Information disclosure duties of divorcing litigants in Connecticut

On Behalf of | Mar 10, 2022 | Property Division

We start with a simplified explanation of what happens to property and debt when someone files for divorce. First, imagine at the time of filing a snapshot of all assets and liabilities of the parties whether joint or personal to one of them. Second, Connecticut law requires that each litigant disclose to the court and to each other basically everything in that snapshot, and court rules restrict what the parties can do with that property and debt during the duration of the dissolution of marriage proceedings. Third, the litigants may also engage in discovery, a process during which they may ask each other for added or clarifying oral, written or documentary information about these topics and they each must respond under oath.

Continuing with the simplified version, the court has broad power to divide the property and debt equitably between the litigants, but fairness can only happen if the litigants comply fully with court rules. In other words, everything must be out in the open; neither may hide assets; and they should only dispose of property during the proceedings as the rules allow. The law requires “honest disclosure” between the litigants and with the court. Toma v. Ceesay, 2015 WL 1867081 (unpublished 2015).

The judge looks at all the assets and debts, decides if they are marital (subject to division in the divorce) and divides them. If the marital estate as the parties present it is not a full, accurate picture, the distribution of property and liability cannot be equitable. The elephant in the room is that for the system to work, both litigants and each of their legal counsel must remain open books about property and debt throughout the entire litigation process. This means they must exercise diligence to update the court record if the picture changes after initial disclosures.

Automatic orders

Procedural rules impose automatic court orders on each divorce litigant that continue in force throughout the proceedings unless a court orders otherwise. These detailed orders place restrictions on or require particular actions of litigants vis-à-vis property and debt (and concerning children of the marriage). Connecticut Practice Book, Rules for the Superior Court, Rule 25-5 (2022). In some matters, a court order or mutual consent of the litigants may allow deviation from these rules.

Here is a high-level list of the automatic orders of a financial nature in force during the pendency of the divorce:

  • Litigants must continue all medical insurance for the family.
  • Litigants may not change life insurance beneficiaries nor cancel life, auto, home or renters policies.
  • Each party may not sell, remove or dispose of any property or encumber it unless the other party gives written consent or the court orders it EXCEPT for asset disposal in the usual course of business, for customary household expenses or for reasonable legal fees in the divorce.
  • Litigants may buy or sell securities “in the usual course of the parties’ investment decisions,” within certain requirements and limitations.
  • Neither may conceal assets or take on unreasonable debt.
  • Each must complete a sworn financial statement containing the information in an official form.

Financial affidavit

The disclosures on the financial statement are intricate and far reaching. The official form asks for detailed data about income and benefits (from pensions, annuities, dividends, trusts, royalties, alimony and other sources), deductions from income, household and children’s expenses, charitable contributions, liabilities, assets (real estate interests, vehicles, money and equivalents, stocks and bonds, mutual and bond funds, life and disability insurance, retirement plans, business interests, profit sharing, personal property of value (art, antiques, collections, firearms, furnishings, jewelry, contents of safes and others)), inheritances, children’s assets, health insurance and more.

Continuing, affirmative duties

These automatic disclosure orders require more from litigants than just completing the forms. There is an “affirmative duty to disclose” any “other financial information” not disclosed by responding to the form’s questions. “Willful misrepresentation” of the required information can result in civil sanctions, contempt or criminal charges.

Essentially the disclosure is like doing a personal and family inventory. For a voluminous marital estate, it can be challenging to meet the extensive disclosure requirements and with the continuing duty to keep the information current throughout the divorce proceedings. For example, a high-net-worth litigant may have domestic and foreign investments, real estate, business interests, executive perks, cryptocurrency or other intangible assets, stocks and bonds, hedge funds, retirement assets, trust interests, fine art, antiques and other significant assets of value.

The Connecticut Supreme Court has said that the relationship between divorcing spouses is more like that of a fiduciary to a beneficiary – careful and voluntary – and less like that of commercial parties doing arm’s length business dealings. This means that each litigant (and the court) must be able to rely on the good faith disclosure (“full and frank … from both sides”) of financial information in the automatic order process and in discovery. Billington v. Billington, 220 Conn. 212 (1991) and Weinstein v. Weinstein, 275 Conn. 671 (2005).

Notably, litigation misconduct may occur, despite the expectation that litigants and the court should be able rely on the duty of good faith disclosure. In the seminal discovery misconduct case in Connecticut, Ramin v. Ramin, the high court stated that counsel for a litigant who is requesting additional disclosure should not be required to take a “best shot” at representing the litigant in a complex financial matter with only the potentially incomplete information that has been disclosed.

The court reasoned that the idea that a litigant “should not expect 100 percent performance is not reconcilable with the ethical duty of zealous representation that counsel owes to a client. Without an agreement between legal counsel and his or her client to limit discovery on an informed cost-benefit analysis, a matrimonial attorney may be found negligent for failure properly to discover and value the [client’s] business interests and related assets (internal quotations and citations omitted).” 281 Conn. 324 (2007).

Moreover, the court expanded the remedy for discovery misconduct to provide family court judges with discretion to award attorney’s fees to the innocent litigant, regardless of the liquidity of the offending litigant and without the need to further determine whether the remedy may undermine other financial orders in the matrimonial litigation, provided the misconduct has not been adequately addressed during the litigation by other orders of the court. Trial courts retain inherent authority to exercise discretion in managing their dockets, yet that authority does not extend to allow the court to arbitrarily limit the discovery obligations of the parties, or to refuse to consider a motion for a discovery request. The process should allow the litigants the opportunity to complete discovery prior to proceeding to trial.

For a divorce litigant of significant wealth, an experienced lawyer is especially helpful in assisting with the arduous, but necessary responsibilities of rule compliance, asset disclosure and discovery. A Connecticut attorney shares an ethical duty with their client of keeping disclosed financial information as well as discovery responses up to date as the litigant’s personal estate evolves during the divorce process within the confines of the automatic orders.

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