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Tuesday, May 31, 2011

Courts - "Madoff Victim Seeks Divorce Do-Over"

Don't miss this front-page story today in the NY Times, reported by business writer Peter Lattman. It begins:

After 33 years of marriage, Steven Simkin and Laura Blank divorced in 2006. They agreed to split their considerable wealth equally. She got the apartment on the Upper East Side; he got the house in Scarsdale, N.Y.

Afterward, they spoke infrequently, mostly concerning their two grown sons.

More than two years later, Ms. Blank received a voicemail message that stunned her: Mr. Simkin wanted to revise their settlement. She refused, and he sued.

While divorce agreements are generally ironclad and rarely rescinded, this challenge has now reached New York’s highest court. Deeply divided appellate justices requested what is considered an unusual review of settled law involving contracts.

What made Mr. Simkin’s call for a do-over even remotely possible has its roots in Bernard L. Madoff’s Ponzi scheme.

When the couple split their assets evenly, the largest chunk of money was invested with Mr. Madoff. Mr. Simkin kept much of his funds in the Madoff account, which was held in his name. Ms. Blank, who said she had no interest in investing with Mr. Madoff, received her settlement proceeds in cash.

Shortly after Mr. Madoff admitted wrongdoing in December 2008, Mr. Simkin, a lawyer at one of the country’s most powerful law firms, Paul, Weiss, Rifkind, Wharton & Garrison, filed court papers to drastically alter the terms of his divorce settlement. Ms. Blank, he argued in the lawsuit, should be required to turn over millions of dollars that she had received in their settlement to make up for the substantial losses he had sustained in the fraud.

The Simkin-Blank dispute has riveted the state’s matrimonial bar, and splintered opinions among the six judges who have already weighed in on the case.

Later in the lengthy story:
Mr. Simkin’s suit rests on the doctrine of “mutual mistake,” a well-established principle that allows for the cancellation of contracts, including divorce agreements, when both parties are innocently mistaken about an essential term.

Posted by Marcia Oddi on May 31, 2011 02:29 PM
Posted to Courts in general