Discovery and financial statements

12

Class NameInstructor NameDate, Semester

Family Law for the Paralegal2nd Edition

Wilson

Chapter 6:Discovery and Financial

Statements

12


LEARNING OBJECTIVESAfter this lecture, you should be able to:

Cont.

Describe discovery – its nature, purpose, and scope in the domestic relations context.

List examples of informal discovery in family law cases.

Identify the five formal discovery methods.

6.1

6.2

6.3

12



Cont.

Describe the strengths and weaknesses of the various formal discovery methods.

Explain what e-discovery is and how the Internet can serve as an information gathering tool.

Identify the kinds of objections that can be made to discovery requests.

6.4

6.5

6.6

12



Cont.

Discuss the sanctions that can be imposed for failing to comply with discovery requests, rules, and orders.

Explain how to locate and complete financial statements.

Identify ways of identifying and uncovering hidden assets.

6.7

6.8

6.9

12



Describe the roles of the client, the paralegal, and the courts in the discovery process.

6.10

Learning ObjectiveAfter this lecture, you should be able to:

6.1Describe discovery – its nature, purpose, and scope in the domestic relations context.

• Discovery is the process of gathering information important to a matter at issue.

• It includes both formal and informal discovery and in more recent years has come to include electronic discovery.

• The purpose of discovery is to gather as much information as possible about a case so that attorneys can make appropriate recommendations and clients can make informed decisions about their options.

• Because a failure to conduct discovery can have serious consequences for the client and possibly result in a malpractice action, the attorney should confirm in writing if the client will not authorize discovery.

What Is The Nature And Purpose Of Discovery?6.1

7

• In an uncontested case involving no children and few assets, little or no discovery may be conducted beyond the exchange of financial statements.

• In complex and hotly contested cases involving many diverse assets, several children, and multiple states, extensive and costly discovery may be conducted.

• Information sought through discovery should not be protected by privilege and should be designed to lead to evidence that will be admissible at trial.

What Is The Scope Of Discovery?6.1

8

• Early in a case, a discovery strategy will be proposed to the client identifying the kinds of information needed, the techniques to be used, the sequencing of efforts, the assignment of tasks, and the projected cost.

• Information is commonly sought about the following:

– Financial assets and liabilities– Current income and expenses– Financial and nonfinancial contributions to the marriage– Dissipation of marital assets – Employment history– Parenting history, skills and weaknesses of both parents– Marital misconduct if fault grounds for divorce are claimed

or misconduct is considered in the context of spousal support and/or property division decisions

What Kinds Of Information Are Sought In Family Law Cases?6.1

9


6.2List examples of informal discovery in family law cases.

• Informal discovery involves information gathering not governed by specific procedural rules.

• Examples include: – Searching public records– Collecting bank account records and credit card

statements– Locating copies of income tax records– Checking Blue Book values of vehicles, boats, etc.– Checking stock values– Using a private investigator– Interviewing potential witnesses– Gathering copies of deeds, titles, registrations– Making copies of electronically stored documents,

emails, etc. if legally accessible

What Is Informal Discovery?6.2

11

• Many states have mandatory self-disclosure rules requiring the parties to automatically provide certain documents to each other within a limited amount of time (usually 30-45 days) after the complaint for divorce is served.

• Mandatory disclosure usually includes documents such as the following:

– Federal and state tax returns for 3 years– Bank statements for 3 years– 4 most recent pay stubs– Documentation of cost and nature of available health insurance

coverage– Statements for investment, retirement and similar accounts for

the past 3 years– Copies of loan or mortgage applications for the past 3 years– Copies of any financial statements prepared within the last three

years

What Is Mandatory Self-disclosure?6.2

12


6.3 Identify the five formal discovery methods.

• Formal discovery is discovery that involves the use of five discovery methods that are subject to procedural and court rules.

• The five basic formal discovery methods are: – Interrogatories– Depositions – Requests for admissions– Requests for production of documents or things or

for entry upon land– Requests for physical or mental examinations

What Is Formal Discovery?6.3

14


6.4Describe the strengths and weaknesses of the various formal discovery methods.

• Interrogatories: a method of discovery in which one party submits a series of written questions to an opposing party to be responded to in writing within a certain period of time under pain and penalty of perjury

• Strengths:– Cost effective– Generate further discovery requests– Can identify potential witnesses, experts, physicians etc.– Respondent has a duty to locate information necessary for

response and to supplement

• Weaknesses:– Can only be used with parties– Reviewed by respondent’s attorney so they reveal as little as

possible to the requesting party– Responses are written so do not reveal respondent’s

potential weaknesses as a witness

What Are Interrogatories And What Are Their Primary Strengths And Weaknesses?6.4

16

• Deposition: a method of pretrial discovery in which one party questions the other party or a third person under oath; oral or written responses to questions are reduced to writing for possible later use in a court proceeding

• Strengths:– Can be used with parties and nonparty witnesses– Necessary information can be obtained more quickly– Performance of the deponent under oath can be

assessed– Follow-up and clarifying questions can be asked if

answers are incomplete, evasive, or open a new topic

• Weaknesses:– Expensive– May reveal the deposing party’s theory of the case– May reveal the deposing party’s defenses

What Are Depositions And What Are Their Primary Strengths And Weaknesses?6.4

17

• Request for admission: a discovery method in which a party makes written requests to an opposing party calling for an admission or denial of specific facts at issue or verification or denial of the genuineness of documents relevant to the case

• Strengths:– Cost-effective– Narrow the issues to be addressed at trial– Clarify disputed issues and confirm suspicions– Reduce the facts (or validity of signatures or

documents) needing to be proved at trial

• Weaknesses:– May reveal the requester’s theory of the case and

defenses

What Are Requests For Admission And What Are Their Primary Strengths And Weaknesses?6.4

18

• Requests for production or entry upon land: a method of pretrial discovery in which a party makes a written request that the other party, or a third person, produce specified documents or other tangible things for inspection and/or copying

• Strengths:– Can be used with both parties and nonparty witnesses– Allow a party to obtain critical information from entities

such as employers and the IRS– Yield information that leads to further productive

discovery

• Weaknesses:– Can be expensive depending on the nature and extent

of the production

What Are Requests For Production Of Documents Or Things Or Entry Upon Land And What Are Their Strengths And Weaknesses?

6.4

19

• Requests for physical or mental examination: a method of discovery in which one party requests that the court order the other party (or in limited instances, a third party) to submit to a physical or mental examination

• Strengths:– May lead to discovery of otherwise privileged

information

• Weaknesses:– Can usually only be served on parties– Highly intrusive and may exacerbate conflict– Usually must be sought by motion and good cause

must be shown

What Are Requests For Physical Or Mental Examination And What Are Their Strengths

And Weaknesses?6.4

20


6.5Explain what e-discovery is and how the Internet can serve as an information gathering tool.

• Electronic discovery: discovery of documents in electronic form; refers to any information created, stored or utilized with computerized technology of any sort

• The focus of e-discovery is on finding information stored in computers. The information can be sought from parties, employers, investment firms, friends, relatives, and others.

• It may be used to discover business records, personal records, cell phone records, etc.

• Rules governing electronic discovery are evolving at both the federal and state levels and in some states e-discovery is governed by existing civil rules.

What Is Electronic Discovery?6.5

22

• The Internet offers a rich variety of means to search for information about people and their interests and activities:

• Social networks like Facebook and Myspace

• Blogs and forums hosted by Google, Yahoo, and websites of various support groups

• Registries, records and directories (some available for free and some at nominal cost)

• Search engines such as Google, Yahoo, and Bing

• See Paralegal Application 6.10 on page 103 of the text: The Internet as an Informal Discovery Tool.

How Does The Internet Serve As An Information Gathering Tool?6.5

23


6.6Identify the kinds of objections that can be made to discovery requests.

• Parties generally have a duty to respond to all discovery requests for which there is no legally accepted objection. Permissible objections are usually governed by procedural rules and common practice.

• The most common objections are:– The request is unduly burdensome– The request seeks information or material that is not

relevant to the issues in the case– The document, item, or information sought is not in

the party’s possession or control

What Kinds Of Objections Can Be Made To Discovery Requests?6.6

25

• The document, thing, or information requested is protected by a privilege recognized in the jurisdiction such as attorney work product, doctor-patient, etc.

• The information being sought is cumulative

• The form of the question is improper

• The request is being made solely for the purpose of harassment

• Compelling a response would violate the respondent’s Fifth Amendment right against self-incrimination

What kinds of objections can be made to discovery requests? (cont.)6.6

26


6.7Discuss the sanctions that can be imposed for failing to comply with discovery requests, rules, and orders.

• They may convene discovery conferences to resolve disputes and order a discovery schedule

• They may issue protective orders when discovery is being conducted in bad faith, is excessive, or seeks privileged information

• In response to a motion, they may issue court orders compelling compliance with discovery

• If a party fails to respond to an order to compel, a court can hold him or her in contempt, award attorneys’ fees to the other party, not permit the admission of certain evidence at trial, or in the extreme, stay or dismiss the case if the party in contempt is the moving party

What Kinds Of Actions Do Courts Take With Respect To Discovery Requests?6.7

28


6.8Explain how to locate and complete financial statements.

• A financial statement/affidavit is a party’s statement of his or her assets and liabilities signed under pain and penalty of perjury. In some states it must also be signed by the party’s attorney.

• Financial statements are basically inventories of each party’s assets and liabilities. They are designed to provide the parties with the information they need to make informed decisions. They also give the courts a frame of reference for making decisions with respect to matters of support and property division.

• Financial affidavits can now be located online in virtually all states and are also available in family courts. In many states, a financial statement is given to the defendant along with the summons and complaint for divorce.

• See Exhibit 6.4 on pages 197 and 198 of the text for an example of a financial affidavit (State of Connecticut).

What Are Financial Statements And Where Can They Be Found?6.8

30

• Financial statements are very important documents and must be completed carefully and accurately. Often several successive versions may need to be prepared if the case does not conclude quickly. Inconsistencies must be able to be explained.

• Depending on the financial, organizational, literacy, and record keeping skills of the client as well as the complexity of the marital estate, the client may complete the statement for review or may be assisted by members of the family law team and sometimes also actuaries (to value pensions), and accountants and experts to value businesses and other such assets.

• See Paralegal Application 6.11 on page 199 of the text for Pointers on Completion of Financial Affidavits.

How are financial statements completed and by whom? 6.8

31


6.9Identify ways of identifying and uncovering hidden assets.

• They transfer assets to family, friends, or paramours

• They set up custodial accounts for their children

• They postpone receipt of bonuses and commissions etc. until after the divorce

• They have a business and make payments to friends and relatives for work that was not actually performed

• They keep cash, precious metals, and other valuables in safe deposit boxes

• They make substantial and unexplained withdrawals from various accounts for unknown or unexplained purposes

• They accumulate substantial vacation and sick time during the marriage for which they will later be paid

• They make sham loans to family and friends

• They receive unacknowledged perks at work such as parking, travel, food, and housing allowances

• They hold unregistered bonds or valuable unexercised stock options

What are some of the ways in which parties “hide” or use marital resources for their own

advantage?6.9

33

• Some of the best resources for detecting hidden assets are:

– Tax returns– Bank statements– Credit card statements– Financial statements– Public records– Mortgage applications

• The family law team looks especially for inconsistencies among the above and sometimes a “forensic accountant” may be retained to analyze and present evidence at hearings or trial.

What are some of the best resources for detecting hidden assets?6.9

34


6.10


• The client and the family law team work together during the discovery process with the paralegal’s and the client’s extent of involvement depending largely on their skill levels. All of the tasks the paralegal performs are completed under the supervision of the attorney and both the client and the family law team are constrained by law and rules of ethics.

• The major tasks performed by the paralegal include among others:

– Drafting formal discovery requests– Assisting the client and the attorney with drafting responses to

discovery requests– Participating in informal discovery efforts to establish values of

selected assets– Assisting the client in preparing financial statements – Conducting Internet searches for information about both the

client and the opposing party

What Are The Roles Of The Client And The Family Law Team In The Discovery Process?6.10

36

12


Cont.

Chapter Summary

6.1

6.2

6.3

Describe discovery – its nature, purpose, and scope in the domestic relations context.

List examples of informal discovery in family law cases.

Identify the five formal discovery methods.

12


Cont.

Chapter Summary

6.4

6.5

6.6

Describe the strengths and weaknesses of the various formal discovery methods.

Explain what e-discovery is and how the Internet can serve as an information gathering tool.

Identify the kinds of objections that can be made to discovery requests.

12


Cont.

Chapter Summary

6.7

6.8

6.9

Discuss the sanctions that can be imposed for failing to comply with discovery requests, rules, and orders.

Explain how to locate and complete financial statements.

Identify ways of identifying and uncovering hidden assets.

12


Chapter Summary

6.10


Discovery and financial statements

Documents

discovery requests

scope of discovery

purpose of discovery

discovery process

discovery strategy

costly discovery

basic formal discovery

use offive discovery