Karen v. LoftusKaren v. Loftus
The plaintiff appealed following the trial court’s denial of her motion to open the dissolution judgment to allow discovery on her claim that the defendant had fraudulently procured an arbitration award that was incorporated into that judgment pursuant to statute (
The trial court had subjeсt matter jurisdiction to adjudicate the plaintiff’s motion to open, even though it was filed outside the applicable statutory (
The trial court improperly denied the plaintiff’s motion to open the judgment based on fraud, as the plaintiff presented evidence of the defendant’s making of false statements or his failure to disclose facts, which was sufficient to establish probable cause to substantiate her claim of fraud, thereby warranting discovery and further proceedings.
PRESCOTT, J. This marital dissolution matter, which requires the resolution of jurisdictional and merits related issues arising from the arbitration of a specific aspect of the parties’ prenuptial agreement, returns to us for a second time. Following the dissolution of the parties’ marriage, the plaintiff, Cindy L. Karen, has endeavored to open that judgment for the limited purpose of allowing discovery with respect to her claim that the arbitration award, which subsequently was incorporated into the dissolution judgment, was procured by fraud committed by the defendant, William P. Loftus.1 In this appeal, the plaintiff claims that the court improperly denied her motion to open the dissolution judgment for the limited purpose of conducting discovery after it concluded that she had failed to establish probable cause that the arbitration award pertaining to the financial ramifications of the defendant’s departure from his employment with Merrill Lynch, and its subsequent incorporation into the dissolution judgment, was obtained by fraud.2 The defendant disagrees with the merits of the plaintiff’s claim and, additionally, contends
In our prior decision, we set forth the following relevant facts and procedural history. ‘‘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 . . . . Paragraph 6 (B) of the [prenuptial] agreement provides: If, at the time that an action for dissolution of marriage, annulment or legal separation is commenced, [the defendant] has left his employment with Merrill Lynch under an arrangement that is in any fashion tantamount to a sale of his interest in Merrill Lynch, i.e. a transaction under which [the defendant] receives any property, real or personal, including but not limited to a sum of money, by way of a sign-on bonus or otherwise, a premium bonus, and/or restricted stock or other ownership interest (Sale Proceeds), to work for another entity for any reason
‘‘In December, 2014, the plaintiff commenced a dissolution action against the defendant . . . . 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 [prenuptial] 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 [an agreement that clarified the specific schedule and amounts of monthly payments of the defendant’s alimony obligation4 and
‘‘The parties agreed to have C. Ian McLachlan, a retired justice of the Connecticut Supreme Court, act as the arbitrator of their dispute.5 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 [prenuptial] 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.
‘‘McLachlan further found that, at the time of the [prenuptial] 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. Additionаlly, 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 [prenuptial] 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 [prenuptial] 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 [prenuptial] 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
On May 12, 2017, the plaintiff filed a motion to confirm the arbitration award, which the court subsequently granted. On June 16, 2017, the trial court, Sommer, J., incorporated (1) the terms of the prenuptial agreement with respect to the division of reаl estate, personal property, debts and liabilities, (2) the August 1, 2016 agreement, which the court found to be fair and equitable, regarding the timing of the defendant’s alimony payments to the plaintiff, and (3) McLachlan’s arbitration award into a final judgment of dissolution. Id., 294.
On April 3, 2018, the plaintiff filed a motion to open the dissolution judgment on the ground that the defendant had made fraudulent representations and failed to disclose material facts to McLachlan during the arbitration. Specifically, she claimed that the defendant’s contentions that LLBH was a new business, and that business was not sold to Focus when he and his partners left Merrill Lynch, were ‘‘wholly contradicted by evidence presented in a subsequent trial concerning the same business . . . .’’ The plaintiff further alleged that the defendant’s representations to McLachlan that (1) when leaving Merrill Lynch, he did not contemplate taking his contacts and clients with him to LLBH, (2) the defendant and his partners did not contemplate an agreement with Focus until after the May 14, 2007 execution of the prenuptial agreement, and (3) the agreement and transaction with Focus did not constitute a sale, were materially false. ‘‘The essence of the plaintiff’s argument in her motion to open is that the defendant testified
After additional filings by the parties, the court, Hon. Eddie Rodriguez, Jr., judge trial referee, held a hearing on May 6, 2019, to consider the plaintiff’s motion to open the dissolution judgment. Id., 296. The purpose of this hearing was to determine whether a sufficient basis existed to open the judgment for the limited purpose of proceeding with discovery on the allegations of fraud set forth by the plaintiff. See Spilke v. Spilke, 116 Conn. App. 590, 593–94 and n.6, 976 A.2d 69, cert. denied, 294 Conn. 918, 984 A.2d 68 (2009); Oneglia v. Oneglia, 14 Conn. App. 267, 269–70, 540 A.2d 713 (1988).
On September 25, 2019, the court denied the plaintiff’s motion to open, stating in relevant part: ‘‘[T]he plaintiff is mistakenly claiming a second bite at the apple. She is attempting to open a judgment by filing a motion which is well beyond [the] permissible four [month] window to open civil judgments and she is claiming fraud. The exception to opening judgments outside of the initial four months does not apply to cases where a party wants to [relitigate] issues already litigated and decided. She seeks to reopen the judgment and obtain a new trial based on what she attempts to characterize as newly discovered evidence. However the evidence she references as newly discovered is evidence which was available during the arbitration and it would have been cumulative of the evidence offered at the arbitration. The plaintiff’s claim fails because the evidence relied upon was not in fact newly discovered evidence and the plaintiff has failed to demonstrate that the evidence could not have been discovered and produced at the former trial by the exercise of due diligence.
The plaintiff then appealed to this court from the denial of her motion to open, claiming that the trial court had utilized an incorrect legal standard when it rejected her claim. Id., 296–97. We agreed and identified the proper standard аs follows: ‘‘[T]he court was required to make a preliminary determination of whether there was probable cause to believe that the judgment was obtained by fraud before it could consider the merits of the claim. If the court found probable cause to believe that the judgment was obtained by fraud, then the court was required to conduct an evidentiary hearing to determine whether, in fact, there was fraud.’’ Id., 302. As a result of the trial court’s failure to make this preliminary determination, we reversed the judgment and remanded the case for further proceedings. Id., 303.
Pursuant to our remand, the court, Truglia, J., held a hearing on September 9, 2022, and January 4 and 5, 2023, for the purpose of determining whether probable cause existed to open the judgment for the limited purpose of proceeding with discovery as to the plaintiff’s claim of fraud. After hearing testimony and considering the submitted exhibits, the court orally denied the plaintiff’s motion, stating that it did not ‘‘see any fraud . . . any fraud whatsoever [and that] [t]here’s no proof, there’s no compelling evidence that [the defendant] misled . . . McLachlan.’’ (Emphasis added.) On February 1, 2023, the court issued a ‘‘statement of decision’’ that contained a brief synopsis of the case and concluded that it had ‘‘found no evidence of fraud.’’ This appeal followed.6 Additional facts will be set forth as necessary.
I
Before considering the merits of this appeal, we must first address the defendant’s claim that the trial court lacked subject matter jurisdiction over the plaintiff’s motion to open the judgment. Specifically, he argues that the plaintiff’s April 3, 2018 motion to open constitutes an untimely attempt to vacate the April 27, 2017 arbitration award and that, consequently, the trial court did not have jurisdiction to consider it pursuant to
We begin our analysis of this issue by setting forth the relevant legal principles regarding the opening of a dissolution judgment based on fraud. It is a well established principle that a court has the inherent authority to open a judgment, subject to certain limitations. See, e.g., Jonas v. Playhouse Square Condominium Assn., Inc., 173 Conn. App. 36, 39, 161 A.3d 1288 (2017). ‘‘Within four months of the date of the original judgment, Practice Book [§ 17-4] vests discretion in the trial court to determine whether there is a good and compelling reason for its modification or vacation.’’ (Internal quotation marks omitted.) McGovern v. McGovern, 217 Conn. App. 636, 645–46, 289 A.3d 1255, cert. denied, 346 Conn. 1018, 295 A.3d 111 (2023); see also
This rule serves to further the compelling interest in the finality of judgments. Strauss v. Strauss, 220 Conn. App. 193, 203–204, 297 A.3d 581, cert. denied, 348 Conn. 914, 303 A.3d 602 (2023). ‘‘Finality of litigation is essential so that parties may rely on judgments in ordering their private affairs and so that the moral force of court judgments will not be undermined. The law favors finality of judgments . . . . This court has emphasized that due consideration of the finality of judgments is important and that judgments should only be set aside or opened for a strong and compelling reason. . . . It
Our appellate courts, however, have recognized that
We now turn to the defendant’s specific jurisdictional claim, made for the first time in this appeal.8 He argues
‘‘[S]ubject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it. . . . [A] court lacks discretion to consider the merits of a case over which it is without jurisdiction . . . . Furthermore, [j]urisdiction of the [subject matter] is the power [of the court] to hear and determine cases of the general class to which the proceedings in question belong. . . . A court has subject matter jurisdiction if it has the authority to adjudicate a particular type of legal controversy.’’ (Citation omitted; internal quotation marks omitted.) A Better Way Wholesale Autos, Inc. v. Saint Paul, 338 Conn. 651, 658, 258 A.3d 1244 (2021); see also Bloomfield v. United Electrical, Radio & Machine Workers of America, Connecticut Independent Police Union, Local 14, 285 Conn. 278, 286, 939 A.2d 561 (2008); Petrucelli v. Travelers Property Casualty Ins. Co., 146 Conn. App. 631, 640, 79 A.3d 895 (2013), cert. denied, 311 Conn. 909, 83 A.3d 1164 (2014). Stated differently, ‘‘[a] court does not truly lack subject matter jurisdiction if it has competencе to entertain the action before it.’’ Monroe v. Monroe, 177 Conn. 173, 185, 413 A.2d 819, appeal dismissed, 444 U.S. 801, 100 S. Ct. 20, 62 L. Ed. 2d 14 (1979).
We turn then to the relevant statutory provisions. Section 52-420 (b) provides that ‘‘[n]o motion to vacate, modify or correct an award may be made after thirty days from the notice of the award to the party to the arbitration who makes the motion.’’ Our Supreme Court repeatedly has held that the trial court lacks subject matter jurisdiction over a motion not filed within this thirty day time period. See, e.g., A Better Way Wholesale Autos, Inc. v. Saint Paul, supra, 338 Conn. 659; Bloomfield v. United Electrical, Radio & Machine Workers of America, Connecticut Independent Police Union, Local 14, supra, 285 Conn. 292–93. Stated differently, ‘‘[t]he only jurisdictional requirement in filing a motion to vacate an arbitration award is that it be filed with the trial court within thirty days of the moving party’s notice of the arbitration award.’’ Middlesex Ins. Co. v. Castellano, 225 Conn. 339, 345, 623 A.2d 55 (1993).
Our Supreme Court’s decision in Wu v. Chang, 264 Conn. 307, 823 A.2d 1197 (2003), warrants discussion because the court in that case addressed whether an arbitration award could be attacked outside the thirty
After an unsuccessful attempt at mediation, the parties agreed to sell the assets of the companies and have their respective shares conclusively determined by binding, nonappealable arbitration. Id., 308–309. The arbitrator determined that the respective share of each party in the proceeds from the sale of assets would be equal to their respective capital contributions. Id., 309. Notice of the arbitration award was sent to the parties. Id.
After receiving the arbitration award, the plaintiffs filed an application to confirm the arbitration award pursuant to
Our Supreme Court first explained that the trial court properly granted the plaintiffs’ timely motion to confirm the arbitration award because the defendant’s motion to vacate had not been filed within the thirty day limitation period of
Ultimately, our Supreme Court agreed with the reasoning of the trial court that a motion to vacate an arbitration award based on any of the grounds set forth in
Additionally, our Supreme Court has explained: ‘‘Judicial review of arbitral decisions is narrowly confined. . . . When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial
‘‘Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that . . . the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators’ decision of the legal questions involved. . . .
‘‘Even in the case of an unrestricted submission, we have . . . recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute . . . (2) the award violates clear public policy . . . [and] (3) the award contravenes one or more of the statutory proscriptions of
In proceedings such as the present case, however, in which an arbitration award is incorporated into a marital dissolution judgment rendered by the trial court, competing policies exist that are inherent in the statutes that apply to family matters. We start with a review
We next turn to subsection (e) of
Pursuant to this statutory language, the parties may choose to use arbitration as a means to resolve some or even all of the disputed financial and custody issues relating to the dissolution of their marriage. If they choose to do so, the court must first find that the agree
Principles of statutory construction further inform our analysis. As
Further, in construing these statutes together, it is important to remember that marital dissolution proceedings are essentially equitable in nature. Leonova v. Leonov, 201 Conn. App. 285, 304, 242 A.3d 713 (2020), cert. denied, 336 Conn. 906, 244 A.3d 146 (2021). For example, in Foisie v. Foisie, 335 Conn. 525, 239 A.3d 1198 (2020), our Supreme Court described the opening of a dissolution judgment for the purpose of reconsidering financial orders on the basis of an allegation of fraud as follows: “[I]n family matters, the court exercises its equitable powers. . . . While an action for divorce or dissolution of marriage is a creature of statute, it is essentially equitable in its nature. . . . The trial court has considerable discretion to balance equities in а dissolution proceeding. . . . The power to act equitably is the keystone to the court‘s ability to fashion relief in the infinite variety of circumstances which arise out of the dissolution of a marriage. Without this wide discretion and broad equitable power, the courts in some cases might be unable fairly to resolve the parties’ dispute . . . . For that reason, equitable remedies are not bound by formula but are molded to the needs of justice. . . . [I]n some situations, the principle of protection of the finality of judgments must give way to the principle of fairness and equity.” (Citations omitted; internal quotation marks omitted.) Id., 543–44; see also
Marital dissolution cases also have unique requirements for full and frank disclosure of relevant information between the parties and to the court. To achieve the goal of private settlements, with judicial supervision, of financial disputes between estranged marital partners, reasonable settlements that have been knowingly agreed upon are essential, and this can occur only when the parties engage in full and frank disclosure to ensure each side has all the essential information necessary. Weinstein v. Weinstein, supra, 275 Conn. 686–87. As such, in dissolution proceedings, “[t]he presiding judge has the obligation to conduct a searching inquiry to make sure that the settlement agreement is substantively fair and has been knowingly negotiated. . . . Pivotal to the validity of such an inquiry is the absolute accuracy of the financial information furnished by the parties to one another and the court.” (Citations omitted; emphasis added; internal quotation marks omitted.) Jucker v. Jucker, 190 Conn. 674, 676, 461 A.2d 1384 (1983); see also Dougan v. Dougan, 301 Conn. 361, 370–71, 21 A.3d 791 (2011); Baker v. Baker, supra, 187 Conn. 321–22.
Our Supreme Court has explained that the principle of complete disclosure “is consistent with the notion that the settlement of a marital dissolution case is not like the settlement of an accident case. It stamps with finality the end of a marriage. . . . Courts simply should not countenance either party to such a unique human relationship dealing with each other at [arm‘s] length. Whatever honesty there may, or should, have
For these reasons, we conclude that the thirty day time limitation imposed by
Having concluded that the trial court had jurisdiction over the plaintiff‘s motion to open, we now turn to the merits of her appeal. The plaintiff claims that the court improperly concluded that she had failed to establish probable cause as to the existence of fraud that would permit the court to open the judgment for the limited purpose of conducting discovery on that claim. See Spilke v. Spilke, supra, 116 Conn. App. 593–94; Oneglia v. Oneglia, supra, 14 Conn. App. 269–70. Specifically, she argues that, contrary to the court‘s determination that there was “no evidence” to support her fraud claim, she presented sufficient evidence that established probable cause to warrant further discovery and additional proceedings. We agree with the plaintiff.
The following additional facts and procedural history are relevant to our resolution of this claim. On April 3, 2018, the plaintiff moved to open the judgment on the basis of fraud.16 The defendant filed a memorandum in opposition and exhibits on December 11, 2018. The plaintiff submitted a reply brief on January 11, 2019. Following the first appeal and our remand for additional proceedings; see Karen v. Loftus, supra, 210 Conn. App. 289; the court, Truglia, J., conducted a hearing over the course of three days, September 9, 2022, and January 4 and 5, 2023, to determine whether the plaintiff met
On January 5, 2023, at the conclusion of the hearing, Judge Truglia stated that the plaintiff had failed to prove that the defendant had misled McLachlan at the arbitration and therefore denied the motion to open. Approximately one month later, the court issued a “statement of decision” that provided in relevant part: “The gravamen of the plaintiff‘s motion to open is that the defendant made material statements during the arbitration . . . that were false, and that the defendant knew were false. The plaintiff alleges in her motion that [McLachlan] relied on these false statements in reaching a decision that was unfavorable to her. Had the defendant not made false statements during the arbitration proceedings, the plaintiff further alleges, the outcome of the arbitration would have been different. . . .
“The court heard approximately nine hours of testimony from both parties in this case and two other witnesses over the three days of evidentiary hearing. The court сarefully reviewed and weighed the testimony presented. The court also carefully reviewed all of the exhibits submitted by the plaintiff in support of her motion. The court found no evidence of fraud.” (Citation omitted; emphasis added.)
As an initial matter, we review the relevant legal principles. “In Oneglia v. Oneglia, [supra, 14 Conn. App. 267], this court held that, in considering a motion to open on the basis of fraud, a court must first make a preliminary determination of whether there is probable cause to believe that the judgment was obtained by
Stated differently, “a party seeking to obtain discovery related to allegedly fraudulent conduct that transpired prior to the entry of judgment must, consistent with the aforementioned precedent, (1) move to open
Next, we identify the applicable standard of review. Generally, our decisions have applied a discretionary standard of review to the denial of a motion to open. “Our review of a court‘s denial of a motion to open [based on fraud] is well settled. . . . In an appeal from a denial of a motion to open a judgment, our review is limited to the issue of whether the trial court has acted unreasonably and in clear abuse of its discretion. . . . In determining whether the trial court abused its discretion, this court must make every reasonable presumption in favor of its action. . . . The manner in which [this] discretion is exercised will not be disturbed so long as the court cоuld reasonably conclude as it did.” (Internal quotation marks omitted.) Cimino v. Cimino, 174 Conn. App. 1, 5, 164 A.3d 787, cert. denied, 327 Conn. 929, 171 A.3d 455 (2017).
In this appeal, however, the specific legal issue raised by the plaintiff warrants the application of a less deferential standard of review. Here, the plaintiff claims that the trial court improperly determined that she had failed to establish probable cause to substantiate her fraud allegations. Our Supreme Court has stated that “[w]hether particular facts constitute probable cause is a question of law.” (Internal quotation marks omitted.)
With our standard of review in mind, we turn to the relevant legal principles regarding the standard of probable cause. We acknowledge that most of the cases that have addressed the existence of probable cause in the context of a motion to open based on fraud have not discussed the standard itself in much detail. Accordingly, we look to the use of probable cause in other contexts for guidance. “Our Supreme Court has determined that [p]robable cause is a standard widely used to validate a preliminary impairment of a broad range of personal and property rights, from the suspension of professional licenses to the issuances of warrants for seizure and arrest. . . . A hearing in probable cause is not intended to be a full scale trial on the merits of the [moving party‘s] claim. The [moving party] does not have to establish that he [or she] will prevail, only that there is probable cause to sustain the validity of the claim. . . . The court‘s role in such a hearing is to determine рrobable success by weighing probabilities. . . . The legal idea of probable cause is a bona fide belief in the existence of the facts essential under the law for the action and such as would warrant a [person] of ordinary caution, prudence and judgment, under the circumstances, in entertaining it. . . . Probable cause is a flexible common sense standard. It does not demand that a belief be correct or more likely true
The issue at the February 16 and 17, 2017 arbitration concerned the interpretation of paragraph 6 (B) of the prenuptial agreement and whether the defendant had “left his employment with Merrill Lynch under an arrangement that is in any fashion tantamount to a ‘sale’ of his interest in Merrill Lynch, i.e. a transaction under which [the defendant] receives any property, real or personal, including but not limited to a sum of money, by way of a ‘sign-on’ bonus or otherwise, a premium bonus, and/or restricted stock or other ownership interest (‘Sale Proceeds‘), to work for another entity for any reason whatsoever, including his bringing a book of business and/or a clientele and/or a book of other assets to a prospective employer, [and, if so] then [the defendant] shall first be entitled to set aside the value of $75,000, or $75,000 from the Sale Proceeds, and the balance of such Sale Proceeds, whenever received or receivable by [the defendant], shall be divided between [the defendant and the plaintiff].” (Emphasis added.)
In the defendant‘s arbitration brief, he claimed that neither his prior employment at Merrill Lynch nor his
In his arbitration award, McLachlan found that, when the defendant and his partners left Merrill Lynch and formed LLBH, each invested approximately $10,000 to $15,000 into the startup of this business. He further determined that Focus purchased the option to buy an interest in LLBH for $2 million shortly after its formation, and each partner received $500,000. After Focus exercised this option to purchase an interest in LLBH, a corporate reorganization, and the creation of a new entity known as Partner Wealth Management, LLC, the defendant received, inter alia, $1,655,000 and 90,000 shares of Focus stock.
McLachlan then determined that the language of paragraph 6 (B) of the parties’ prenuptial agreement did not apply to the defendant‘s departure from Merrill Lynch
At the hearing on the plaintiff‘s motion to open, however, the defendant acknowledged that Focus paid him and his three partners $2 million at the same time LLBH was formed. The defendant admitted that the option agreement with Focus was signed on the same day that he resigned from Merrill Lynch. He also conceded that the negotiations with Focus had occurred prior to his leaving Merrill Lynch and that Focus was committed to
Additionally, during a July 27, 2016 deposition that was taken as a part of the marital dissolution proceeding and utilized at the hearing before Judge Truglia, the defendant had testified that he and his three partners left Merrill Lynch and “put our own money into LLBH. . . . We set up our firm. We put our own capital in, and we set up a business.” Later in that deposition, the defendant stated: “For the record, for the record, I did not sell anything. . . . I started a business. No one—no one gave me any money. I got no consideration. I put my own money into a . . . new company, took [an] inordinate amount of risk at the absolute peak of the financial crisis, had no way of knowing that my clients would come with me, [and] walked away from . . . millions of dollars . . . .” (Emphasis added.)
The defendant‘s counsel indicated to Judge Truglia that, during the arbitration proceeding, McLachlan had been provided with a copy of the option agreement between LLBH and Focus.18 The plaintiff‘s attorney disagreed with this representation. The defendant confirmed that the option contract was executed on October 17, 2008, the same day he and his three partners left their employment with Merrill Lynch. The defendant further conceded that the negotiation regarding the
At the January 4, 2023 hearing, the plaintiff‘s counsel read from the defendant‘s testimony in a separate lawsuit19 in which he had testified that the option contract with Focus had been contemplated before leaving Merrill Lynch, and he described his receipt of $500,000 as a “payment.” In this prior testimony, he also stated that he and his LLBH partners, over the course of three months, brought over approximately $375 million in assets to manage from former Merrill Lynch clients.
The plaintiff testified at the hearing on her motion to open that she, her attorney and McLachlan had not been in possession of the Focus option agreement at the time of the arbitration, and that she did not learn of its existence, or the subsequent asset purchase agreement, until “[l]ong after” the arbitration.20 She also stated that, at the arbitration hearing, the defendant had testified that it was not until “sometime after” he left Merrill Lynch and formed LLBH “that Focus came around in any way.” She also recalled that his testimony before McLachlan was that he and his partners had no contact with Focus before leaving Merrill Lynch. She further indicated that, at the time of his departure from Merrill Lynch, the defendant had worked to transfer client accounts to the new enterprise.
During cross-examination by the defendant‘s counsel during his deposition, McLachlan described his recollection of the defendant‘s theory of the case: “Well, he said first of all he wasn‘t being paid—this is as I recall
We now turn to the legal principles governing fraud in the context of a motion to open filed in a marital dissolution action. We emphasize that, at this stage of the proceedings, the plaintiff is not required to prove the existence of fraud but, rather, must demonstrate only probable cause as to the existence of fraud in
“Fraud consists in deception practiced in order to induce another to part with property or surrender some legal right, and which accomplishes the end designed. . . . The elements of a fraud action are: (1) a false representation was made as a statement of fact; (2) the statement was untrue and known to be so by its maker; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment. . . .
“Fraud by nondisclosure, which expands on the first three of [the] four elements [of fraud], involves the failure to make a full and fair disclosure of known facts connected with a matter about which a party has assumed to speak, under circumstances in which there is a duty to speak. . . . A lack of full and fair disclosure
The plaintiff presented evidence that, during the arbitration proceeding, the defendant represented to McLachlan that he and his partners left their employment at Merrill Lynch essentially to start a new company, LLBH, and that they did not receive any funding from Focus until after its formаtion. The defendant specifically had argued to McLachlan that the Focus payment of $2 million constituted a transaction without a nexus to his departure from Merrill Lynch. Indeed, during a deposition taken earlier in this proceeding, he stated that he did not sell anything, nor did he receive any money or consideration from a third party; he used his own money to create a new business. He also failed to provide the plaintiff or McLachlan with a copy of the Focus option agreement. The plaintiff presented further evidence that showed that the defendant and his partners had been working with Focus prior to their departure from Merrill Lynch, and they executed the option agreement with Focus on the same day they formed LLBH. The group also brought over former Merrill Lynch clients and their assets worth approximately $375 million.
Applying the flexible, commonsense standard of probable cause that would warrant a person of ordinary
We determine that the plaintiff presented evidence that satisfied the probable cause standard that the defendant had made false statements, or failed to disclose facts, regarding the details of the end of his employment at Merrill Lynch and the formation of LLBH in an effort to deprive her of money she may have been entitled to under the terms of the parties’ prenuptial agreement. Such conduct, if proven, would result in a situation “in which one party held a valuable asset, the true worth and nature of which only that party knew.” Weinstein v. Weinstein, supra, 275 Conn. 690. Efforts to hide or obfuscate material facts in а marital dissolution proceeding are incompatible with our jurisprudence, and we will not countenance such an attempt to unfairly bypass the conditions of a prenuptial agreement to the detriment of the plaintiff. See id., 695; see also Miller v. Appleby, 183 Conn. 51, 57 n.1, 438 A.2d 811 (1981) (when false representations are made for purpose of inducing act to another‘s injury, necessarily there is plain implication that such representations were made with intent to deceive). We conclude, therefore, that the court improperly denied the plaintiff‘s motion to open the judgment based on fraud. As a result, we reverse the trial court‘s judgment denying the plaintiff‘s motion to open and remand the case with direction to open the judgment for the limited purpose of allowing further discovery in conjunction with the plaintiff‘s claim of fraud.
The judgment is reversed and the case is remanded for further proceedings in accordance with this opinion.
In this opinion the other judges concurred.
Notes
‘‘Upon the court’s acceptance of the arbitration award . . . the court’s orders regarding article 6 of the prenuptial agreement shall supersede the prenuptial agreement and render it null and void after judgment for dissolution of the marriage is entered except as specifically set forth herein.’’
‘‘(b) If an award is vacated and the time within which the award is required to be rendered has not expired, the court or judge may direct a rehearing by the arbitrators. . . .’’
‘‘(b) No motion to vacate, modify or correct an award may be made after thirty days from the notice of the award to the party to the arbitration who makes the motion.
‘‘(c) For the purpose of a motion to vacate, modify or corrеct an award, such an order staying any proceedings of the adverse party to enforce the award shall be made as may be deemed necessary. Upon the granting of an order confirming, modifying or correcting an award, a judgment or decree shall be entered in conformity therewith by the court or judge granting the order.’’
In our view, it is appropriate to rely on this provision in resolving the present case because the statute simply clarifies, among other things, that, if the parties’ final agreement to resolve their dissolution proceeding contains an arbitration award embedded in that agreement, the parties’ agreement is subject to the same review and approval process set forth in subsection (c) of
On appeal, the plaintiff claimed that the Supreme Court lacked subject matter jurisdiction over an appeal taken from an order vacating an arbitration award that included issues related to child support. Id., 135. As the court explained, “[t]he plaintiff‘s jurisdictional argument seizes on the proviso in
In rejecting the plaintiff‘s argument in Blondeau, our Supreme Court first generally observed that “[t]he fact that the arbitration at issue involves a marital dissolution is of no consequence” and then noted that
In our view, and for several reasons, the Supreme Court‘s decision in Blondeau does not impact our resolution of the defendant‘s claim that the trial court lacked subject matter jurisdiction over the plaintiff‘s motion to open the dissolution judgment. First, the claim in Blondeau involved an attack on the appellate jurisdiction of the Supreme Court rather than, as here, an attack on the subject matter jurisdiction of the trial court. Second, the language of
“The court‘s role in such a hearing is to determine probable successes by weighing probabilities. . . . In judging the probabilities, a court must weigh the evidence, assess the credibility and demeanor of the witnesses, and evaluate exhibits offered. Evidence offered by the party subject to that standard is not to be accepted uncritically or presumed to be true; nor is the evidence necessarily construed, as would be true on a motion to dismiss at the end of a plaintiff‘s [case-in-chief] in a full-blown trial, in the light most favorable to the plaintiff.” (Citation omitted; internal quotation marks omitted.) Malave v. Ortiz, supra, 43 Conn. L. Rptr. 148–49.