Dear Nick and Nora:
I’ve written to you about how Judge Maryland dealt with the way the lawyers prepared your cases. In short, they were each fined $1,000 for their lack of professionalism.
Now that you’ve received your first bills from the lawyers, you can see why $1,000 is just a drop in the bucket that doesn’t make much difference to them or to you.
After she fined the lawyers, the judge observed that the motion to keep Nick from destroying records was based on Sluggo’s fears; nowhere was there something signed by Nora saying she thought Nick would destroy business records. So the judge asked her directly: “Do you think Nick would destroy business records?” Nora, being Nora, couldn’t stop herself from getting a few zingers into her reply but, in a word, the answer was, “No.”
The judge therefore denied Nora’s motion for a restraining order against Nick. Then she denied Nora’s request to “compel” Nick to produce documents and gave Nick 60 days to find what was requested. She told Mr. Sluggo he could return to court if he wasn’t satisfied with what Nick came up with. In that event, the judge said she would appoint a “Special Master” to deal with the issue. A Special Master is just a lawyer the judge likes, but, unlike the judge, the Special Master works by the hour at his or her usual rate. Guess who pays it?
Ms. Ripper’s motion on behalf of Nick didn’t do any better than Nora’s motion against Nick. Nick asked that a budget be imposed on Nora’s spending. This was silly because you have investment income belonging to both of you equally and, while you live extravagantly, you don’t have an airplane or servants or bodyguards or extra houses or any of the other things that can make lots of income disappear. Ripper also wanted the judge to order the two of you to fund an account that both lawyers could draw against whenever they wanted and then you (plural) would have to replenish it.
Judge Maryland denied Nick’s motion and said there could be an accounting at the end of the case instead. If either of you had spent more than your half of the income during the period of separation, you would be ordered to pay back the difference from your half of the community property.
Then Judge Maryland did two things that were brilliant. I’ve already written about how she ordered Nora to pay “reasonable attorney’s fees” to Nick for the cost of defending against Nora’s stupid motion. Then, she ordered Nick to pay reasonable attorney’s fees to Nora for her cost of defending against Nick’s stupid motion. The lawyers were given a week to submit their bills along with whatever they wanted to submit in justification of those fees. Then the other lawyer was given two days to file any objections.
So Nick is paying Nora’s fees and Nora is paying Nick’s fees. Who do you think is going to pay for the cost of preparing what the lawyers submit in justification of their fees? Who do you think is going to pay for the preparation of objections to the other’s request for fees?
The very smart thing Judge Maryland did will save you lots of money and lots of upset. Sluggo is taking the position that Nick should get less than half the community property — in spite of the fact he earned every penny of it. Sluggo argues that Nick lost money in the stock market because he didn’t systematically study whatever he bought and sold. He also lost $1 million he “invested” with a crook.
The law imposes a fiduciary duty on the way a married couple deals with each other. Some lawyers, like Nora’s, seem to believe the spouse handling the money gets surcharged for any losses while any gains are ignored. This argument can be dressed up so that it almost sounds reasonable, but it isn’t the law.
One spouse can violate his or her fiduciary duty in one of three ways: (1) He can enter into a transaction that favors his interests over the interests of his spouse; (2) She can make reckless investments that result in a loss of community property; or (3) She can conceal or simply refuse to allow her spouse to see business records concerning the management of community property.
I can’t imagine how Nick could make a deal that favored him at the expense of Nora, but I can think of a couple hundred questions I could ask him just to “make sure” if I wanted to harass him while being paid by the hour.
Nick never denied Nora’s access to business records. It could be argued that he wouldn’t have known where to find them if Nora asked for a peek. I don’t know if that’s a violation of the fiduciary duty, but so what? Nora’s never claimed that she’s asked; in fact, she’s stated that she didn’t ask.
What is cool is the way the judge tried to pre-empt this issue. There is a question that has to be asked on a case-by-case basis about whether she should consider the big picture when deciding on whether a spouse has been reckless with community property. Your judge made it clear that she wanted to see the big picture before the lawyers presented any details. And she made it clear that she thought the big picture was so important that she wanted the trial to be divided into at least two parts to be held on different days.
From reading the transcript, it seems pretty clear that her first instincts are to view the case through the principle of: If you are going to take a lot of good, you’ve got to take the little bit of bad that goes with it.
Of course, she had to say that her comments were tentative and that she’d consider whatever the lawyers put before her at the proper time and then she’d make a decision. To me, she sounds like someone who has made up her mind.
Speaking about taking the good with the bad, what do you think about the statements you got from your attorneys for the work they’ve done to date? Nick got a bill for $35,000 and Nora got one for $75,000. The judge ordered you each to pay $20,000 to the other. Does this make any sense?
Actually, it does make more sense than you think. That will be the subject I’ll address in my next letter. For now, consider the following:
» Either the lawyers or someone in their office spent the time shown on your bill, and when you signed the fee agreement, you consented to the hourly rates being charged.
» Even though the time was spent, the work didn’t benefit either of you.
» Even though the work was worthless, the lawyers can justify it as a necessary aspect of “conventional practice.” This includes the “unprofessional” declarations submitted in support of the motions.
» Nothing the lawyers did violated the Rules for Professional Conduct.
» As soon as a client signs an hourly fee agreement in a divorce case, there is, in general, a higher potential for an economic conflict of interests between the client and her lawyer than between the client and her spouse.
In the next letter I’ll also explain how divorce lawyers earn a living.
Your oldest and best friend,
Bucky
— Brian H. Burke is a certified family law specialist practicing family law and mediation in Santa Barbara. A researcher and educator in the field of divorce and family conflicts, he is also the creator of the Legal Road Map™. Click here for more information, call 805.965.2888 or e-mail .(JavaScript must be enabled to view this email address).
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