ATROs and Fiduciary Duty in the Mary Kate Olsen Divorce

Mary Kate Olsen and her husband, French banker Pierre Olivier Sarkozy, had a massive falling out and are heading towards a divorce—although not as quickly as Mary Kate would like. The courts in New York City where the couple resides are currently not accepting petitions for divorce due to the COVID-19 crisis.

According to reports by TMZ and other media sources, Mary Kate is requesting that the court grant emergency orders. Why the rush? Because allegedly Sarkozy has ended the lease on their apartment without Olsen’s knowledge. She asserts that she doesn’t have enough time to move out of the property and is afraid that Sarkozy will dispose of her things.

Note that laws in New York are different from those in California. We’ll discuss these issues in the context of California law with our own high net worth divorce litigator, Carrie Block.

Can one spouse legally dispose of separate or community property as Sarkozy is threatening to do with Olsen's things if there is no divorce underway?

Carrie Block: Generally, no. Before a divorce, if the parties are separated, a spouse in Sarkozy’s position may be held liable if they decide to dispose of the other spouse’s property. Actions like those are frowned upon by the court and can result a charge of breach of fiduciary duty. The spouse may owe the other party for half of the disposed assets or may owe in full for their value.

How does starting a divorce protect against one spouse disposing of the other’s property? What rules are involved if this was in California?

CB: As soon as you file for a divorce, Automatic Temporary Restraining Orders (ATROs) go into effect prohibiting those types of actions. Under Family Code 2040, parties are not allowed to transfer, encumber, conceal, or dispose of any property during this time frame without the written agreement of the other party and the court.

Back in April, Olsen couldn't file a petition for divorce due to COVID-19 court closures. She has asked NY courts for an emergency order of some variety. If this was California, is this an emergency? What might be the appropriate actions for Olsen to take thru the courts?

CB: In California, there’s a six-month waiting period for a divorce to be final, so her actions are out of context here. The state of New York doesn’t have a waiting period, so that’s why she was trying to get the action done as an emergency. Her request was not granted by the courts. Here in California, during normal circumstances pre-COVID-19, you could ask the court for emergency orders protecting against actions that violate ATROs or breach of fiduciary duty.

TMZ says that Mary Kate has an "ironclad" prenup in place. Why would that have any bearing on whether Sarkozy could dispose of her things? 

CB: Words like “ironclad” in the context of the article don’t have any real legal basis. I draft premarital agreements all the time and follow all requirements to make them enforceable, but you never know. The likely scenario is that their prenup made their divorce an open-and-shut case like they are designed to do, so Olsen was requesting the court to enforce it immediately.​

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