Husband, a partner at a large and prestigious New York law firm, and Wife, also an attorney, divorced in 2006. The couple had marital assets valued at $13 million at the time of their divorce.
Among their assets, the couple had invested several million dollars with Bernie Madoff. Husband opted to keep the Madoff account and other assets, so Husband wrote Wife a check as an equalization payment. In other words, so that Wife ended up with half of the value of the marital assets.
After the divorce, Husband invested additional money with Bernie Madoff.
Fast forward two years. Madoff is exposed for running a Ponzi scheme.
As things turned out, Husband figures he got the short end of the divorce stick. And that doesn’t sit right.
Husband wants to recoup his losses. So he sues …
Wife. Arguing, interestingly and creatively, that both Husband and Wife overestimated the value of their Madoff investments, so the equalization payment Husband made to Wife was larger than it should have been and …. should be refunded in part.
The New York family court dismissed Husband’s claim at trial. After all, as a matter of policy, divorce settlements are supposed to be final – unless, among a few narrow exceptions, one spouse commits fraud on the other.
There is no suggestion by Husband that Wife engaged in any fraud or nondisclosure. If anyone did, it was Bernie Madoff.
Husband’s law firm is representing him without charge, so … Husband appeals the family court’s ruling at trial.
On appeal, an intermediate appellate court reinstated Husband’s claim based on the contract law doctrine of “mutual mistake”. And yes, although most people probably don’t think of it that way, a marital settlement agreement is a contract.
Depending on the ultimate outcome of this case, not only might numerous divorce cases be revisited but also even more numerous contract disputes.
Read more in this Yahoo News Lookout piece: Citing Madoff fraud, lawyer wants divorce deal do-over and this New York Times article: Madoff Victim Seeks Divorce Do-Over.
