December 2018 Update
Summarized below are some of the more important developments in the law related to financial discovery in family law cases since publication of the 2017 update.
Attorney Fees, Costs, and Sanctions
Family Code §271 does not preclude an order allowing the supporting party to deduct sanctions from a spousal support award, as long as the reduction does not create an unreasonable financial burden for the payee. Marriage of Pearson (2018) 21 CA5th 218. See §9.13.
A party moving for sanctions must comply with all of the procedural requirements in CCP §128.7(c), including the 21-day safe harbor waiting provision. Sanctions sought based on a purportedly frivolous complaint, written motion, or court filing that could be withdrawn or on some other alleged action or tactic that could be appropriately corrected are properly denied when the opportunity to correct has not been provided. Nutrition Distribution, LLC v Southern SARMs, Inc. (2018) 20 CA5th 117. See §9.14.
Child and Spousal Support
A child is excused from the requirement to be a full-time high school student if he or she has a medical condition documented by a physician that prevents full-time school attendance. Fam C §3901(a)(2). See §7.4.
An appellate court properly disallowed a deduction for the depreciation of motor vehicles in the calculation of business income available to pay child support, as the asset depreciation did not actually reduce the father’s available income and did not otherwise come within the scope of any specific deduction permitted under Fam C §4058 or §4059. In addition, the court properly raised the child support award above guideline, based on evidence of childrens’ special needs, including their functional difficulties, the high level of care required for them at home and school, and the out-of-pocket medical expenses required for their care. Marriage of Rodriguez (2018) 23 CA5th 625. See §§7.11, 7.13, 10.9.
Legislation effective January 1, 2019, has revised Fam C §4058(b) so that a court may, when exercising its discretion to consider the earning capacity of the parent for purposes of awarding child support, take into consideration the overall welfare and developmental needs of the children and the time that parent spends with the children. See Stats 2018, ch 178. See §7.14.
Spousal support. The Tax Cuts and Jobs Act of 2017 repealed IRC §§71 and 215, eliminating the tax deduction for a spousal support payor. See Tax Cuts and Jobs Act (Pub L 115–97, §11051, 131 Stat 2054). The Act eliminates tax deduction for the payor, and spousal support payments will no longer be taxable to the recipient. This change in tax treatment applies to any divorce or separation instrument executed after December 31, 2018. Existing spousal support orders and agreements are not affected by this change, although a couple may expressly modify an existing agreement to adopt the tax treatment of the Act. See §7.58.
Confidentiality in Mediation
Effective January 1, 2019, new Evid C §1129 requires that an attorney representing a client participating in a mediation or a mediation consultation must, as soon as reasonably possible before the client agrees to participate in the mediation or mediation consultation, provide that client with a printed disclosure containing the confidentiality restrictions described in Evid C §1119. In addition, the attorney must obtain a printed acknowledgment signed by that client stating that the client has read and understands the confidentiality restrictions. These provisions are designed to ensure that clients understand that mediation confidentiality might impede their later ability to use communications and writings to support a claim that their attorney committed malpractice or engaged in other misconduct during a mediation. See §5.20A.
Legislation effective January 1, 2019, revises Evid C §1122(a), adding a condition that may be used to waive confidentiality of a communication or writing made or prepared for the purpose of, or in the course of, or pursuant to, a mediation or a mediation consultation, namely that “the communication, document, or writing is related to an attorney’s compliance with the requirements under Evid C §1129 and does not disclose anything said or done or any admission made in the course of the mediation, in which case the communication, document, or writing may be used in an attorney disciplinary proceeding to determine whether the attorney has complied with Evid C §1129.” See §5.29A.
Although federal law prohibits the trial court from compensating a former spouse for the loss of her share of her husband’s military retired pay after he elected to receive combat-related special compensation, the trial court may modify spousal support, provided the modification is based on the relevant factors and not as compensation. Marriage of Cassinelli (2018) 20 CA5th 1267. See §10.25.
A trial court properly awarded the proceeds of a private disability insurance policy to a husband, based on evidence of the intent of the parties that it was intended to replace earned income, not act as part of a retirement plan. The court is not required to infer an intent to provide retirement benefits based on an assumed retirement date. Marriage of Marshall (2018) 23 CA5th 477. See §11.23.
Privileges and Privacy
Absent the consent of the party claiming the attorney-client privilege, a trial court assessing a claim that information contained in an invoice is privileged is not permitted to examine the invoice to determine whether specific billing entries reveal anything about legal consultation or provide insight into litigation strategy. County of Los Angeles Bd. of Supervisors v Superior Court (2017) 12 CA5th 1264. See §4.5.
An attorney’s previous employer, a law firm, and not the attorney himself, is the holder of the attorney work product privilege under CCP §2018.030 that attached to documents created by the former attorney employee during and in the scope of his employment. Tucker Ellis LLP v Superior Court (2017) 12 CA5th 1233. See §4.12.
In an employment case in which a plaintiff sought identifying information regarding fellow coworkers, the California Supreme Court held that privacy concerns could not support a complete bar against disclosure of such information, which is “routinely discoverable as essential prerequesite to effectively seeking group relief, without any requirement that the plaintiff first show good cause.” Williams v Superior Court (2017) 3 C5th 531. See §4.39.
A trial court improperly considered the income and expense declaration of a wife who failed to appear at a hearing to determine her needs, over the objection of a husband who asserted his right under Fam C §217 to cross-examine her. Marriage of Swain (2018) 21 CA5th 830. See §1.31.
If parties are unable to resolve a discovery dispute through meet and confer, the court may conduct an informal discovery conference upon request by a party or on the court’s own motion for the purpose of discussing discovery matters in dispute between the parties. CCP §2016.080. See §§16.23A, 18.13.
Rules of Professional Conduct
On May 10, 2018, the California Supreme Court issued an order approving new Rules of Professional Conduct, which went into effect on November 1, 2018. The revised rules and citations have been reflected throughout this title.
The legislative intent behind Fam §1101(g), which provides that the value of the asset is to be “determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court,” dictates that when the value of the asset in question fluctuates, an award is properly calculated as of the date of the undisclosed transfer, rather than the date of the asset’s highest value. Marriage of Kamgar (2017) 18 CA5th 136. See §17.21.