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Pre-Suit Divorce Settlements: Protecting the Privacy Rights of High Net Worth Clients

As published in the Daily Business Review on August 29, 2016. 

Nearly everyone has heard or read about Johnny Depp's and Amber Heard's divorce settlement. However, most of what they think they know about the agreement is rumor and conjecture. That's because the actual divorce proceedings were settled privately -- pre-suit -- prior to open court where filings would have been public record.

That was by design. Pre-suit divorce settlements are popular not only with Hollywood celebrities but other high-profile individuals such as athletes, entrepreneurs, business leaders and those with generational wealth, among others.

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In high-profile cases such as these, both parties have a mutual desire to protect their privacy and reputation as well as to shield their family from prying eyes during a particularly stressful time. In an age when any nosy neighbor with an internet connection can gain access to court documents, one can't be too careful.

Face it: divorce is one of the most traumatic experiences anyone will ever undergo. It should be private, but once filed in court, divorce particulars are open to scrutiny by anyone with an interest in exploring the litigants' personal lives.

For that reason alone, we often recommend pre-suit settlement. It's not unusual for attorneys to work with opposing counsel and resolve marital issues privately to ensure their client's interests are protected.

Ultimately, even private, pre-suit settlement agreements must be filed with a court. However, there are ways to significantly minimize the chance that the agreement details are ever made public. Once both parties reach an agreement outside of court on all issues -- from property distribution to alimony to shared parenting -- we file the agreement as an uncontested divorce in a remote venue, not in the jurisdiction where the marriage existed.

In many cases, we take our commitment to privacy a step further, citing the Rush Limbaugh opinion to request that settlement agreements be kept out of court files. The opinion, in which the Third District Court of Appeal denied a newspaper's petition to unseal Limbaugh's settlement, maintains a divorce agreement reached privately should not be considered part of the public record.

Self-determination
Is there a downside to pre-suit settlement agreements? Not if attorneys represent each party's interests. In fact, a settlement many times will be more equitable than a court ruling because each party has input and must agree on the eventual disposition of the case.

Consider the last major decision you made. Did you walk away from the process, turning it over to an unknown third party to make the decision for you? Of course not. Yet that's what happens when a couple takes divorce proceedings to court and empowers a judge make the final decision.

The judge may be impartial, but does not have a personal stake in the outcome. Each party in the divorce does. With the proper guidance, they usually arrive at an equitable decision that is appropriate for each while protecting the dignity of the family unit.

There are other benefits as well. A pre-suit settlement preserves a sense of self-determination for each party that stays with them for the rest of their lives. You can't place a value on that. And, a negotiated settlement likely will be less costly than assembling the legal team for a litigated divorce.

Clients may believe they must file in court to set the cut-off date for a marriage. However, if both parties agree to the earlier cut-off date in pre-suit negotiations, a court filing isn't necessary. That's important, for example, if a marriage is nearing 17 years -- generally the threshold for lifetime alimony -- and reaching a settlement might cross that time limit, costing the primary earner more money.

Like the cutoff date, most issues determined in a litigated divorce can be effectively handled during pre-suit negotiations, privately ... without the attention and expense. Even when both parties cannot come to agreement, they can turn to a private judge -- usually a retired one -- to rule on the final disposition. The decision is binding, just as in a litigated divorce, but the proceedings remain private and hidden from the press and public. Plus, the judgement can be filed in the same manner as a settlement agreement.

We would argue pre-suit settlement agreements not only aren't an inferior product, they may be a superior way to handle these personal matters without public disclosure. And, they need not just be used on behalf of high net worth clients.

So why aren't settlements utilized in 100 percent of all divorces? Not every attorney knows about them or feels confident in the process. Some parties simply aren't willing participants, or don't think media and others will have an interest in monitoring their proceedings.

Still, pre-suit negotiation remains the best route for many couples facing the end of their marriage. Attorneys should care about the psychology of their client -- both entering a divorce and afterward. We believe the best resolution is one that reduces emotionality and lets people exit a marriage with the same dignity they entered into it.

Good pre-suit settlement agreements do that.

Republished with permission from the August 29, 2016 issue of Daily Business Review. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

 

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