Steve Simkin is a prominent real estate lawyer in New York City with blue-chip law firm Paul, Weiss. He and his wife Laura Blank separated in 2002 after 30 years of marriage and entered into a separation agreement in 2006 that divided equally their significant assets including a home in Scarsdale, an apartment in Manhattan and a stock portfolio managed by Bernard L. Madoff Investment Securities. Simkin’s Madoff account statement showed a value of $5.4 million and he paid his wife about $2.7 million as her fifty percent share of the asset.
To fund the payment to her, he liquidated a portion of his Madoff account, retained the balance and continued to operate this account with Madoff.
In 2008 Mr. Simkin learned he was a victim of Maddof’s criminal scheme and there was no account with Madoff’s company. The statements Simkin relied on were fraudulent. Simkin filed a lawsuit seeking to recover the funds he paid his wife for her share of the portfolio. His lawyer argued that Ms. Blank had received a “windfall” and on the basis of a “mutual mistake” the agreement should be varied and Mr. Simkin should receive reimbursement from his ex-wife.
A Manhattan trial judge disagreed and tossed out Simkin’s lawsuit. She ruled there had been no mistake as at the date of the separation agreement the account held funds, a portion of which were used to payout Ms. Blank.
The fact that the account was later worth nothing was not a “mutual mistake” in accordance with well-known contract law principles.
Mr. Simkin appealed and in a 3-2 decision in his favour, the Appeal Court this week ruled that Simkin’s claim was legitimate and ought to proceed in the lower court.
In a stinging dissent Justice Karla Moskowitz held that the majority decision trampled on years of well-settled law that “a deal is a deal”. She opined that when the agreement was signed the account had value and to adjust the division of assets because one asset had declined in value was “divorced from reality”.
The legal concepts set out in the dissenting opinion, mirror the laws in British Columbia with respect to a Court’s hesitancy to overrule or set aside a separation agreement negotiated by the parties in good faith and with independent legal advice.
The reason why separation agreements should not be easily varied is exemplified by the Simkin case. Another example? If a couple divorced, with the wife retaining the family home and the husband retaining other assets of equal value, it would be ridiculous for the wife to come back two years later and say, “The real estate market has dropped and my home is now only worth half the value it was at the date of the separation agreement, please pay me more money to account for this change in value.”
Simkin’s best defence is the one that satisfied the majority of the Appeal Justices, namely, that Bernard Madoff testified at his own sentencing hearing there were no accounts, just forged account statements.
The Simkin case will now be appealed by Ms. Blank according to her lawyer, an automatic right because of the two dissenting opinions.
My prediction? I believe at the end of the day, which could be years away, the pain caused by Madoff’s swindle will be suffered only by Mr. Simkin. Do I believe that is fair? Not really, but the law set out in the fourteen page dissent is compelling.
Lawdiva aka Georgialee Lang