Failure to follow California’s strict disclosure rules can be very expensive in divorce cases.

by | Feb 6, 2012 | Uncategorized

California Duty of Disclosure

In California, it is essential in every dissolution, divorce, nullity or legal separation case to make a full and complete disclosure.

Young black man filling out income and expense declaration fl-150 and schedule of assets and debts fl-142

California Family Code § 721 requires full disclosure in divorce cases.

California Family Code § 721

The duties of disclosure are largely controlled by California Family Code § 721, which describes the fiduciary duties between spouses. It provides, in part:

[A] husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.

California Family Code § 721 (b).

The statute goes further to subscribe to marriages the same sort of fiduciary duties that exist between business partners. It indicates that, as with business partners, the confidential relationship between spouses is

(b)…a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following:

(1)Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying.

(2)Rendering upon request, true and full information of all things affecting any transaction which concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions.

(3)Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property.

Id.

Family Code § 2102

With this in mind, the California Family Code has specific disclosure rules. Per Family Code § 2102, parties are subject to the § 721 fiduciary standards.  This goes from the time of separation until the distribution of the community assets. Section 2102 requires the following:

(1)The accurate and complete disclosure of all assets and liabilities in which the party has or may have an interest or obligation and all current earnings, accumulations, and expenses, including an immediate, full, and accurate update or augmentation to the extent there have been any material changes.

(2)The accurate and complete written disclosure of any investment opportunity, business opportunity, or other income-producing opportunity that presents itself after the date of separation, but that results from any investment, significant business activity outside the ordinary course of business, or other income-producing opportunity of either spouse from the date of marriage to the date of separation, inclusive. The written disclosure shall be made in sufficient time for the other spouse to make an informed decision as to whether he or she desires to participate in the investment opportunity, business, or other potential income-producing opportunity, and for the court to resolve any dispute regarding the right of the other spouse to participate in the opportunity. In the event of nondisclosure of an investment opportunity, the division of any gain resulting from that opportunity is governed by the standard provided in Section 2556.

(3)The operation or management of a business or an interest in a business in which the community may have an interest.

Family Code § 2102(a).

Duty to Update and Augment Disclosures

It is important to note that the code not only requires a complete disclosure, but it also requires “immediate, full, and accurate update or augmentation to that extent that there have been material changes.” Id [emphasis added]. This means that after you provide your first disclosure, you must update the other party when there are changes.

Preliminary and Final Declarations of Disclosure

Before the court will grant a judgment for divorce, the parties must exchange preliminary and final declarations of disclosure. Parties can waive the final declaration of disclosure by written stipulation of the parties.  But, they can’t waive the preliminary disclosures.  See Family Code §§ 2104 and 2105. The statute requires that the parties use specified forms for the disclosures. They are:

Declaration of Disclosure (Judicial Counsel Form FL-140)

Complete this form and sign under penalty of perjury to indicate that you have made a complete and accurate disclosure.  Don’t file this form.  Rather, just serve it on the other party.

Income and Expense Declaration (Judicial Counsel Form FL-150)

On form Fl-150 you provide all of your income and expense data.  You show everything you earn and everything you spend.  It’s kind of a “budgety” type form.  This aids the court and the spouses in determining the best choices for child support and alimony.  You only need to file the form FL-150 if support is at issue at a court hearing.  Otherwise, just serve it with your Declaration of Disclosure form.

Schedule of Assets and Debts (Judicial Counsel Form FL-142)

On form FL-142 you list all of your assets and debts.  In essence, it shows everything you own and everything you owe.  Be sure to list EVERYTHING.  There can be consequences if you leave something off.  So, when in doubt, disclose.  You don’t file form FL-142 at court.  Instead, just serve it on the other party with your Declaration of Disclosure.

Declaration Regarding Service of Declaration of Disclosure (Judicial Counsel Form FL-141)

This form indicates to the court that you completed your declaration of disclosure and served it on the other spouse.  File this one at court.

Importantly, you only need to file the Declaration Regarding Service of Declaration of Disclosure form at court. Rather than filing, you simply serve the other documents on the other party. However, despite not filing them at court, it is essential to take these forms seriously and to be complete and truthful. The court can be very harsh with people who are inaccurate or incomplete in their disclosures.  So, get this one right too.

Sanctions for Failure to Comply with Disclosure Requirements

Family Code § 2107(c) requires monetary sanctions and reasonable attorney fees if a party fails to comply with the spouse’s California Family Code § 721 fiduciary duty of disclosure during dissolution proceedings. Family Code §271(a) provides authority to order attorney fees and costs in the nature of a sanction if conduct “frustrates the policy of the law to promote settlement of litigation.”

In summary, the disclosure required by California Family Code § 721 is not a topic to mess around with. The court must impose Draconian penalties and sanctions on parties who do not comply with the disclosure statutes. Hence, the best advice is to err on the side of caution. Disclose everything and anything to the other side even if you think it is unimportant. Do it early and thoroughly.  What’s more, Augment and update routinely.  I have seen even the smallest technicality lead a court to set aside a judgment or order stiff sanctions. So, it is simply best to play it safe and disclose it all. Withholding information, whether it is inadvertent or an attempt to be sneaky or cute, can lead to devastating results. If you are not sure if you have disclosed everything necessary, then talk to an attorney and get it right.

For more information, read:

https://weberdisputeresolution.com/california-child-support/

https://weberdisputeresolution.com/early-intervention-mediation-settlement-conference-divorce-case/

https://weberdisputeresolution.com/pre-mediation-information-packet-2/

Are You a Victim of Financial Infidelity?

by | Jan 20, 2012 | Uncategorized


The author in this article presents a very interestin­g take on fidelity in marriage. The idea of “financial fidelity” is a good one. So many of my divorce clients arive at the decision to end their marriages over money issues. As a divorce profession­al, I appreciate the advice to have a moderate response with financial “cheating” is discovered­. Many of my clients opt for a postnuptia­l agreement when such happens as a way to prevent the marriage from disintegra­ting. Having a written agreement with clear understand­ings of the financial boundaries and what is expected from a spouse can have a huge impact on the success or failure of the marriage going forward. I also support having the prenup discussion prior to marriage so that a marrying couple can have the money conversati­on. This prevents misunderst­andings and incorrect expectatio­ns from developing down the road.
Read the Article at HuffingtonPost

What Children Of Divorce Do And Don’t Learn

by | Dec 7, 2011 | Uncategorized


Judith Wallerstei­n does an excellent job pointing out in this article on Huffington Post some of the important obstacles facing children of divorce. In my legal practice, I often observe that children have to grow up too quickly. They often become “parentifi­ed” in their relationsh­ips with their siblings and often even their parents. I think it is essential that divorcing parents do everything they can to shield their children from their conflict and to just let their children be kids.
Read the Article at HuffingtonPost

What sort of drug or alcohol testing can a California Family Court order in a custody proceeding?

by | Nov 29, 2011 | Uncategorized

California Family Code section 3041.5 provides a mechanism for drug and alcohol testing for parents involved in custody disputes. Testing can be ordered if the court finds, by a preponderance of the evidence, that a parent uses illegal drugs or alcohol habitually or continually.

It doesn’t end there, however. The tested party is entitled to a hearing to challenge any drug results. So, a positive test, in and of itself, is not sufficient grounds for a ruling to limit or terminate custody rights. However, it can be a huge factor in evidence.

Interestingly, only certain tests are allowed thanks to a case known as Deborah M. v. Superior Court (Daryl W.) (2005) 128 Cal.App.4th 1181. In Deborah M., the court held that because Family Code section 3041.5 requires drug testing to conform to federal drug testing procedures and standards, only urine testing is allowed.

While a 5 panel urine drug test can indicate whether drugs have been used recently, the preferred test, the hair follicle test, cannot be ordered by the court unless the parties agree. Hair follicle testing is more reliable than urine testing because the evidence of substances remains for as long as the hair follicle exists, whereas in urine testing the substances pass out of the system in 24 hours. . It is then that professional help might be sought and with the help of service providers (such as Countrywide Testing) in this specialized field, proper results can be achieved. More often than not, the tests conducted tend to give accurate results and the same lays a significant effect on the outcome of various hearings. However, as with all methods, there can still be faults with hair drug testing. Regardless, the Court has made it clear that the code’s requirement of conformity to the federal standard of urine testing is what will be allowed. Of course, parties can agree to a more stringent standard.

If a client of mine is worried about the other parent’s alcohol or drug use, but there is not enough evidence to get a drug test ordered or there is a concern that unrine testing will be insufficient, I often recommend that the client try to get an order for a mutual prohibition of alcohol or illegal drug usage in the presence of the child.

If there is a past history of addiction, the Court will often require attendance with a sponser at Alcoholics Anonymous or Narcotics Anonymous. Whenever I represent a party with a history of addiction, no matter how slight that history may be, I often recommend and even insist that the client attend AA or NA as a protective measure in the case. I have never seen a Judge punish a party for going to meetings.

I have also had cases in the past where there is concern that a client is abusing prescribed pain medication such as Oxycontin. In such case, it is a good idea for the non-using parent to insist that there be controls in place to ensure that the other parent doesn’t abuse his or her medication. For instance, there should be a pain management contract regulating the use of controlled substances. I have also had success in getting orders for mass spectometry and liquid chromotography testing, which does a more thorough examination of a urine sample using laser technology. Not only does it give a qualititative result (i.e., relating to the presence of a substance) but also gives a quantitative result (i.e., how much of a given substance is present). This is helpful because the test itself is a simple urine sample type test, so it is no more invasive than any other urine test, but the data is so much more useful. It is especially helpful in determining whether a pain management patient is compliant with his contract or if he is overusing a particular medication or is mixing the medication with alcohol. Although I have been successful in getting orders for such a test, I have seen no caselaw to test whether it meets the standard set out in Deborah M.

In general, unless you have obvious and provable abuse, it is hard to produce enough evidence to limit a drug or alcohol abusers parenting. The best alternative approach is to insist on boundaries and controls that can provide the most possible protection for the child, even if parenting cannot be limited.