When couples divorce , generally the last thing on their mind is to be fair to the other spouse. However, that is exactly what the law in California requires of both spouses. The more formal term for this concept is called a f iduciary obligation. More specifically , spouses are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This concept covers all aspects and dealings between spouses including any transaction regarding any item of community property whether it be car insurance, medical insurance, bank accounts, running a businesses, or handling investments. Every aspect that deals with having an impact on the other spouse is subject to this obligation.
In fact, any alleged violation of this fiduciary obligation can result in a cause of action against the other spouse . California Family Code section 1101 states that a spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the other spouse’s present undivided one-half interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.
Should there be a violation of the fiduciary obligation , very harsh repercussions may follow. Remedies for breach of the fiduciary duty by one spouse can include an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs. The value of the asset shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court. Thus, not only could a spouse get the entire asset or 100% of its value but the violating spouse would have to pay the attorney fees of the other spouse!
A recent article by Patricia Hurtado on Bloomberg.com shows how this concept of a fiduciary duty and fair dealing may come into play to help a litigant in a case in New York. In that case, an attorney, Steven Simkin, and his ex-spouse, Laura Blank, had an uncontested divorce. During the divorce proceeding, Mr. Simkin bought out Ms. Blank one-half share of an investment for $2.7 million. The problem was that the investment account was with Bernard Madoff, who was charged in December by federal prosecutors with securities fraud after allegedly confessing to investigators that he directed a $50 billion Ponzi scheme. Due to the fact that this asset is of no value, Mr. Simkin now wants his money back. Suzanne Bracker, a New York City divorce lawyer, said Simkin may have a chance to re-do the terms of his divorce settlement. It will depend in large part on this concept of good faith and fair dealing. If Mr. Simkin can show that he did not know about this scheme then he should stand a good chance to get his money back.
Of course, California law does not apply to a New York case but the concept of fiduciary duty and fair dealing between spouses that the New York case is dealing seems to be similar to the rights and obligations California divorce litigants owe to each other. This concept may be the last thing on litigants minds when they consider a divorce, however, wise counsel should assure that these obligations be given serious attention. If you or someone you know has questions regarding what your fiduciary duties are, consult with a family law attorney who will point out your obligations and advise you how you can avoid being in breach. Or, if you believe that your spouse may not be in compliance with his or her duties, consult a family law attorney who can triage your case and point out the remedies available to you.