Ancillary Litigation: A Treasure
Trove for Divorce Discovery
by Charles C. Abut
DURING MATRIMONIAL representation, the divorce practitioner usually conducts broad discovery aimed at gathering the relevant information pertaining to assets and income. Routinely, discovery devices, such as interrogatories and depositions, directly target the areas of concern. For example, the practitioner will ordinarily obtain deeds and mortgages for a real estate parcel, or financial statements and tax returns for business or personal income. Often, however, critical information can be gleaned from sources outside the four corners of the divorce litigation. Thus, care should be taken to determine whether either party has ever been engaged in litigation impacting on any matrimonial issues.
Bankruptcy. After the filing of a bankruptcy petition, an individual or entity is required to file certain schedules, detailing assets, liabilities and recent income. Sometimes the bankruptcy filing takes place during the pendency of the matrimonial action, and this can lead to a whole host of separate issues. But even where the bankruptcy filing took place years before a pending divorce action, an examination of the bankruptcy pleadings can often yield rich results. In one recent case, a divorcing husband was stopped from asserting equitable distribution claims with regard to certain marital assets that he had failed to disclose in his earlier bankruptcy proceeding. (Gelber v. Gelber, NYLJ, 12/17/96, N.Y. Sup. Ct., Kings Co.)
Income Tax Proceedings. While tax returns are considered during any divorce proceeding, one should not omit inquiring into the existence of present or prior proceedings involving local, state or federal taxing authorities. Certain types of income tax audits, for example, can trigger a line-by-line audit of every aspect of a taxpayer's tax return. This, in turn, can give rise to inconsistencies maintained by the taxpayer in pending divorce litigation.
Personal Injury Actions. Wholly apart from whether the proceeds of personal injury actions are subject to equitable distribution in your jurisdiction, such lawsuits often trigger inquiries into a party's actual or projected earnings and other economic losses or gains. Moreover, personal injury actions can involve the testimony of mental health professionals who opine that the injuries sustained are so severe that long-term (permanent?) disability is claimed. In such a situation, the alleged mental disability may have a severe and perhaps dispositive effect on custody, visitation and relocation issues impacting minor children.
Environmental Litigation. Increasingly, property owners are faced with state and federal pollution and toxicity cases being litigated against them. In the context of such cases, the property owner may have to submit financial statements and projections of profitability and costs of cleanup. These may or may not be at variance with positions being taken in a pending divorce suit.
Employment Litigation. Many causes of action, such as wrongful termination, harassment or invasion of privacy, arise out of the workplace. In prosecuting and defending such cases, matrimonial litigants may assert demands involving loss of profitability or income, with claims of both compensatory and punitive damages that implicate an employer's net worth and asset/liability profile. The potential usefulness of such information in a divorce context is self-explanatory.
Property Tax Appeals. Known in some jurisdictions as "certiorari" matters, these proceedings involve an attempt by an owner of real estate to reduce the tax assessment on the subject property. This is an example of an area where prior litigation can actually support a divorcing party's claim as to the fair market value of real estate subject to matrimonial division. A successful tax appeal by the property owner, after supporting and opposing appraisals, might culminate in the litigant's favor, with principles of res judicata and/or collateral estoppel then being used to vindicate the prevailing value.
Third-Party Litigation. Whether based on a promissory note, a mortgage foreclosure, the purchase or sale of a business or the payment (or non-payment) of an insurance claim, it is increasingly the case that parties to a matrimonial litigation have been involved in other lawsuits. Even a simple breach of contract case will involve claims for damages - low or high - that may be completely different from the posture being maintained in the pending divorce action.
Suggested Interrogatories At a minimum, the matrimonial practitioner is well-advised to include the following type of interrogatory, accompanied by the appropriate document demands:
* Have you (or any entity in which you have or had any legal or equitable interest) ever been a party to any civil or criminal litigation other than the within matter? If so, provide a description of each such litigation and the names and addresses of all parties thereto, together with the name of the court and address of the clerk of the court in which each such litigation is or was pending, the state and county of vicinage, the docket number and the name and address of the attorney for each party.
* For each litigation identified in answer to the prior interrogatory, state whether any offers of settlement have been made by any party to any other party and, if so, the amount of offer in settlement, from whom the offer was made, to whom, and attach true copies of any document containing or referring to any such offer.
If any litigation referred to in the prior interrogatories has been resolved, state when and how it was resolved, and attach a copy of any document evidencing such resolution, such as a settlement agreement, a judgment or a stipulation.
The ultimate benefit of exploring ancillary litigation is best seen in the type of situation that arose in Levin v. Robinson, et al. 246 N.J. Super. 167 (Law Div. 1990). In Levin, the plaintiff husband, an attorney, had argued in his divorce case that his law firm partnership interest had minimal value. However, in subsequent litigation against his partners, he claimed a substantial value. The obvious inconsistency was rejected because of "judicial estoppel," and the court labeled the inconsistency as "the ultimate about face," with a finding that the husband was playing "fast and loose."
Farming the fertile soil of lawsuits outside divorce territory can lead to rich crops. No matrimonial practitioner should avoid considering discovery of the types of litigation described in this article.
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