A New York attorney, Steven Simkin, settled his divorce in 2006 by dividing property and assets equally with his wife, Laura Blank. At the time, the couple had a large sum invested in Bernie Madoff’s now-infamous Ponzi scheme. Mr. Simkin opted to leave his money there; his wife preferred cash, so he took $6.6 million in cash out of the Madoff account and paid it to her. She also got one of their houses and half of the rest of their assets.
The divorce had been final for more than two years when the Madoff fund collapsed, and Mr. Simkin immediately went to his wife and asked for a do-over on the distribution of assets. She refused. He took her to court, arguing the theory of “mutual mistake.” That theory says that when both parties to a contract are laboring under the same erroneous belief–for example, that the value of an item is much greater than it actually is–the contract can be cancelled. Mr. Simkin argues that because both he and his then-wife were mistaken in their belief that they had money in the Madoff account, their settlement agreement should be voided. Ms. Blank’s rejoinder is that there was no mistake and that the money was there at the time, as evidenced by Mr. Simkins’ ability to take out $6.6 million to pay her for her share. She says the only mistake was Mr. Simkins’ belief that the account would continue to have value in the future–a mistake made by many a divorcing spouse who retains certain assets based on a belief that they’ll continue to appreciate.
Does this seem like a simple question of Mr. Simkin regretting a bad decision? Apparently the courts don’t think so–the case is now pending in New York’s highest court, after a trial court held in favor of Ms. Blank and an appellate court overturned that ruling.
My favorite part is the claim of “extreme hardship” by Mr. Simkin, who earns at least $3 million annually as a partner at the law firm that is representing him in the divorce do-over case (for free).
Check back for updates when the New York high court rules on this interesting case.