”). You find it very difficult to listen and keep track of everything. Also, if you are paying attention and do not feel intimidated by the courtroom environment, you might even say to your attorney “I didn’t agree to that” or “we didn’t talk about that”, at which time further discussions or negotiations may need to take place. At some point, the attorney will say that what has been put on the record is the agreement and stipulation of the parties. The other attorney may still add a few more points which may lead to further negotiations or discussions.
Eventually, when it is acknowledged by everyone that everything has been addressed, then comes the “voir dire”. This is where you and your spouse enter into a binding contract without ever having read or signed anything. (Up until this point, a dense jungle has developed from all the verbiage planted by the lawyers and judge. The “voir dire” is where a huge slippery wall is built around the jungle where you, your soon to be ex-spouse, and your children will dwell for a long, long time. Although extremely unlikely, there may be a way out—but bet against it.) The “voir dire” starts with the judge swearing you and your spouse in as witnesses. The judge then begins to ask you and your spouse a scripted series of questions designed to ensure an end to the case in the form of a binding contract, and that it will be extremely difficult for either of one of you to change anything later on. You and your spouse’s verbal answers to the judge’s questions are the equivalent of your signing a written agreement.
By this time in the proceedings, you are probably emotionally and mentally exhausted and tired of all the wranglings and legal proceedings, have had enough, and just want to be done with it and either go home and crawl under the covers or go out and celebrate. The judge’s questions to you and your spouse (along with my comments in parentheses) go something like this:
After having asked both you and your spouse the same series of questions, and perhaps a few more just to be sure there is no way out, the judge will then say something like “having heard from the parties and their respective counsel, having heard the stipulation put on the record, and the parties having accepted the stipulation freely and voluntarily, the court hereby accepts the stipulation as put on the record.” The judge will then typically thank you, your spouse, and the attorneys for having worked so diligently to reach an agreement which is, after all, in the best interests of everyone involved.
The transcript of the stipulation put on the record will then need to be ordered, transcribed (put into writing), and paid for. When that is done, you will for the first time be able to read and review what you agreed to. When you see the written transcript, you need to know one very important thing—it’s a done deal. You cannot change the agreement unless you have and can prove a valid legal basis for doing so, such as coercion or fraud. However, do you remember you already told the judge no one coerced or threatened you, and that you entered into the stipulation knowingly, freely and voluntarily? Fraud can be very difficult to prove, and that means more legal fees and proceedings.
As you start to read the transcript and think that, if nothing else, at least the divorce is finally over, you realize a mistake was made! You did not agree to $79,000.00 being transferred from your account to your spouse’s. You agreed to $29,000.00. The court reporter transcribed the amount incorrectly! What do you do now? You call your attorney in a panic. Because there was nothing in writing, are you sure, with all that went on in court, that you did not agree in court to $79,000.00 and, if not, will your attorney be able to convince your spouse’s attorney of an error and agree to the correction? If not, did the judge take notes of the stipulation while it was being recorded by the court reporter? Hopefully, civility and honesty will prevail in resolving the discrepancy. Believing the worst is over and behind you, you try to get comfortable again in your recliner to once again read the transcript of the stipulation of settlement. Horror sets in! It’s not in there! You read the transcript again. Still nothing! The attorney forgot to address your receiving half of your spouse’s retirement assets which you thought was agreed to!
As you can see, there can be disastrous consequences putting a stipulation of settlement on the record. When stipulations are put together under hurried and pressured circumstances, errors and omissions can occur. (On the other hand, those disastrous consequences to you could be a gift to your spouse, or vice-versa. But do you want to take that chance?) The sad truth is that people have more rights buying a $30.00 telephone than when entering into a stipulation of settlement put on the record. At least the telephone can be returned and your money refunded if it breaks down within the warranty period, or you can return it within a certain period of time if not “completely satisfied”. However, with the stipulation put on the record, absent a legal basis to set it aside, you cannot negotiate a better deal if you do not like the one you made in court, unless your spouse consents to it.
By doing business this way and resolving cases with stipulations put on the record, lawyers and judges do a disservice to litigants. People are stressed out and anxious when they go to court. People really do not understand everything they are consenting to, let alone the consequences. Most people give their consent and go along with stipulations put on the record because they want to avoid appearing ignorant, and are too embarrassed to admit they really do not understand what is going on. Many people are afraid of angering the judge or their own attorney by not going along with the stipulation put on the record. Some people even mistakenly believe they will have a later opportunity to review and further negotiate a written agreement before signing it.
Consider also that the stipulation of settlement put on the record can be used by attorneys as a kind of shield in an attempt to conceal a lack of preparedness or unwillingness to proceed to trial because, for instance, your money to pay legal fees ran out. Consider also that lawyers who often appear before certain judges want to “please” judges by helping to get cases settled where often the most expedient way to get a case settled is with the stipulation put on the record.
The good news is that you do not have to agree to enter into a stipulation of settlement put on the record! The consent of both you and your spouse is necessary. You can tell your attorney, who will then advise the court, that you will not agree to anything unless it is in writing and you have had time to review it. Why should you be deprived of this right? Hopefully, also, long before you are ever put into the situation described above, the attorneys will have already drafted written settlement proposals which you have been reviewing and considering along the way, perhaps with the assistance of other professionals such as accountants or financial planners.
However, be prepared for other pressures to come to bear if you try to protect your rights. The judge may threaten you (if you appear to be the recalcitrant one) that if the case does not settle that day with the stipulation of settlement put on the record, you will have to “proceed right to trial!” The judge may even make other threats, like awarding counsel fees to the other side. (Of course, these threats would likely not be “on the record”.) Or your attorney may tell you in private, after one of those “attorneys only conferences” in which you were not present and, so, do not know what was said, that if you do not settle, the judge will “give you nothing” or “you’ll lose custody”.
Do not give in! Step back a moment and think about what is happening. Say to yourself, “Okay, we have an understanding or framework for an agreement. What would happen if I really answered “no” to any of the questions the judge asks me? What if I were to say, for instance, “I really do feel very pressured and need to see the agreement in writing?” If the agreement is generally “fair” the day you are in court, it should be generally fair and acceptable in a week or two after it has been reduced to writing, and after you have had time to review and understand it. However, if the judge still insists you start the trial because the judge will not allow the case to be adjourned so that a written agreement can be drafted, read by you, and fine tuned by everyone, be prepared to at least start the trial, because not being prepared for trial can be another pressure put to bear upon you and your attorney to settle.
The legal origins of the stipulation put on the record:
The New York Civil Practice Law and Rules (“CPLR”) Section 2104 states the following in relevant part:
“Stipulations. An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered… ” (Underlining is added for emphasis.)
In this statute, the “stipulation of settlement”, being an “agreement”, is carved out as an exception to the general rule noted in this statute of agreements having to be in writing and subscribed, etc. As one court put it, “strict enforcement [of stipulations of settlement] not only accomplishes efficient dispute resolution but also effectuates judicial economy.” See Rubenfeld v. Rubenfeld, 279 A.D.2d 153 (1st Dep’t, 2001). See also Natole v. Natole, 256 A.D.2d 558 (2nd Dep’t, 1998). Stipulations of settlement are “judicially favored”, and unless there is a legal basis for setting them aside such as fraud, collusion, mistake or duress, they will be enforced. See Woods v. Velez-Shanahan, 308 A.D.2d 593 (2nd Dep’t, 2003); Pretterhofer v. Pretterhofer, 37 A.D.3d 446 (2nd Dep’t, 2007). If your case falls within the First or Second Departments, stipulations of settlement are favored, encouraged, and enforced.
On the other hand, if your case falls within the Third or Fourth Departments, stipulations of settlement will only be enforced if reduced to writing, signed and subscribed as provided for in the New York Domestic Relations Law (“DRL”) Section 236 (B)(3), which states the following in relevant part:
There is also the Court of Appeals (the highest court in New York State) case of Matisoff v. Dobi, 90 N.Y.2d 127 (1997) in which the court ruled that a written postnuptial agreement that was signed by the parties was invalid and unenforceable because it was not also “acknowledged” as required under DRL Section 236(B)(3). Based upon DRL Section 236(B)(3) and Matisoff, cases from the Third and Fourth Departments have each ruled that unless the stipulation of settlement put on the record is also put into writing, signed, and duly acknowledged, it is not valid or enforceable. See Harbour v. Harbour, 243 A.D.2d 947, (3rd Dep’t, 1997); Sorge v. Sorge, 238 A.D.2d 890 (4th Dep’t, 1997); Tomei v. Tomei, 39 A.D.3d 1149, (Fourth Dep’t, 2007).
There appears to be a contradiction in the law between CPLR Section 2104 versus DRL Section 236(b)(3) regarding the validity of stipulations put on the record when not in writing, signed, and acknowledged. However, the First and Second Departments make a distinction in order to avoid the contradiction, a distinction which the Third and Fourth Departments have been unwilling to make.
The distinction is as follows: There are agreements entered into between soon to be married couples (prenuptial agreements) and already married spouses (postnuptial agreements) to which DRL Section 236(B)(3) applies, since such agreements are “entered into outside the context of a pending judicial proceeding” and must, therefore, be in writing, signed, and duly acknowledged. And then there is “a different class of agreement, one terminating litigation”, to which CPLR Section 2104 applies, along with its exception allowing for stipulations of settlement put on the record. (See Rubenfeld, supra.)
It would be interesting to see what would happen in the First or Second Departments if a divorce action resolved with a settlement put on the record involving a postnuptial agreement, with the parties essentially agreeing to abandon or discontinue the divorce action, and where one of the parties subsequently challenged the validity of the postnuptial agreement because it was not in writing, signed and acknowledged.
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