Case Highlights: the Year in Review

• Jurisdiction: California,United States
• Citation: Vol. 36 No. 2
• Publication year: 2014
• topic: Contracts,Family Law,Civil Procedure

Case Highlights: The Year in Review

Continued from Issue I, 2014

The collaboration between Continuing Education of the Bar (CEB) and the Family Law Section continues to reap benefits for our members. The Family Law News is pleased to once again publish the CEB Year in Review. Each year, CEB publishes a detailed compilation of important case law and legislative developments on issues ranging from attorneys fees to child custody to enforcement.

Re-printed below for your review and easy reference are a limited number of case highlights in the Family Law arena. Due to space constraints, the Family Law News is unable to publish the entire list of new cases in this issue. The next issue of the Family Law News will include the remaining CEB case summaries. In the meantime, please continue to take advantage of Judge Burke's case summaries that come through on a regular basis to keep fresh on legal developments coming from the courts. Thanks again to CEB for supporting the education of the Family Law Section.

Recent Family Law Cases

Community Property

Characterization and Division in General

Marriage of Georgiou & Leslie, 218 Cal. App. 4th 561(2013)

A family court properly granted a former husband's motion for summary adjudication of an action by his ex-wife for breach of fiduciary duty under Family Code § 1101 when the asset at issue had previously been adjudicated; the proper remedy, if any, would have been a set aside motion.

In 2000, an attorney-husband entered into an "of counsel" relationship with a law firm (Milberg Weiss) that entitled him to a referral fee of 10 percent in class action litigation in which the husband "secured the plaintiff and the firm was designated lead counsel." In 2002, Milberg Weiss entered into a contingency fee agreement with the Regents of the University of California, which was ultimately designated the lead plaintiff in federal class action securities litigation against Enron Corporation. Fees to Milberg Weiss for this action were to be on a sliding scale.

In 2003, the husband and his wife separated and the husband petitioned for marital dissolution. In 2007, the parties entered into a marital settlement agreement (MSA) that divided the husband's expected referral fee from the Enron litigation unequally (90 percent to the husband and 10 percent to the wife), with the wife to also receive approximately $7 million in other assets and debt relief. The husband's prospective referral fee in the Enron litigation was a major factor during the MSA negotiations and the subject of discovery by the wife's attorneys, who had deposed a Milberg Weiss partner regarding the referral fee arrangement. The MSA was incorporated into the parties' dissolution judgment in 2007.

In September 2008, a federal district court in the Enron litigation awarded Milberg Weiss $688 million in fees, and the firm negotiated a 9-percent referral fee with the husband. He then purportedly paid the wife $5,568,200 for her 10-percent share of his net referral fee (meaning he recovered some $55,682,000). In 2009, the wife moved to set aside the judgment on the basis of her own mental incapacity (duress from not taking prescribed psychotropic medication and pressure by her then attorney to settle the case), but she then retained yet another attorney and dismissed the motion.

In 2010, she filed an independent action under Family Code § 1101, claiming the husband breached his fiduciary duty of disclosure, in that he "deceived her into believing his potential referral fee would be between $9 and $33 million, by not providing her with a copy of the fee agreement between Milberg Weiss and the Regents and inventing or exaggerating a dispute with the firm over the amount of his referral fee." Had she known the terms of the fee agreement, she claimed, she could have calculated the Milberg Weiss fee award; and she then asserted that she was entitled to either 50 percent or 100 percent of the husband's referral fee under Family Code §§ 1101(g) or (h). The husband successfully moved for summary adjudication, arguing the action was untimely (Fam. Code § 1101(d)(1)), but the trial court, on its own motion, ruled that that relief under Fam. Code § 1101 was not available in a "post-marital dissolution judgment action." It also found that the wife's sole remedy was under Fam. Code § 2122(e) (judgment set aside for mistake) but the 1-year limitations period had long passed. The wife appealed from the court's order granting summary adjudication.

The court of appeal affirmed the judgment. The appellate court stated that it need did not determine the propriety of the trial court's statement that Family Code § 1101 never authorizes a postjudgment action. Instead, the appellate court concluded that § 1101 did not authorize a postjudgment action under these facts, "because the referral fee [could not] be disposed of without upsetting the judgment, or at least a portion of it [given that] [t]he judgment divided [the] referral fee unequally and divided the remainder of community assets and debts based on the disparity [and the wife] cannot take the benefits of the judgment and also obtain 50 percent or 100 percent of the referral fee under Family Code §§ 1101(g) or (h)." To accept the wife's interpretation of § 1101, it stated, would require the court "to ignore [Fam. Code] section 2120 et seq. and the strong public policy of assuring finality in judgments within a reasonable time (§ 2120, subd. (b))." The wife's only remedy was to have filed a set-aside action under Family Code § 2122, which was now time-barred.

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Reference: Practice Under the California Family Code: Dissolution, Legal Separation, Nullity, chap 18 (Cal CEB).

Marriage of Simmons 215 Cal. App. 4th 584(2013)

Because the remedy allowing for the award of an undisclosed asset in Family Code § 1101(h) applies only to the nondisclosure of a community property asset, a trial court's order sanctioning a party for the failure to disclose a separate property bank account was reversed.

In a dissolution action, a trial court found that the protracted and expensive litigation between the parties was due in large part to the husband's questionable legal tactics, which included failing to comply with financial disclosures, filing misleading and delayed disclosures, failing to respond to discovery, failing to appear at his own deposition or at trial, and acting intentionally and in bad faith. Based on these findings, the court ordered sanctions against him under Family Code § 2107 for nondisclosure of community or separate property in dissolution proceedings and Family Code § 271 for uncooperative conduct. It also applied the remedy in Family Code § 1101(h) for the fraudulent failure to disclose a separate property savings account and awarded the entire $245,850 value of that account to the wife. The husband appealed, claiming that the court had no authority to apply the Family Code § 1101(h) remedy to the nondisclosure of separate property.

The court of appeal reversed the portion of the judgment awarding sanctions under Family Code § 1101(h), concluding that the legislature intended that remedy to apply only when a spouse fails to disclose community property. It based this conclusion on four reasons: (1) Family Code § 1101 is located in a portion of the Family Code that exclusively concerns matters associated with community property, and Family Code § 1101(a) specifies that a spouse may raise a breach of fiduciary claim under this section when there is an impairment to the spouse's community interest; (2) Family Code § 1101(f) provides that the Family Code § 1101(h) remedy may be pursued in an action even when the parties have not filed for dissolution, suggesting that it is not intended to extend to separate property, which is generally not subject to the control of the nonowner spouse and typically only becomes relevant on the filing for dissolution; (3) the legislature enacted other remedies that are expressly applicable to separate property, including Family Code § 271 for uncooperative conduct and Family Code § 2107 for nondisclosure of community or separate property in dissolution proceedings; and (4) because separate property assets are not subject to equal ownership and division between the parties, the legislature's alteration of the one-half interest formula was not meant to be applied to nondisclosure of separate property.

Reference: Practice Under the California Family Code: Dissolution, Legal Separation, Nullity, chap 13 (Cal. CEB).

Date of Separation

Marriage of Davis, 220 Cal. App. 4th 1109(2013)

California Supreme Court has granted a petition for review of IRMO Davis.

A trial court properly found that a couple's date of separation was at the time the wife imposed a strict segregation of the parties' individual finances, rather than some five years later when she moved out of the family residence.

In June 2006, while a married couple still shared the same residence with their children (but used separate bedrooms), the wife presented her husband with a "financial ledger" itemizing household expenses in an effort to ensure that each of them contributed equally to those expenses on a monthly basis. She also informed him of her intention to end their marriage, but did not petition for dissolution until December 2008, and did not move out of the residence until July 2011. In her dissolution petition, she claimed a date of separation of June 1, 2006. In the husband's initial response, he claimed a date of separation of January 2, 2009, but later amended it to claim a separation date of July 1, 2011. In dissolution proceedings, the parties bifurcated the issue of the date of separation, and a trial court ruled that this date was June 1, 2006.

Acting on the husband's appeal, the court of appeal affirmed the judgment, concluding that substantial evidence supported the trial court's ruling. Under existing case law, it reasoned, a court decides the date of separation by examining (1) whether either party...