Can Harming Your Spouse’s Reputation During Divorce Cost You?

On behalf of The Marks Law Firm, L.L.C. posted in Divorce, Business Valuation, and Property Division on Wednesday, April 23, 2014

Recently, a family court judge in New York issued a ruling that diminished a wife’s share in her husband’s law practice because the allegations wife made during the lengthy and contentious divorce compromised the value of her husband’s law partnership.

Ira and Janice Schachter had been married nearly twenty years and had two children together when their marriage finally combusted in a domestic abuse incident that resulted in both being arrested and pressing charges.  Though the district attorney failed to press charges, the newspaper did report on the story.

After filing for divorce in 2007, the proceedings dragged on for an incredible six years, during which the judge found both parties “displayed offensive behavior in court” including shouting, gesticulating and leaving court during the middle of proceedings.  Another consequence of the long separation was that Ira had time to find a new lady in his life, one who happened to be a former Playboy model.  This relationship caused Janice to make a public accusation that Ira would not pay for one child’s hearing aids while he gave his new lady a $215,000 engagement ring.  It seems that latter comment caused the most public damage to Ira’s reputation, an allegation he contended was not accurate.

Given the length of the marriage, Janice would certainly have a half interest in the shares of Ira’s partnership, a sum that could have been quite significant given that the partnership was valued at over $5 million dollars at the time of the separation.  However, Ira claimed the partnership shares were worth much less after the long divorce proceedings and the damage to his reputation.  The judge did not accept the devalued partnership shares, but she did attribute some of the loss in earnings to the conflict and did find Janice accountable.  So, instead of giving Janice a half interest in the partnership, the judge granted her only 17% of the partnership.

The judge noted that the principal reason for her award was the Janice made repeated public posts and comments about domestic violence and their marriage throughout the proceedings, essentially venting all of her frustrations in public to the detriment of Ira, which understandably cost him clients.  On the other hand, Janice still received half of the marital residence, half their assets, and alimony and child support; taken together, Janice did not end up with a highly disproportionate share of the total marital assets, only somewhat disproportionate based on the public airing of her allegations.

Does this happen often?

A court generally has the right to make an unequal distribution of property based on misconduct, but this particular manner of an award – a reduction based on essentially trashing your ex at your collective economic detriment – seems novel, but not necessarily unwarranted.

Could this happen in Missouri?

Yes.  Missouri allows a court to make an unequal distribution of property based on marital misconduct, and that would include the type of conduct in which Janice engaged.  What seems odd is that the court in New York did not issue a protective order that would have stopped such conduct in the first place (perhaps it did and Janice ignored it anyway).  Missouri law does recognize that if the intentional actions of a spouse cause the devaluation of a shared partnership, one spouse can be forced to pay for that devaluation, as the New York judge did to Janice.

While this case seems extreme, it may only be because of the length of the case and the public figure status of the parties.  We know that courts in Missouri take into account emails, texts, Facebook and Twitter postings in terms of misconduct, so this New York case may be a harbinger of things to come.  Given the Internet age and how easy it is to find information on an individual, the more “dirt” one dishes in a public manner, the more damage to reputation could result – damage that does not easily go away given the permanency of the Internet.  So, it seems that courts may have to deal with more issues of economic harm to reputation in the future.  It also raises the interesting question of what happens when an ex engages in conduct like Janice after the court enters a final dissolution and no longer has the ability to redistribute property – would the spouse have a remedy in tortious interference with business relations?  Time will tell.

If you have questions about marital misconduct and property division in divorce, contact our St. Louis divorce attorneys – we can help.

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