"Please Note: The Family Division Rule
1.25-A rule DID NOT take effect on April 1, 2011, as the court at
the last minute postponed implementation. The date of
implementation has not been decided yet.
(Originally published in the New Hampshire Bar Journal, March 2011)"
Effective April 1, 2011, new Family Division Rule 1.25-A will bring significant changes to the practice of family law in NH. Rule 1.25-A requires parties to produce financial information shortly after the commencement of a family court proceeding, without waiting for discovery requests to be propounded. The text of the new rule is as follows:
Rule 1.25-A Mandatory Initial Self Disclosure:
This Mandatory Initial Self Disclosure Rule applies to all new actions in the family division for divorce, legal separation, annulment, or civil union dissolution. For parenting or child support petitions, or petitions to enforce or change court orders in parenting, divorce, legal separation, or civil union dissolution cases in the family division, sections B (1) (g) through (l) shall not apply.
This rule applies to parties engaged in mediation or other alternative dispute resolution processes once the petition invoking court involvement has been served/delivered. Parties involved in alternative dispute resolution before filing are not bound by the rule until they initiate court action.
B. INITIAL DISCLOSURES.
1. Except as otherwise agreed by the parties or ordered by the Court, each party shall deliver the following documents to the other no later than the earlier of (i) forty-five (45) days from the date of service/delivery of the petition or (ii) ten (10) days prior to the temporary hearing or initial hearing on the petition, not including the First Appearance required by rule 2.11:
(a) A current financial affidavit in the format required by family division rule 2.16, including the monthly expense form.
(b) The past three (3) years' personal and business federal and state income tax returns and partnership and corporate returns for any non-public entity in which either party has an interest, together with all tax return schedules, including but not limited to W-2s, 1099s, 1098s, K-1s, Schedule C, Schedule E and any other schedules filed with the IRS.
(c) The four (4) most recent pay stubs (or equivalent documentation) from each current employer, and the year-end pay stub (or equivalent documentation) for the calendar year that concluded prior to the filing of the action.
(d) For business owners or self-employed parties, all monthly, quarterly and year-to-date financial statements to include profit and loss, balance sheet and income statements for the year in which the action was filed; and all year- end financial statements for the calendar year that concluded prior to the filing of the action.
(e) Documentation confirming the cost and status of enrollment of employer provided medical and dental insurance coverage for:
i. The party,
ii. The party's spouse, and
iii. The party's dependent child(ren).
(f) For the twelve (12) months prior to the filing of the action, any credit, loan and/or mortgage applications, or other sworn statement of assets and/or liabilities, prepared by or on behalf of either party.
(g) For the twelve (12) months prior to the filing of the action, documentation related to employee benefits such as but not limited to stock options, retirement, pension, travel, housing, use of company car, mileage reimbursement, profit sharing, bonuses, commissions, membership dues, or any other payments to or on behalf of either party.
(h) For the twelve (12) months prior to the filing of the action, statements for all bank accounts held in the name of either party individually or jointly, or any business owned by either party, or in the name of another person for the benefit of the either party, or held by either party for the benefit of the parties' minor child(ren).
(i) For the twelve (12) months prior to the filing of the action, statements for all financial assets, including but not limited to all investment accounts, retirement accounts, securities, stocks, bonds, notes or obligations, certificates of deposit owned or held by either party or held by either party for the benefit of the parties' minor child(ren), 401K statements, individual retirement account (IRA) statements, and pension-plan statements.
(j) For the twelve (12) months prior to the filing of the action, any and all life insurance declaration pages, beneficiary designation forms and the most recent statements of cash, surrender and loan value.
(k) For the six (6) months prior to the filing of the action, statements for all credit cards held by either party, whether individually or jointly.
(l) Any written prenuptial or written postnuptial agreements signed by the parties.
2. The parties may redact all but the last four (4) digits of any account numbers and social security numbers that appear on any statements or documents.
3. The parties shall promptly supplement all disclosures as material changes occur while the action is pending.
4. A party may seek a protective order for information disclosed in response to these mandatory disclosures. Protective orders will ordinarily be available upon request. In the event of a dispute concerning the need for a protective order, the party seeking the order shall file a motion requesting that the Court conduct an in camera review of the materials in dispute. The Court will review the materials and determine if a protective order is necessary. From the date of the filing of the motion until such ruling, the materials shall be produced, but shall be disclosed by the parties only to their attorneys, staff, experts/consultants, in court, and as otherwise necessary in connection with the pending action. Materials submitted for in camera review shall be sealed in the Court's file until the Court determines the necessity of a protective order. If a protective order is issued, the Court shall seal the exhibits submitted in connection with the request for the protective order that remain in the Court's file.
C. UNAVAILABILITY OF DOCUMENTS.
1. In the event that either party does not have any or all of the documents required under this rule or has not been able to obtain them, that party shall state in writing, under oath, the specific documents which are not available, the reasons the documents are not available, and the efforts made by the party to obtain the documents. A statement of unavailability under this provision does not limit the filing party's duty to supplement disclosures and provide the other party with documentation as it becomes available.
2. When a statement of unavailability is filed or when it otherwise becomes apparent that documents required by this rule are unavailable, the party seeking the documents may prepare and submit to the other party appropriate authorizations or releases enabling the seeking party to retrieve the documents from their source. Upon receipt of such a release or authorization the party to whom documents were unavailable shall execute and immediately return to the seeking party the release or authorization. The seeking party may use the authorization or release to retrieve the unavailable documents covered by this rule, initially at their own expense, but that expense may be reallocated upon motion or at the final hearing.
D. FAILURE TO PROVIDE INITIAL DISCLOSURES.
1. Unless and until a party provides Initial Disclosures as required by section B and C above, the Court may impose sanctions, including, but not limited to prohibiting that party from: (a) introducing into evidence any document which was required under section B or C of this rule; (b) testifying or making an offer of proof regarding information or subject matter which is likely to be contained in or referred to in section documents required by section B and C; (c) filing requests for discovery as allowed under the family division rules; or (d) filing any discovery motions.
2. If a party's failure to provide Initial Disclosures prejudices access of a compliant party to requested substantive relief, such as the calculation and receipt of child support, the Court may, in addition to other sanctions, address the relief requested by the compliant party on the basis of reasonable estimates and assumptions, at least until such time as the documents are produced.
E. ADDITIONAL DISCOVERY.
If a party is in compliance with section B and C of this rule, that party may request further information as allowed under family division rules. This rule is not intended to limit the scope of discovery as provided under family division rule 1.25.
F. COURT ORDERED COMPLIANCE
Notwithstanding any agreement by the parties for limited applicability, the Court may, at any time, order full compliance with this rule.
This rule was adopted as part of an ongoing effort to increase efficiency in the process of domestic relations cases. Compliance with this rule should assist parties and counsel in avoiding many costly and time consuming discovery disputes. By codifying the expectations of which types of information must be produced, the rule creates a uniform approach to financial discovery. This rule provides for the exchange of basic discovery early on in the case. This starts the parties off on a positive note where they are exchange and sharing information rather than litigating contested issues. In domestic relations cases, the parties do not always have equal access to information about financial matters. Requiring mandatory disclosure may assist in leveling the playing field, allowing both parties access to information, which in turn should enable them to prepare for settlement discussions.
Understanding the practical implications of the new Mandatory Initial Self Disclosure Rule ("Rule") is extremely important for lawyers and clients. Because mandatory disclosure provides for the exchange of basic discovery necessary for the resolution of any case, it should be seen as an opportunity to start the divorce or other family law process to which the new rule applies, on a positive note with the focus being cooperation rather than conflict. Parties don't always have equal access or control over financial and other relevant information; mandatory disclosure helps to level the playing field by ensuring the exchange of basic information. It also encourages cooperation between counsel not just for mandatory disclosure but for the exchange of other relevant discovery. The modeling by the attorneys in having their clients timely exchange information under the Rule creates an environment where one is more likely to get other discovery by agreement.
As Family Division Administrative Judge Edwin Kelly states: "The collaborative effort between the court and bar in producing the Mandatory Disclosure Rule will, we hope, result in an equally collaborative effort geared toward implementing the Rule. Members of the bar will be called upon to honor the intention of the Rule which is to reduce the conflict and motion practice related to discovery in family cases. Over the years conflict on these basic issues has consumed the time and resources of the bar, the court and, most importantly, the thousands of families who cases are the subject of dispute in the state's family courts. It goes without saying that none of us can afford this unnecessary use of our limited resources, nor does it serve either the best interest of the families before the court or our system of justice to continue down this adversarial path."
Practice Tools and Tips
Mandatory disclosure streamlines and reduces cost for clients, and can dramatically reduce discovery issues that need to be litigated. In thinking about the practical application of the new Rule, the following may be helpful:
1. Explain the mandatory discovery rules as part of the initial consult, and provide the client with a copy of Rule 1.25-A. Many clients, even if they don't retain you immediately, will start gathering the necessary information for the initiation of their case. You should encourage them to do so. Being prepared will save them time and legal fees.
2. Immediately upon being retained, provide your client with a copy of Rule 1.25-A, even if you did so initially, with a detailed explanation of what they are required to produce and why. Make clear that this is MANDATORY! Explain the possible consequences for failure to comply, which under the Rule can be onerous. Clients are much more likely to comply with the Rule if they are explicitly told what they must produce and the purpose of providing those documents. Clients should also be told they have a duty to inquire. The fact that they don't keep their bank or credit card statements each month does not mean they don't have to produce those documents. They either need to obtain them online or make a request to the bank or other third party. This also holds true for information from employers, life insurance companies, or other third parties to whom the client may have to make inquiry. Some clients will prefer that you inquire, and you should have the client sign a release to obtain the information. Availability of Health insurance benefits in particular can be confusing. Although not specifically required by the rule, it may be helpful to have your client obtain a letter from H.R. explaining the available post-divorce coverage. In some cases, there can be a significant charge by third parties in order for them to provide requested documents. In those circumstances, have your clients alert you about this, to see if there is a way to share the cost between the parties. However, clients may have to incur some costs to obtain mandatory disclosure documents, so let them know this up front.
3. Create a mandatory disclosure compliance checklist allowing clients to easily check off what they have/have not provided and why, when they send you their responsive documents. Give clients a deadline date for them to respond, explaining that you need time to review what they produce, ensure that it is complete, and have time to organize in order to send to opposing counsel. If the other party is pro se, send them a copy of the Rule along with a letter enclosing the same checklist you provided to your client. Ask them to provide their responsive documents to you by a date certain, and explain that your client will provide responsive documents in a timely fashion.
4. When you get the responsive documents from your client, review them carefully to be sure everything has been provided, and in complete form. For example, tax returns without supporting schedules are not sufficient. If anything is missing without explanation, follow through and find out why. Whether it is mandatory initial self-disclosure or other discovery, some clients need more assistance than others, either because they just don't understand what is being asked of them, they don't know how to obtain some of the documents or they are overwhelmed by the emotional stress of the divorce. You will have clients who are resistant to providing documents, or even completing a financial affidavit. Providing your client with guidance as to the Rule and its requirements, and giving them with whatever assistance is necessary, is imperative in getting compliance under the Rule. If you are not going to be timely, let other attorney know and obtain an extension of time to respond. Let the other attorney know you are working with your client to comply with the Rule. Under these circumstances, you may want to send at least partial disclosure if you don't yet have all the information.
5. Consider a joint request or a joint subpoena if neither party is able to obtain documents required by the Rule. The Rule provides for giving releases or other authorization for the exchange of information, but a joint request from counsel may be necessary in some cases, and is certainly the most cost-effective option.
6. Mandatory disclosure can result in the production of lots of paper. Consider the exchange of information on CD, However be sure you properly protect any confidential information provided on CD. Also, don't just keep a copy of the documents you sent in your computer files. Keep an actual and protected copy of the CD as well in your file.
7. Create a mandatory disclosure response form to be signed by your client. This will be attached to the documents produced and outline what is attached, including dates covered by the documents (e.g. Big Bank checking account number xxx-___, statements dated January 1-December 1, 2010). This provides easy identification of what is being produced and what is missing. If documents are missing but are in the process of being obtained, or you are endeavoring to obtain a document but are not sure you will be able to do so, include that in the response. Don't hold up responding because one document is missing. You can always supplement as needed.
8. When providing your response, separate out the documents by section with colored paper or some other way to distinguish the various components of mandatory disclosure, and organize chronologically by date. This is helpful to counsel and the parties and appreciated. Sending a pile of disorganized and unidentified documents undermines purpose of the Rule and the spirit of the NH Bar Association litigation guidelines. (Note that the NH Superior Court rules specifically identify disorganized production as a form of discovery abuse)
9. It can be difficult to get records in some cases, especially where a party is self-employed or pro se. If the records aren't being produced under the Rule, consider a Motion to Compel. If you must file Motion to Compel mandatory disclosure, request attorney's fees and whatever other sanctions are appropriate and permissible under the Rule. However, indicate to counsel that if you receive the documents pursuant to the Rule by a date certain you will withdraw your motion. If opposing counsel is having difficulty with his/her own client in obtaining the mandatory disclosure documents, or a self-employed or pro se party is being non-compliant, a motion makes clear that this is mandatory, and there are consequences, but that your goal is to obtain the documents and that you are giving them a final opportunity to comply.
10. Review your file regularly at crucial points in the case to ensure there is continuing compliance by both parties in terms of updating documents during the legal process when there are significant and material changes, as contemplated by the Rule. Update the disclosure checklist whenever the production is supplemented.
11. Although it is unlikely attorneys will opt totally out of mandatory disclosure, there are cases for example, where you might consider and agree to a more limited disclosure than required by the Rule. If the case is one where there is trust between the parties, or one of limited assets/liabilities, or the parties are both well aware of their financial circumstances, the parties and counsel can agree what actually needs to be produced. For example, there is rarely an opt out with regard to tax returns or retirement statements, but if parties always had joint accounts they may choose not to exchange the full range of bank statements but only the most recent statements. Before opting out in part or in full, ensure the client understands the Rule and the consequences of any opt out with respect to discovery and the impact upon their case. Any agreement to opt out either in part or in full should be in writing between the parties and counsel.
12. If you believe you need a protective order or confidentiality agreement in order to produce certain documents, draft the order or agreement and provide it to the other party for review to determine if you can reach agreement rather than litigate such an issue.
13. Parties can agree to follow the mandatory disclosure rule even without benefit of the court process, in mediation or collaborative law. You may even wish to include this in a mediation or collaborative law process agreement.
Mandatory disclosure builds trust between counsel and parties, by showing that the parties and counsel can work together toward the common goal of information exchange and reciprocity. Contact the other attorney or party if you have questions, if something is missing, or if you don't understand a document that you received. Mandatory disclosure not only helps build relationships early on in the case, but it provides a basis for the parties and/or counsel to begin communicating about a case so they understand what is needed to bring a case to conclusion. Any new Rule can seem onerous; however the Mandatory Initial Self Disclosure Rule should be embraced as a mechanism for simplifying and expediting discovery and therefore moving parties closer to resolution with less cost and less conflict.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.