- When is the trial court required to conduct a fairness hearing when one party challenges the enforceability of a settlement agreement?
Facts and Procedural History
The parties signed a settlement agreement in mediation dividing their community assets, including Husband’s business. The agreement did not assign a value to any of the assets, other than the estimate value of a commercial property. Wife waived her right to receive spousal maintenance in the agreement.
After Husband lodged the agreement, Wife filed a motion asking the trial court to determine the enforceability of the agreement, arguing that the court had an independent obligation to determine if the agreement was fair. The court denied Wife’s request for hearing, finding that the agreement complied with Rule 69 and that Wife failed to show any defect in the agreement.
Ruling
Courts are not required to conduct a fairness hearing if it is possible to determine from the agreement itself or from the record that the agreement is not unfair to either party. Hutki v. Hutki, 244 Ariz. 39 (App. 2018). However, the court must hold a hearing when there are “plainly disputed facts on the question of the fairness of the agreement, and the court was presented [with] no evidence as to the extent of the community assets.” Sharp v. Sharp, 179 Ariz. 205 (App. 1994).
In this case, the court was required to conduct a fairness hearing because the agreement did not state the value of the business, and the value was not available anywhere else in the record. The record also indicated a significant financial disparity between the parties, which was enough for Wife to be able to challenge the fairness of the spousal maintenance waiver.
The parties’ pleadings challenging the agreement contained “plainly disputed” explanations for the business valuation report and resulting allocation, therefore the court had to weigh positions and determine credibility to reach the conclusion that the agreement was not so unfair as to reject it.
Prescott v. Prescott, 1 CA-CV 20-0393 FC (App. Apr. 7, 2022) (mem.).