Karen v. Loftus
| Decision Date | 25 January 2022 |
| Docket Number | AC 43488 |
| Citation | 210 Conn.App. 289,270 A.3d 126 |
| Parties | Cindy L. KAREN v. William P. LOFTUS |
| Court | Connecticut Court of Appeals |
Thomas J. Rechen, with whom were Charles D. Ray, and, on the brief, Brittany A. Killian, Hartford, for the appellant (plaintiff).
Logan A. Carducci, Hartford, for the appellee (defendant).
Elgo, Suarez and Palmer, Js.
The plaintiff, Cindy L. Karen, appeals from the judgment of the trial court denying her motion to open the judgment dissolving her marriage to the defendant, William P. Loftus. On appeal, the plaintiff claims that the court utilized the incorrect legal standard in adjudicating her motion to open.1 We agree, and, accordingly, we reverse the judgment of the court and remand for further proceedings in accordance with this opinion.
The following facts and procedural history are relevant to this appeal. The plaintiff and the defendant were married in June, 2007. Prior to the marriage, on May 14, 2007, the parties entered into a prenuptial agreement (agreement). Paragraph 6 (B) of the agreement provides:
In December, 2014, the plaintiff commenced a dissolution action against the defendant, seeking to enforce the terms of the agreement. The parties disagreed as to whether the defendant's obligation to pay the plaintiff pursuant to paragraph 6 (B) was triggered by the specific circumstances surrounding the defendant's departure from his employment at Merrill Lynch. Under this paragraph of the agreement, if the defendant's departure from Merrill Lynch was determined to be "tantamount to a ‘sale’ of his interest in Merrill Lynch," the plaintiff would be entitled to one half of the sale proceeds after the defendant set aside $75,000. If the defendant's departure from Merrill Lynch was not "tantamount to a ‘sale,’ " however, the plaintiff would not receive any of the proceeds. On August 1, 2016, the parties entered into a stipulated judgment consistent with their agreement, excepting paragraph 6 (B) of the agreement. Instead, the stipulation required the court to refer the case to an arbitrator for resolution of the issue of whether the defendant's departure from Merrill Lynch was a "sale of his interest in Merrill Lynch." On that same day, the court, Hon. Gerard I. Adelman , judge trial referee, accepted the parties’ stipulation and referred the issue of the defendant's departure from Merrill Lynch to an arbitrator.
The parties agreed to have C. Ian McLachlan, a retired justice of the Connecticut Supreme Court, act as the arbitrator of their dispute. Beginning on February 16, 2017, McLachlan held a two day hearing wherein both parties testified. On April 27, 2017, McLachlan issued a decision in which he concluded that the defendant's departure from Merrill Lynch was not "tantamount to a sale" under the agreement. In his memorandum of decision, McLachlan found that, in October, 2008, sixteen months after the parties were married, the defendant and three colleagues left Merrill Lynch and formed a business known as " ‘LLBH.’ " Each partner invested between $10,000 and $15,000 to start LLBH. Shortly after the business was formed, Focus Financial (Focus) purchased an option to buy an interest in LLBH for $2 million, which was shared equally among the partners. Focus subsequently exercised its option, there was a corporate reorganization, and Partners Wealth Management was created. When Focus exercised its option, the defendant received $1,665,000 and 90,000 shares of Focus stock, as well as some options.
McLachlan further found that, at the time of the agreement, the defendant had certain benefits incident to his employment with Merrill Lynch, including restricted stock units, which he forfeited by leaving Merrill Lynch. This practice of forfeiture was "very common in the financial services industry and was one of the reasons that brokers were generally paid a ‘sign-on’ bonus when changing jobs by the new employer." Additionally, "brokers were being paid [by their new employers] for their ‘book of business’ which, in effect, represented their customers." The plaintiff and the defendant negotiated the agreement, specifically paragraph 6 (B), to account for this possibility.
Additionally, McLachlan concluded that the evidence did not support the plaintiff's claim that the defendant contemplated leaving Merrill Lynch at the time the agreement was made. The defendant did not leave Merrill Lynch until sixteen months after the date of the marriage, and there was no mention of the defendant starting his own business in the agreement. Ultimately, McLachlan determined that paragraph 6 (B) was drafted in contemplation of the defendant leaving Merrill Lynch and going to a competitor that would compensate him for both the employment benefits that he was forfeiting from Merrill Lynch and the contracts and business that he would bring to the new company. Instead, the defendant left Merrill Lynch to start his own company and invested his own money into the venture. An option to invest in that new venture was sold, and more than one year later, the business created by the venture itself was sold. According to McLachlan, this scenario is "substantially different than the situation where an employee leaves a brokerage house and is compensated by the new employer." On June 16, 2017, the trial court, Sommer, J. , incorporated McLachlan's decision into a final judgment of dissolution.
On April 3, 2018, the plaintiff filed a pleading titled, "Motion to Open—Post Judgment." In her motion, the plaintiff asserted that subsequent legal proceedings between the defendant and his partners at LLBH "clearly indicate" that several of the representations that the defendant had made during the arbitration were false. According to the plaintiff, the defendant falsely represented that (1) his leaving Merrill Lynch did not contemplate taking his contacts and clients with him; (2) he and his partners did not contemplate the option agreement or transaction with Focus until after the execution of the agreement between the plaintiff and the defendant; and (3) the option agreement and transaction with Focus were not a "sale." The plaintiff claimed that the defendant "wholly mischaracterized the nature of his departure from Merrill Lynch, in that he knew prior to the departure that he was selling the LLBH business, including their clients, to [Focus], and that the sale took place pursuant to a scheme which was contemplated by the parties when drafting [paragraph 6 (B)] of the prenuptial agreement." The plaintiff further claimed that the defendant's testimony during the arbitration proceeding regarding the Focus transaction was "a statement of fact known to be false, was intended to persuade the arbitrator to conclude that the Focus transaction was not a sale," and "the arbitrator relied upon this false testimony in denying [the plaintiff's] prayer for the application of [paragraph 6 (B)] of the parties’ prenuptial agreement."
The essence of the plaintiff's argument in her motion to open is that the defendant testified falsely during the arbitration and that McLachlan relied on the purportedly false testimony in concluding that paragraph 6 (B) did not apply to the defendant's departure from Merrill Lynch to form LLBH.
On December 11, 2018, the defendant filed a memorandum in opposition to the plaintiff's motion to open. The defendant opposed the motion on two separate grounds. First, the defendant argued that the plaintiff's motion was an attempt to get a "second bite at the apple." Specifically, the defendant argued that the plaintiff was merely seeking to relitigate the same argument that she had made before McLachlan in the arbitration proceeding, namely, that the defendant's decision to leave Merrill Lynch, to form LLBH, and to sell an option to purchase LLBH to Focus was "tantamount to a sale" under paragraph 6 (B) of the agreement. Second, the defendant argued that the plaintiff failed to meet the necessary elements to prevail in her motion, which, despite its title, he characterized as a motion for a new proceeding on the basis of newly discovered evidence.
On January 11, 2019, the plaintiff filed a reply to the defendant's December 11, 2018 memorandum in opposition to the motion to open. In her reply, the plaintiff argued that the defendant "lied under oath and therefore committed fraud concerning whether [Focus] was involved in the decision by [the defendant] and his fellow partners to leave Merrill Lynch and open a new business." The plaintiff asserted that,...
To continue reading
Request your trial