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

Madonna Battles in New York Family Court for Return of Her Son

GeorgiaLeeLang016She’s one of those people whose one word name is instantly recognizable: Madonna. She and her ex-husband British director Guy Ritchie, were in family court in New York this week being scolded by Judge Deborah Kaplan over the custody dispute concerning their 15-year old son, Rocco.

Since 2008 Rocco has lived primarily with his mother in New York, however, on Madonna’s international Rebel Heart Tour last summer, Rocco decided to stay in Europe and moved in with his father who lives in England. Madonna was not pleased.

And neither was the judge this week. She admonished Madonna and Mr. Ritchie suggesting that while they appeared to enjoy living their lives in the media spotlight, their son did not. As is typical in custody cases the barbs flew…. Madonna’s lawyer, Eleanor Alter accused Mr. Ritchie of ignoring a court order and encouraging Rocco to do the same, while his lawyer, Peter Bronstein expressed the folly of forcing a 15-year old teenager to live with one parent or the other, against his wishes.

The expression often used for teens in custody disputes is that they “choose with their feet”, which is just what Rocco has done. Mr. Bronstein also noted the difficulty in forcing Rocco to board a plane back to New York… and he is spot on.

I remember a case I had many years ago of a mature 12-year old boy visiting his father in Vancouver during the summer, and when the vacation was over, he refused to return to his mother in Germany.

There was a court order that stipulated the exact date of this boy’s return and I warned my client that he was obliged to obey the court order, bring the child to the airport, and see that he got on the plane. But the boy took matters into his own hands.

Father and son approached the airline counter where the young man started screaming and tossing his clothes out of his suitcases and onto the floor. He created such a scene that the passenger agents paged the plane’s Captain to come to the counter to determine if they should force the child to board. Viewing the scene, the Captain refused to permit the young man to board the plane.

My client was clever enough to get the names of the other passengers in line who witnessed this spectacle and later agreed to be witnesses, confirming that my client had done everything he could to persuade the boy to board the plane.

Yes, the young man remained in Vancouver with his father after his mother realized she could not force him to return to Germany. A few years later his younger brother joined him. His arrival was unexpected and a real escapade, but that’s another story.

Lawdiva aka Georgialee Lang

The Tragedy of Munchausen By Proxy

GeorgiaLeeLang025Many years ago I acted for a single mom who had an 8-year-old daughter. She retained me when her ex-husband filed an application seeking a change of custody from my client to him…not so unusual, right?

Wrong! This case was my first introduction to the mental illness called “Munchausen by proxy”, an insidious syndrome that experts say causes mothers, rarely fathers, to exaggerate or fake their child’s health problems, or in the worst cases, deliberately harm or cause injury to their child.

The signs and signals that Munchausen may be present include:

• A child who is often hospitalized with unusual and unexplained symptoms that seem to go away when mother is not present, or a child who is moved by her caregiver from doctor to doctor and hospital to hospital.

• Symptoms that don’t match the child’s test results.

• Symptoms that worsen at home but improve while the child is under medical care.

• Drugs or chemicals in the child’s blood or urine.

• Siblings who died under strange circumstances.

• A mother who is overattentive to the child and overly willing to comply with health care workers.

• A mother who is a nurse or who works in the health care field.

Unfortunately, many friends, family, and medical experts who observe such symptoms have difficulty imagining that the child’s mother, who is overly protective, indeed, sacrificial in her care for her child, could intentionally harm her child.

Psychologists explain that the pay-off for the Munchausen mother is the fulfillment of her pathological need for attention and sympathy, something that the growth of social media exploits, with Facebook postings and mommy-blogs.

In a case from White Plains, New York, Lacey Spears, age 29, was charged with the murder. She was accused of poisoning her son, 5-year-old Garnett-Paul Spears with sodium….that’s right, every day table salt.

Garnett-Paul’s sodium levels escalated, confounding his doctors at Westchester Medical Centre who tried desperately to control his brain swelling and seizures, and prevent his eventual death.

Meanwhile his mother used social media to regale her readers with details of Garnett-Paul’s tortuous medical journey, all the while preening and accepting accolades for her unstinting dedication to her sick son.

Ms. Spears was bedside at the hospital with her son, sleeping with him overnight, until he died. Prosecutors allege  she was continually depositing salt in his feeding tube.

Video cameras caught Ms. Spears on two occasions taking her son into a hospital bathroom with a feeding tube. A search of her apartment also turned up two feeding bags contaminated with salt. One of the bags had the equivalent of 69 salt packets.

His death is a terrible tragedy and one that experts say is rare, because Munchausen mothers don’t intend to kill their children, they simply want them to stay sick to feed their uncontrollable need for attention.

She was convicted of second degree murder and sentenced to 20 years in prison.

As for my client, her ex-husband was unable to prove his daughter was a victim of Munchausen by proxy, although the circumstances were admittedly suspicious. I often wondered how that little girl fared and thought about her for years after.

Lawdiva aka Georgialee Lang

A Man Who is His Own Lawyer Has a Fool For a Client

_DSC4851In 1814 British scholar and writer Henry Kett wrote “A man who is his own lawyer has a fool for a client”, a truism if there ever was one, and later adopted by the Supreme Court of the United States who wrote “the adage that a lawyer who represents himself has a fool for a client” is the product of years of experience by seasoned litigators. (Kay v. Ehrler, 499 US 432, 437 (1991)

A classic example of the danger of acting “pro se” or for one’s self is illustrated by Anthony Zappin, a 30-year-old New York lawyer who made the disastrous mistake of acting for himself in his own divorce.

Married to lawyer Claire Comfort in 2013, the couple separated shortly after their son was born. Zappin’s path to self-destruction began after he entered into a consent order dated November 2013 where he agreed to have no contact with his wife and supervised access to his son.

In April 2014 Superior Court Judge Anthony Epstein found that a motion filed by Mr. Zappin was “replete with intemperate and uncivil language…redundant, immaterial, impertinent, or scandalous”. Judge Epstein also criticized his counsel skills, a comment that Zappin, a junior lawyer, took great exception to.

In May 2014 Judge Epstein rendered a further decision throwing out Zappin’s application that he reconsider his prior ruling. By this time, Mr. Zappin’s bad behavior was escalating as evidenced by the handwritten note he attached to his reconsideration motion that read “You’re pathetic! (Judicial Complaint Forthcoming)

On March 3, 2015, Justice Deborah A. Kaplan rendered oral reasons in open court that apparently displeased attorney Zappin. When she concluded she asked Mr. Zappin if there were any other matters for her to consider. He answered:

MR. ZAPPIN: I just want to make it known on the record that I am tired of the lies coming from the court and tainting of the record, knowing full well this is going to go to the Appellate Division. And we’re gonna be in the Appellate Division tomorrow, getting a stay, and then we’ll go back down to D.C. on Friday, and we’re going to open up to Ms. Comfort’s domestic violence petition, and we’re gonna have a hearing down there in from of Judge Blant, because that’s who she lied to, saying that she filed the motion and we’ll have him make a finding of domestic violence. So that’s all I have to say.

THE COURT: Are you finished?

MR. ZAPPIN: Oh, I’m finished, your Honor.

Penning the disciplinary judgment in respect of Anthony Zappin, Justice Matthew F. Cooper wrote:

(Zappin’s) “contemptuous remarks directed towards Justice Kaplan — made to her face in her own courtroom in front of attorneys, litigants and court staff — were not restricted to the statements quoted above. Without reciting the other deeply personal, and frankly outrageous, verbal attacks that plaintiff launched against Justice Kaplan when he was before her on March 3, 2015, they can only be described as words not said in civil discourse, let alone ones that should ever be uttered by an attorney to a judge in the context of a court proceeding.”

But Justice Kaplan was just one of Mr. Zappin’s victims. He also targeted a lawyer ordered by the court to represent his son’s interests, regaling her with scathing comments. Later he established a domain site in her name and on this website wrote missives like:

“Harriet You’re a very sick and greedy woman. I pray for you and hope you seek help. Also, “I intend to keep the public apprised of your misconduct and disturbing behavior.”

The child’s lawyer retained a court ordered psychiatrist to provide expert testimony, a task that was met with Mr. Zappin’s pernicious complaint to the psychiatrist’s professional organization, and although quickly dismissed, caused considerable anxiety and harm to the innocent expert.

Most damaging, however, was Justice Cooper’s conclusion that Mr. Zappin’s “ill-advised behaviour seriously calls into question his fitness to practice law” and indicates a “personality that makes (him) incapable of properly parenting the parties’ child”.

Zappin was fined $10,000. The trial to resolve the issues takes place in November 2015. After all this, one can only hope Zappin finally hires a lawyer.

Lawdiva aka Georgialee Lang

Disbarred and Disgraced Lawyer Strikes Again

GEO Oct 26, 2010Former lawyer Janice L. Jessup, who practiced on Long Island New York has a dreadful discipline history which led to her resignation and disbarment in 2010. Rather than slinking away into oblivion she is again in the news for stealing $1.2 million dollars from an elderly, mentally and physically challenged client.

In 2008 she faced 13 charges of professional misconduct involving making false statements of fact and law; engaging in conduct involving dishonesty, fraud, deceit or misrepresentation; representing a client without adequate preparation; conduct adversely reflecting on her fitness as a lawyer; engaging in an impermissible conflict of interest; and conduct prejudicial to the administration of justice.

Unable to muster any kind of defence she opted to resign in 2010, an act that ensured she could not apply for reinstatement for at least seven years. Frankly, she got off lightly if her disbarment was the only punishment for her flagrant abuse of her clients’ trust. She apparently relocated to Charlotte, North Carolina and began using her husband’s surname, Jones.

It now appears the 2008 discipline charges were only the tip of the iceberg.

In 2007 she acted for Geraldine Savage, age 47, in respect of real estate inherited by Ms. Savage that was expropriated and used to build a community centre in Westbury. Lawyer Jessup convinced officials she had authorization to accept $1.2 million dollars in compensation on behalf of her client.

She craftily arranged for an imposter to pretend she was Geraldine Savage when government officials visited her home to confirm Ms. Jessup’s authority to act was legitimate and to investigate Savage’s health status. The real Geraldine Savage was resting comfortably in a residential facility, oblivious of the fraud being perpetrated.

In 2013 Ms. Savage’s relatives realized she had been duped by her lawyer. They later learned Ms. Jessup had spent all the money on herself, her family, and reimbursing other clients.

She was arrested in January 2015 for charges of first-degree grand larceny and first-degree scheme to defraud and entered a “not guilty” plea last month. The offences carry a maximum prison sentence of eight to 25 years. Her bail was set at a bond of $150,000 or $100,000 cash.

Is it just me or does it seem that cases of corrupt lawyers seem to be on the increase or is it that with the web and other social media we now hear about them much more than before?

“There is no fire like passion, there is no shark like hatred, there is no snare like folly, there is no torrent like greed.”
― Gautama Buddha

Lawdiva aka Georgialee Lang

Aged New York Husband His Wife’s Prisoner?

GEO#1Eighty-four-year old Martin Cassidy spent his career creating dinosaurs for the American Museum of National History.

His career began in 1972 when the museum was offered the articulated skeleton of a dinosaur, an acquisition that would cost $200,000, plus as much as $500,000 to send a team into the field to find, collect, pack, ship, prepare, and reassemble the gigantic beast. Realizing how financially impractical that was, his new calling began.

Over the years Mr. Cassidy and his team built life-like dinosaur facsimiles for museums around the world. It was while working at the museum that he became acquainted with New York pulp and paper billionaire and philanthropist Ira Wallach, whose charitable foundation provided funding for the famous museum.

Eventually he met Ira Wallach’s daughter, Kate Wallach, and before their 1987 marriage he signed a pre-nuptial agreement. Kate allegedly told him it was necessary to “make her family more comfortable”. Her father died in 2007 at the age of 97, and left her $200 million dollars.

During their 28-year May-December marriage they had five children. In Mr. Cassidy’s recent divorce court filing he deposed that while his wife luxuriates in their lavish $20 million dollar Long Island estate, he is relegated to a dark, dank area above the garage outfitted with a small bed and two rickety folding chairs.

There is a toilet, but no bath or shower, and he uses a nail pounded into the wall to hang his meagre wardrobe. His daily menu consists of canned soup and he receives $2,500 a month to meet his expenses.

Martin Cassidy explains in his filed affidavit that he is “literally and figuratively a prisoner” of his wife who he says is waiting for him to die so that she doesn’t have to share any of her large estate with him.

Kate Wallach’s lawyer, Kenneth, Weinstein, says Mr. Cassidy lives in a “beautiful home with surroundings he has chosen” and that his client’s husband is suffering from dementia. She reportedly does not wish to divorce.

A court-appointed guardian who is overseeing the process to determine his mental status has remarked that his living accommodation is “far from luxurious”.

In a recent court application Mr. Cassidy sought an order that his wife pay him $30,000 a month so he can move to his own rental accommodation. The Court ruled that pending the mental evaluation he should remain in the family home. His lawyer, Bettina Hindin, is appealing the order. She remarked:

“Imagine, solely as the result of being a divorce litigant, a court can force you to live with the spouse you are trying to rid yourself of.”

My observations? If the tables were turned and Kate Wallach was the victim of the circumstances described, a spousal support order would have been granted tout-suite, and probably for a lot more than $30,000 a month.

After 28-years of marriage and five children it is hard to imagine that a Court will not set aside the prenuptial agreement. In British Columbia these types of agreements are effective in short-term marriages with no children. Add years and children to the equation and they become less sustainable.

Lawdiva aka Georgialee Lang