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Harding v. Naseman

November 14, 2008


The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.


Plaintiff Toehl Harding filed this lawsuit in connection with a dispute over a property settlement agreement ("PSA") that was negotiated between Plaintiff and her ex-husband, Defendant David Naseman, in connection with their 1993 divorce. Plaintiff complains, in essence, that Defendant fraudulently misrepresented the amount of assets he held when he entered into divorce negotiations with Plaintiff. The core of Plaintiff's complaint is her assertion that, during property settlement negotiations, Defendant concealed the amount of their joint 1990 income by providing Plaintiff with false 1990 federal income tax forms that listed their joint income as $1,323,916, while in actuality, by reason of this nondisclosure of his income, it was $5,561,728. Discovery having closed on June 30, 2008, Defendant moves for summary judgment against Plaintiff, asking this Court to dismiss all of Plaintiff's claims, both those that sound in fraud (Claims 1-3), and those that do not. (Claims 4-12.)*fn1

For the reasons set forth below, Defendant's motion for summary judgment against Plaintiff is granted in part and denied in part. Plaintiff's fraud-based claim may proceed to trial or settlement, while her remaining claims are dismissed.

1. Relevant Facts

Plaintiff's Claim

Plaintiff and Defendant, both attorneys, started dating in 1980 and were married in October 1982. (Def.'s Rule 56.1 ¶1; Pl.'s Rule 56.1 ¶1; Harding Aff. ¶6.) After marrying, they lived in New York City, first renting and then owning an apartment located at 425 East 51st Street. (Harding Aff. ¶¶7, 11-12.) Defendant worked as a General Counsel at LIN Broadcasting Company, while Plaintiff worked as a General Counsel for the NYNEX Corporation. (Harding Aff. ¶¶9, 33; Pl.'s Rule 56.1 ¶5.) As part of Defendant's pay package, he was granted stock options in LIN. (Harding Aff. ¶¶3-4, 15-16; Def. Ex. 8.) In 1987, these options were worth approximately $2 million. (Harding Aff. ¶¶13-14; Def. Ex. 5.) Defendant exercised the "vast majority" of his options in 1988, and used approximately $750,000 from the proceeds to pay off the mortgages on the couple's New York City apartment, their farmhouse in Massachusetts, and a residence in Michigan. (Harding Aff. ¶¶16, 18.) The remainder of the options proceeds, approximately $1 million, was deposited in a joint account at Republic National Bank. (Harding Aff. ¶17.)*fn2 During their marriage, Defendant prepared the parties' joint tax returns. (Harding Aff. ¶23.) Commencing in 1988, Defendant asked Plaintiff to sign her name to blank tax forms (IRS Form 1040) because Plaintiff "was often away on business," and Defendant would then be able to complete and file the tax returns himself while she was away. (Harding Aff. ¶¶22-23.) In 1989, McCaw Communications purchased LIN Communications, making any unexercised options potentially very valuable. (Harding Aff. ¶¶24-26.) Plaintiff was aware that Defendant had received a "buyout package" as part of the McCaw takeover of LIN. (Id. ¶28.) Plaintiff asked Defendant how much money he was due to receive; he told her that because he had exercised the majority of his options in 1988, he would now get "very little." (Id. ¶26.) Because of Defendant's statements, Plaintiff believed that Defendant would receive a buyout package in the "hundreds of thousands of dollars range," but not in the "millions." (Id. ¶¶27-28.)

In August of 1992, Defendant moved to Nevada and told Plaintiff he wanted a divorce. (Harding Aff. ¶32.) Both parties hired counsel to negotiate a property settlement; by letter dated February 5, 2003, Plaintiff's counsel requested all of Defendant's investments, bank accounts, and tax forms for the years 1987-1991. (Harding Aff. ¶38; Schalk Aff. at TH790 [letter].)*fn3

Plaintiff was facing a "perilous financial future" due to the "impending loss" of her job; therefore, throughout these negotiations, Plaintiff told Defendant "repeatedly and unequivocally" that she "expected to receive 50% of the marital assets." (Harding Aff. ¶¶34, 36-37; Pl.'s Rule 56.1 ¶26.) Plaintiff's expectation for receiving 50% of the marital assets was confirmed in a letter her counsel sent to Defendant. (Harding Aff. ¶37; Pl.'s Rule 56.1 ¶22.)

During the negotiations over the divorce settlement agreement, Plaintiff reviewed copies, furnished by Defendant, of their joint tax returns for the years 1987 through 1991. (Harding Aff. ¶39; Pl.'s Rule 56.1 ¶28.) Plaintiff did not recall seeing any 1991 tax return reporting more than $5 million in income, and she states that there was "no way" Plaintiff would have missed seeing a tax return reporting such an unusually large amount of income. (Harding Aff. ¶¶39-40; Pl.'s Rule 56.1 ¶¶26, 28.) The couple was granted a divorce in Nevada on April 21, 1993, and, as required by the divorce decree, on May 4, 1993 Plaintiff and Defendant signed a Property Settlement Agreement ("PSA"), which was filed with the Nevada court.*fn4 (Def.'s Rule 56.1 ¶¶7-8; Pl.'s Rule 56.1 ¶¶7-8.) It was Plaintiff's belief, when she signed the PSA, that she was being provided with "approximately 50% of the marital estate." (Harding Aff. ¶40; Pl.'s Rule 56.1 ¶26.)

Under the terms of the PSA, Plaintiff received the condominium she shared with Defendant in New York (valued at $500,000), $500,000 from their joint checking account, and all of the stock and bank accounts held in her own name. (Def's Rule 56.1 ¶24; Harding Aff. ¶42.) Based upon the representations made by Defendant during the negotiations over the PSA, Plaintiff believed that the proceeds from the exercise of the stock options had been "accounted for," and that she had received "slightly more than 50%" of the "marital pie" in the PSA. (Harding Aff. ¶41; Pl's Rule 56.1 ¶26.) Defendant's notes made during the time the PSA was negotiated indicated that he believed that he was receiving 74.78% of the marital pie, worth approximately $3.8 million,*fn5 while leaving the remaining 25.22%, worth $1 million, for Plaintiff. (Def.'s Dep. at 26; Schalk Aff. at TH817 [notes].)

In June 1993, three months after his divorce from Plaintiff, Defendant married Marcia Bothe. (Bothe Aff. ¶5.) Defendant filed for divorce from Bothe in 2005, and, according to Bothe, in connection with those divorce proceedings, Defendant provided Bothe with "incomplete financial information and tax returns." (Bothe Aff. ¶6.) Bothe, however, looked through numerous filing cabinets located in the house she shared with Defendant, and found two separate 1990 signed income tax returns, one showing a gross income of $1,323,916, and the other showing an income of $5,561,728. (Bothe Aff. ¶6; Bothe Aff. Exs. 1-2 [$1 million tax forms]; Harding Aff. Exs. 3-4 [$5 million tax forms].)

On January 18, 2006, Bothe telephoned Plaintiff and asked her whether she and Defendant had earned over $5 million in 1990. (Harding Aff. at ¶47; Harding Aff. Ex. 1 [note of call]; Bothe Aff. ¶9.) Plaintiff told Bothe that they never "earned anything close to $5 million," and it was at that point that Bothe told Plaintiff about the two 1990 income tax returns. (Harding Aff. ¶¶47-48; Bothe Aff. ¶9.) This was the first time that Plaintiff had heard about the existence of the $5 million income tax return. (Harding Aff. ¶41.) Bothe then sent copies of these returns to Plaintiff, along with a letter written by Defendant at the time of the parties' divorce negotiations indicating that Plaintiff "fe[lt]" that she had "won" by "taking most of everything." (Harding Aff. ¶¶42, 48; Harding Aff. Ex. 2 [shipping invoice]; Bothe Aff. ¶¶9-10; Bothe Aff. Ex. 4 [letter].) Upon receipt of these returns, Plaintiff concluded that the $5 million federal income tax return was the correct one filed with the IRS, while the $1 million tax return was the one presented to Plaintiff during their divorce negotiations to disguise the couple's true earnings. (Harding Aff. ¶49.)*fn6

Plaintiff now alleges that because of Defendant's "fraudulent misrepresentations and fraudulent concealment," she was "fraudulently induced into signing the PSA by which the parties divided and distributed their marital property." (Harding Aff. ¶27-28.) As a result of Defendant's deceit, Defendant captured "75% of the 'marital pie' for himself, while he nonetheless made it appear" that Plaintiff "was receiving slightly more than 50%." (Harding Aff. ¶41.) Plaintiff's complaint, originally filed in Nevada, contains claims based on fraud, alleging fraudulent misrepresentation and fraudulent concealment (Compl. ¶¶59-97), as well as a number of other claims against Defendant, alleging: breach of a fiduciary duty, breach of contract, negligent misrepresentation, contractual and ...

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