In legal conflicts between family members, feelings run high

Will Astor//June 13, 2014//

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Business and property disputes between siblings or divorcing spouses bring emotions to a fever pitch, says Douglas Foss, a member of Harris Beach PLLC. (Photo by Kimberly McKinzie)

Malcolm Glazer was no stranger to litigation.

A native Rochesterian transplanted to Palm Beach, Fla., he became famous as the owner of the Tampa Bay Buccaneers in the National Football League and the Manchester United English soccer team. Glazer and his Rochester-based holding company, First Allied Corp., were involved in a number of high-profile legal cases.

But the longest and hardest-fought court battle waged by Glazer, whose holdings at the time of his recent death were estimated by Forbes at $5 billion, might have been a 16-year tug of war with his own siblings over their mother’s estate.

Experienced litigators agree: Civil disputes can be emotionally charged for unrelated litigants, clouding their reason. How much more might feelings overwhelm reason when civil disputes and family law intersect?

Court disputes involving family law are not like other civil litigation, says Lisa Sandinsky (at right), a Rochester attorney with two decades of experience in matrimonial law. When child custody or division of spouses’ treasured possessions are at stake, feelings run far higher.

Breakups between unrelated business partners often are like divorces, raising partners’ emotional hackles, says Douglas Foss, a member of Harris Beach PLLC in the firm’s Pittsford office.

Co-leader of Harris Beach’s business and commercial litigation practice, Foss is not a family law expert but has been called in to help value assets in a number of divorces and Surrogate’s Court disputes.

Business and property disputes between siblings or divorcing spouses bring emotions to a fever pitch, he says.

While some divorcing spouses might part amicably with few disagreements over the division of property, in more cases than not, “it’s extremely emotional.” And when there are considerable assets or when couples have been business partners, “you need experts, CPAs.”

Subject to differences of interpretation in any circumstances, asset valuation in marital breakups or matters of inheritance can be even trickier.

While the lay perception of divorce settlements is that marital property is divided 50-50, equitable distribution might not mean an even split, Sandinsky says. Different states and individual judges within each state have different takes on what a fair split might mean.

If spouses start a business during their marriage, the business is marital property. If one spouse owned a business before the marriage and the other has no legal stake, it might not be marital property. But questions could arise if both worked in and contributed to the enterprise during the marriage.

Even the question of what qualifies as marital property can be fraught. Assets previously owned by a spouse before a couple married are not generally considered marital property, but they might become marital property if shared during the marriage. The status of an inheritance left to one spouse as non-marital property could be clouded if it is put into in a joint account.

In 1985, Sandinsky says, New York’s Court of Appeals handed down a ruling upending the state’s previous matrimonial law by declaring that a husband’s medical degree was marital property.

In that case, Michael O’Brien and not his soon-to-be ex-wife, Loretta, had earned the M.D. Still, the court ruled, she had supported him through medical school and was entitled to some of the financial rewards he would reap from it.

The couple divorced after Michael O’Brien graduated but before he had accumulated substantial earnings. The degree was the couple’s only meaningful asset.

The Court of Appeals decision affirmed a lower court’s finding that Loretta O’Brien was entitled to a percentage of the current value of the degree, a six-figure sum.

Since money or assets can be markers for scores to be settled in family disputes, that can complicate matters.

“It’s not just about the money,” Foss observes. “It’s about what you did to me when I was 10 years old.”

Hannah Glazer’s estate of some $1 million was money Malcom Glazer arguably did not need. Already a rich man, he still sought to close his sisters out of their mother’s estate.

“I never went anyplace with my sisters. They never took me,” Glazer complained to a Baltimore Sun reporter in a 1992 interview. “My mother would say, ‘Take him to the movies,’ and they would say no. My mother would say, ‘Why not? You’re going to sit next to a stranger anyway.’ They’d said, ‘We don’t care; we’re not taking him.’”

After his father’s death in 1943, Glazer at age 15 took over the family’s mom-and-pop Main Street jewelry and watch repair business.

Hitting on the idea of selling watches to servicemen stationed at a nearby base, the teenage Glazer made $50,000 in his first year of running the store. At the time, $50 a week was seen as an adequate wage for a single earner to support family.

In succeeding years, Glazer branched into real estate, investing in inner-city rental properties and mobile-home parks. By the time of his mother’s death, Glazer’s holdings also included television stations and nursing homes.

In a response the reporter characterized as “dripping with sarcasm,” Glazer said in the 1992 interview: “I am very sorry my mother and I had a close relationship like we did. I am not sorry, but we did. In my next life, I am not going to be so close to my mother, and my sisters will be happy. I’m sorry I made my mother wealthy.”

Kenneth Payment, a now-retired partner in Harter, Secrest & Emery LLP, was one of three local attorneys who represented Glazer’s sisters in the case.

“We got a summary judgment ruling right away,” Payment recalls.

Then sitting on the surrogate bench, U.S. District Judge Michael Telesca handed down a ruling in 1981 finding the will presented by the sisters to be valid and the will presented by Glazer and his brother Jerome to be not legitimate, Payment says. He also removed the brothers as co-administrators of Hannah Glazer’s estate, leaving their sister Rosalind Klein as sole executor.

Despite that ruling, the case dragged on for more than a decade, outlasting Telesca and a successor on the probate court bench before settling on the watch of a third judge.

“It was all about the valuation,” Payment says.

All the holdings Malcolm Glazer amassed originally stemmed from profits earned by his parents’ Main Street shop. After taking over the shop, however, Glazer took some of its profits to invest in other assets, some of which were in his and his mother’s name and some of which were in his name alone.

For Hannah Glazer’s will to be probated, the court had to determine exactly what portion of the commingled Glazer fortune should be credited to Hannah Glazer’s estate.

Business records Glazer submitted—in more than 100 boxes full of documents in no particular order—did little to clarify the question, Payment says.

Carl Braisley, a witness, who as Glazer’s accountant was supposed to explain the dealings memorialized in the records, was revealed at some point in the proceedings to be illiterate.

The joke among himself and two other attorneys working for the sisters, Payment says, was that not only did Braisley not know what a W-2 was; he did not know what a W was.

A turning point in the case came during a break in a deposition.

Anxious to keep the proceedings moving but apparently unaware that a court stenographer was taking down his words as part of the official record, Glazer remarked to his lawyer, “We have to keep going until there is no money left in this estate.”

Glazer’s later contention that he meant to convey that his sisters and not he would keep the dispute alive failed to convince the court.

In a 1982 decision, Judge Raymond Cornelius wrote that Glazer “beyond a doubt has acted in bad faith” in failing to turn over an adequate accounting of businesses owned with his mother.

Four years later, Judge Lyman Smith cited “intentional and prolonged non-compliance with the court’s reasonable orders” and ordered Glazer to pay fees totaling $268,299 to Payment and the other two lawyers working for Glazer’s sisters.

After 14 years, Payment and the sisters’ other two lawyers dropped out of the case.

A silver lining for the sisters, Payment says, was that during the inflationary 1980s their decision to pay taxes on the estate in advance meant the prepaid sum generated income sufficient to cover attorneys’ fees.

Syracuse attorney Daniel Berman, leader of Hancock Estabrook LLP’s litigation group, took over as the sisters’ attorney. After further hearings to challenge Glazer’s accounting, he arranged a settlement some two years later.

Asked how the sisters fared, “I cannot speak about that,” Berman says. “But I can tell you this: There is a trend toward more closely held businesses. Commercial litigation is starting to look more like family law.”