Friday, June 03, 2011

Unbridled Greed


I remember hearing political commentator Lawrence O'Donnell say once that when he was in law school, he and his fellow students bemoaned the fact that all the great civil rights and other social justice issues had been litigated, laws had been passed, and all was now settled . . . to the point that Mr. O'Donnell and his fellow aspiring lawyers wouldn't have the opportunity to make history by helping make America a still "more perfect Union."

I confess to having had that same thought myself while I was in law school. Boy, were we all ever wrong. Despite that fact that there's no argument when only one side (the losing side) keeps yammering about it, law that was long considered settled is suddenly up for review again. [Texas Gov. Rick Perry is one of the worst offenders. He keeps beating the drums of secession, despite the fact that the outcome of the US Civil War made that a moot point. I have two questions for him: (1) if Texas does secede, how long does he seriously think it will last once the federal government pulls out all its resources, from the Johnson Space Center in Houston to all the military bases, to everything else the federal government has there? (2) Doesn't he realize that just because Texas cannot secede, it doesn't mean the rest of us cannot kick Texas out of the Union if we're fed up enough with Texas' behavior?-- But I'll stop beating that poor dead horse . . . for now.--Ed.]

The motivating factor for all this reopening of settled issues seems to be a combination of the need for lawyers (and their support staffs and the other people, goods, and services they use) to have something to do to make more money [which in itself is an expression of greed--Ed.] and the utter rapaciousness greed produces in some people. Alas for the rest of us, the most greedy are often the most powerful and already wealthy among us. Most of us will not benefit from these outbreaks of manifest greediness, but we surely will bear the burden of their consequences.

What has me riled up today is a divorce case in New York. [Please note: in New York, the state Supreme Court is the first appellate court, and the state Court of Appeals is the highest appellate court--you know, the one every other jurisdiction calls its Supreme Court. Do not ask me why New York jurisdictions are set up the way they are. I have no idea.--Ed.]

Bask in 2006, after 33 years of marriage, Steven Simkin and his then-wife, Laura Blank, divorced. Most of their considerable assets were split equitably, including the money they had invested with the infamous Bernie Madoff. Ms. Blank took her part in cash; Mr. Simkin, seeing ever more money to be made, kept his money with Madoff. We all know what happened within the next two years. Once Madoff admitted he was running a Ponzi scheme of epic proportions, Mr. Simkin decided his remedy was to recover what he lost not from Madoff, but from his ex-wife. He telephoned Ms. Blank and demanded a "do-over" of their divorce settlement. She refused. He thereupon sued to get what he wanted.

Most of the time, when a divorce settlement is made, it's done. This is because the law recognizes that certainty in the outcome of litigation has positive social value--it allows people to move on with their lives, instead of living in fear that what had been done and ruled acceptable by the trial judge could be yanked out from underneath the litigants at any time in the future. The law, however, also recognizes that occasional mistakes are mad--not just in divorce settlements, but in all areas of contract law. The law has allowed for this by allowing parties to raise the issue of "mutual mistake." A qualifying "mutual mistake" is one wherein all parties misunderstand something essential about the agreement they initially reached. As the New York Times article I read noted, the most famous example is when two parties agree that one will sell and the other will buy from the seller a Stradivarius violin, but the violin turns out to be NOT a Strad. In such as case, the contract of sale is rescinded; the seller gives back the money and the buyer gives back the violin.

No harm, no foul, in other words. Mr. Simkin is shoehorning this concept onto his divorce settlement, claiming that he and Ms. Blank were mutually mistaken about the nature of the investment with Madoff. The divorce called it "an account." In his filing, Mr. Simkin claims there was no account, only a massive Ponzi scheme. Now, Mr. Simkin is chairman of the real estate department with his firm. [His firm is one of not just New York's, but the nation's, most influential: Paul, Weiss, Rifkind, Wharton & Garrison.--Ed.] Ms. Blank is herself a labor lawyer for City University of New York. These are not unsophisticated, uneducated, ignorant people. They are not rubes who were duped by Bernie Madoff's bamboozling them with high-falutin' investment lingo they didn't understand . . . though he did dazzle Mr. Simkin, at least, by the obviously outsized returns he promised and for a long time seemed to deliver. What Mr. Simkin is doing in this case, however, amounts to a pile of linguistic legerdemain, sound and fury signifying nothing.

Mr. Simkin didn't have to leave his money with Madoff under the terms of the settlement. He could have taken his funds and moved them elsewhere, as Ms. Blank did with her part of the settlement. But Mr. Simkin did not. He saw the returns he thought he was getting, and decided he wanted to continue to cash in. That's greed, pure and simple. When Madoff's house of cards finally fell apart and Mr.Simkin realized he'd lost not just his expected returns, but also most of what he'd invested, and knowing as a practical matter that he'd never get even part of his initial investment back from Madoff, he sued his ex-wife. That's greed, unbridled. [You know, they teach the "deep pocket" doctrine in the first week or so of law school. That's the doctrine that says "don't sue the one who done you wrong--sue the one who can pay the most." I thought it was ugly then. I think it's ugly now. I apparently stand more alone in this conviction than I thought.--Ed.]

The trial court rightly threw out his case, but a sharply divided New York Supreme Court ruled 3-2 that the case could proceed. Count me with the appellate court's dissenters on this one. It doesn't matter whether it was "an account" or merely "a Ponzi scheme." Mr. Simkin had the same opportunity to get out that his ex took at the time of their divorce settlement. He just didn't want to, and now, more than two-and-a-half years later, he wants her to pay for his greed.

The New York Times says the legal community is "divided" about Mr. Simkin's legal argument. It cited a professor at George Washington University who claims that "mutual mistake" is a valid argument in this case. I say BULL PUCKEY. Not only is this a blatant attempt by Mr. Simkin to escape the consequences of his own greedy actions, if his claim is allowed, it will inundate an already overburdened court system with dubious appeals by everyone else who thinks he/she got shafted in his/her original divorce. Mr. Simkin's unbridled greed may have an effect on our court systems not unlike the effects much of the country has experienced by the Mississippi and Missouri River floods of this year. That is truly unbridled greed--he wants "his" money back so badly that he's willing to drown the entire court system to get it.

And if he gets his way, we will also be farther along the way than we are now to Stephen Colbert's "America Plus," where those with the real money will extract what little we have from the rest of us; to reap the benefits of being Americans without sharing any of the responsibilities of being Americans--which responsibilities they will dump onto the rest of us so that we can never even hope to catch up to their level of wealth, power, and influence. That is NOT what America was supposed to be. But it's what America is in danger of becoming. I'd be a lot less disturbed about this is the New York appellate court had agreed with the trial court and thrown Mr. Simkin's case out on its utter lack of merit. The fact that ANYONE is entertaining his legal "argument" seriously frightens the heck out of me. Doesn't anyone believe in John Kennedy's "ask not" anymore?

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