IBM Heiress Case Pushes Legal Boundaries
$10M inheritance at stake in dispute involving same-sex adoption
by Thomas B. Scheffey
Connecticut Law Tribune
August 17, 2009
Attorney Michael Koskoff said a recent decision by the Maine Supreme Court makes it more likely that his client will prevail in Connecticut and collect $10 million from a trust set up by a former IBM chairman.
Two decades ago, no states had civil unions, let alone marriage for same-sex couples.
But blue-chip lawyers in New York and Connecticut nevertheless suggested a recipe for romantic and economic happiness for an IBM heiress and her longtime female lover: They should get an adult adoption.
But what started as an outside-the box way to formalize a relationship has turned into a long-running court battle over the potential inheritance of $10 million or more.
The legal battle stretches from the islands of Maine to the Gold Coast of Connecticut. It has involved probate courts in both states and, most recently, the Supreme Court of Maine. The last chapter has yet to be written, with an appeal of a probate decision scheduled for October in Stamford Superior Court.
The story starts with Olive Watson, now 61, who is the granddaughter of IBM founder Thomas Watson and the daughter of Thomas Watson Jr., of Greenwich, who ran the legendary business for decades and amassed a large fortune before his death in 1993.
Her longtime lover is a woman named Patricia Spado.
“They went to all the family gatherings together. They were a couple. But there was no marriage permitted,” said Bridgeport lawyer Michael Koskoff, of Koskoff, Koskoff & Bieder, who currently represents Spado. “They wanted to see what they could do to set up a binding financial relationship. So they went to consult with several attorneys.”
The women wanted to formalize their relationship and to ensure financial stability for Spado, who had quit her interior design job to be with Watson full time. They consulted top New York trust lawyer William Zabel, who proposed adult adoption. New York didn’t allow adult same-sex adoptions, but Maine seemed more accommodating. It is one of just three states where an adult adoption would have worked, Olive Watson was told.
Fortunately, the Watson clan has a $20 million, 300-acre vacation compound on the Maine island of North Haven with its own private air strip. Maine’s adoption statute at the time only required that the adoptee be “living” in Maine. Even though Olive Watson was a few months younger, she would become the “mother” and Spado would become the adoptive “daughter.” And so the formal proceedings took place in 1991, after the two women spent several weeks at the North Haven compound.
In 1992, the couple broke up. At the time, Olive Watson paid Patricia Spado a $500,000 settlement for clear title to some jointly held real estate, but reassured Spado in a letter that she would never contest the legality of the adoption.
That became a key point at the end of 1993, when the IBM chief died. By being adopted by Olive Watson, Spado was arguably a grandchild of Thomas Watson Jr. And he left trusts to his grandchildren, including those who were adopted, that were worth more than $10 million each, according to lawyers familiar with the matter.
The trustees of the Watson trusts opposed the idea of Spado inheriting money. They said it was never Thomas Watson Jr.’s intent to treat an adult same-sex partner as a grandchild. They launched a collateral attack on the validity of Spado’s adoption in a Maine probate court, claiming that Spado, by claiming to be living in Maine, had perpetrated a fraud on the Maine probate court – and that the adoption was invalid.
The Maine probate judge reasoned that “living” was like “residing.” Spado certainly didn’t reside in Maine, the judge found, ruling the adoption invalid.
And so Spado appealed.
In an opinion issued last month, a unanimous Maine Supreme Court ruled that the adoption of Patricia Spado, under the statute in force at the time, was perfectly legal. “Adoption jurisdiction is conferred on the Probate Court of a county when an adoptee `lives’ in the county,” the Maine court wrote. So the whole legal issue hung from a thread – whether Patricia Spado was truthful when she told the probate judge back in 1991 that she “lived” in Maine even though she had been there only a few weeks.
Deciding the term “lives” was ambiguous, the court delved into the legislative history of the statute. Over the past 80 years, through multiple amendments, the legislature never defined the word “lives” in the adoption statute. Construing the term liberally is generally in the best interest of the child, and adoption is to be encouraged, the court reasoned. There was no fraud on the court by Patricia Spado, the Maine Supreme Court decided, and her adoption by Olive Watson is legally valid, it concluded.
The ruling delighted Koskoff. “I’m sure that it is the first decision ever to grant legal status to the adoption of a same-sex partner as a matter of law – certainly by any Supreme Court of any state,” he said.
“The case has gotten much stronger as a result of this Maine decision. It was very specific, saying they were not going to start looking at the reasons behind an adoption. That’s going to help us in Connecticut.”
The Connecticut portion of the case has been based in Greenwich Probate Court.
One of Connecticut’s most successful trial lawyers, Koskoff began representing Spado six years ago. The case was referred to him by a New York trusts lawyer who felt Spado needed a trial lawyer’s expertise. Koskoff has teamed with Day Pitney estates and trusts lawyer Keith Braddock Gallant, in the firm’s New Haven offices.
The lawyers made a claim in Greenwich Probate Court to clarify her rights under the Watson trusts. They argued on Spado’s behalf that Connecticut statutes and its public policy treated adopted children like biological children, and that the trusts’ terms did, too.
But in 2006, Greenwich probate court judge David W. Hopper ruled against Spado’s status as a grandchild under the Watson trusts.
Hopper focused on interpreting the intent of Thomas Watson Jr. He placed significant weight on the fact that Watson referred specifically to his 15 grandchildren in the trust, and his lack of knowledge that Olive Watson had adopted Patricia Spado.
“The fact that Spado and Olive [Watson] deliberately did not inform [Thomas] Watson of the adoption leads to the clear conclusion that they may well have been concerned with what Watson might do had he been informed,” Hopper wrote.
He concluded by stating that Spado acknowledged that one motivation for the adoption was to enable her claim to be a beneficiary under the trusts. “It is a reasonable conclusion that Watson did not intend to benefit someone who is adopted for no reason other than to obtain his money,” Hopper wrote.
But Koskoff said there is well-established language that can be placed in a trust if a grantor wishes to include minor adopted children but exclude adopted adults. That language did not appear in the documents establishing the Watson trusts, he said.
Spado has appealed Hooper’s ruling. In October, they’ll get a brand new hearing before a Stamford Superior Court judge. Attorney Koskoff said the Maine Supreme Court decision give him an edge.
“The only basis for the claim in Connecticut, that [Spado] is not the grandchild, is that there is some ambiguity in the term ‘adopted,'” said Koskoff. “And the Maine Supreme Court has said there is no ambiguity. An adopted child is an adopted child is an adopted child.”
At least one legal expert back Koskoff’s interpretation. New York Law School Professor Arthur Leonard has been writing about the legal significance of adult adoptions for decades, and has a legal blog on current development in the law of same-sex couples.
In an e-mail exchange, he commented: “Since Spado was legally adopted by Watson in Maine, she is a legal child of Watson. As courts generally interpret the Full Faith and Credit Clause of the U.S. Constitution, an adoption decree by a state court is entitled to full faith and credit by courts of other jurisdictions.”
The Maine decision isn’t likely to be susceptible to attack on the grounds that it might be decided differently in Connecticut, Leonard said. “Generally speaking, there is no ‘public policy’ exception to this obligation. This means that in the Connecticut litigation, the court must extend to Spado the same status as would be extended to any other adoptive child of a child of Thomas and Olive Watson.”
The Watson trusts are represented by Cummings & Lockwood’s Robert P. Dolian and B. Cort Delany, who were unavailable and did not return calls for comment. Greenwich trust lawyer Henry Pascarella is the guardian ad litem for any unborn, unknown or unascertained beneficiaries under the three Watson trusts, and Woodbridge trusts and estates lawyer David W. Schneider represents him.
“We’re disappointed by the Maine Supreme Court decision,” Schneider said. In the Connecticut probate court, Pascarella and Schneider had opposed recognizing Spado as a grandchild, saying to do so would be “a travesty.”
They will be part of the upcoming Superior Court proceeding. “I expect this to be litigated,” said Schneider, “and then there are, of course, two levels of appeal beyond that.”