In Foisie v. Worcester Polytechnic, Institute (September 30, 2019), the United States District Court for the District of Massachusetts allowed a Motion to Dismiss where a former wife brought claims of fraudulent transfer and/or constructive fraudulent transfer against Worcester Polytechnic Institute (“WPI”) located in Massachusetts under Connecticut law. The former wife alleged that the assets donated to WPI by her former husband were hidden from her during their divorce, and that the donation was intended to defraud her.
In Connecticut, the then husband and wife had engaged in mediation to arrive at their stipulated Divorce Judgment, during which the husband represented multiple times that he had disclosed all of his assets. The husband had exchanged sworn financial statements with the wife, and he also submitted his sworn financial statement to the Connecticut Superior Court and gave testimony affirming his financial disclosures.
The District Court found that the former husband in fact lied and knowingly failed to disclose all of his assets to the former wife during the divorce, and that the former wife had relied on those representations to her detriment. However, applying Massachusetts law, the District Court concluded that the former wife lacked standing to bring claims under the Uniform Fraudulent Transfer Act (“UFTA”) because she was not a “creditor” under the act given that the transfers to WPI occurred post-divorce.
What relief is available in Massachusetts if a party finds out later that a former spouse knowingly hid assets during the divorce? It depends. Often as part of a Separation Agreement that is incorporated into a Divorce Judgment, divorcing parties include a provision specifying what happens if assets were not disclosed by a party during the negotiation process and are discovered later by the other party. Or, pursuant to Massachusetts Domestic Relations Procedure Rule 60(b), a party can seek relief from a Divorce Judgment in court if there is newly discovered evidence or if there was fraud, misrepresentation, or other misconduct by a party. However, relief pursuant to Rule 60(b) on the basis of newly discovered evidence or fraud, misrepresentation, or misconduct must be sought no later than one year after the entry of the Divorce Judgment, whereas relief sought for “any other reason justifying relief” must only be made within “a reasonable time.”
Interestingly, Rule 60(b) also includes a provision stating that the “rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment . . . for fraud upon the court” for which no time restriction is specified.
If you have any divorce or post-divorce related questions, please contact our attorneys at Fitch Law Partners LLP.