Weinstein v. Weinstein

• Decision Date: 04 October 2005
• Docket Number: (SC 17097).
• Citation: 882 A.2d 53,275 Conn. 671
• Court: Connecticut Supreme Court
• Parties: NANCY WEINSTEIN v. LUKE A. WEINSTEIN.

275 Conn. 671

882 A.2d 53

NANCY WEINSTEIN v. LUKE A. WEINSTEIN.

(SC 17097).

Supreme Court of Connecticut.

Argued January 11, 2005.

Officially released October 4, 2005.

Sullivan, C. J., and Borden, Norcott, Katz and Zarella, Js.

Lori Welch-Rubin, with whom was Susan Wolfson, for the appellant (plaintiff).

Karen L. Dowd, with whom were Kenneth J. Bartschi and, on the brief, Wesley W. Horton and Linda T. Douglas, for the appellee (defendant).

Gaetano Ferro and Norman A. Roberts II filed a brief for the Connecticut Chapter of the American Academy of Matrimonial Lawyers as amicus curiae.

Opinion

KATZ, J.

The plaintiff, Nancy Weinstein, appeals, following our grant of certification,¹ from the judgment of the Appellate Court, affirming the judgment of the trial court. Weinstein v. Weinstein, 79 Conn. App. 638, 830 A.2d 1134 (2003). The trial court had denied the plaintiff's application for a rule to show cause requesting that the court open and vacate the judgment dissolving her marriage to the defendant, Luke A. Weinstein, on the ground that the stipulation on which the judgment was based was the result of a fraudulent misrepresentation by the defendant. On appeal to this court, the plaintiff challenges the Appellate Court's conclusion that the trial court's findings, namely, that the plaintiff had failed to prove both that the defendant committed fraud by clear and convincing evidence and that there was a substantial likelihood that the result of a new trial would be different, were not clearly erroneous. Id., 648. Specifically, the plaintiff contends that she offered clear and convincing evidence that: (1) the defendant had committed fraud by failing to disclose a $2.5 million offer he and his business partners had received for the purchase of a software company that they owned during the pendency of the marriage dissolution proceedings; and (2) the defendant's rejection of that lucrative offer compelled the conclusion that the defendant fraudulently had undervalued his ownership interest in the company in his financial affidavit submitted to the court in the marriage dissolution proceedings. The plaintiff also contends that she established that there is a substantial likelihood that the outcome of a new trial would be different in light of the withheld and misrepresented information. We agree with the plaintiff, and, accordingly, we reverse the judgment of the Appellate Court.

The record reveals the following facts and procedural history. After nearly seven years of marriage and the birth of one child, the plaintiff filed a complaint seeking to dissolve her marriage due to an irretrievable breakdown. At the time of the dissolution proceedings, the defendant owned a substantial minority interest in a small, privately held software company, Product Technologies, Inc. (Product Technologies).² During the pendency of the matter, the plaintiff deposed the defendant, seeking specifically to obtain financial information about the value of his interest in the company. At trial before Higgins, J. (dissolution court), the plaintiff, through her expert witness, Kenneth J. Pia, Jr., submitted a report to the court containing Pia's valuation of the defendant's interest, which Pia had made on the basis of the financial information contained in the defendant's deposition, discovery and other representations, including the defendant's sworn financial affidavits in which he repeatedly had valued his interest at $40,000.³ Subsequently, the parties stipulated to, and the dissolution court adopted, the $40,000 value for the defendant's interest in the company. On May 12, 1998, the dissolution court entered orders for, inter alia, child support and alimony. The court also ordered the defendant to pay to the plaintiff $100,000 as a property settlement. On the basis of the stipulated valuation of the defendant's interest in Product Technologies, the dissolution court allowed the defendant to retain that interest and the plaintiff to retain an inherited interest in a separate partnership owned by her family.

On May 29, 1998, the defendant filed a motion for reconsideration of the financial orders in the dissolution judgment, claiming that complying with the existing orders would "strip him bare" and force him to sell premarital assets. While that motion was pending, on June 12, 1998, the defendant received a memorandum of understanding from ICL, Inc. (ICL), a company with which Product Technologies jointly had developed certain software.⁴ Although the memorandum of understanding did not set forth the finalized terms of the sale, it nonetheless clearly stated ICL's intent to purchase Product Technologies, stating: "This [memorandum of understanding] sets forth the intent of the parties that the Shareholders shall sell to ICL and ICL shall purchase from the Shareholders all of the issued and outstanding shares of [Product Technologies]. As such, the [Product Technologies] Business . . . shall be transferred to ICL including, but not limited to, all intellectual property rights. The term `[Product Technologies] Business' shall include, but is not limited to, [Product Technologies] operations as a smart card software developer and systems integration/solutions provider. More specifically, the [Product Technologies] Business includes, but is not limited to, the supply, both directly and through strategic relationships, of SmartCity system software, hardware, installation, customization, system integration, support and training. At ICL's election the Shares shall be sold to either ICL or to one or more of the companies within the ICL Group. The term `ICL Group' means ICL's parent, affiliated and subsidiary companies." (Emphasis added.) On June 15, 1998, the defendant and his partners met with representatives from ICL, at which time ICL made an offer to purchase Product Technologies for $2.5 million. The defendant and his partners immediately rejected the offer, in part because they believed it was too low if ICL expected it to include the intellectual property asset. The defendant did not notify the plaintiff or the dissolution court that he had received and rejected this offer.

On June 16, 1998, the dissolution court denied the defendant's motion for reconsideration. In October, 1998, five months after the entry of the judgment of dissolution, the defendant and his partners sold Product Technologies to ICL for $6 million. As a result of the sale, the defendant received approximately $1.45 million for his interest in the company.

Thereafter, the plaintiff filed an application for a rule to show cause seeking to open and to vacate the judgment on the basis of fraud, asserting that the defendant fraudulently had failed to disclose and misrepresented material financial information during the pendency of the marital dissolution proceedings.⁵ With respect to nondisclosure, the plaintiff claimed, inter alia, that the defendant's failure to disclose the $2.5 million offer constituted fraud. Specifically, the plaintiff contended that the defendant's duty to disclose pertinent financial information had extended until June 16, 1998, when the dissolution court ruled on the defendant's motion for reconsideration. The plaintiff asserted that the defendant had become aware of ICL's intent to purchase Product Technologies upon receipt of the memorandum of understanding on June 12, 1998, and that he had a duty to disclose the $2.5 million offer because the dissolution court had not yet ruled on his motion to reduce his financial obligations under the dissolution judgment due to monetary constraints.

With respect to misrepresentation, the plaintiff asserted, inter alia, that the defendant would not have considered the $2.5 million offer, which would have yielded the defendant approximately $500,000, to be too low unless Product Technologies and his interest therein were worth far more than the $40,000 that he had represented in his financial affidavit. Finally, the plaintiff contended that there was a substantial likelihood that the outcome of a new trial would be different in light of the withheld and misrepresented information.

The trial court, Parker, J., denied the plaintiff's application for a rule to show cause, finding that the plaintiff had not proffered clear and convincing evidence that the defendant had committed fraud. With respect to the defendant's nondisclosure, although the dissolution court did not render judgment in the case until May 12, 1998, the trial court apparently concluded that the defendant's duty to disclose ended at the conclusion of the evidence, not upon the date on which judgment was rendered. The trial court found that, although the defendant had received an offer on June 15, 1998, "as of the time of the trial, April 16 and 17, 1998, there was no sale pending, no offer to purchase had been made, and no negotiations or discussions regarding [the] sale of [Product Technologies] had taken place." With respect to the defendant's allegedly fraudulent misrepresentation in his financial affidavit, the court declined to infer from the defendant's rejection of ICL's $2.5 million offer that Product Technologies was worth that amount or more. Because the trial court concluded that the plaintiff had failed to prove that the defendant engaged in fraudulent nondisclosure, and that the defendant's rejection of the $2.5 million offer did not establish clear and convincing evidence of fraud in his financial affidavit, the court did not address the plaintiff's claim that there was a substantial likelihood that the outcome of a new trial would be different in light of the $2.5 million offer and the defendant's rejection thereof. The trial court did, however, reach that issue with respect to a different nondisclosure claim asserted by the plaintiff; see footnote 7 of this opinion; but concluded that, even had the defendant violated his duty to disclose such information, there was not a substantial likelihood that the result of a...