Law Makes Divorcing a Bit More Businesslike

The rules of divorce court in California changed this year because of a law that took effect Jan. 1 imposing greater obligations on a divorcing husband and wife to make full disclosure of financial matters.

The law, section 4800.10 of the California Civil Code, explains the theory behind the changes: “Sound public policy . . . favors the reduction of the adversarial nature of marital dissolution and the attendant costs by fostering full disclosure and cooperative discovery.”

Actually, the new requirements may increase the costs of a divorce proceeding in the short term since each person must give full and accurate disclosure of all assets and liabilities early in the proceeding and then “update and augment” that disclosure along the way.

As taxpayers know, compiling financial information in an established form can be a costly and time-consuming process. However, the theory is that full disclosure may encourage early settlements and thereby reduce costs.

Under the new law, husband and wife now have an enforceable “fiduciary duty,” says family law lawyer Donna Beck Weaver. In other words, one must behave toward one’s spouse as one might behave toward a business partner.

A key change is the requirement that each party volunteer all material facts to the other. What is material in a divorce?

For example, the California Supreme Court ruled in 1979 that a husband did not have to inform his wife during their divorce proceeding that a company in which they owned stock was about to go public, which would have vastly increased the stock value.

Under the new law, the husband presumably would have to make such a disclosure.

The law also specifically requires that each party make an “accurate and complete written disclosure of any investment opportunity that presents itself after the date of separation, but which results directly from any activity, involvement or investment of either spouse from the date of marriage to the date of separation.”

So if the wife owns a small business that started during the marriage, and receives an unsolicited offer to buy it, her husband must be told about the “investment opportunity,” apparently.

The law also allows a spouse to seek to set aside a judgment based on incorrect information.

It is still too early to tell how the law will be interpreted in many situations; it often takes years for cases to wind their way through the appellate process, where judges interpret the words contained in new statutes. But there is no doubt that divorce lawyers have been spending a great deal of time reading the fine print, and trying to explain it to their clients.