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Sports Betting Bankruptcies & Who Gets the Engagement Ring? · Bloomberg Law

0:03
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
0:11
Speaker 2: Two hundred dollars, instantly, jes A betting, five bucks, DraftKings,
0:15
Speaker 2: Listen to me, you listening? You listen good. I appreciate
0:18
Speaker 2: you for recognizing how valuable my time is. But instantly stop.
0:22
Speaker 1: You're not gonna make me sweat a little bit, feel
0:24
Speaker 1: some extra bump, some of a chest.
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Speaker 2: While the game is going on. Oh look, wait a minute,
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Speaker 2: there's my two hundred dollars.
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Speaker 1: Sports betting apps are fast. You can place multiple bets
0:34
Speaker 1: on multiple games within seconds, and of course there's the
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Speaker 1: accessibility right on your phone at any time. There's expected
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Speaker 1: to be more sports betting this NFL season than ever before,
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Speaker 1: but consumer bankruptcy attorneys are starting to see the downside
0:51
Speaker 1: to the apps, as gambling debts play a more prominent
0:55
Speaker 1: role in bankruptcies. In fact, a new study finds there's
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Speaker 1: a twenty eight percent increase in the likelihood of bankruptcy
1:02
Speaker 1: filings in states with legalized online sports betting. Joining me
1:07
Speaker 1: is Evan Oxner, a bankruptcy reporter at Bloomberg Law who's
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Speaker 1: researched and written about this. Online gambling is pretty new
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Speaker 1: in the legal scheme of things. How many states have
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Speaker 1: legalized it.
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Speaker 3: This all stems from a twenty eighteen Supreme Court decision
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Speaker 3: that cleared the way for states to legalize sports betting,
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Speaker 3: and so far about thirty states have legalized online sports
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Speaker 3: betting since that decision. There's some additional states that have
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Speaker 3: legalized sports betting but not online, still only at physical
1:37
Speaker 3: locations like casinos, and so you have a buried landscape
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Speaker 3: right now of states that have legalized it in some
1:44
Speaker 3: states that haven't. Missouri is set to go to the
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Speaker 3: ballot in November. They're considering whether to legalize sports betting
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Speaker 3: at that time.
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Speaker 1: And I assume that billions are involved. How many billions?
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Speaker 3: The number that I highlighted in my stool with a
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Speaker 3: projection from the American Gaming Association which projects thirty five
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Speaker 3: billion dollars in legal sports bets to be placed throughout
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Speaker 3: this NFL season. I don't know what proportion of that
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Speaker 3: is online, but the thirty five billion dollar projection is
2:14
Speaker 3: up significantly from twenty seven billion dollars last year.
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Speaker 4: Wow.
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Speaker 1: You talked to consumer bankruptcy attorneys and they say that
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Speaker 1: online sports books betting have pushed clients into chapter seven
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Speaker 1: or chapter thirteen.
2:30
Speaker 3: Yeah, that's right. I chatted with consumer bankruptcy attorneys and
2:34
Speaker 3: states that have legalized online gambling, and they said within
2:37
Speaker 3: the last few years they have seen an increase seen
2:40
Speaker 3: clients that have had issues of financial distress that were
2:43
Speaker 3: tied to online sports betting. One attorney told me this
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Speaker 3: is a phenomenon that he's just started to see within
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Speaker 3: the last five years, and another told me that he's
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Speaker 3: seeing the largest gambling debts when his clients are doing
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Speaker 3: betting online. The issues that they see are generally most
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Speaker 3: pronounced among young men, and some of the research that's
3:02
Speaker 3: been coming out in recent months also find some of
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Speaker 3: the strongest financial downsides among younger men.
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Speaker 1: And it's not necessarily because of huge bets. It can
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Speaker 1: just be a lot of small bets.
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Speaker 3: Yeah, that's right. That's a great point. And a lot
3:17
Speaker 3: of times they'll see their clients just rack up bets
3:20
Speaker 3: over time, sometimes ten dollars bets, sometimes one hundred dollars bets,
3:24
Speaker 3: but that can all build up. I also saw one
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Speaker 3: case where the debtor admitted himself that he was trying
3:30
Speaker 3: to make something out of nothing. He was struggling financially
3:33
Speaker 3: and actually placed some bets right around the time of
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Speaker 3: his bankruptcy filing and right after, and that through the
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Speaker 3: attention of a creditor who didn't like that type of spending.
3:42
Speaker 3: But yes, it can be small bets that just add
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Speaker 3: up over time. And the consumer attorneys, though, did emphasize
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Speaker 3: that this is a problem that's often combined with other
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Speaker 3: financial issues. It's not necessarily a giant gambling debt that
3:55
Speaker 3: pushes something into bankruptcy. There's usually other things going on,
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Speaker 3: and sometimes too, you'll see their clients who say, gamble
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Speaker 3: away their money in cash and then rack up debt
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Speaker 3: elsewhere because they don't have cash to meet other needs
4:08
Speaker 3: like groceries are ranked.
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Speaker 1: One attorney told you he's had clients who blew through
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Speaker 1: their four to one case savings.
4:16
Speaker 3: That's right. He was telling me about clients who, he said,
4:19
Speaker 3: make a good living, make a high salary, but blew
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Speaker 3: through their savings accounts in their four oh one case
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Speaker 3: and then that's when they kind of have that moment
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Speaker 3: of reckoning and reach out to a bankruptcy attorney.
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Speaker 1: Can gambling debts be discharged in bankruptcy?
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Speaker 3: Yeah, gambling debts generally can be discharged in bankruptcy, but
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Speaker 3: it's not always super simple, at least according to the
4:42
Speaker 3: bankruptcy attorneys I talk to. They said they generally tried
4:46
Speaker 3: to design a case so that issues around the gambling
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Speaker 3: debts don't arise. One lawyer I talked to you says
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Speaker 3: she won't file the case until she can submit three
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Speaker 3: months of queen financial records that show no gambling transaction.
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Speaker 3: She said with one client she had, that was a
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Speaker 3: big struggle. They were having a hard time staying away
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Speaker 3: from the sportsbooks. To get into three clean months was
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Speaker 3: an issue. And again, even though it's dischargeable, it can
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Speaker 3: really cast some issue with the creditors or the trustees
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Speaker 3: who help administer these bankruptcy estates, because sometimes it's viewed
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Speaker 3: as irresponsible spending by someone who's already underwater. An attorney
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Speaker 3: I talk too suggested that he frames it as an
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Speaker 3: entertainment expense sometimes, and he said there's nothing illegal about it.
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Speaker 3: You can disagree about how people spend their money on entertainment,
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Speaker 3: but as long as it's within reason, there's nothing inherently
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Speaker 3: wrong about it. In the bankruptcy contact and another lawyer
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Speaker 3: I was talking to, I mentioned I was searching court
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Speaker 3: dockets for examples of some sports gambling cases, and I
5:44
Speaker 3: told him I was having a hard time finding times
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Speaker 3: where it came up, and he said that's intentional. If
5:49
Speaker 3: a lawyer designs their case correctly, they can prevent those
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Speaker 3: issues from coming up at all.
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Speaker 1: Are there any circumstances where you can't discharge gambling debts
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Speaker 1: in bankruptcy?
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Speaker 3: And it generally is dischargeable, and it's dischargeable under the
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Speaker 3: Bankruptcy Code. An interesting case all highlights is a creditor
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Speaker 3: who objected to thirteen thousand dollars invests that were made
6:10
Speaker 3: by this debtor around the time and during his bankruptcy,
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Speaker 3: and the judge found that even that was a good
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Speaker 3: face debt and didn't merit the case being dismissed. He
6:19
Speaker 3: said that, yes, it was bad judgment, but bad judgment
6:22
Speaker 3: doesn't equal bad faith, and if it was a bad
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Speaker 3: face set, that's where you run into issues of dischargeability.
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Speaker 3: But as one lawyer told me, his clients didn't gamble
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Speaker 3: to lose. It's not like a lot of gamblers and
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Speaker 3: problem gamblers don't think they're going to pay the money back.
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Speaker 3: They fully believe that they're going to win and dig
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Speaker 3: out of that hole. So it's not a bad face
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Speaker 3: test in the sense that they knew that they weren't
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Speaker 3: going to be able to pay it off.
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Speaker 1: You mentioned that one lawyer waits until her client has
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Speaker 1: three months of financial records without gambling payments. I mean,
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Speaker 1: what happens if a client keeps gambling during the bankruptcy?
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Speaker 1: Does that show up?
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Speaker 3: Yeah, that's a good question, and it can. And that's
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Speaker 3: where the one lawyer was talking about framing it as
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Speaker 3: an entertainment expense. An individual debtor will submit a proposed
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Speaker 3: budget to the court, and let's say that in my budget,
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Speaker 3: I propose a three hundred dollars a month on entertainment,
7:15
Speaker 3: So I could still theoretically gamble two hundred dollars a
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Speaker 3: month and you know, have that as an entertainment expense.
7:22
Speaker 3: Is how his lawyer talked about framing it. And then
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Speaker 3: in the other case, I mentioned some of the bets
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Speaker 3: of these chunk of thirteen thousand dollars by the debtor,
7:29
Speaker 3: who admitted that he was trying to dig himself out
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Speaker 3: of trouble. Some of those bets were made while he
7:34
Speaker 3: was bankrupt, and that's part of why the creditor argued
7:36
Speaker 3: that it showed that the bankruptcy was in at faith,
7:39
Speaker 3: but again the judge disagreed with that and determined that
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Speaker 3: it didn't equal bad faith.
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Speaker 1: Did any of the other lawyers that you spoke to
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Speaker 1: make an effort to help the clients with their gambling problems?
7:52
Speaker 3: Yeah, And essentially the lawyers who I spoke with suggested
7:56
Speaker 3: that helping the client with the gambling problems also helped
8:00
Speaker 3: smooth in the bankruptcy process. It's helpful essentially to be
8:03
Speaker 3: able to tell creditors and a trustee that their client
8:06
Speaker 3: is getting treatment. One lawyer had told me that before
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Speaker 3: he files the case, he has his client sign up
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Speaker 3: for self exclusion list, which is something that you can
8:14
Speaker 3: do at casinos or now at online sportsbooks, where if
8:18
Speaker 3: you know you have a gambling problem, you can essentially
8:21
Speaker 3: ban yourself from that gambling platform so you don't accrue
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Speaker 3: any additional gambling losses. And that's something that's helpful for
8:29
Speaker 3: the lawyers to be able to tell a court is
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Speaker 3: that their clients is no longer gambling because they sign
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Speaker 3: themselves up to these lists.
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Speaker 1: So the betting apps themselves, I mean, I take it
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Speaker 1: they're encouraging more gambling. Are there any ways to limit
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Speaker 1: yourself on a betting app. I mean, I have no
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Speaker 1: idea because I've never placed a bet on a sports app,
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Speaker 1: but I know people who have.
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Speaker 3: I haven't either, And yes, the betting apps allow you
8:55
Speaker 3: to place limits on how much gambling activity that a
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Speaker 3: user participations, so you can set limits on, say how
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Speaker 3: much money you want to bet the gambling apps and
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Speaker 3: some of the lawyers I talked to you also said
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Speaker 3: it's helpful because they provide rundowns of how much money
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Speaker 3: a better loses for wins. So essentially, think of it
9:13
Speaker 3: as like a monthly statement that shows you your betting activity.
9:16
Speaker 3: That makes it easier for players to keep track of
9:19
Speaker 3: their wins and losses.
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Speaker 4: You know.
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Speaker 3: Compare that to someone who's going into a casino and
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Speaker 3: just playing flocks and has a harder time keeping track
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Speaker 3: of it. I also talked to one expert who says
9:28
Speaker 3: that better historically overestimate their wins and underestimate their losses.
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Speaker 3: So having to kind of print out and being able
9:36
Speaker 3: to see wins and losses I think is intended to
9:39
Speaker 3: be helpful as far as giving people an idea of
9:41
Speaker 3: their financial picture.
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Speaker 1: It sounds like you had to do digging for this.
9:45
Speaker 1: Have any studies been done about how much online gambling
9:49
Speaker 1: contributes to bankruptcies.
9:51
Speaker 3: Yeah, there's been a couple interesting studies that have come
9:54
Speaker 3: out just this summer. One look at states that have
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Speaker 3: legalized online betting and in those states found a twenty
10:00
Speaker 3: eight percent increase in bankruptcy likelihood. They saw that online
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Speaker 3: act that drives most of the effects they observe as
10:07
Speaker 3: far as financial harms. They found out that the legalization
10:11
Speaker 3: of sports gambling decreased consumer financial health. Another study found
10:16
Speaker 3: the strongest adverse financial effects among lower income households in
10:20
Speaker 3: space with legalized sports betting. They found that legalized sports
10:23
Speaker 3: betting decreases in that investment and increases overdraft. There was
10:27
Speaker 3: a third study that has not yet been peer reviewed
10:30
Speaker 3: and came out just a couple of weeks ago that
10:32
Speaker 3: did not find a statistically significant increase in self reported
10:35
Speaker 3: financial distress.
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Speaker 1: So in the states that are considering it, I mean,
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Speaker 1: what's the upside to having online gambling in your state.
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Speaker 3: Some of the arguments I've seen amount to tax revenue.
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Speaker 3: This is something that states can tax and find another
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Speaker 3: revenue stream. You know. It was highlighted to me by
10:55
Speaker 3: one of the experts I talked to you that that's
10:56
Speaker 3: a big motivation for some of these states is an
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Speaker 3: additional revenue. And in some of the states, the entities
11:03
Speaker 3: that are arguing against that are traditional casinos who don't
11:06
Speaker 3: want people to just stay at home and bet. They
11:08
Speaker 3: want him to have to come in and bet at
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Speaker 3: their casino.
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Speaker 1: So we'll see what happens with the ballot initiative in Missouri.
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Speaker 1: Six states tried but failed to legalize sports betting during
11:21
Speaker 1: the twenty twenty four legislative session. They are in alphabetical order, Georgia, Hawaii, Minnesota, Missouri, Oklahoma,
11:30
Speaker 1: and South Carolina. Thanks so much, Evan, great story and research.
11:35
Speaker 1: That's Evan Oxner, Bloomberg Law Bankruptcy Reporter. Only eight weeks
11:40
Speaker 1: remained for President Joe Biden to complete his efforts to
11:44
Speaker 1: remake the racial, gender, and professional diversity of the judiciary.
11:49
Speaker 1: The task is complicated by the pressures of an election
11:52
Speaker 1: year and a narrowly divided Senate. Joining me is an
11:56
Speaker 1: expert in the judiciary, Carl Tobias, a professor at the
11:59
Speaker 1: University of Richmond Law School. Carl, where does Biden stand
12:04
Speaker 1: in comparison to Trump?
12:07
Speaker 4: Biden now today will confirm two people, so he will
12:12
Speaker 4: have one hundred and sixty one confirmations at the district
12:17
Speaker 4: level and forty three appellet. At that same point in
12:22
Speaker 4: twenty twenty, Trump had one hundred and fifty one, ten
12:27
Speaker 4: fewer at the district level, but fifty three appellet, and
12:32
Speaker 4: so that's ten more at that point in time. He
12:35
Speaker 4: ended with fifty four. So that's where we are.
12:39
Speaker 1: So only eight weeks of the Senate session remain, including
12:43
Speaker 1: the lame duck session. How many nominees are in place
12:47
Speaker 1: and how many do you think they can get through?
12:50
Speaker 4: Well? I think they can confirm the six appellet nominees,
12:56
Speaker 4: one or two I think are controversial. But then at
13:01
Speaker 4: the district level, there are sixteen district nominees on the floor.
13:07
Speaker 4: I believe ten or eleven of them will easily be
13:10
Speaker 4: confirmed because they had bipartisan Senate Judiciary Committee approval, and
13:16
Speaker 4: so you have five who may have somewhat closer votes.
13:21
Speaker 4: Then there are also four district nominees who've had hearings
13:25
Speaker 4: but have not had committee votes, which they'll have either
13:28
Speaker 4: Thursday or the following Thursday. And then they're about six
13:34
Speaker 4: or so other newer nominees who still would need hearings
13:41
Speaker 4: and committee votes and floor votes. So that's what we're
13:44
Speaker 4: looking at in terms of what we have now, though
13:47
Speaker 4: I think the White House is committed to going further
13:51
Speaker 4: in the lame duck session and actually holding hearings then,
13:56
Speaker 4: and may still have nominees this month in September who
14:01
Speaker 4: could still make it through during the lame duck with
14:03
Speaker 4: hearings and committee votes and floor votes. But we'll see
14:07
Speaker 4: at some point it's going to be too late to
14:10
Speaker 4: nominate and move people through the process. But I don't
14:13
Speaker 4: think we're quite there yet.
14:15
Speaker 1: There are some who there's been opposition to tell us
14:19
Speaker 1: about those. One would be the first Muslim federal appellate judge,
14:23
Speaker 1: if confirmed. Why is his confirmation being opposed?
14:28
Speaker 4: A deal among the for the Third Circuit and the
14:33
Speaker 4: Republican Senators have criticized him, saying that he is against
14:40
Speaker 4: law enforcement, which is not true, and also that, for example,
14:47
Speaker 4: they asked him questions about what his views were of
14:51
Speaker 4: the conflict in Gaza now, and so some GOP members
14:55
Speaker 4: raised the question of his support for Israel or support
15:01
Speaker 4: for solutions in Gaza. That just muddy the waters. So
15:05
Speaker 4: we'll see what happens, but I think that he will
15:09
Speaker 4: be confirmed at some point. It may be in the
15:11
Speaker 4: Lame dug.
15:12
Speaker 1: A number of national Jewish groups came to his defense,
15:15
Speaker 1: saying that Republican lawmakers inappropriately grilled him about his views
15:20
Speaker 1: on terrorism, Israel, and anti Semitism. Another nominee who's facing
15:26
Speaker 1: challenges is also a Muslim, Mustafa kusab Hi, who has
15:30
Speaker 1: been nominated for Oregon's District Court.
15:34
Speaker 2: Well.
15:34
Speaker 4: Republicans criticized him, I think for some reasons that were
15:38
Speaker 4: sort of analogous to Monkey, but not exactly the same.
15:42
Speaker 4: He had written some articles I think we know it's
15:45
Speaker 4: in law school that they thought and argued were not appropriate.
15:51
Speaker 4: Even some of them talked about him as a Marxist
15:54
Speaker 4: or whatever. But those were articles written a long time ago.
15:58
Speaker 4: There were other criticisms. He's been a magistrate judge for
16:01
Speaker 4: some time in Oregon, and they were concerned about pronouns
16:06
Speaker 4: and that type of thing in his courtroom. But I
16:10
Speaker 4: think that he's likely to be confirmed, but it may
16:13
Speaker 4: be close, and so that's his situation.
16:16
Speaker 1: It just happens to be those two or is there
16:18
Speaker 1: a racial component to it.
16:20
Speaker 4: I don't know. Some of the supporters of both of
16:23
Speaker 4: those nominees are saying what you just suggested, but it's
16:30
Speaker 4: not quite that late, but their concerns about whether that
16:34
Speaker 4: might be the case.
16:36
Speaker 3: There are I.
16:36
Speaker 1: Believe, six appellate picks outstanding. Yes, do you think that
16:41
Speaker 1: the Judiciary Committee and you know, Chuck Schumer should prioritize
16:45
Speaker 1: the appellate picks because they have a lot more influence.
16:52
Speaker 4: Yes, I think you're correct, But they also need thirty
16:56
Speaker 4: hours of post cloture debate timesposed to two hours for
17:02
Speaker 4: district nominees, and so he looks to be leading so
17:08
Speaker 4: far this week, at least with the district nominees, because
17:12
Speaker 4: they consume less time and they're often less controversial, as
17:16
Speaker 4: you suggest, because they mostly do trials and move cases
17:21
Speaker 4: and are really nominated for their competence in being able
17:24
Speaker 4: to keep up with heavy dockets as opposed to Pella
17:28
Speaker 4: judges who make more policy and their rulings govern multiple
17:33
Speaker 4: states within the appeals courts, and the GOP and Democrats
17:39
Speaker 4: too in the Trump years focus more on those kinds
17:44
Speaker 4: of nominees because they have outsized influence as opposed to
17:48
Speaker 4: the large number of district nominees. But district nominees of course,
17:52
Speaker 4: are important because they make the record and they hear
17:55
Speaker 4: the facts, but they don't bind anybody, even in their
17:58
Speaker 4: own courthouse with their rulings as opposed to Pella judges.
18:02
Speaker 1: The Democrats hold a fifty one to forty nine majority,
18:06
Speaker 1: but can you really consider it fifty one to forty
18:10
Speaker 1: nine Because Joe Manchin has said that he's not going
18:14
Speaker 1: to support any nominees who don't have Republican support.
18:17
Speaker 4: That's true, and that's unfortunate. But yesterday he did vote
18:23
Speaker 4: for Abelson, and it was bipartisan because Lindsey Graham and
18:27
Speaker 4: Susan Collins both voted for Abelson and will do the
18:31
Speaker 4: same today. I expect for Jeanette Vargas for the Southern
18:35
Speaker 4: District of New York. So on the more controversial nominees,
18:41
Speaker 4: they may lose that vote, You're right, but there won't
18:45
Speaker 4: be that many of them, and there'll be some offsetting too,
18:48
Speaker 4: because remember, for example, yesterday there were seven GOP members
18:54
Speaker 4: who did not vote. One of them, of course, was Vance,
18:57
Speaker 4: and he'll be on the campaign trail for the next
19:00
Speaker 4: couple of months.
19:02
Speaker 1: We've talked about before that home state support, the support
19:05
Speaker 1: from home state senators isn't required to advance ap pellet nominees,
19:10
Speaker 1: but some Republicans have criticized Biden for not adequately consulting
19:15
Speaker 1: them on appellet vacancies. Anyway, so North Carolina Republicans Tom
19:20
Speaker 1: Tallis and Ted budd said they had enough votes to
19:23
Speaker 1: sink Park's fourth Circuit nomination. Will that play into more
19:28
Speaker 1: of these nominations.
19:30
Speaker 4: Well, the White House has said that it did consult
19:33
Speaker 4: and that they worked very closely with the North Carolina
19:38
Speaker 4: Senators and four candidates the North Carolina Senators forwarded and suggested, recommended,
19:46
Speaker 4: were considered by the White House, and in turn, the
19:51
Speaker 4: White House had four people it was considering and ran
19:56
Speaker 4: those people by the Senators, including Ryan Park Ark who
20:00
Speaker 4: became the ultimate nominee. And so Biden just made a choice,
20:05
Speaker 4: but I think he seriously considered the four people the
20:08
Speaker 4: senators had sent forward. So there was a fair amount
20:12
Speaker 4: of consultation that went on, and ultimately they chose someone else,
20:18
Speaker 4: Ryan Park, who is well qualified and was very articulate
20:25
Speaker 4: and clear at his hearing and answering difficult questions from
20:29
Speaker 4: GOP senators. So I'm optimistic that he'll have a positive vote.
20:34
Speaker 1: Greg Nunziata, who was the former Chief Nominations Council to
20:38
Speaker 1: the Senate Judiciary Committee during George W. Bush's administration, said,
20:42
Speaker 1: you never want to be a judicial nominee who's counting
20:45
Speaker 1: on Senate action after August in an election year.
20:50
Speaker 4: Yes, but they're there for three weeks now, and what
20:54
Speaker 4: we've seen this week is the district nominees coming forward.
20:57
Speaker 4: A number of them will be confirmed this week and
20:59
Speaker 4: then on to the next couple of weeks, and then
21:02
Speaker 4: they leave to campaign, I think around the thirtieth or so,
21:06
Speaker 4: but they'll be back for the five week lamed duck
21:09
Speaker 4: that starts on November twelve, after the elections, And so
21:13
Speaker 4: there seems to be a fair amount of time left.
21:16
Speaker 4: And the commentator is correct that there will come a
21:20
Speaker 4: time when it's too late. But the White House has said,
21:23
Speaker 4: and so has Senator Schumer, the Majority leader, that they
21:26
Speaker 4: intend to go as deeply as they can into December.
21:31
Speaker 4: I think they're going to be committed to confirming as
21:34
Speaker 4: many people as they can.
21:36
Speaker 1: Suppose Democrats lose the Senate in November, will that make
21:41
Speaker 1: it harder? Will there be more opposition to pushing Biden's nominees.
21:46
Speaker 4: Through well, there could be, but the majority rules as
21:50
Speaker 4: happened in twenty twenty if you remember back to that
21:54
Speaker 4: period in time, and actually after Biden defeated Trump in
22:00
Speaker 4: the election, Trump nominated and confirmed want a Pellet judge
22:06
Speaker 4: on December fifteenth, twenty twenty, and a dozen or so
22:11
Speaker 4: district judges. So that's the relevant precedent. I think the
22:17
Speaker 4: White House is committed to moving forward regardless of who
22:21
Speaker 4: might have the majority after the elections, and that's the
22:26
Speaker 4: prerogative as the majority until the new Senate comes in
22:31
Speaker 4: early January.
22:32
Speaker 1: Okay, we'll see what happens in the next few weeks.
22:35
Speaker 1: Thanks so much, Carl. That's Professor Carl Tobias of the
22:39
Speaker 1: University of Richmond Law School. Coming up next on the
22:42
Speaker 1: Bloomberg Law Show, A seven year fight over a seventy
22:47
Speaker 1: thousand dollars Tiffany engagement ring. This is Bloomberg. And if
23:05
Speaker 1: you do decide to put a ring on it and
23:08
Speaker 1: the engagement is broken off, who gets the ring? Well,
23:13
Speaker 1: it depends. And that's why a fight over a seventy
23:16
Speaker 1: thousand dollars Tiffany engagement ring has reached Massachusetts highest court.
23:22
Speaker 1: A would be groom broke off his engagement because he
23:25
Speaker 1: suspected his fiance was having an affair, something she denied,
23:30
Speaker 1: so he took her to court to get the pricey
23:33
Speaker 1: ring back. That was seven years ago, and the litigation
23:37
Speaker 1: is still going on and now it will be up
23:39
Speaker 1: to Massachusetts Highest Court to decide who gets the ring.
23:44
Speaker 1: Joining me is Peter Wallser, founding partner of Wallser, Melcher
23:48
Speaker 1: and Yoda. Our lawsuits over who gets the ring the
23:52
Speaker 1: last remaining types of litigation over broken engagements.
23:57
Speaker 2: Yes, that's true. All the heartbone stats which would laws
24:01
Speaker 2: in the forties and fifties where you could suit for
24:04
Speaker 2: a broken engagement have been abolished in all the states,
24:08
Speaker 2: So this is sort of the vestige of that. This
24:11
Speaker 2: is one of the last forms of liberation relating to
24:14
Speaker 2: broken engagements. The older law in this country did allow
24:19
Speaker 2: people to sue over a broken engagement, but those are
24:23
Speaker 2: antiquated and course have been inclined to get rid of
24:27
Speaker 2: bolved in relationship litigation, including divorce, broken engagement to that
24:34
Speaker 2: kind of thing.
24:36
Speaker 1: And in Massachusetts, in a case over who gets the
24:40
Speaker 1: engagement ring, it depends on who's at fault for breaking
24:44
Speaker 1: off the engagement. That's the issue.
24:47
Speaker 2: Yeah, and other states like Texas have that kind of law.
24:52
Speaker 2: In Massachusetts, it's case law, not statutory law. And if
24:56
Speaker 2: you could do it was the other person's fault for
25:01
Speaker 2: breaking off the relationship, you could keep the ring. It
25:04
Speaker 2: was your fault, then I keep the ring. That involves
25:10
Speaker 2: a lot of litigation, and in this case it went
25:13
Speaker 2: from the trial court to the appellate court to the
25:16
Speaker 2: Supreme Court, which are a lot of money, even for
25:19
Speaker 2: seventy thousand dollars engagement ring from Tiffany.
25:23
Speaker 1: Let me ask you this by at fault? If you
25:25
Speaker 1: just break off an engagement, are you at fault or
25:29
Speaker 1: is it more than that?
25:30
Speaker 2: I think it's more than that. In this case, the guy,
25:35
Speaker 2: the giver of the engagement ring, accused her of having
25:38
Speaker 2: an affair. She used on posts on social media that
25:43
Speaker 2: she was with a guy. Her claim was and it
25:45
Speaker 2: was just an old friend and she wasn't at fault.
25:48
Speaker 2: So this causes a court you have to decide who
25:52
Speaker 2: is at fault. Was she really cheating on the guy
25:55
Speaker 2: or was it an old friend and he made a mistake.
25:58
Speaker 1: In this case, the trial court concluded, as you mentioned before,
26:02
Speaker 1: that he was mistaken him and he had to bear
26:04
Speaker 1: the fault, so she got to keep the ring, as
26:07
Speaker 1: well as more than forty thousand dollars for plan dental
26:11
Speaker 1: work he promised her. Is that over and above or
26:14
Speaker 1: is that included too in these kinds of lawsuits, like
26:17
Speaker 1: you promised to do this once we got married.
26:19
Speaker 2: Well, that's probably a deferent issue. That's a contractual issue.
26:24
Speaker 2: The court found that there was an oral contract for
26:27
Speaker 2: him to do this and enforced that it probably had
26:30
Speaker 2: nothing to do with the engagement. The engagement ring was
26:34
Speaker 2: a separate issue and dealt with separately. But if you
26:39
Speaker 2: promised somebody in court fun, there's a contract and there's consideration.
26:44
Speaker 2: I don't know what the consideration in this case was,
26:46
Speaker 2: but you know that is I would say unusual, and
26:51
Speaker 2: maybe is why this case went up to the Supreme
26:55
Speaker 2: Court because it was so ridiculous.
26:59
Speaker 1: The trial court's decision was reversed by an appeals court,
27:03
Speaker 1: and now the case is before Massachusetts Highest Court. What
27:08
Speaker 1: were the arguments.
27:09
Speaker 2: There with with special category? If you know, if you
27:12
Speaker 2: promise to marry me, if you break it off and
27:15
Speaker 2: for no good reason, why shouldn't I get the ring back?
27:18
Speaker 2: And in fact, in many states like California, if the
27:22
Speaker 2: engagement is broken off for whatever reason, you get the
27:26
Speaker 2: ring back. Other states treated differently, but no matter what
27:31
Speaker 2: the reason, the person who receives the ring keeps it.
27:35
Speaker 2: But California, for example, not only do you get your
27:39
Speaker 2: ring back, but if the person says I can't find
27:42
Speaker 2: the ring, which you can imagine how common that is,
27:45
Speaker 2: you have to pay the value of the way. So
27:49
Speaker 2: you say I can't find it, Well, too bad, I
27:53
Speaker 2: want the money for the ring. Wow.
27:56
Speaker 1: Why isn't the ring considered a gift.
28:00
Speaker 2: It would be considered a gift, for example, if it
28:02
Speaker 2: was a birthday gift or a holiday gift Christmas or Knika, whatever.
28:10
Speaker 2: But in this case, there's a promise and you broke
28:14
Speaker 2: your promise. I want my ring back.
28:17
Speaker 1: The highest court in Massachusetts could just decide this based
28:20
Speaker 1: on the law as it is, or could they establish
28:24
Speaker 1: a new law in Massachusetts more in line with other states.
28:28
Speaker 2: From my reading of it, they're likely to set a
28:32
Speaker 2: precedent one way or the other that it's a conditional gift.
28:36
Speaker 2: If the engagement is broken off for whatever reason, the
28:41
Speaker 2: ring is returned, or they could treat it as an
28:44
Speaker 2: unconditional gift. The person keeps the ring no matter what happens.
28:49
Speaker 2: And I guess it depends on who you are, who's
28:52
Speaker 2: the giver and who's the receiver. But you know, if
28:55
Speaker 2: there was a good reason for breaking up the relationship,
28:59
Speaker 2: for example, the person was married with somebody else, you
29:02
Speaker 2: could imagine situations that you would want your ring back,
29:07
Speaker 2: you know, or there was some kind of fraud, you'd
29:09
Speaker 2: want the ring back. But the court doesn't want a
29:12
Speaker 2: lot of litigation over this because it's expensive, and it's
29:18
Speaker 2: basically he said she said, or he said he said,
29:22
Speaker 2: or she said she said. It's not necessarily opposite sex,
29:26
Speaker 2: but it's a special legal relationship getting married, and it's
29:30
Speaker 2: different than a holiday gift. And people will spend a
29:34
Speaker 2: lot more money on an engagement ring than they would
29:38
Speaker 2: on a holiday gift. So that's why it's treated differently
29:42
Speaker 2: under the law.
29:44
Speaker 1: Is there ever litigation over a ring in a divorce.
29:50
Speaker 2: Yeah, I've had that one. That is really tough because
29:55
Speaker 2: if it's an expensive ring, more than the parties would
29:58
Speaker 2: ordinarily spend on a gift to one another. Under at
30:01
Speaker 2: least California lit unless it's in writing, you can get
30:06
Speaker 2: your ring back or your jewelry back. And I had
30:10
Speaker 2: that in one case where the guy had cheated on
30:15
Speaker 2: my client and he gave her a ring to make
30:18
Speaker 2: up for it, which was worth about seventy five thousand
30:21
Speaker 2: dollars at the time, probably twenty years ago. The court
30:25
Speaker 2: ordered that she return it to him because it was
30:29
Speaker 2: not in writing and it was an extraordinary amount of money.
30:33
Speaker 2: My client was not happy. I was not happy, but
30:37
Speaker 2: that was the result.
30:38
Speaker 1: So in a prenup, now you should write and I
30:41
Speaker 1: get to keep the ring or he gets to keep
30:43
Speaker 1: the ring.
30:44
Speaker 2: Yeah, we definitely put that in the separate property schedules
30:49
Speaker 2: and list the ring because we don't want a situation.
30:53
Speaker 2: And you have to say, even if we don't get married,
30:56
Speaker 2: even though the agreement is not valid in less you
31:00
Speaker 2: get married, except for the ring, I get to keep
31:03
Speaker 2: my ring.
31:04
Speaker 1: And in this case, they're fighting over a seventy thousand
31:07
Speaker 1: dollars ring for seven years. And I wonder how much
31:10
Speaker 1: the legal fees are going to take.
31:12
Speaker 2: Up hundreds of thousands of dollars. I mean, that is crazy.
31:18
Speaker 2: And you know, maybe it's a publicity stunt, maybe it's
31:22
Speaker 2: about something else. Usually it's about somebody's fears, but it
31:26
Speaker 2: is crazy. But seventy thousand dollars a lot of money,
31:29
Speaker 2: but that's your end give up. I mean the fact
31:33
Speaker 2: that this made it it's Supreme Court. Maybe the ways
31:36
Speaker 2: of I mean that, so they their names in the paper.
31:39
Speaker 2: Who knows.
31:41
Speaker 1: So you think there should be a bright line rule
31:44
Speaker 1: in all the states.
31:46
Speaker 2: Yeah, it's it's more of a symbol. I would say.
31:49
Speaker 2: It's an emotional symbol for people, so not like your
31:53
Speaker 2: ordinary gifts of something. And there's a lot of feeling
31:59
Speaker 2: and the courts really needs to take charge of the
32:03
Speaker 2: legislatures do and make a bright light rule. Either it's
32:07
Speaker 2: a gift outright and no conditions, no matter what, or
32:13
Speaker 2: it's a conditional gift, so if it's broken off, you
32:18
Speaker 2: get the ring back. It's probably practical to say if
32:21
Speaker 2: you are inclined to give an extensive gift on the
32:25
Speaker 2: condition of getting married, you know you're given it, no
32:29
Speaker 2: conditions made. It doesn't matter if the relationship goes through.
32:32
Speaker 2: It's on you to ensure you pick the right person.
32:36
Speaker 2: And you don't get this on a on a whim.
32:40
Speaker 2: So if I was writing the law, I would go
32:44
Speaker 2: for it's a gift no matter what, and if you
32:46
Speaker 2: give it, whether the wedding is broken off. On the
32:50
Speaker 2: other hand, though, you could think of people deceiving people
32:55
Speaker 2: saying let's get married, I love you the ring and
32:58
Speaker 2: then they break off the way. So these things are
33:02
Speaker 2: not as easy as it seems, right.
33:06
Speaker 1: Not at all, although I think Montana has made it
33:08
Speaker 1: easier because the Supreme Court there more than twenty years
33:13
Speaker 1: ago decided no take back policy that treats the ring
33:18
Speaker 1: no different than any other gifts, So that seems pretty easy.
33:22
Speaker 2: So, you know, it's interesting because in the sixties, my
33:26
Speaker 2: dad was on the Governor's Commission for no fault divorce
33:29
Speaker 2: in California, and in nineteen seventy we enacted to no
33:35
Speaker 2: fault statute and divorces and that's kiried to pretty much
33:40
Speaker 2: most states, not all states, but most states. But now
33:44
Speaker 2: there's you know, it's sort of backtracking where many states
33:48
Speaker 2: are bringing domestic violence into it and coercive control and
33:53
Speaker 2: it's getting back to a fault situation in many states
33:58
Speaker 2: like California and what was or now your quote simple divorce,
34:03
Speaker 2: even though none of them are really simple. It's led
34:07
Speaker 2: to a lot of allegations of domestic violence or coercive
34:12
Speaker 2: control or abuse, global abuse, that kind of thing so
34:18
Speaker 2: with finding how things cycle around.
34:21
Speaker 1: Yes, I've seen a lot of repeating cycles in our
34:23
Speaker 1: society lately. Thanks so much, Peter. That's Peter Wallser of Wallser,
34:28
Speaker 1: Melcher and Yoda. And that's it for this edition of
34:31
Speaker 1: the Bloomberg Law Podcast. Remember you can always get the
34:34
Speaker 1: latest legal news by subscribing and listening to the show
34:37
Speaker 1: on Apple Podcasts, Spotify, and at Bloomberg dot com, slash podcast,
34:42
Speaker 1: Slash Law. I'm June Grosso and this is Bloomberg