'Bad boy' postnup clause can be enforced in Maryland, top state court says
Maryland public policy allows enforcement of a $7 million “bad boy” postnuptial clause that penalizes a spouse for adultery, the Maryland Supreme Court has ruled.
In Aug. 30 opinion, the Maryland Supreme Court ruled for Anna Cristina Niceta, who had negotiated the penalty with her husband, Thomas L. Lloyd, after his first incident of adultery.
“We reject the contention that remaining faithful to a spouse is too onerous of an obligation,” the Maryland Supreme Court said.
The state supreme court said it agreed with a circuit court’s observation that agreeing to the $7 million transfer “may have been improvident,” but that alone doesn’t warrant voiding a provision that the parties had negotiated with the assistance of counsel.
Lloyd, a wealth manager, was the grandson of Rachel “Bunny” Mellon, who left him $10.7 million after she died in 2014, the state supreme court said. Niceta was an event planner and was the White House social secretary between February 2017 and January 2021.
The postnup required Lloyd to transfer his inherited funds into joint accounts. He would have to pay Niceta $7 million if the parties divorced after he engaged in adultery or inappropriate sexual conduct, with the money coming from his 50% portion of the shared assets.
As a result, the Maryland Supreme Court said, the postnup penalty could not amount to more than 50% of Lloyd’s share of the couple’s joint assets. The state supreme court provided an example. If the shared assets were $28 million, Lloyd could satisfy the $7 million penalty out of his $14 million half. If the shared assets were below $14 million, however, Lloyd would not have to pay the full $7 million.
Public policy in Maryland supports distribution of marital assets based on adultery for two reasons, the Maryland Supreme Court said.
First, the state currently permits divorce based on fault, including adultery. Second, the state permits courts to consider adultery in determining a monetary award.
Other jurisdictions that have rejected adultery penalties had reasoned that they violated no-fault divorce laws.
“We conclude that Maryland’s public policy currently permits spouses to transfer assets to each other based on adultery that leads to the dissolution of a marriage,” the Maryland Supreme Court said. “The court is not holding that spouses may impose on each other monetary penalties unrelated to marital assets or unrelated to the division of such assets during a divorce; rather; the court is narrowly holding that spouses may allocate marital assets in the event of divorce based on adultery.”
Hat tip to the Legal Profession Blog, which published highlights from the opinion.