A New York Supreme Court judge has ordered the release of over $275,000 in escrow funds to a defendant in a divorce case involving profit-sharing from a business. The ruling affects CC, now known as CK, and RC, who are navigating financial disputes stemming from their divorce. The decision is significant as it addresses the enforcement of a business-profit-sharing clause from their mediation agreement.

The case, CC v. RC, was decided on March 16, 2026, by Judge Ronald Castorina Jr. The court's ruling comes after a lengthy dispute over the interpretation and enforcement of financial agreements made during the couple's divorce proceedings. This ruling could set a precedent for similar cases involving profit-sharing agreements in divorce settlements.

Background

CC and RC were married until their divorce was finalized on November 6, 2013. Their divorce included a written mediation agreement that outlined various financial obligations, including a business-profit-sharing clause. This clause requires CC to pay RC thirty percent of the profits from a business they operated together, initially known as RGI and later as CYOWl, LLC.

The dispute escalated when CC filed a rescission action in April 2018, seeking to invalidate the profit-sharing clause. However, this action was dismissed on January 5, 2026, after being adjudicated on its merits. Following the dismissal, RC filed a motion to release funds held in escrow, which were generated from the sale of CC's residence. The escrow amount totaled $275,754.49.

CC contested the release of these funds, arguing that there were several offsets and credits that needed to be considered before any payment could be made. The court had to determine whether RC was entitled to the funds and how the profit-sharing clause should be interpreted.

The Ruling

The court ruled in favor of RC, stating that he was entitled to the release of the escrowed funds as a partial distribution. Judge Castorina noted, "The equitable justification for continuing to immobilize the escrow diminished substantially" after the dismissal of CC's rescission action. The court emphasized that the profit-sharing clause remained valid and enforceable.

While the court granted the release of funds, it also acknowledged that further proceedings were necessary to resolve the final accounting between the parties. The judge stated, "The final net accounting should not be fixed solely on the motion papers," indicating that disputes over the calculation of profits and alleged offsets needed to be addressed.

Impact

This ruling has significant implications for both parties. For RC, the release of the escrowed funds represents a critical step towards receiving the financial compensation outlined in their divorce agreement. For CC, the court's decision highlights the importance of clear financial agreements in divorce proceedings and the potential consequences of challenging those agreements.

The court's emphasis on resolving financial disputes through cooperative efforts may encourage other couples in similar situations to seek mediation or settlement conferences before resorting to litigation. This approach could potentially reduce the costs and emotional stress associated with prolonged court battles.

What's Next

The court has mandated that both parties engage in a four-way settlement conference within thirty days to attempt to resolve the remaining accounting issues. If they cannot reach an agreement, a framed-issue evidentiary hearing will be scheduled to address the unresolved financial disputes. This ruling allows for the possibility of further litigation if necessary, but it encourages the parties to work together to find a resolution.