Sucks for him!

Simkin v. Blank

Supreme Court of the State of New York

Decided 12-22-09

Steven Simkin and Laurie Blank divorced in 2006.  At that time, they divided the marital assets in a settlement agreement using September 1, 2004 as the valuation date.  Steven kept all of the bank, brokerage and financial accounts in his name as well as a joint Citibank account, his law practice and the house.  Laure kept the bank and investment accounts in her name and a Manhattan apartment.  She also received a $6.25 million payment from Steven.  Although both parties retained their own retirement accounts, Steven transferred $368,000 from his to Laurie’s account in order to equalize their savings.  The agreement included several mutual releases in which each spouse gave up any claim to the property of the other.

Three years after the parties signed the agreement, Steven discovered he was a victim of Bernie Madoff’s Ponzie scheme. Steven suffered undisclosed financial losses and filed an amended complaint to reform the 2006 settlement agreement. He claimed mutual mistake and unjust enrichment, for which he sought restitution.

Laurie moved to dismiss his complaint based on the numerous releases in the agreement. She also contended that the amended complaint did not set forth a claim for mutual mistake.  Until the fraud was discovered, Steven could have cashed in his account, which would have probably been worth more than it was as of the valuation date.

Steven claimed that the releases were limited and did not encompass the issue at hand.  An elaborate Ponzi scheme which rendered an account nonexistent could not have been foreseen at the time they divided their property. Although not explicitly stated in the agreement, Steven said that the couple intended to equally divide their property. With one account now known to be fictional, however, that intention was thwarted.

The court held that Steven’s amended complaint failed to state a cause of action for mutual mistake.  His claim was too vague, only stating that the account did not exist now.  He did not assert that he couldn’t redeem the account for cash at the time of the agreement.  In fact, the court noted, Steven may have done so in order to pay his wife at the settlement. The division of property relied on his mere ability to cash in his account.  Since it appeared that Steven did have at least the ability, there was no mutual mistake.

Additionally, the court found that Laurie had not been unjustly enriched. Each person received the benefit of the agreement at the time it was entered. The later Ponzie scheme revelation, while unfortunate, did not evidence Laurie’s unjust enrichment.  The court stated: “Subsequent events have revealed that the plaintiff’s retention of the Madoff account in the division of the parties’ assets and for three years thereafter was improvident.”  The court dismissed Steven’s complaint.

Analysis: Not really a new case but I just ran across it and thought it was interesting. Here, the husband who ended up with the Madoff accounts really ended up with nothing, and sought to vacate the judgment. The court denied it holding that he should have known better, “Subsequent events have revealed that the plaintiff’s retention of the Madoff account in the division of the parties’ assets and for three years thereafter was improvident.”

Gimme a break. While I understand the practical reasons for not vacating judgments randomly, this was an  incredibly successful deception. In my opinion, Steven not only was a victim of Madoff, but also faulty reasoning by the court.  Bottom line: sucks for him!