Bernie Madoff Fraud Victim Attempts to Renegotiate Divorce Settlement in Unusual New York Divorce Case
The New York Times reports on an unusual case in New York that has divided the legal community. In 2006, a couple divorced after 33 years of marriage and agreed to equally split their wealth. Two years later, however, the man wanted to revise their divorce settlement, following the news of the Bernie Madoff fraud case. The woman refused, and the man sued. The case has reached the highest court in New York.
While divorce agreements are typically rarely overturned, the man’s request is receiving increased attention due to the circumstances created by the Madoff case. When the couple’s assets were split equally, a large portion of money was invested with Madoff under the man’s name. The woman received her settlement in cash. In December 2008, when news of the Madoff scheme broke, the man filed to drastically change the terms of the divorce settlement, arguing that his ex-wife should have to give him millions of dollars she had received in the settlement to replace the losses he suffered due to the fraud.
The man’s lawsuit is based upon the doctrine of “mutual mistake,” which allows contracts to be canceled, including divorce agreements, if both parties involved are mistaken regarding an essential term. In the man’s case, he believed that $5.4 million of the couple’s $13.2 million in assets were in a Madoff account at the time of the divorce. The man then withdrew money from the account to put towards the woman’s $6.6 million cash payment, and continued to invest with Madoff. Once the fraud scheme was revealed, the man argued that he and the woman were mistaken regarding the account’s very existence. However, the woman has argued that the mistake involves the future value of the account, and not its existence. Under law, a mistake regarding an account’s future value would not give reason for revising the divorce agreement. The case is expected to be decided later this year.
Many attorneys predict that, if the Court of Appeals permits the man to revise the divorce agreement, it could potentially affect other contracts, in addition to divorce settlements. Some believe that if the agreement is rescinded, other lawsuits could follow, and may destabilize all kinds of contracts to which fraud victims have agreed.
For over 20 years, the Chicago divorce attorneys at Nottage and Ward have exclusively practiced family law. To find out how our lawyers can help you, call 312-332-2915 today.
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