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A spouse has the absolute right to discontinue a divorce action when no complaint has been served, even though substantial discovery has been completed and a trial date set, a New York appellate court has ruled. The case, McMahon v. McMahon, 2583, involved the sudden inflation of a trader’s stock and options when Goldman Sachs converted from private to public ownership. The New York Appellate Division, 1st Department, unanimously affirmed Justice Joan Lobis’ denial of John McMahon’s motion to vacate his wife’s notice of discontinuance of a divorce action. Julie McMahon had served a summons on her husband in April 1998 but no complaint. Mr. McMahon never demanded a complaint, nor served an answer while stipulations were negotiated to resolve maintenance and child custody issues, and while discovery on equitable distribution issues was under way. When Goldman Sachs announced four months later that it intended to go public, both parties realized that Mr. McMahon’s stock and stock options in the firm, where he had been a trader for 16 years, would appreciate enormously. Goldman Sachs’ initial public offering (IPO) in May 1999 resulted in Mr. McMahon’s stock and options increasing in value to about $30 million, according to the appellate court’s unsigned memorandum decision. Discovery continued, but in September, Mrs. McMahon sought to depose Goldman Sachs officials to obtain records concerning the public offering. A month later Mr. McMahon sought a protective order barring production of the evidence, arguing that more than a year had elapsed since the initiation of the divorce action, and thus his interest in the IPO was separate rather than marital property. Mrs. McMahon immediately served a notice of discontinuance of the action, citing Section 3217(a)(1) of New York’s Civil Practice Law and Rules, which permits a plaintiff to withdraw an action without court order if she serves a notice of discontinuance upon all parties at any time before a responsive pleading is served. Her intention, the court observed, was to retain a marital interest in the benefits accruing from the IPO. NO COMPLAINT SERVED “The dispositive factor in this case is that the complaint was never served,” the 1st Department said. “Hence the wife retained the ‘absolute and unconditional’ statutory right to discontinue the action on notice.” The court did not agree with Mr. McMahon that his wife should be equitably estopped from discontinuing the divorce. “[T]he omission in service was as much for the husband’s convenience as the wife’s, and he had an adequate opportunity to demand a complaint,” the court said. It noted that Mr. McMahon had intended to negotiate the financial aspects of the divorce before the service of the complaint, which contained allegations of fault that could have interfered with a settlement. “Even as we recognize the practical benefits of deferring service of the pleadings in many matrimonial cases, nevertheless, that is but one factor to be evaluated among others by the parties as they chart their own course. Having participated in the charting of this course, the husband cannot now complain of outrageous trickery,” the court concluded. Justices Peter Tom, Betty Weinberg Ellerin, Richard W. Wallach, Israel Rubin and David B. Saxe formed the appellate panel. Charles J. Moxley appeared for Julie McMahon. Ira E. Garr was counsel for John McMahon.

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