In an opinion today, Judge Pauley granted in part and denied in part a motion by SAC Capital’s founder Steven Cohen to dismiss claims that he misled his ex-wife Patricia in connection with their divorce settlement. Patricia Cohen alleged that Steven Cohen falsely told her that a certain real estate investment, referred to as the “Lurie Investment,” was worthless, when in fact he received a $5.5 million settlement arising from the investment. The divorce settlement included a clause stating that Steven Cohen made no representations about the investment’s value, and a general merger clause, but Judge Pauley found that those statements did not negate the possibility of fraud:
Here, the separation agreement specifically disclaimed that Steven had made any representation “as to the value of the interest in [the Lurie investment.]” However, . . . this disclaimer does not fully eclipse the representation on which Patricia allegedly relied. Patricia’s allegation is not just that Steven misrepresented the value of the real estate, but that he led Patricia to believe the invested money was lost. Further, neither the acknowledgment that full financial disclosure was lacking nor the general merger provision nullifies the possibility that Patricia reasonably relied on Steven’s statements that the Lurie Investment was lost.
Judge Pauley found that Patricia’s RICO claim was a “bridge too far,” however:
Plaintiff’s theory that Steven’s position in the enterprise allowed him to make the Lurie Investment, the settlement of which he then concealed from her, is a bridge too far. Any number of a defendant’s activities or affiliations might create the circumstances for a RICO predicate act, but the legal question is whether the predicate act could rationally be ascribed to the enterprise such that it was conduct of an enterprise within the meaning of the RICO act. Although Patricia alleges Steven and Donald [Cohen, Steven’s brother] “committed the Scheme against Patricia” through their roles as officers in SAC, she does not plead facts suggesting that SAC was involved in the scheme. Nor does she allege that SAC benefitted from the scheme. The absence of any benefit to SAC is significant because “defendants who allegedly constitute an illegal enterprise and engage in predicate offenses in furtherance of the defendants’ own affairs or purposes, as opposed to the affairs or purposes of their common ‘enterprise,’ . . . fail to satisfy the requirements of RICO.”
The opinion concludes with Judge Pauley’s observation that the litigation has lasted longer than the Cohens’ marriage:
This is a case to restore faith in the old-fashioned idea that divorce is something that lasts forever. Indeed, factoring in Patricia’s 1991 motion, the Cohens’ legal battles have covered a span over twice the length of their marriage. But though treble damages are a tempting way to spice things up, civil RICO and marriage do not go together like a horse and carriage.