Divorce Lawyers Misunderstand Effects of Minority Shareholdings

GeorgiaLeeLang025The division of business assets between spouses in a divorce can be complicated and tricky. Elizabeth Berardi of New York found this out the hard way. She retained seventy-member law firm, Philps Nizer , in 2000 to draft a marriage agreement for  her, a document that would take effect if her marriage to Eugene Berardi failed to survive.

The negotiations led to an agreement that would give her 49% of her husband’s  interests in  several bus companies, while Mr. Berardi would retain 51%. It seemed like a very good deal.

Five years later the Berardis’ marriage collapsed and divorce proceedings were commenced. Mr. Berardi’s first tactic was to  challenge the marriage agreement, attempting to set it aside. Ms. Berardi reengaged Philips Nizer, who put 23 attorneys and 16 other professionals to work on her case,  appointing lawyer Helen Davis Chaitman as lead counsel.  After a trial in 2006, the court handed down their Reasons in 2009 upholding the agreement. Philips Nizer had achieved success for Ms. Berardi , despite Ms. Chaitman’s inexperience in family law, and after charging  legal fees of $1.4 million.

But all was not what it seemed. When Ms. Berardi attempted to liquidate her share of the bus companies, she found she had little power as a minority shareholder, particularly in the face of shareholder’s agreements  executed before 2000 that limited her ability to freely sell her interests. Her minority position also diminished the value of her shares in the company.

Ms. Berardi sued Philips Nizer for malpractice and professional negligence, asserting they either knew or should have known, and told her of the effects of her minority interest and the shareholders’ agreements. In particular, when her husband sought to overturn the agreement, they should not have opposed his application. Had the agreement been set aside, by consent of the parties, she could have negotiated a bargain that would see her receive liquid assets.

She also argued that Philips Nizer were in a conflict of interest by agreeing to act for her while seeking to uphold the agreement they had drafted. In a separate claim Ms. Berardi alleged she was grossly overcharged by Philips Nizer, as her ex-husband paid his lawyers only $395,000 in legal fees.

Naturally Philips Nizer sought to have Ms. Berardi’s lawsuits dismissed, suggesting she was simply attempting to escape payment of the funds she still owed the law firm, an amount over $700,000. However, this week Justice Nancy Bannon disagreed with Philips Nizer, refusing to dismiss the court action, paving the way for the litigation to continue.

Ms. Berardi’s new lawyers, Pollock & Maguire, believe that Philips Nizer pursued and obtained minority shareholder status for Ms. Berardi, never realizing the ramifications of their successful defence, until it was too late. Lead counsel, Helen Davis Chaitman is no longer with the firm and is not a defendant in the lawsuit.

Lawdiva aka Georgialee Lang

 

 

 

 

To Sign or Not to Sign: The Prenup Dilemma

DSC01152_2 (2)_2Pre-nuptial agreements are so commonplace today that no one gives them a second thought.  They are considered de rigueur in second marriages, particularly where there are children from a first marriage, who panic at the first sign that good ol’ dad has a girlfriend. They are also regularly used when a 50-year old wealthy bachelor moves his 25-year old girlfriend into his home. Ah…young love…

Their purpose is to protect a spouse’s assets from attack by their new partner if the relationship breaks down, and often they provide that upon separation, the wealthy spouse will not pay spousal support to the other.

But do they offer the protection the monied spouse is seeking, and what happens if your partner refuses to sign one?

Prenups are, of course, simply contracts, but unlike commercial contracts, courts look at prenups differently. When a couple begin living together or get married, there should be no expectation that each of them automatically has an interest in the other’s property or can expect to be supported by their new partner.

However, there comes a time when a couples’ lives are so intertwined that the law recognizes and provides for the sharing of property and in many cases, spousal support. Some of the factors include the birth of children, the sharing of childcare, the pooling of financial resources, the length of the relationship, and the many  non-financial contributions  each makes based on their abilities and skills.

In the usual prenup scenarios, if dad’s second marriage lasts as long or longer than his first, the prenup signed at the outset may be difficult to enforce. Our bachelor with the young girlfriend may find that after she has two children and is no longer participating in the job force, the contract they signed is simply unfair to her.

Often clients will make an appointment to discuss their desire for a prenup, but frequently it is a subject they have not yet raised with their partner. While prenups are not terribly expensive, to instruct a lawyer to draft one is rather foolish unless one has broached the issue with one’s sweetheart.

Case in point: New York executive,  Yiri Sun, is a Princeton graduate and vice-president of a large insurance company. She was very excited about her wedding day. She had booked a beautiful venue, the catering was top-notch, her bridal gown was exquisite, and the invitations sent.

At the last minute she was forced to call off the wedding as she refused to sign the prenup that was presented to her. Instead of losing her $8,000  reception deposit, she decided to turn her wedding into a party for 60 needy children and their families, referred to her by  the Salvation Army. She hosted the event wearing her wedding gown.

Ms. Sun’s professional status clearly gave her the confidence to call off the wedding when she saw the terms of the contract. Most women presented with prenups simply sign them. The good news for them is that if their relationship is not short, and they have made life choices that prejudice their financial well-being, they may be able to convince a judge to overrule the prenup.

As I tell my clients, prenups are a short-term solution, that in the long-run may not meet their expectations.

Lawdiva aka Georgialee Lang

Missouri Politicians Vote in Favour of Equal Parenting

GeorgiaLeeLang025The State of Missouri can truly boast of their “enlightened” political representation as state legislators took a bold step this week and passed legislation to engrain the concept of shared parenting into their family laws. The next step is for Governor Jay Nixon to sign the bill into law.

You may ask: Is this another one of those “watered-down” efforts we have seen before, where the change does not remedy the age-old “dad can’t be an equal participant in parenting” philosophy?  Not at all.

The changes contemplated in the new law are exciting for Missouri fathers who have for too long been marginalized by antiquated twentieth century traditions of stay-at-home moms and working dads, operating to advance a maternal preference for parenting after separation. The old way of parenting was shored up by untested psychological theories about mothers and fathers that unwittingly led to a template of a “visiting” parent, usually relegated to every second weekend for a total of four nights of access per month.

The primary caregiver model became the default position without consideration of the quality of parenting, the psychological functioning of each parent, or the history and nature of the parent/child relationship.

Good parents were lumped together with dysfunctional parents because judges relied on precedent, a straightjacket that we now know has hurt generations of children and needlessly disempowered parents, usually fathers.

The proposed Missouri law challenges those outdated assumptions by injecting language that directly addresses the inequality that has reigned for decades in North America.

For example, the definition of joint custody will read:

” Joint physical custody means an order awarding each of the parents approximate and reasonably equal periods of time during which a child resides with or is under the care and supervision of each of the parents. Joint physical custody shall be shared by the parents in such a way as to assure the child of substantial, frequent, continuing, and meaningful contact with both parents;”

The bill also includes the following passage:

” In determining the allocation of periods of physical custody, the court shall presume that a parenting plan that equalizes to the highest degree the amount of time the child may spend with each parent is in the best interest of the child. The state courts administrator shall modify the Form 68-A Parenting Plan, also known as “Schedule J”, to reflect the provisions of this subdivision and to include that the default parenting plan shall include alternating weeks with each parent, unless the parents submit an alternative parenting plan.”

It is encouraging to see politicians embrace the most up-to-date research which overwhelmingly supports parents as equal partners in parenting after separation. Hopefully, other jurisdictions will wake up and recognize that conflict during divorce should not be used to eliminate what hundreds of social scientists say is the best outcome for children. Shared parenting. It’s good for kids and parents.

Lawdiva aka Georgialee Lang

GUEST POST: Making Sense of Divorce Statistics

In today’s society, couples are led to believe that 50% of marriages end in divorce. How accurate is this statistic, though? In actuality, relationship experts have found the arbitrary figure of “50%” to be misleading. Recent, detailed analysis indicates that more encouraging statistics lie beneath this often referenced yet exaggerated data point. So, what can couples learn from the new research in order to build a healthy marriage?

First, it’s important to note that this “50% myth” is false. In fact, the divorce rate has been declining since 1980. An article published in The New York Times, “The Divorce Surge Is Over, but the Myth Lives On,” states that 70% of spouses who tied the knot during the 1990s have celebrated their 15th anniversary, a 15% increase from those who married in the ‘70s and ‘80s. Moreover, couples walking down the aisle from 2000 onward, are experiencing even fewer causes for separation. The current ratio of divorced couples to married couples is measured at 1:3, and if this trend continues, nearly two-thirds of marriages will never end in divorce.

This steady decrease in divorce rates is based on several factors. Here’s a breakdown of why exactly marriages either thrive or fail, and how couples can use this data to improve their chances of maintaining wedded bliss.

Education Level

According to Sharon Pastore of the Main Line Family Law Center, spouses who have both earned degrees are 25% less likely to divorce than those without collegiate training. In fact, of college-educated people who married during the early 2000s, only 11% had divorced by their seventh anniversary (so, don’t take that “Seven Year Itch” stereotype too seriously!).

Age Range

A study launched by the CDC has concluded that those who tie the knot between 20-24 years old, face a higher threat of getting divorced than any other age demographic. This can be attributed to a young person’s tendency toward self-absorption, emotional immaturity, ill-preparation and tenuous grasp on adult responsibilities.

Financial Status

Households that generate an annual income of at least $50K are 30% less likely to divorce than those living within the budget constraints of a $25K annual income, as determined by the Main Line Family Law Center. Lower socioeconomic status often results in marital tension and subsequent separation. However, ironically, the actual divorce process can potentially lead to financial hardship for both parties involved, as well.

Religious Affiliation

On average, divorce rates within the church tend to be lower than among secular environments. The American Family Association Journal surveyed over 50 churches from 2012-2013, and found that only 22% of married congregants had been divorced. Furthermore, if spouses are actively engaged in practicing a religion together, they are 14% less likely to separate than those lacking any faith-based ties.

Geographic Location

The prevalence of divorce can also depend on where people live. For example, in the United States, West Coast couples are more vulnerable to marriage failure. According to The Demographic and Household Estimates for 2005-2009, conducted by American Community Survey, New York City exhibits less divorce than any other U.S. metropolitan area. Why do Big Apple-based marriages stick? NBC New York reports: “It’s difficult to file for divorce in New York which might contribute to the lower rates. New Yorkers also tend to stay single longer, so there are fewer people per capita getting married, thus fewer people getting divorced.”

Part 2 of this Guest Post will identify other relevant factors.

Guest Author:NANDA DAVIS  is a graduate of George Mason University School of Law. She practices family law in Virginia at The Davis Law Practice. Her articles have appeared in several legal publications including Justipedia.  http://www.davislawpractice.com/

$500,000 Custody Case Garners Harsh Criticism

 

Another day…another courtroom, but the same insanity…. a custody battle that has cost two parents $500,000 in legal fees. This time it’s an exasperated Ontario Superior Court judge from Hamilton who asks the question, “How does this keep happening? What will it take to convince angry parents that nasty and aggressive litigation never turns out well?”

Mr. Justice Alex Pazaratz presided over a 36-day trial, awarding sole custody of an 8-year-old child to her father, a Toronto police officer. The Court’s Reasons for Judgment begin with the recitation of an email sent by the husband to his wife, a year after their separation, and before litigation commenced:

“We are both reasonable people and I really think we can work this out without spending $40,000 to $50,000 a piece in lawyer fees only to have a judge tell us something we could arrange ourselves. Please I’m begging you to be reasonable.”

It only takes one parent to turn a family law case into a hellish nightmare, and according to Judge Pazaratz that’s what an angry, foolish woman did. Consider the optics: Father wants generous parenting time, and mother refuses, turning the child against her father. In these situations, fathers will get nowhere unless they ask a court to intervene. At this point, most right-thinking parents would instruct their lawyers to negotiate a parenting plan, or attend mediation, with the goal of maximizing each parent’s time with the children, focusing always on the child’s best interests.  Sound so simple, doesn’t it?

In this case, dad spent $300,000, while mom spent $200,000. Judge Pazaratz said:

“Pause for a moment to consider the overwhelming tragedy of this case,…These are nice, average people. Of modest means (now considerably more modest). They drive old cars and probably pinch pennies shopping at Costco.”

The harshest criticism was leveled at the child’s mother, who the Court found had manipulated and falsified evidence, engaged in provocative and dangerous behaviour, and poisoned the child against her father. Judge Pazaratz described her conduct as “emotional child abuse… with their only child caught in the cross-fire”. Her deviant behaviour was triggered when her estranged husband began to move on with his life and began a new relationship.

The Court ordered the mother to pay costs to the father in the amount of $192,000, wryly concluding:

“In retrospect, (the father’s) sombre warning about ‘spending $40 – $50,000 a piece in lawyer fees’ now amounts to wishful thinking.”

Lawdiva aka Georgialee Lang

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Late for Court? Go to Jail!

BarristerJudge Amanda Sammons of Campbell County, Tennessee has a strict rule that if defendants don’t arrive at court before 9 am, or 1 pm for her afternoon session, they can’t come in! When she first started this practice she instructed the court bailiffs to lock the doors. Later she agreed the doors could remain unlocked, but no one could enter after the prescribed court commencement times.

More than a few people have been caught by her rule, which is antithetical to the concept of open courtrooms and transparent justice.

Case in point: Suzanne Webb, age 39, arrived at the courthouse at about 1 minute to nine for a hearing in a misdemeanour vandalism case. She was barred from entry and waited in the hallway. Once the doors were opened she entered, took a seat, and read a book until her name was called. Judge Sammons asked her why she was late. She replied that she was not permitted to enter, whereupon Judge Sammons said, “That’s no excuse. You’re going to jail, you violated your bond.”

Ms. Webb was handcuffed and led to the jail holding area adjacent to the courtroom. Her only previous charge was for driving with a suspended license, a charge that was dropped after she paid an outstanding ticket.  She remained in custody waiting for her aunt to bring her the funds to pay the new bond, and then was released.

A few months later she was back in court where the vandalism charges were dropped in exchange for the forfeiture of her $424.00 bond. Coincidentally, the fine for a vandalism conviction? $424.00!

Other “victims” of Judge Sammons include Ryan Daniel Currier who was held without bond for 24 hours and Laura Hatfield who was ordered to post $15,000. One unlucky lady was arrested on a bench warrant, and Jason Inman was ordered held pending his posting of a $75,000 bond.

Not surprisingly, Judge Sammons, whose nickname is “the blue-eyed assassin”,  is not a stranger to controversy. She has been accused of refusing to sign orders for accused persons who are entitled to have their records expunged, and ordering children into foster care in the absence of any request from the Department of Child Services.

Formerly a kick-ass prosecutor, Judge Sammons’ election website says:

“With a low tolerance for foolishness, Mandy’s tough approach to prosecuting crime has earned her a reputation as hard-nosed prosecutor who “goes for the jugular” and doesn’t quickly back down from a fight.”

Lawdiva aka Georgialee Lang

Bill O’Reilly Loses Custody Appeal

GeorgiaLeeLang025The founder of the “No Spin Zone” may think that New York judges are “pinheads”, and that’s because they ruled against him this week in his bid to have his teenage children live with him, rather than his ex-wife.

Last year the Nassau County Supreme Court awarded his ex, Maureen McPhilmy, age 49, full residential custody of 13-year-old Spencer and 17-year-old Madeleine, although O’Reilly, age 66, has full visiting rights and shares legal custody.

As is typical in custody cases involving teenagers, both teens expressed their views, which given their ages, were highly persuasive to the judges hearing the case. The children wanted to remain living with their mother.

The Appellate court, however, spoke in favour of continued joint legal custody saying:

“…the record supports the court’s finding that if either parent were awarded sole decision-making authority, there would be a danger that it would be used to exclude the other parent from meaningful participation in the children’s lives.”

An unfortunate finding that suggests this custody battle has been high-conflict and that the once-married O’Reilly’s can no longer say anything positive about the other. It has also been reported that O’Reilly’s daughter advised a child custody assessor that she had witnessed domestic violence in the home, a charge that O’Reilly has adamantly denied.

What is not so unusual about this case is that the name O’Reilly does not appear in the court registry or in court documents, undoubtedly to protect the children.

The case is listed as Anonymous 2011-1 v Anonymous 2011-2 which indicates their fight has raged on for 5 years.

Lawdiva aka Georgialee Lang