Articles Posted in Sanctions

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California law imposes a “fiduciary duty” on spouses to generally act in each other’s best interests in financial transactions throughout the course of the marriage. That includes the time period after a couple separates and before they divorce. As the Second District Court of Appeals recently explained, a spouse who commits fraud during that time is likely to be required to pay back the other spouse for the value of any community property lost as a result.

broken-blush-and-makeup-brush-1171197Husband and Wife separated in September 2009, following more than five years of marriage in which the couple had two children. Wife filed for divorce shortly thereafter. In the proceedings that followed, a judge found that Husband actively tried to conceal the fact that he owned a cosmetics business based in Nigeria. Husband later admitted that he owned the company, but he said it had no assets and was created solely to transact business for a separate entity where he worked as an employee.

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California law recognizes just how important the relationship between a person seeking a divorce and his or her attorney is. Among other protections, the law generally shields all communications between client and lawyer under the attorney-client privilege. The state’s First District Court of Appeals recently took on one of the many situations in which the privilege may come up during a divorce case.

https://www.bayareadivorceattorneyblog.com/files/2014/12/Screen-Shot-2014-12-09-at-6.38.30-PM-237x300.pngHusband and Wife separated in July 2011, and Wife filed for divorce less than one month later. The relationship appears to have been on the rocks for some time before they couple split. Wife met with an attorney to discuss her options in early July 2011. At the lawyer’s request, she filled out a detailed intake form concerning the marriage and Wife’s position on various issues. Wife downloaded the completed form to an unused USB flash drive stick that she said she found in the couple’s garage. Wife ultimately went with another lawyer, but she continued to use the stick to retain records of communications with the new attorney.

Wife said she left the couple’s home in September 2011 while seeking a restraining order against Husband. She said she returned four days later to find that Husband had rummaged through her belongings and that the flash drive stick – which she’d hidden in a brown bag and placed under some clothes – was missing. As the divorce litigation moved forward, Husband produced Wife’s completed intake form as one piece of evidence that he intended to rely on at trial.

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In divorce cases, as in life, honesty is the best policy. Not only does being completely forthright help ease some of the bitterness and acrimony that can arise when a couple decides to split, it can also help speed up the divorce process by narrowing the focus of any litigation or negotiation to real issues instead of wasting time on playing “he said, she said.” If that’s not enough reason, consider this:  distorting the facts and refusing to play nice in a divorce proceeding can also cost you money in the form of sanctions and attorney fees. A recent case out of California’s Fourth District Court of Appeals is a good example.

wooden-box-1228830-mWife filed for divorce from Husband in February 2005, after more than 21 years of marriage. The couple reconciled later that year, however, and lived together for the next five years. According to the court, Husband and Wife filed joint tax returns, slept in the same room, took vacations together, and otherwise had “normal marital relations” during this time. They also had a variety of work done to improve the family’s home. Nevertheless, Wife filed for divorce again in 2010.

After a three-day hearing to resolve various property distribution and spousal support issues, a trial judge ordered Husband to pay Wife nearly $62,000 in sanctions related to his actions during the divorce proceedings. The court also forced Husband to pony up $25,000 to cover some of Wife’s attorney’s fees. The judge noted that Husband refused to provide certain financial documents during the discovery process and said he breached a fiduciary duty by withdrawing money from community banking accounts from 2005 to 2010 without notifying Wife.

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California divorce cases can be stressful and even hostile affairs that require several rounds of hard-fought litigation. They don’t have to be, however, and many of these matters are resolved on mutually beneficial grounds through a negotiated settlement. In fact, the state family court system wants divorcing spouses to resolve as many issues as possible through negotiation and to work to help ensure that any remaining disputes are sorted out in a timely manner. As the Fourth District Court of Appeals explains in a recent case, a spouse who doesn’t hold up his or her end of the bargain may be subject to a money penalty.

money-607703-mHusband and Wife were married for 16 years and had two children before separating in 2010. What followed, according to the Fourth District, was “protracted, highly contentious litigation.” In particular, the spouses disputed child custody and property division issues in a series of hearings and trials over a two-year period.

In December 2012, the trial court ordered Wife to pay $70,000 in sanctions to Husband as a result of her actions in litigating the case. The trial judge said Wife unreasonably extended the proceedings because she “frustrated efforts to minimize litigation” and used an “unnecessarily aggressive approach to the case thwarting the reduction of litigation and possibility of settlement.” Among other behavior, the judge noted that Wife withdrew more than $75,000 in community money on the same day that she filed for divorce, filed “frivolous” objections, refused to cooperate with the admission of an expert report, failed to disclose a 401k account, interfered with the appraisal of certain community property, and arrived at a trial two hours late. The judge further said Wife’s actions violated California public policy, which encourages the early settlement of divorce disputes.

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