United States: Setting Aside The Settlement Agreement When New Evidence Comes To Light

Last Updated: August 27 2013
Article by Robert A. Epstein

As a litigant, you can only agree to settle based on what you know.  When the other party details their income, assets and liabilities by anwering discovery and producing documents under oath, signing a Case Information Statement under oath also detailing such information, testifying during a deposition that there exists nothing else, asserting throughout a settlement agreement that everything has been disclosed, and then asserting on the record before the Court – again, under oath, that the agreement is being entered into on a knowing and voluntary basis, what else is a litigant supposed to rely on in deciding whether to settle?  Ultimately, a party who wants to withhold information is going to do so without concern for lying under oath, in the hope that the other spouse will never find out.

We recently dealt with a matter where one spouse did not disclose that he was in talks to sell his business for a significant sum of money.  During the divorce proceeding, he convinced the wife and accounting experts that the company was worth nothing, and she settled based on that premise, taking nothing in equitable distribution for the business as well.  Within the next year, the wife learned that the husband sold the company for millions of dollars.

What option did she have?  With our representation, we successfully moved to set aside the agreement and obtain discovery from the husband to see what had happened.  If you think that those facts are rare, you would be wrong.  We have taken on cases within recent years where one spouse defrauds the other, or new evidence comes to light after the agreement is signed, thereby leaving the other spouse with no choice but to seek to set aside the previously entered settlement agreement.   We even procured summary judgment against the wrongful spouse in one such case.

So when I read newly unpublished (not precedential) Appellate Division decision in Sevintura v. Tosun, I was less than surprised by the fact pattern and ultimate outcome.  Simply put, after the settlement agreement was entered, the wife learned that the husband had other business interests and assets that he had previously failed to disclose during the divorce proceeding.  As a result, she filed an emergent application for discovery, and a reopening of equitable distribution to include the assets not previously disclosed.  The trial court denied the requests, finding that the alleged new evidence was previously disclosed.

On appeal, the Appellate Division found, in accordance with Rule 4:50-1 of the New Jersey Rules of Court, that sufficient issues were raised to warrant further discovery and, depending on the outcome of such discovery, a potential hearing on the wife's motion.  While such motions are to be only sparingly granted, the Appellate Division noted that equity compelled such a result, especially as to issues of equitable distribution.  The court also expounded upon the equitable principles involved, noting how the potential time limits in seeking such relief can be expanded when necessary.

As a result, language in the settlement agreement – as seen in most agreements – that the parties agreed in the settlement agreement to cease in conducting discovery was ultimately unpersuasive when faced with a subsequent allegation of fraud, new evidence, and the like.  Generally, it seems a stretch to argue that a wronged party would be precluded by such language when they could not possibly have known to even seek discovery on something that was not known to exist.

While signing or asserting under oath as to what assets or income exist may never stop some litigants from refusing to disclose everything and anything, there are protections in place for the wronged litigant who later learns that there is more to the story than originally appeared.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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