**PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION**
Dear Jonathan,
I hope this message finds you well. I am writing to provide you with a comprehensive summary of the proposed settlement terms that emerged from the second court-ordered mediation session, and to convey our firm's recommendation regarding same.
**A. Background and Purpose**
As you know, the parties participated in a second mediation session on April 5, 2023, before the Hon. Robert Castellano (Ret.) of Castellano ADR Services LLC, at 100 Church Street, Suite 800, New York, NY 10007. Building on the productive discussions initiated at the first mediation session on March 14, 2023, the parties reached a framework for a global settlement of all outstanding issues in this matter.
The purpose of this email is to summarize the principal terms of the proposed settlement for your review and consideration, and to provide Calderwood & Harkness's recommendation. I encourage you to review the terms carefully, and I am available to discuss any questions or concerns at your convenience.
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**B. Total Equitable Distribution to Dr. Elena M. Caldwell**
Under the proposed settlement, Dr. Caldwell would receive a total equitable distribution package valued at **$31.2 million**, structured as follows:
**(i) Lump Sum Cash Payment — $14.5 Million**
Dr. Caldwell would receive a lump sum cash payment of $14,500,000, payable in two installments:
- **$8,000,000** due within sixty (60) days of entry of the Judgment of Divorce; and - **$6,500,000** due within twelve (12) months of entry of the Judgment of Divorce.
Please note that the $14.5 million lump sum incorporates the marital residence buyout payment described below (Section B(ii)) as well as additional cash of $3,150,000 covering personal property and miscellaneous items (Section B(viii)).
**(ii) Marital Residence Buyout — $2,555,000**
Consistent with the 65/35 split of net equity in the marital residence set forth in the prenuptial agreement, Dr. Caldwell would receive a buyout payment of $2,555,000 for her interest in the marital residence at 14 Gramercy Park South, Apt. PH-A, New York, NY 10003. The calculation is as follows:
- Appraised value of the residence: $11,400,000 - Less outstanding mortgage (Trident National Bank, Loan No. TN-2010-447821): ($4,100,000) - Net equity: $7,300,000 - Dr. Caldwell's 35% share: **$2,555,000**
This amount is incorporated into the lump sum cash payment described in Section B(i) above. You would retain the marital residence.
**(iii) Transfer of Vacation Property — $4,800,000**
The vacation property at 44 Dune Road, Westhampton Beach, NY 11978 (valued at $4,800,000) would be transferred to Dr. Caldwell by deed. Tax considerations relating to this transfer are addressed in Section M below.
**(iv) Transfer of Joint Brokerage Account — $4,600,000**
The full balance of the joint brokerage account held at Mercer & Hall Securities LLC (Account ending 8812), currently valued at approximately $4,600,000, would be transferred to Dr. Caldwell.
**(v) QDRO Transfer — $600,000**
A total of $600,000 would be transferred from your 401(k) plan to Dr. Caldwell as alternate payee, to be effectuated via a Qualified Domestic Relations Order conforming to IRC § 414(p) and the applicable provisions of ERISA. Our firm will prepare the draft QDRO for submission to the court.
**(vi) Art Collection (Specified Pieces) — $850,000**
Certain specified pieces from the marital art collection (total collection valued at approximately $1,800,000) would be identified and transferred to Dr. Caldwell, with an agreed value of $850,000. The specific pieces will be enumerated in the formal Settlement Agreement.
**(vii) Vehicle — $145,000**
The 2021 Range Rover Autobiography (valued at $145,000) would be transferred to Dr. Caldwell by title.
**(viii) Additional Cash — $3,150,000**
An additional $3,150,000 in cash, covering personal property and miscellaneous items, is included in the lump sum payment structure described in Section B(i) above.
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**C. Caldwell Meridian Capital LLC — Valuation Resolution**
The central valuation dispute regarding your 85% interest in Caldwell Meridian Capital LLC ("CMC") has been resolved at a negotiated value of **$36,550,000** (on an 85% interest basis). This represents a compromise between the following expert valuations:
- **Our expert**, Dr. Vivian Osei of Pinnacle Valuation Group LLC, valued the enterprise at $38,200,000 (85% interest = $32,470,000); and - **Respondent's expert**, Catherine Ng of Ng Barker & Cole LLP, valued the enterprise at $52,700,000 (85% interest = $44,795,000).
Under the proposed settlement, you would retain 100% of your ownership interest in CMC. No transfer of ownership interests is required.
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**D. Active vs. Passive Appreciation on Pre-Marital Real Estate**
The dispute over the $17,200,000 in appreciation on the three pre-marital properties held in Caldwell Realty Holdings LP ("CRH") — from $11,400,000 at the time of marriage to $28,600,000 in current appraised value — has been resolved.
As you will recall, Dr. Caldwell claimed the full $17,200,000 constituted active appreciation and was therefore marital property subject to equitable distribution. Our position was that the appreciation was passive in nature and constituted your separate property.
The parties have settled this issue at a **$5,800,000 credit** toward the marital estate — a significant reduction from the respondent's $17,200,000 claim and a favorable outcome for you. You will retain all interests in Caldwell Realty Holdings LP.
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**E. Assets Retained by Mr. Caldwell**
Under the proposed settlement, you would retain the following assets:
1. All interests in Caldwell Meridian Capital LLC (85% ownership; assets under management approximately $1.4 billion); 2. All interests in Caldwell Realty Holdings LP (12 properties; $63,800,000 appraised value; $18,700,000 in debt; $45,100,000 net equity) and Caldwell Realty GP LLC; 3. The marital residence at 14 Gramercy Park South, Apt. PH-A, New York, NY 10003 (subject to the buyout payment described above); 4. Your separate brokerage account at Mercer & Hall Securities LLC (Account ending 4477; current value approximately $14,300,000); 5. The 2018 Porsche 911 Turbo S (valued at $175,000); 6. The balance of the art collection (approximately $950,000); 7. The joint savings account at Trident National Bank (Account ending 3301; balance approximately $1,200,000) — we will need to confirm the allocation of this account in the final agreement; and 8. The balance of your 401(k) after the QDRO transfer (marital portion was $2,300,000; $600,000 transferred to Dr. Caldwell; $1,700,000 remaining marital portion retained by you).
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**F. Prenuptial Agreement**
As part of the global settlement, Dr. Caldwell has agreed to **withdraw her challenge** to the validity of the prenuptial agreement dated June 7, 2008. The agreement will be upheld in its material terms, including the spousal maintenance cap and the marital residence disposition provisions.
This is a significant outcome. It eliminates the risk that the prenuptial agreement could be invalidated at trial on the grounds of inadequate financial disclosure, duress, or unconscionability — any of which, if successful, could have substantially increased your exposure.
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**G. Spousal Maintenance**
Consistent with the prenuptial agreement's cap for marriages exceeding ten (10) years, spousal maintenance would be set at **$15,000 per month for a period of forty-eight (48) months (four years)**, for a total maintenance obligation of **$720,000**.
Please note that under post-Tax Cuts and Jobs Act rules (applicable to divorce agreements executed after December 31, 2018), maintenance payments are **non-deductible** by the payor and **non-includable** in income by the payee. Leonard Cross can provide further detail on this point and its implications for your tax planning.
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**H. Child Support and Custody**
**(i) Custody**
The parties have agreed to **joint legal custody** of both children:
- **Sophia Caldwell** (DOB February 12, 2012; age 11) - **Alexander Caldwell** (DOB August 29, 2014; age 9)
Dr. Caldwell would have **primary residential custody**. Your parenting time would be as follows:
- Every other weekend, Friday at 5:00 PM through Sunday at 7:00 PM; - One weeknight dinner per week; - Alternating holidays pursuant to a schedule to be detailed in the Agreement; and - Four (4) weeks during the summer.
Please note that the pendente lite temporary child support order of $14,000 per month (entered September 30, 2022) will be superseded by the final support terms set forth below.
**(ii) Child Support**
Child support would be set at **$8,500 per month per child ($17,000 per month total)**, payable until each child reaches the age of eighteen (18) or graduates from high school, whichever occurs later.
In addition, you would be responsible for **seventy-five percent (75%)** of the following expenses:
- Private school tuition at Lockwood Academy (current annual tuition: $58,500 for Sophia; $54,200 for Alexander); - Extracurricular activities; and - Uninsured medical expenses.
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**I. Caldwell Children's Education Trust**
The Caldwell Children's Education Trust (established January 15, 2016; current value approximately $3,100,000; Graymoor Trust Company serving as trustee) will remain in place. Both parties will be named as trust advisors.
The Trust was funded with $2,000,000 from marital funds. By agreement, it is treated as a set-aside for the children's education and will not be divided as part of the equitable distribution.
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**J. Jonathan R. Caldwell 2010 Irrevocable Trust**
The Jonathan R. Caldwell 2010 Irrevocable Trust (established October 22, 2010; current value approximately $9,700,000; Graymoor Trust Company serving as trustee; beneficiaries: Sophia and Alexander Caldwell) is confirmed as **not marital property** and is excluded from the equitable distribution. The Trust was funded with $5,000,000 from your separate property.
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**K. Dr. Caldwell's Separate Property**
Dr. Caldwell will retain the following assets as her separate property:
- **Baranova Dermatology & Aesthetics PLLC** (agreed value $2,400,000; approximately $1,900,000 in annual revenue); and - Her own retirement accounts (SEP-IRA and 401(k), totaling approximately $1,100,000).
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**L. Total Marital Estate (Settlement Basis)**
For your reference, the total marital estate as negotiated is valued at approximately **$89,170,000**. This figure compares favorably to the respective litigation positions:
- **Your position**: $79,290,000 - **Dr. Caldwell's position**: $108,810,000
Dr. Caldwell's $31,200,000 distribution represents approximately **35%** of the settled marital estate (after setting aside the Education Trust of $3,100,000). This is a reasonable outcome given New York equitable distribution principles and the enforceable prenuptial agreement, which together support a distribution below the 50/50 benchmark that might otherwise apply absent a valid prenup.
You may wish to refer to the marital estate summary spreadsheet previously circulated to you for additional detail.
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**M. Tax Considerations**
Leonard Cross of our tax group has been closely involved in structuring the proposed settlement. Key tax considerations include the following (and you may refer to Leonard's tax implications memorandum previously circulated for further detail):
1. **IRC § 1041 Transfers**: All property transfers between the parties will be structured as tax-free transfers incident to divorce under IRC § 1041. No immediate taxable event arises from these transfers.
2. **Tax Filing Status**: The parties will **file separately** for tax year 2022.
3. **Vacation Property (44 Dune Road)**: The transfer of this property to Dr. Caldwell will carry over your existing tax basis. There will be no immediate taxable event at the time of transfer; however, Dr. Caldwell will bear any capital gains liability upon a future sale.
4. **QDRO Transfer**: The $600,000 QDRO transfer is tax-deferred. Dr. Caldwell will be taxed upon distribution from her rollover account at ordinary income rates.
5. **Spousal Maintenance**: As noted in Section G above, maintenance payments are non-deductible by you and non-includable in Dr. Caldwell's income under post-TCJA rules.
Leonard is available to discuss any of these items with you in greater detail.
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**N. Our Recommendation**
After careful consideration, Calderwood & Harkness LLP recommends that you **accept** the proposed settlement framework. Our recommendation is based on the following considerations:
1. **CMC Valuation**: The negotiated value of $36,550,000 for your 85% interest in CMC was resolved much closer to our expert's valuation ($32,470,000) than to the respondent's expert's figure ($44,795,000). This represents a substantial savings relative to the risk of an adverse finding at trial.
2. **Active Appreciation Dispute**: The resolution at $5,800,000 represents a significant win compared to your potential exposure of $17,200,000 had the court credited Dr. Caldwell's claim in full.
3. **Prenuptial Agreement**: The withdrawal of Dr. Caldwell's challenge to the prenuptial agreement eliminates the single greatest risk in the case. Had the prenup been invalidated at trial, your exposure would have increased materially across multiple categories, including maintenance and equitable distribution.
4. **Maintenance Cap**: Spousal maintenance is capped at the prenuptial agreement terms of $15,000 per month for 48 months — a figure well below what a court might have awarded absent the prenup.
5. **Retention of Core Business Interests**: You retain 100% of your interests in both CMC and CRH without dilution, forced sale, or any transfer of ownership interests. This preserves the integrity of your business operations and long-term wealth.
6. **Avoidance of Trial**: Settlement avoids the substantial cost, delay, publicity, and uncertainty inherent in a contested matrimonial trial before Justice Lessing.
We acknowledge that the total cost of the settlement and related obligations is substantial. However, given the size and complexity of the marital estate, the litigation risks identified above, and the terms achieved, we believe this proposed settlement represents a reasonable and defensible outcome.
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**O. Next Steps**
Upon your review, we propose the following next steps:
1. **Your Review and Approval**: Please review the terms summarized above and provide any comments, questions, or your approval at your earliest convenience.
2. **Formal Settlement Agreement**: Upon your approval, we will prepare the formal **Settlement Agreement and Stipulation** for execution by both parties and their respective counsel. Dr. Caldwell is represented by Rachel Whitford of Whitford Garza & Stein LLP.
3. **QDRO**: We will prepare and file the **draft Qualified Domestic Relations Order** with the court.
4. **Brokerage Account Transfer**: We will coordinate with Mercer & Hall Securities LLC regarding the transfer of the joint brokerage account (Account ending 8812) to Dr. Caldwell.
5. **Mortgage Coordination**: We will coordinate with Trident National Bank regarding the mortgage on the marital residence.
6. **Deed Transfer**: We will arrange for the deed transfer of the vacation property at 44 Dune Road, Westhampton Beach, to Dr. Caldwell.
7. **Closing Checklist**: We will prepare a comprehensive closing checklist to track all deliverables and ensure timely completion of each item.
8. **Target Timeline**: We are targeting execution of the Settlement Agreement in **early to mid-May 2023**.
9. **Judgment of Divorce**: Following execution, we will submit the stipulation and proposed Judgment of Divorce to Justice Lessing for entry.
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**P. Closing**
Jonathan, I understand that this is a great deal to absorb. Please do not hesitate to call me to discuss any questions or concerns. I am happy to schedule a meeting at our offices at 425 Lexington Avenue, 38th Floor, or by telephone at a time that is convenient for you. Douglas and Leonard are also available to assist.
Thank you for your continued confidence in Calderwood & Harkness. We will continue to work diligently to bring this matter to a favorable conclusion.
Warm regards,
**Priya Anand, Esq.** Partner, Litigation Calderwood & Harkness LLP 425 Lexington Avenue, 38th Floor New York, NY 10017 Tel: (212) 554-7200 Email: panand@calderwoodharkness.com
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