Saturday, January 17, 2009

California Disclosure Rules Scare Wealthy Spouses

Further evidence that California is an excellent jurisdiction for a spouse who does not have complete knowledge of the other spouses’s financial condition is supplied by the just-issued decision in In re Marriage of Straus, 2009 WL 98447 Cal.App. 4 Dist.,2009.  In that case the appellate court upheld an award of $3,000 in sanctions against the husband because he did not voluntarily respond to two letters from his wife’s attorneys seeking information about his retirement benefits.

Section 271 of the California Family Code provides that “the court may base an award of attorney's fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys."

Since the wife filed a motion to compel discovery the trial court required the husband to pay a penalty which was in excess of the amount of the legal fees that the wife had paid her attorneys to make the motion.

The appeal court ruled that, “These facts support a finding that James's conduct frustrated the policies of promoting cooperation, settlement of litigation and reduction of litigation costs that underlie section 271, because Candyce was forced to file a motion and serve discovery to obtain James's cooperation. Because section 271 allows the imposition of sanctions when a party's conduct frustrates its underlying policies, the trial court was within its discretion to impose sanctions on James."

California’s approach to discovery, which requires litigants to voluntarily provide full access to their financial circumstances, stands in total contrast to the approach in most other jurisdictions, and especially civil law jurisdictions in other countries. It is why wealthy international spouses with a potential California divorce will often look for any possible way of avoiding the California courts, perhaps by asserting lack of jurisdiction or by rushing to file first in another jurisdiction.