More than three years after entry of judgment, Maria Leslie filed an action under Family Code section 1101,
We conclude section 1101 does not authorize Leslie's action, and thus we are not required to address the alternative ruling. Because the prospective referral fee was not concealed, but rather the parties litigated the issue and the judgment fully adjudicated the asset, Leslie's recourse was an action to set aside the judgment, or a portion thereof, within the one-year limitations period specified in the relevant portion of section 2122, subdivision (f). Because her action was untimely, the court lacked jurisdiction over the matter. We affirm the order.
Leslie and Georgiou married in 1985 and separated in 2003. Georgiou filed for dissolution that year, and a bifurcated judgment terminated the marital status in 2005.
Georgiou is an attorney, and in 2000 he entered into an "of counsel" relationship with Milberg Weiss Bershad Hynes & Lerach LLP (Milberg Weiss)
In 2002 Milberg Weiss entered into a contingency fee agreement with the Regents of the University of California (the Regents), which was ultimately designated the lead plaintiff in federal class action securities litigation against Enron. On a sliding scale, the agreement authorized attorney fees of between 8 and 10 percent of the recovery.
In February 2007 Leslie and Georgiou entered into an MSA. Before signing it, Leslie knew of Georgiou's referral fee agreement with Milberg Weiss, that the firm had thus far recovered approximately $7.2 billion in settlement funds, the largest recovery to date in a class action, and the firm would be submitting a request for attorney fees in federal district court under its fee agreement with the Regents. It is undisputed that Georgiou did not give Leslie a copy of the fee agreement.
Leslie deposed Darren J. Robbins, a Milberg Weiss partner designated most knowledgeable about Georgiou's relationship with the firm. Her attorney questioned Robbins on whether the firm had a fee agreement with the Regents, but he did not ask Robbins what percentage of fees the Regents had agreed to pay the firm, nor did he ask for a copy of the agreement. In any event, Robbins testified the federal district court must approve a fee award based on a variety of factors, and it is not bound by a fee agreement.
Robbins also testified Georgiou was entitled to a referral fee from Milberg Weiss in the Enron litigation, but there was a dispute as to the amount of the fee. Robbins said, "I would not imagine any scenario under which [Georgiou] would receive less than three percent." Robbins also said the firm hoped to obtain attorney fees substantially exceeding the largest securities class action fee award to date of $330 million, as that award was based on a much smaller
In a settlement conference brief, Leslie gleaned that Georgiou's referral fee may be between $9 and $33 million, presumably based on a potential fee award to Milberg Weiss of $330 million. She acknowledged, however, that the firm intended to seek "far more than $330 million," and that Georgiou intended to "vigorously argue" he was entitled to a full 10 percent referral fee.
The MSA divided the prospective referral fee unequally. Leslie agreed to accept 10 percent of the fee, in exchange for approximately $7 million in other assets and debt relief. She received the family home, even though it was Georgiou's separate property, eight townhomes that produced net monthly income, a Roth IRA and retirement accounts. He received 90 percent of his referral fee, life insurance policies, loan receivables, business interests, and substantial credit card and other debt. According to Georgiou, Leslie "was taking everything that was certain."
The MSA was incorporated in a judgment of dissolution entered on December 12, 2007. About a month later, Milberg Weiss submitted its fee application to the federal district court in the Enron case, requesting 9.52 percent of the ultimate recovery of approximately $7.2 billion, pursuant to the terms of its fee agreement with the Regents. In September 2008 the federal district court issued a lengthy order granting the request as reasonable and awarding Milberg Weiss $688 million in fees.
Milberg Weiss then negotiated a 9 percent referral fee with Georgiou. In September 2008 Georgiou paid Leslie $4 million for her 10 percent share of the fee, which caused her to realize his fee exceeded the top range of $33 million she anticipated when she entered into the MSA. In November 2009 she learned she was entitled to an additional $1.56 million.
Leslie retained a new attorney, and in November 2009 she filed a motion under section 2122, subdivision (d), to set aside the judgment of dissolution based on her mental incapacity. A motion under this provision must be filed within two years after the date of entry of judgment. (Ibid.) She argued her former attorney insisted that she enter into the MSA so he could get paid, and implied she was under duress because she had not been taking psychotropic medications as prescribed by her physicians. In September 2010 after retaining yet another attorney, Leslie dismissed the motion.
Georgiou moved for summary adjudication, arguing her action was untimely because she did not file it within three years from the date she had "actual knowledge that the transaction or event for which the remedy is being sought occurred." (§ 1101, subd. (d)(1).) Leslie argued her action did not accrue until September 2008 when she learned the amount of Georgiou's referral fee and realized he had understated his potential fee in breach of his fiduciary duty.
The court determined, sua sponte, that relief for breach of fiduciary duty under section 1101 "is not legally available in a post-marital dissolution judgment action." The court interpreted section 1101 to authorize an action in only three instances: (1) during an intact marriage; (2) in conjunction with a dissolution proceeding; or (3) after the death of a spouse.
The court also found that section 2122, subdivision (e), under which a judgment may be set aside for mistake, provided Leslie's sole recourse, but such an action was not viable because the statute's one-year limitations period was long expired. Alternatively, the court determined that even if section 1101 applied, her action was barred by the statute's three-year limitations period since she knew when she signed the MSA that she did not have a copy of Milberg Weiss's fee agreement with the Regents.
Leslie contends the court erred by granting summary adjudication. She asserts the court misinterpreted section 1101 to authorize an independent action for breach of fiduciary duty only in an intact marriage.
The fiduciary duties expressly extend throughout dissolution proceedings. (§§ 2100, subd. (c), 2102-2107.) "From the date of separation to the date of the distribution of the community or quasi-community asset or liability in question, each party is subject to the standards provided in Section 721, as to all activities that affect the assets and liabilities of the other party ...." (§ 2102, subd. (a).) "[A] full and accurate disclosure of all [the parties'] assets and liabilities ... must be made in the early stages of a proceeding for dissolution of marriage ...." (§ 2100, subd. (c).) "It reasonably follows that a spouse who is in a superior position to obtain records or information from which an asset can be valued and can reasonably do so must acquire and disclose such information to the other spouse." (In re Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334, 1348 [113 Cal.Rptr.2d 849].)
Further, "[i]n 1993, a chapter entitled Relief From Judgment was added to the Family Code. (§§ 2120-2129, added by Stats. 1993, ch. 219, § 108, pp. 1615-1617.) ... In adopting this chapter, the Legislature found `[t]he law governing the circumstances under which a judgment can be set aside, after the time for relief under Section 473 of the Code of Civil Procedure has passed, has been the subject of considerable confusion which has led to increased litigation and unpredictable and inconsistent decisions at the trial and appellate levels.' (§ 2120, subd. (d).)" (Rubenstein v. Rubenstein, supra, 81 Cal.App.4th at p. 1143.)
Section 2120, subdivision (a), acknowledges that California's strong public policy of ensuring the fair division of community property can only be implemented with full disclosure of community property. Section 2120 also provides: "(b) It occasionally happens that the division of property ..., whether made as a result of agreement or trial, is inequitable when made due to the nondisclosure or other misconduct of one of the parties. [¶] (c) The public policy of assuring finality of judgments must be balanced against the public interest in ensuring proper division of marital property, ... and in
Under section 2122, there are six grounds to set aside a judgment, or portion thereof, including actual fraud, perjury, duress, mental incapacity, mistake, and the failure to fully disclose the value of assets under section 2100 et seq. (§ 2122, subds. (a)-(f).) "Upon vacating the judgment, in whole or in part, a trial court is empowered to make an unequal distribution of the concealed assets, in the interests of justice. (§ 2126.)" (Rubenstein v. Rubenstein, supra, 81 Cal.App.4th at p. 1146.)
With the applicable section 2122 limitations period expired, Leslie relied on section 1101. Subdivision (a) of section 1101 provides: "A spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant 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."
Section 1101, subdivision (d)(1), provides that a claim for breach of fiduciary duty "shall be commenced within three years of the date a petitioning spouse had actual knowledge that the transaction or event for which the remedy is being sought occurred." Section 1101, subdivision (d)(2), provides that "[a]n action may be commenced under this section upon the death of a spouse or in conjunction with an action for legal separation, dissolution of marriage, or nullity without regard to the time limitations set forth in paragraph (1)."
Leslie also cites In re Marriage of Rossi (2001) 90 Cal.App.4th 34 [108 Cal.Rptr.2d 270] (Rossi), as authority for the applicability of section 1101 to her action. In Rossi, judgment on an MSA was entered in April 1997, and in May 1999 the former husband learned for the first time that his former wife had received lottery winnings during the marriage. In July 1999 he filed an action against her under section 1101. The family court determined the wife committed fraud within the meaning of Civil Code section 3294 by concealing the winnings, and it penalized her by awarding the husband 100 percent of the winnings under section 1101, subdivision (h). (Rossi, supra, at p. 39.) The appellate court affirmed the ruling, concluding, "This case presents precisely the circumstance that ... section 1101, subdivision (h) is intended to address." (Id. at p. 42.)
Relying on Rossi, Hogoboom indicates section 1101 may provide a postjudgment remedy for breach of fiduciary duty in proper circumstances. Chapter 16, which is entitled "Challenging the Judgment: Motions, Appeals & Writs," states that while section 2120 et seq. preempt a tort remedy arising out of a dissolution proceeding, "remedies otherwise authorized by law, are not preempted by [section] 2120 et seq. [¶] For instance, subject to statutory time limitations, a spouse alleging intentional nondisclosure or concealment of marital property in violation of statutory duties of disclosure may pursue alternative remedies of a set-aside based on concealment and breach of fiduciary duty or an award of 50% or 100% of the concealed property ..." pursuant to section 1101, subdivisions (g) and (h). (Hogoboom, supra, ¶ 16:103.2, pp. 16-30 to 16-31 (rev. #1, 2012), some italics added, citing Rossi, supra, 90 Cal.App.4th at pp. 38-39.)
Moreover, the facts of Rossi are readily distinguishable from those here. In Rossi, the lottery winnings were concealed and not addressed in the judgment of dissolution. Thus, the winnings could be divided in a postjudgment action under section 1101, pursuant to its harsh 100 percent penalty provision (§ 1101, subd. (h)), without affecting the judgment's division of other community property. In other words, the section 1101 action did not violate the strong public policy of ensuring the finality of judgments within the one-year limitations period of section 2122.
Here, Georgiou not only disclosed his prospective referral fee in the Enron litigation, it was a major factor during negotiations on the MSA and the subject of discovery by Leslie's attorneys. The judgment fully adjudicated the issue, with the MSA awarding Leslie 10 percent of the fee and Georgiou 90 percent of the fee and dividing the remainder of the community assets and debts to reflect the disparity.
Section 2120 et seq. take precedence, however, "when either party is seeking to `undo' a property division judgment that adjudicated particular assets and/or liabilities. By contrast, those statutes have no effect on proceedings to determine community interests in assets and liabilities that were unadjudicated or omitted from the judgment ...." (Hogoboom, supra, ¶ 16:160, p. 16-47 (rev. #1, 2012); see In re Marriage of Melton (1994) 28 Cal.App.4th 931, 939 [33 Cal.Rptr.2d 761] ["property left unadjudicated by a divorce decree is subject to future litigation, the parties being tenants in common in the meantime"]; see also § 2556 ["the court has continuing jurisdiction to award community estate assets or community estate liabilities to the parties that have not been previously adjudicated by a judgment in the proceeding"].) "The mere mention of an asset in the judgment is not controlling. [Citation.] `[T]he crucial question is whether the benefits were actually litigated and divided in the previous proceeding.'" (In re Marriage of Thorne & Raccina (2012) 203 Cal.App.4th 492, 501 [136 Cal.Rptr.3d 887].)
The court correctly found Leslie's exclusive remedy was a set-aside action under section 2122. Because she did not file her action within the one-year limitations period of subdivision (f) of section 2122, the family court lacked jurisdiction over the matter and summary adjudication was proper. (In re Marriage of Thorne & Raccina, supra, 203 Cal.App.4th at p. 500.)
The order is affirmed. Georgiou is entitled to costs on appeal.
Benke, J., and O'Rourke, J., concurred.