In a highly acrimonious divorce between a Cadwalader partner and his wife, the partner has been allowed to keep most of the value of his partnership interest as a judge found the wife’s conduct during the divorce contributed to the decline of his business assets.
Ira and Janice Schacter’s divorce generated headlines in the New York tabloids and legal blogs, which reported the wife’s allegations of her husband’s angry behavior and failure to provide for their daughter.
Manhattan Supreme Court Justice Laura Drager (See Profile), who called this “one of the most contentious litigations this court has ever presided over,” issued a decision on April 4 distributing assets.
Drager disagreed with the husband that his wife’s conduct was the sole reason for the decline in business, noting Cadwalader, Wickersham & Taft’s revenue dropped during the recession, resulting in layoffs. But after considering Ms. Schacter’s conduct, Drager awarded her only 17 percent, or about $855,440, of the partnership value.
“In essence, the wife chose to bite the hand that fed her. Although the court recognizes that the wife feels she was badly treated by the husband, her repeated attacks against him have played a part in diminishing his income,” the judge said.
The parties in Ira S. v. Janice S., 311503/2007, are identified only by their first names and last initial.
Mr. Schacter, 53, is a corporate partner at Cadwalader. Ms. Schacter, 50, attended law school and was admitted to the bar, working for a few years as an associate at a personal injury firm. She left the practice when their daughter was born.
As a result of their daughter’s hearing loss, Ms. Schacter formed the nonprofit Hearing Access Program to advocate for people with hearing loss. The high-profile position brought in no income.
The couple initiated the divorce in October 2007, after both the husband and wife were arrested for allegedly assaulting one another. The wife brought charges against her husband but they were dropped by the Manhattan District Attorney’s Office, according to Drager.
Drager said both parties agreed that the husband’s equity partnership at Cadwalader is a marital asset.
Mr. Schacter considered himself a rainmaker and claimed his earning were largely derived from his ability to bring in business, according to the opinion. But he argued that the court should value his partnership to be only $627,141, which was the cash basis of his partnership as of September 2012, the date of trial.
He argued that his wife’s conduct since the start of the divorce “has so interfered with his ability to retain clients that she actively caused the value of his partnership interest to decline.”
But Jay Fishman, a forensic accountant, valued Mr. Schacter’s partnership at about $5.03 million at the time the divorce was filed in 2007, even though his merit points in the firm’s partnership system were reduced to three in 2012 from nine in 2008; Cadwalader’s revenue dropped 13.7 percent in 2008 and continued to drop the next two years; and the firm laid off 131 associates during the financial crisis, when Cadwalader was hit hard by reduced appetite for commercial backed-securities.
According to Mr. Schacter, the layoffs were in capital markets, real estate finance and bankruptcy areas, practices directly related to his own. Two of his major clients declared bankruptcy by 2010, and between 2007 and 2011 the revenue he brought into the firm fell more than 94 percent, Drager said.
“The firm’s business was heavily tied to investment banks and in particular, mortgage-backed securities. The evidence reveals that the earnings for the firm as a whole declined,” Drager said. “Thus, to a large extent, the decline in the value of the husband’s partnership was the result of the economy.”
But Drager said the wife’s actions should be addressed in distributing assets.
Drager found both parties contributed to the acrimony, with the husband bringing 40 motions and the wife 26.
Mr. Schacter testified he was subject to seven investigations by New York City’s Administration for Children’s Services, each one determined to be unfounded, and police came to his home more than 100 times.
“They each shouted and interrupted court proceedings. They made inappropriate comments and gestures to each other immediately outside the courtroom,” Drager said. She cited an incident between Mr. Schacter and his daughter that led to his arrest and mandatory attendance at an anger management program. Drager also found he had made vulgar and crude comments about his wife to their children.
But in finding Ms. Schacter contributed to the decline of the value of her husband’s partnership, Drager considered several newspaper articles and web posts about the divorce.
For instance, the judge said the wife was the source of a New York Post article in 2011 that reported Mr. Schacter bought his model fiancée a $215,000 diamond engagement ring but refused to pay for his teen daughter’s $12,000 hearing aids.
In fact, Drager said, the daughter had already received the hearing aids by the time the article appeared and the issue of who was responsible for the cost was pending before the court.
Although Ms. Schacter was not necessarily the source of all negative publicity, the judge said, she regularly posted negative information about he husband on various web sites.
Mr. Schacter’s alleged failure to pay for his daughter’s hearing aids landed him a mention in Above the Law’s “Lawyer of the Month,” a feature that pokes fun at attorneys.
Mr. Schacter claimed the negative publicity caused his business to dry up.
One company’s general counsel, identified in Drager’s opinion as J.L., testified he had used Cadwalader for legal services in 2007 but when Mr. Schacter sought a retainer in 2011, J.L. did not hire him because of the negative publicity. Though the general counsel was a friend of Mr. Schacter’s, he said he could not risk his own reputation.
“His testimony [and others] establishes to this court that the Internet postings have been injurious to the husband’s professional standing and ability to retain clients,” Drager said. “The wife was well within her rights to publicly raise her concerns about domestic violence. However, the wife’s incessant postings and discussions about the husband went beyond any reasonable discussion of this very serious issue.
“At a time when work in his field was in decline, any negative publicity, even if not directly related to the husband’s legal acumen, could potentially scare away clients,” Drager said.
Ultimately, she awarded Mr. Schacter 83 percent of his partnership value at the time the suit was filed, about $4.17 million. She said he should pay Ms. Schacter the other 17 percent, $855,440.
On attorney fees, Drager said the husband has paid $459,000 for interim fees for his wife’s attorneys and $70,000 for her expert accountants.
The wife requested additional fees owed to her former counsel at Aronson Mayefsky & Sloan and Advocate & Lichtenstein. Each firm has filed collection lawsuits against her, claiming outstanding fees totaling several hundreds of thousands of dollars.
Drager denied Ms. Schacter’s request for fees that may be owed to the firms, but she ordered Mr. Schacter to pay her present attorney, Michael Joseph of Kliegerman & Joseph, $100,000 in additional fees owed.
Mr. Schacter’s own legal fees totaled $1.64 million for his first attorney and $671,706 for his second. He incurred about $512,000 for expert expenses and $461,248 for expenses arising from the criminal prosecutions and other investigations.
Drager also distributed assets from the parties’ $4.4 million townhouse, $4.5 million house in the Hamptons, retirement accounts, cars, jewelry and other assets.
Joseph, Ms. Schacter’s attorney, declined to comment.
Ashish Joshi of Lorandos Joshi, who represents Mr. Schacter, did not return a call seeking comment.
Mr. Schacter referred all comments to his representative at Rubenstein Associates, Marcia Horowitz. Horowitz said her client had no comment, “other than to say that he now has a wonderful close relationship with both his son and his daughter.”