NXIVM Settlement Mistake: Plaintiffs Lose $116,000 In Legal Battle – With Nancy Salzman Leading The Way So Far

It appears that the plaintiffs in the NXIVM case (Edmondson et al. v. Raniere et al.) made a procedural error in their settlement agreement with defendant Nancy Salzman, co-founder and former president of NXIVM.

The dispute concerns an amount of $116,000.

In January 2020, some 70 plaintiffs sued Salzman, Keith Raniere, Clare Bronfman, Sara Bronfman, and others for alleged abuse within NXIVM. Salzman agreed to settle the lawsuit in September 2022 by providing information against the other defendants and selling three properties, with the “net proceeds” going to the plaintiffs and their attorneys, led by Neil Glazer.

Redefinition of “net product”

After selling the properties for $600,000, Salzman decided to redefine “net proceeds” in the settlement agreement and deduct an additional $116,000 for federal capital gains taxes. The original settlement agreement did not include capital gains taxes in the definition of net proceeds.

Now out of prison, Salzman knows that possession is a misdemeanor punishable by nine-tenths of the law. Salzman turned over his share of the net proceeds from the sale — about $400,000 — and kept the $116,000.

Request from Attorney Glazer

Attorney Glazer asked U.S. District Judge Eric R. Komitee for a court order compelling Salzman to pay him the $116,000.

The net proceeds from the sale of the three properties, after deducting the $116,000, are approximately $409,000. Taking into account the standard 1/3 attorney fee for Glazer and his firm ($135,000), the distribution to the 70 plaintiffs, if divided equally, is approximately $4,000 per plaintiff. If Glazer prevails, the plaintiffs will pocket an additional $1,200 and Glazer’s firm will collect an additional $39,000.

Judge Eric Komitee’s decision has been handed down

Federal Rule of Civil Procedure 41(a)(1)(A)(i) allows plaintiffs to voluntarily dismiss a defendant without a court order, which is what they did with Salzman. However, that means the court no longer has automatic jurisdiction over the issues involving Salzman in this civil case. It is eliminated.

If Glazer wanted the court to retain jurisdiction over the settlement agreement after the plaintiffs dismissed the case, the dismissal order had to state that the court retained jurisdiction to enforce the settlement agreement.

He does not have.

Judge Komitee’s decision refers to Hendrickson v. United States, which established that simply dismissing a case does not automatically allow the court to retain jurisdiction over a settlement agreement. The dismissal order must contain clear language indicating that the court has retained jurisdiction.

Challenge for the complainants

With the plaintiffs having rejected Salzman without a court order allowing them to weigh in on the settlement agreement, they must now prove why the judge should enforce the contract. The outlook looks bleak, according to the judge’s quote from Hendrickson.

Glazer could sue Salzman in a separate breach of contract action. If the action survives summary judgment, Salzman would be entitled to a jury trial.

Appropriate policy

The correct policy in dealing with former NXIVM executives is to assume that they will find a legal workaround and to ensure that the court’s termination order retained jurisdiction over the settlement agreement at the time of Salzman’s termination, which it did not.

This would have avoided the current conflict.

On a happier note, Nancy Salzman, who is now on probation, recently welcomed a cat named Lilly into her home.

The properties and their sale prices were:

– 3 Hale: $230,000 (where Lauren Salzman lived before buying her own house)

– 9 Hale: $190,000 (next to Keith Raniere’s library, formerly occupied at various times by Michelle Salzman, Loreta Garza and Sylvie Lloyd)

– 203 Yorktown Drive: $180,000 (occupied by Dawn Morrison)

Salzman is free

Salzman is out of prison. She finished her stint at a halfway house and returned to the Albany suburbs, where she helped Keith Raniere for 20 years run a community called NXIVM. She is on probation.