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 susanappeals@embarqmail.com

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 erome.novey@noveylaw.com 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 susanappeals@embarqmail.com Tallahassee, FL 32301

Ph. (850) 224-4000 J erome.novey@noveylaw.com Shannon.novey@noveylaw.com 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 bster@carltonfields.com,

boneal@carltonfields.com; cgraves@carltonfields.com, twalker@carltonfields.

com; and talecf@cfdom.net); and to trial counsel for the Respondent/Cross-

Appellee, Fred F. Harris, Jr., Greenberg Traurig, P.A., 101 E. College Ave.,

Tallahassee, FL 32301 (harrisf@gtlaw.com), 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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