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Husband Seeks to Do Over Divorce Settlement, Alleging That He Is a Victim of Madoff's Fraudulent Actions
Divorce agreements, when signed, are contracts that, as a general rule, cannot be changed. The principle of law behind the finality of contracts is that if a Stipulation of Settlement or an agreement was easily changeable, there would never be any finality to divorce settlements.
In the case that is before the highest court in the state, the Court of Appeals in Albany, New York, a lawyer who signed a Stipulation of Settlement is seeking to have the agreement changed.
Mr. Simkin, a lawyer at a prestigious law firm in the city, settled with his wife, with the wife receiving real estate and miscellaneous assets, and the husband retaining his money and securities in an account managed by hereBernie Madoff.
Once the Madoff scheme was exposed, more than 2½ years after the agreement was signed, there was in fact no account, and there were no securities or other assets, argued the husband’s attorneys. There was only a Ponzi scheme of unprecedented size and duration, Mr. Simkin argued: “Mutual mistake, a well-established principle that allows for the cancellation of contracts including divorce settlements when both parties are mistaken about an essential term”.
The lawyer for Mr. Simkin’s wife argued that any mistake involved the accounts of future value, not its existence. Under the law, an error about the account's future value would not justify rewriting the agreement. He added, “Just like other Madoff investors, he was able to redeem his money until the scheme collapsed, precisely because he had an account there. To argue that he did not have a Madoff account is nothing more than a semantic trick”.
The courts are in disagreement as to what should occur. A trial judge dismissed Mr. Simkin’s suit, but a divided New York Appellate Court in a 3-to-2 decision ruled that Mr. Simkin could sue to revise the Stipulation because of the fraud, citing mutual mistake about the Madoff account. There was a dissent by Judge Karla Moskowitz, criticizing the majority opinion, stating that such a ruling could bring “chaos for not only the court system, but for litigants as well, who deserve finality and to move on." Mrs. Simkin, the judge wrote, cannot be responsible for Mr. Simkin’s decision to invest with Mr. Madoff for 2½ years after their divorce.
The legal community is divided on the case. On the one hand, the contract law principle of mutual mistake makes a strong case to cancel this divorce agreement, said Lawrence A. Cunningham, a law professor at George Washington University, who has written about the dispute. On the other, judges are reluctant to rescind these contracts because there is a strong interest in maintaining the finality of divorce. It’s a close call. We will follow the case in further e-newsletters.
