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22 Jul 2020

Discovery

Navigating a divorce does not necessarily require the assistance of an attorney.  Many divorces can be settled between the parties.  However, when the other party is not cooperating or they are hiding information or documentation about money, property, or other assets, you may need to hire an attorney. When looking for an attorney, you need one who is knowledgeablein the law and who has experience in all aspects of discovery.

Discovery is a formal legal process through which parties gather information and evidence from each other.  Discovery may be obtained for the identity of persons having knowledge of any discoverable matter, as well as of the existence, description, nature, custody, condition, and location of any document, tangible thing, land, or other property.

California requires full disclosure.

California law recognizes the vital importance of full and accurate disclosure of assets, liabilities, and financial circumstances at the early stages of adivorce action in order to ensure a proper division of the community estate and fair and sufficient child and spousal support awards.  While the law requires parties to be open and honest about disclosing information about community property and assets, not all parties comply.  So, the attorney will have to employ discovery tools to inquire of the other party about the undisclosed property or information.

Formal discovery.

California state policy and Orange County court local rule encourages parties in a divorce not to fight or to spend unnecessarily over the disclosure of information.  Sound public policy further favors the reduction of the adversarial nature of marital dissolution and the attendant costs by fostering full disclosure and co-operative discovery.  In order to promote this public policy, a full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made …, together with a disclosure of all income and expenses of the parties.

Unfortunately, formal discovery is expensive and time-consuming.  The attorneys will draft the discovery documents, serve them on the opposing party and then wait for 30 days for an answer.  Once the other side answers, the responses are often found to be insufficient or inadequate, so another request is made to correct the discovery responses.  More time passes and the information is still not produced.

Informal discovery.

California allows “informal” discovery where parties or their attorneys exchange requests for documentation or information without the formal discovery requirements or the lengthy response times.  Informal discovery can save clients lots of money and time.  But informal discovery only works when the other side is reasonable and cooperative.

We advise our clients that California law states there is virtually nothing that is not discoverable in a family law case.  This means, whether the party likes it or not, they are required to disclose all information related to the marriage under the divorce proceeding.  Therefore, we always urge our clients to cooperate with informal requests for information or document in the divorce because family law litigants generally have nothing to gain by resisting informal discovery.

 Each spouse has a fiduciary duty to the other spouse to furnish information about marital property.

If the non-managing spouse makes a prima facie showing concerning the existence and value of missing community assets under the control of the other spouse post-separation, the burden shifts to the managing spouse to rebut the showing or prove the proper disposition or lesser value of those assets.  Failing to meet this burden, the managing spouse should be charged with the assets according to the prima facie showing.  Indeed, “support for this crucial shift of the burden of proof can be found in the recurring mandate, running throughout the statutory scheme, that the managing spouse must furnish information to the other spouse concerning the community property.”  [Marriage of Margulis (2011) 198 Cal.App.4th 1252, 1267-1271, 1277, 130 Cal.Rptr.3d 327, 337-340, 346 – no statutory or equitable basis for imposing burden on non-managing spouse to provide evidence of managing spouse’s mismanagement or misappropriation.]

 Unintentional failure to disclose.

While spouses have fiduciary duties to preserve and protect community property assets for the other spouse, sometimes they may innocently or inadvertently transfer such property or fail to disclose the existence of the property.  There are consequences for the party’s breach of fiduciary duties.  Although spouses may make an “innocent” transfer, any or all of such unilateral transactions could amount to a breach of the interspousal fiduciary duties (Family Code §§ 721(b), 1100(e))for which the non-managing spouse’s remedies “shall include” a 50% penalty, plus attorney fees and costs.  [Family Code § 1101(g); see Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334, 1344, 113 Cal.Rptr.2d 849, 855 – spouses’ statutory fiduciary duties arise “without reference to any wrongdoing,” compare Bono v. Clark (2002) 103 Cal.App.4th 1409, 1430, 128 Cal.Rptr.2d 31, 46]

Intentional failure to disclose.

Some people think that they are smarter than the other party or their attorneys and will hide the assets anyway, no matter what is required by the law.  It can turn out to be a very costly mistake when the hidden asset(s) is discovered.  California law provides for a 100% penalty for fraud against a spouse who, during dissolution proceedings, deliberately hides assets or intentionally misrepresents or conceals facts bearing on the existence or value of community property interests.  [Marriage of Rossi (2001) 90 Cal.App.4th 34, 42, 108 Cal.Rptr.2d 270, 276 – wife’s intentional concealment of lottery winnings from husband constituted “fraud” within the meaning of Civil Code § 3294, resulting in 100% award of same to husband pursuant to § 1101(h).]

Once a proper showing is made for the finding of fraud, there are no exceptions or defenses and can result in the spouse who hid or concealed the asset to lose 100% of the concealed asset plus be ordered to pay for the other party’s attorney’s fees. [Marriage of Rossi (2001), supra, 90 Cal.App.4th at 42-43 – no exception or defense based on supposed “unclean hands” of spouse from whom asset concealed or otherwise because wrongdoing spouse was “battered emotionally and physically.”]

Discovery is an important tool in divorces.

Discovery is an important tool in finding and identifying property and income in a divorce.  Informal discovery should be attempted first because of its time and cost savings but, if the other side does not want to cooperate, the attorney can proceed with formal discovery.  In some situations, the party forced to resort to formal discovery may request the court to have the uncooperative party, who failed to disclose, pay the attorney’s fees and costs of the formal discovery process.

While we counsel our clients to be reasonable and comply with informal discovery requests, when forced we will employ all formal discovery tools under the law to identify and recover our client’s rightful share of the marital property.

 


Jos Family Law