When dealing with high-net-worth and/or high-stakes clients, the lawyer should explore and discuss the roadmap for – and benefits of – settling the divorce out of court.
For many high-stakes clients, discretion and privacy is of the utmost importance. The breadwinning spouse is often concerned that their financial disclosure, net worth, and details regarding their income will become available to the public through the court file, including being visible to business competitors. Moreover, the parties are often concerned about their private affairs becoming known to the public, potentially jeopardizing their social status, and in the case of a high-profile client, becoming local and/or national news. Therefore, when dealing with high-net-worth and/or high-stakes clients, the lawyer should explore and discuss the roadmap for – and benefits of – a pre-suit settlement.
Assessing the Issues
During their initial consultation with high-net-worth/high-stakes clients, a lawyer should assess whether the issues require a case to be filed immediately. For example, if there are urgent child-related issues that require a client to come before the court, then the case likely cannot be negotiated and settled pre-suit. Perhaps the client is in need of immediate injunctive relief for protection against a spouse’s intentional secreting or divesting of marital funds, again requiring a case to be filed immediately. However, in many instances, all issues of the case – including parenting and economic – can be negotiated and settled pre-suit in accordance with the following practice procedure.
Contacting the Other Side
After receiving a commitment from the client regarding proceeding on a pre-suit basis, the lawyer should send an introductory letter to the opposing party or the opposing party’s attorney (if one has been retained). This letter should be cordial in nature, advising that the client has elected to proceed on a pre-suit basis in an effort to resolve the dissolution matter amicably and collaboratively without the need for any litigation, if possible. The letter should also outline how the case would be settled “behind the scenes,” including suggesting the methodology of exchanging discovery and a timeline for the case to be ready for a meaningful mediation/settlement conference. Finally, depending on whether he/she is representing the income-earning spouse or the impecunious spouse, the lawyer should consider requesting a cut-off date for the determination of marital assets and liabilities. In Florida, for example, the cut-off date for determining assets and liabilities to be identified or classified as marital or non-marital assets and liabilities is the earliest of the date the parties enter into a valid separation agreement, such other date as may be expressly established by such agreement, or the date of the filing of a petition for dissolution of marriage. When representing the income-earning spouse on a pre-suit basis, it is especially important to reach a written agreement at the outset concerning the cut-off date; this will avoid a situation where the parties are continuing to accumulate marital assets or liabilities when they could have otherwise filed the petition.
Methodology for Exchanging Financial Discovery
Once both parties have committed to the pre-suit process, the lawyers should devise a plan and methodology for exchanging pertinent financial information and documents. This may involve each party retaining their own forensic accountants, or in some cases, hiring a neutral forensic accountant. Having professionals from both sides meet at the outset can often prove helpful with identifying the economic and valuation issues, compiling a list of documents to be exchanged, and establishing a deadline by which those documents will be exchanged. In cases where both forensic experts are familiar and trusted, they may be authorized to communicate directly with each other to streamline the process and reduce the expense to the clients. Moreover, an early professionals meeting can also prove useful with putting in place an agreement regarding the payment of temporary support and/or maintenance of the financial status quo – an important factor in keeping the parties civil and out of court. Finally, the lawyer should consider having the parties and professionals sign a confidentiality agreement regarding the maintenance and use of the information obtained through discovery in the case.
Resolving Contested Parenting Issues
Even if the parties cannot agree on a parenting plan/timesharing schedule that is in the best interests of their children, in most instances the case can still proceed pre-suit. In fact, when dealing with sensitive child-related issues – particularly those that concern a party’s moral and psychological wellness – most high-net-worth/high-stakes clients prefer to proceed on a pre-suit basis in order to avoid airing their “dirty laundry” to the world. When dealing with sensitive parenting issues, the lawyers should agree to a forensic investigation by a well-respected psychologist in the community. Tailored to the issues of the case, the investigation can be conducted simultaneously with the ongoing financial discovery process. The psychologist could recommend a timesharing schedule as well as perform any necessary evaluations of the parties. In stipulating to these types of pre-suit investigations, the lawyer should consider preserving by agreement the admissibility of the final report of the forensic psychologist. This way, should the pre-suit process breakdown, the work of the forensic psychologist will be admissible before the court – avoiding the time and expense of starting the evaluation process over.
It’s Settled – Now What?
Once the parties have executed the global settlement document pre-suit, the dissolution of marriage case is ready to be filed with the court, requesting therein that the court simply ratify the settlement agreement and dissolve the parties’ marriage.
As further protection to the client’s privacy concerns, a lawyer should consider stipulating with the other side to filing the case in a different venue within the state. Many states have certain densely populated venues in which reporters and paparazzi are monitoring the recently filed cases. Although traveling to a different venue within the state creates an added expense, it may offer an extra layer of privacy protection for the client.
Finally, different states have requirements regarding what documents must be contained in the court file; this could include the final settlement agreement as well as the parties’ financial affidavits. Considering agreements and financial affidavits contain extremely private information, a lawyer should explore whether there is case law in their state that permits keeping these documents out of the court file. Otherwise, the lawyer should file the appropriate motion with the court to seal the court file, preventing any unauthorized person from viewing and copying such sensitive and private information.
The Benefits of Settling Pre-Suit
Contested litigation places an emotional and financial strain on the entire family, including the children. Proceeding on a pre-suit basis offers parties the opportunity to resolve their differences amicably while maintaining the privacy of their information and personal affairs. Although resolving a high-net-worth case on a pre-suit basis may not generate the same legal fees as bitterly-contested litigation, it provides the lawyer with an opportunity to serve the true desires and goals of their client, thereby converting a well-connected client into a referral source for years to come.
David L. Hirschberg is a partner with the law firm of Gladstone & Weissman, P.A., in Boca Raton, FL. He is Florida Bar Board Certified in Marital and Family Law, and is AV Preeminent Rated by Martindale-Hubbell. www.gwpa.com