Tuesday, April 3, 2012

Madoff Investment Does Not Undo Divorcing Lawyers Settlement Agreement

In a case involving a marital settlement agreement between two divorcing attorneys, the New York Court of Appeals reversed the order of the Appellate Division and reinstated the order of the Supreme Court.

The issue involved a claim of mutual mistake involving an investment account. The court here concluded that the plaintiff (husband and partner in a New York law firm) failed to state a cause of action against the wife, who is employed by a university.

The investment account at issue was with Bernie Madoff. The husband claimed that they both believed that the account was valued at $5.4 million on the valuation date in the agreement. Husband withdrew funds from the account in 2006 to pay wife. He continued to invest with Madoff until the "colossal Ponzi scheme was publicly exposed..."

Husband commenced the action 2 1/2 years after the divorce was finalized.

The court found that the situation did "not amount to a 'material' mistake of fact as required by our case law." Rather, '[t]his situation, however sympathetic, is more akin to a marital asset that unexpectedly loses value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain constant."

Abovethelaw had this story from last year. (Mike Frisch)


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