Will Wife’s Shoe Collection Determine Court’s Jurisdiction?

We often hear politicians speak of our “global community” to describe the people or nations of the world being closely connected by modern telecommunications and being socially, economically, and politically interdependent.

One area where the phenomena of global connectedness is ever more apparent is  in the area of family law. Only a few decades ago cases in family court typically involved a divorcing couple who lived in the same city or town and they usually remained there after their divorce was finalized.

Now it is commonplace for family law cases to involve several jurisdictions. The scenarios are varied. It may occur where a couple own real estate outside of their country of residence, or one of them wishes to move away with the children to another country. Child abduction is on the increase world-wide as couples separate and engage in high conflict litigation, sometimes marked by one parent’s non-consensual departure from the home country.

Couples that have  domestic situations involving multiple jurisdictions now also analyze where the law is most favourable to them and seek to bring their court cases to that jurisdiction. It’s called forum-shopping.

Great Britain is seen as a very friendly jurisdiction for women in large property cases and there have been many recent cases where one party sought to persuade a British court to take authority over their case, while the other stridently resisted. In middle eastern countries where sharia law governs, women have few legal rights and even with the limited rights they have, they often find themselves waiting years to obtain justice, if it ever arrives. If another jurisdiction is available they will go there.

There is no doubt that family law has become more complex as a result of the global community that is now our world. In a recent case in New York City, Swiss businessman, Maurice Alain Amon and his wife, Tracey Hejailan, had homes in Manhattan and in Monte Carlo. Mr. Amon argued the Monte Carlo court was the proper jurisdiction to hear their case. Not surprisingly, Mr. Amon had received advice that the family law system in Monaco did not include a division of property based on the fact of marriage. In Monaco ownership of property is conclusive. In other words, if you own it, you keep it.

In support of his argument that the couple’s primary residence was in Monaco, Mr. Amon submitted evidence of the size of his wife’s shoe collection, along with her walk-in closet in Monte Carlo, suggesting that where she stored most of her extensive shoe collection and designer fashions is where they lived.

Mr. Amon was no doubt motivated to make his jurisdictional argument when he learned his wife was going after his valuable art collection on the walls of their New York home, property she would have no interest in under Monacan law.

Somehow I think it’s going to take more than Jimmy Choo’s and Manolo Blahnik’s for Mr. Amon to succeed.

 

Lawdiva aka Georgialee Lang

 

 

 

Big Law Partner Bears the Brunt of Madoff Fraud During Divorce

In 2011 I wrote a story about Steve Simkin, a prominent real estate lawyer at New York mega-firm Paul, Weiss. An unwitting victim of Bernie Madoff’s ponzi scheme, Mr. Simkin signed an agreement with his wife, lawyer Laura Blank in 2006, before Madoff’s massive fraud unravelled, dividing their family assets between the two of them. Part of the deal saw Ms. Blank receive compensation for her one-half interest in Mr. Simkin’s investment portfolio valued at $5.4 million dollars and held by Bernie Madoff.

In 2008 Mr. Simkin realized he was a victim of Madoff’s criminal scheme. The truth was there was no account with Madoff’s company and the monthly statements were forgeries. Simkin filed a lawsuit against his ex-wife seeking to recover the funds he paid her for her share of the portfolio. Simkin’s lawyer argued that Ms. Blank had received a “windfall” on the basis of a “mutual mistake”. He sought a variation of the agreement and reimbursement from his ex-wife.

A Manhattan trial judge didn’t see it that way and tossed out Simkin’s lawsuit. She ruled there had been no mistake, because at the date of the separation agreement the account held funds. The fact the account was later worth nothing was not a “mutual mistake”.

Mr. Simkin immediately appealed and in a 3-2 decision in his favour, the Appeal Court 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.”

Of course, Ms. Blank appealed the Court of Appeal decision and in 2011 I made the following 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.”

Sure enough, with all appeals now completed, Mr. Simkin alone bears the burden of Madoff’s fraud, while Ms. Blank is permitted to retain the “overpayment” of $2.7 million.

It is likely that Steve Simkin’s plight will attract little sympathy, given the enormous salaries earned by “biglaw” partners in New York City. Website abovethelaw.com suggests a salary range of $600,000 to $900,000 per annum. Nice work if you can get it!

Will Bankrupt Billionaire Escape His Spousal Support Obligations?

American Samuel Wyly and his late brother Charles made their fortune as savvy entrepreneurs. They founded or grew a variety of successful businesses including arts and crafts stores Michael’s, University Computing Company, restaurant chain Bonanza Steakhouse, and Sterling Software. They also reputedly donated over $90 million dollars to charitable causes, including large donations to the Republican party.

Along the way some of their business activities attracted the attention of the U.S. Securities and Exchange Commission. In 2006 they were under investigation for their alleged use of potentially illegal offshore tax shelters. Grand juries in New York and Texas were tasked with investigating whether the brothers had used funds in offshore trusts to purchase $30 million dollars of art, jewellery, furniture, and other personal items for themselves.

They denied any wrongdoing and advised investigators they would invoke the fifth amendment if they were subpoenaed to testify. They were never called, a bullet dodged.

However, an insider trading investigation in 2010 did not end as well. The allegations, later proved in court, were that Samuel Wyly used insider information to buy and sell securities for an undisclosed profit of $550 million. He apparently traded public stock in companies where he and his brother served as board members, through hidden entities in other jurisdictions.

A Manhattan federal jury in May 2014 found Mr. Wyly guilty and it is expected that Mr. Wyly will have to “disgorge” or pay back $300 million dollars. His assets were also frozen.

Last month Mr. Wyly filed for Chapter 11 bankruptcy in Texas, an event that caused consternation for his ex-wife Victoria Lee Wyly, now Torie Steele, who after their 1991 divorce negotiated support payments of $500,000 per year. In his bankruptcy filings Mr. Wyly recorded monthly spending of $1 million. That has also been curtailed by bankruptcy officers.

Spousal and child support payments are not cancelled by a bankruptcy, however, a paying party’s change in income will be grounds for a variation of support. According to Ms. Steele’s lawyer, Samuel Wyly has already missed a monthly payment of just over $40,000.

There is, however, a complicating factor in respect of Ms. Steele’s support payments. To avoid the “risk and cost” of a contested spousal support hearing the parties agreed in 1993 that Mr. Wyly would act as an investment advisor for Ms. Steele, manage $5 million dollars of her funds, and guarantee her returns of $500,000 per year for her lifetime.

In 2007 Mr. Wyly went to court seeking to be released from this obligation. A judge upheld the arrangement saying Wyly “was agreeable to taking his chance with his acumen as an investor as opposed to
risk incurring any further spousal support obligations.”

The question for the bankruptcy court is whether Ms. Steele’s investment income arrangement constitutes spousal support and if it does not, where does that leave her?

I’ll be watching this case closely and report the outcome in due course.

Lawdiva aka Georgialee Lang

Judge Trashes New York Landmark “Carnegie Deli” in Divorce Ruling

I was in New York city last fall and near the top of our agenda was a trip to the Carnegie Deli, a landmark in mid-town since 1937 and run by the Levine family since 1976. Its claim to fame is kosher pastrami, corned beef, and their famous cheesecake, all of which they can ship almost anywhere in the world. It’s a very kitschy little place with uneven floors and plastic table cloths, but there is always a line-up.

I didn’t expect the Carnegie Deli to be featured in a divorce post, but it seems that Marian Harper Levine and her husband Sandy, who now runs the deli with her, were lambasted by Manhattan Supreme Court Justice Matthew Cooper for their petty squabbles, while litigants with serious problems were put on the back burner. The audacious judge said:

“What I care more about is the fact they’ve made millions of millions of dollars on the backs of dishwashers, cleaners and pastrami slicers who make as much in a year as they’ve made in a day or two.”

This was apparently in reference to a recent $2.65 million dollar settlement reached between the Levine’s and their staff, who were cheated out of proper wages for over a decade.

Mrs. Levine’s application was to reduce the $11,00 per month she has been paying her husband in spousal support, a request that was denied by Judge Cooper. She also complained that her husband, who began an affair with the deli’s former hostess, had helped himself to huge sums of money, an allegation that was called “all smoked meat and mirrors” by Mr. Levine’s witty attorney, Donald Frank. Mrs. Levine took exception to the trivialization of her concerns by opposing counsel, a view that Judge Cooper dismissed saying:

“This is not a case where I lose sleep at night. This is not some case where I have people with disabled children, where I have people who can’t afford to make next-month’s rent”…If I made light of anything, if I joked more than I should have, if I occasionally used a sarcastic tone…it’s not that I’ve lost track of what this case is about…”

No doubt we’ll hear more about the dissolution of the Levine’s 22-year marriage…as for me, I really didn’t like their cheesecake at all!

Lawdiva aka Georgialee Lang