Time Limitations on Setting Aside Judgment Based on Non-Disclosure of Spouse’s Assets
The California Court of Appeal for the Fourth Appellate District has held that a spouse who knew or should have known of a claim to set aside a judgment for the other spouse’s failure to disclose assets is governed by the time limitations set forth in Family Code section 2122. In Marriage of Georgiou and Leslie (filed on July 31, 2013), the wife’s attorney took the deposition of the husband (an attorney) but never asked for the terms of an attorney’s fee-sharing agreement (in a contingent-fee case involving the Enron securities litigation), or otherwise obtained a copy of that agreement. The parties entered into a marital settlement agreement under which the wife received a 10% interest in the husband’s fee-sharing agreement with the other law firm in the Enron litigation. Thus, the wife was to be paid only 10% of the referral fee to the husband, even though it would ordinarily have been community property to be divided 50/50.
More than one year later, the wife learned that the husband’s fee-sharing agreement provided for him to be paid 9% of the contingent fees earned by the plaintiff’s law firm prosecuting the Enron litigation. Around that time, that plaintiff’s law firm submitted a fee application for which it was awarded $688 million in attorneys’ fees. Thus, the husband’s interest in the attorneys’ fee award amounted to more than $55 million. Under the marital settlement agreement, the wife would receive only 10% of this amount, or approximately $5 million, rather than the $27.5 million she would have received if the referral fee had been confirmed as community property.
The wife filed a motion to set aside the judgment entered on the marital settlement agreement, based on her alleged mental incapacity resulting from pharmaceutical dependency. After another change of counsel, the wife dismissed this motion, and filed a second motion to set aside the judgment, this time based on the husband’s failure to fully disclose the terms and conditions of the referral fee.
The Court of Appeal ruled that the wife’s motion was untimely because it was filed more than three years after the judgment was entered. Under Family Code section 2122, a spouse has between six months and three years in which to file a motion to vacate a judgment based on non-disclosure of assets or other grounds. The actual time period depends on the specific grounds alleged in the motion, but no such motion will be considered timely if filed more than three years after the entry of judgment.
The wife relied on Marriage of Rossi for the proposition that the time limitations set forth in section 2122 should not apply because she was not aware of the basis for the motion to set aside the judgment. The Court of Appeal disagreed because, in Rossi, there had been no disclosure whatsoever of the lottery winnings that presented the basis for setting aside the judgment. Here, the wife knew that her husband had never fully disclosed the terms and conditions of the referral fee, such that the time periods set forth in section 2122 would apply.
The Georgiou case serves to highlight the importance of full and complete discovery between the spouses before the parties proceed to trial or resolve their case through a marital settlement agreement. Where, as in Georgiou, the basis for a challenge to a judgment is incomplete disclosure regarding an asset, the time limitations in section 2122 will often present a complete barrier to getting such a judgment set aside.