Justia Contracts Opinion Summaries

Plaintiffs sued the former spouse of Stephen Walsh, who was a defendant in related actions brought by plaintiffs, alleging that the property derived from Walsh's illegal securities activities went into the former spouse's possession under the parties' separation agreement and divorce decree. At issue, in certified questions to the court, was whether the former spouse had a legitimate claim to those funds, which would prevent plaintiffs from obtaining disgorgement from her. The court held that an innocent spouse who received possession of tainted property in good faith and gave fair consideration for it should prevail over the claims of the original owner or owners consistent with the state's strong public policy of ensuring finality in divorce proceedings.

The company filed civil claims under Massachusetts state laws and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 after discovering a scheme under which its employees and outsiders duped it into paying fraudulent invoices. Other defendants settled. After a trial, a former employee and an outsider, who advanced funds for the scheme, were found liable to the company. The First Circuit affirmed. There was sufficient evidence that the outsider knowingly and willfully participated in the scheme to support a verdict under RICO. That the jury did not find her liable for conspiracy to violate RICO is irrelevant. The evidence also supported a verdict of common law fraud; any error in a "willful blindness" jury instruction was harmless. Inclusion of anticipated attorney fees in an appeal bond was appropriate.