Alimony Escalation Clauses Enforceable in Mississippi?
Buyer Beware—Know what you are signing in a divorce property settlement agreement
In many divorces in Mississippi, five years following the divorce, the same amount of money is being paid in alimony despite the cost of living having increased during the same period. That same money will not buy what it once did. The solution is an alimony escalation clause. The problem is anticipating the impact of that escalation clause.
In 2000, the Mississippi Supreme Court first approved the use of alimony escalation clauses in property settlement agreements. Up until then, Mississippi courts had only addressed the use of escalation clauses in child support cases where they were, and still are, disapproved more than approved. In Speed v. Speed, the Hinds County couple entered into a property settlement agreement. Under the agreement, the husband agreed to pay $1,500 per month in alimony. The parties further agreed that the payments would “increase or decrease directly in relation to the increases and the cost of living as determined by the U.S. Department of Commerce Consumers Cost of Living Index, to be adjusted annually….” Speed at 222. For ten years, the husband paid in accordance with the agreement, but then quit paying the escalated amounts. At a contempt hearing for his failure to pay, the husband complained the escalation clause was unfair and unenforceable. The chancery court agreed. In reversing the chancery court, the Mississippi Supreme Court stated:
“Absent fraud, overreaching or mistake, escalation clauses in property agreements are enforceable even though the agreement may prove to be improvident for one party in the future.” Speed at 226.
The Court said alimony escalation clauses in property settlement agreements protect both spouses from increases or decreases in income and encouraged their use in future cases.
Four years later, the Mississippi Supreme Court once again approved an escalation clause agreed to by the parties. West v. West. In West, the parties agreed to an alimony escalation clause. Years later, the husband realized that he made a bad deal and argued the agreement should not be enforceable as written or that it was unenforceable due to ambiguity or unconscionability. As the Court stated, “property settlement agreements are contractual obligations.” And the parties will be bound to their contractual obligations absent fraud, mistake, or overreaching. While the agreement was “less than desirable,” the Court said it could not say “that no spouse in his or her right mind would agree to what is, at worst, a begrudging but generous offer of Tim’s part to provide alimony to Debbie after divorce.” West at 214. The escalation clause, which increased or decreased the bi-weekly payments in accordance with the husband’s total salary, was legal. The husband, the Court said, had "presented no hard evidence of fraud, overreaching, or mistake. He may have entered into the agreement improvidently, but even if he did so, improvident decisions do not provide a basis with which to characterize an escalation clause as being illegal.” West at 214
There are few cases in Mississippi discussing chancellor’s imposing an alimony escalation clause on the parties. In the cases reported above, the parties agreed among themselves to the escalation clauses and they were approved by the court. Clearly, in both Speed and West, the husbands had buyer’s remorse long after the deal was made. While escalation clauses can be beneficial to both parties, they can also produce unintended windfalls to one spouse to the detriment of the other.
Alimony escalation clauses can be beneficial to ensure that alimony payments are adjusted as the cost of living rises or falls or the spouses’ income rises or falls. However, parties should ensure they are represented by an attorney who can explain the implications of such clauses and properly draft an agreement to avoid unintended consequences years following the divorce.
