Notwithstanding this strong incentive to use the discovery process, parties in domestic relations litigation often con-duct little or no formal discovery. There are multiple reasons for this omission. The parties may not be willing or able to afford the expense; there may be few or

no assets to discover; the parties may be-lieve they are sufficiently aware of their own assets and liabilities not to need dis-covery; or they may voluntarily provide each other the information. Thus, marital settlement agreements often recite that the parties have made full disclosure of

their financial position to one another, have expressly been advised of the right to conduct discovery, and have volun-tarily chosen not to do so.

However, although there may be good reasons to forego formal discovery in many domestic relations cases, doing so can be perilous, as is illustrated by the re-cent decision of In re Marriage of Gold-smith.2

Divorce Without Discovery: A New Landmine in Marital Litigation

By Reuben A. Bernick

A recent case holds that if you don’t conduct formal discovery in your divorce case, you may lose the right to reopen the judgment after it’s entered, even to seek assets that weren’t disclosed by the other side.

Here’s a look at the problem and how you can protect your client.

In most civil litigation, neither party has the right to receive, or the obligation to provide, any information (other than that stated in the pleadings) concerning the merits of the case, unless such information is requested in discovery. The principle is another

version of “don’t ask, don’t tell:” if you don’t ask, your opponent has no duty to tell.1

Reuben A. Bernick (rbernick@mandellipton.com) practices in the areas of commercial litigation and family law and is of counsel to Mandel Lipton Roseborough & Sharma in Chicago.

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1. There are exceptions. See, e.g., Rule 26, F. R. Civ. P. (required disclosure of witnesses and documents in federal cases); Rule 222 of the Rules of the Supreme Court of Illinois (same in state-court litigation seeking damages of less than $50,000).

2. 2011 IL App (1st) 093448, 962 N.E.2d 517.

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Goldsmith: due diligence requires formal discovery

In Goldsmith, the wife filed a post-decree petition under section 2-1401 of the Code of Civil Procedure3 alleging that the husband had concealed assets worth nearly $2 million during the litigation leading to the divorce. These consisted of (1) the proceeds, received after the divorce, of litigation the husband initiated during the marriage; (2) $300,000 in jointly held bank stocks; and (3) approximately $300,000 in refunds re-sulting from the husband’s post-divorce amendment of joint tax returns filed during the marriage. The marital settlement agreement incorporated in the judgment of dissolution included the following provision:

WHEREAS, the parties acknowledge each of them has been fully informed of the estate, assets, income and lia-bilities of the other, and each is conversant with the estate, assets, income and liabilities possessed by the other. Each party represents and warrants they have made a full and complete disclosure of his or her property. In the event a court of competent jurisdiction subsequently determines either party owned or possessed property not disclosed in these proceedings, said property shall be distributed pursu-ant to the facts [sic] delineated in 750 ILCS 5/.503.4

The wife’s section 2-1401 petition sought to enforce this provision and compel distribution of the allegedly concealed assets, or in the alternative, to vacate the judgment due to the failure to disclose. The husband defended the petition on the grounds that (1) on the merits, the wife had no right to any share of the assets in question (i.e., she had no meritorious claim) and (2) because the wife had not conducted any discovery, she could not demonstrate the due diligence required under section 2-1401.5 The trial court granted summary judg-ment for the husband on both grounds.6

On appeal, the appellate court held that the wife had not demonstrated the existence of a meritorious claim concerning any of the three allegedly concealed assets: the proceeds of the litigation (though not disclosed) were the husband’s non-marital property, the bank stocks had been disclosed in the settlement, and the re-funds belonged to the husband and not the wife under the terms of the parties’ marital settlement agreement.7 Accordingly, the wife was not entitled to any relief.

This holding disposed of the case, and had the appel-late court stopped there, the opinion probably would not even have been deemed worthy of publication. But the court did not stop there. It continued as follows:

While we have rejected the petitioner’s contentions that she had a meritorious claim over each of the purportedly undisclosed assets, which is fatal to her petition, we elect to address the petitioner’s claim that she acted with legal due diligence based on her reliance on the representation and warranty in the MSA and the respondent’s unsigned affidavit. We do so to make clear that the petitioner’s con-tention of legal diligence based on reliance, in lieu of for-mal discovery, is without support in Illinois law. When a divorce party elects to forego formal discovery in favor of accepting a representation and warranty of full and com-plete disclosure, the party does so at his or her own peril. We emphasize that this case does not present a question of fraudulent concealment of assets, as the trial court found below.8

As the court acknowledged, its ruling on the due diligence issue is dictum, unnecessary to the disposition of the case. Apparently, the court wished to give notice that relying on a representation of full disclosure in lieu of discovery does not constitute due diligence. But why should such notice need to be given? The answer re-quires an analysis of the case law.

Goldsmith is inconsistent with prior authority

The Goldsmith court purported to show that its rul-ing was no more than “a proposition that has long been established in Illinois law,” citing two cases, In re Mar-riage of Himmel9 and In re Marriage of Broday.10 Both

of these cases involved petitions under section 2-1401 (then section 72 of the Civil Practice Act) seeking to vacate divorce judgments on grounds of nondisclosure of assets.

In both cases, the appellate court denied relief on grounds of lack of due diligence. In Himmel, the pe-titioner knew of the supposedly concealed assets but took no action to discover their value or assert her claims.11 In Broday, the asset was disclosed in the settle-ment papers, but the petitioner had made no attempt to investigate it.12 However, the Goldsmith court did not mention substantial authority inconsistent with its holding on the due diligence issue.

In In re Marriage of Buck13 (which Goldsmith cited but did not discuss), the wife brought a section 2-1401 petition to modify a divorce judgment on the grounds that the husband had failed, during the divorce process, to disclose property interests (option contracts) owned, not by him personally, but by his company, the John Buck Company, which was marital property. The hus-

After Goldsmith, conducting little or no discovery and relying on

representations of full disclosure in a marital settlement agreement will no longer protect your client.

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3. 735 ILCS 5/2-1401.4. Goldsmith, 2011 IL App (1st) 093448, ¶ 5, 962 N.E.2d at 520. 5. “Relief under section 2-1401 requires that the petitioner set forth

specific factual allegations supporting each of the following elements: (1) the existence of a meritorious defense or claim; (2) due diligence in pre-senting that claim in the original action; and (3) due diligence in filing the section 2-1401 petition to vacate.” Selvy v. Beigel, 309 Ill.App.3d 768, 774, 723 N.E.2d 702, 707 (1st Dist. 1999).

6. Goldsmith, at ¶ 11, 962 N.E.2d at 522. 7. Id. at ¶¶ 26-45, 962 N.E.2d at 524-27.8. Id. at ¶ 47, 962 N.E.2d at 527. 9. 285 Ill.App.3d 145, 673 N.E.2d 1140 (2nd Dist. 1996).10. 256 Ill.App.3d 699, 628 N.E.2d 790 (1st Dist. 1993).11. Himmel, 285 Ill.App.3d at 148-49, 673 N.E.2d at 1143.12. Broday, 256 Ill.App.3d at 703, 628 N.E.2d at 795.13. 318 Ill.App.3d 489, 742 N.E.2d 378 (1st Dist. 2000).

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band had disclosed the existence of the company, which was known to the wife in any event, but made no separate dis-closure of the option contracts. The wife conducted no discovery of the husband or the company.

Ten years later, when the option con-tracts were exercised, the wife learned of their existence and brought her petition. The trial court dismissed it for the wife’s lack of due diligence in failing to con-duct discovery that would have disclosed the contracts, but the appellate court re-versed, specifically declining to hold (or to read prior authority as holding) “that

it is per se lack of diligence not to take discovery in a divorce action.”14

In Garmisa v. Garmisa,15 the wife filed a section 2-1401 petition to vacate or modify a divorce judgment alleging that the husband had failed to disclose, in the divorce process, negotiations for the sale of his business that were relevant to its valuation. The court held that these ne-gotiations were a “material fact” that the husband had an obligation to disclose and that his non-disclosure was “in es-sence a misrepresentation”16 justifying a hearing pursuant to the petition.

And in In re Marriage of Frazier,17 the husband’s failure to make an affirmative disclosure during the divorce negotia-tions that certain marital property had been stolen was held to be grounds for relief under section 2-1401. The court held that “respondent’s nondisclosure of the theft of the property in question…constituted “‘an affirmative withholding of a material fact which was vital for the judge to know’ in deciding the distribu-tion of the parties’ property.”18

Similarly, In Deahl v. Deahl,19 a par-ty’s nondisclosure of an intention to re-marry once the divorce was final was held to be an “affirmative withholding of a material fact”20 warranting section 2-1401 relief, notwithstanding that the party had made no affirmative statement

but simply kept silent on the issue.Neither in this case, nor in any of

those cited above, was there discussion of what discovery (if any) the petitioner had conducted or how such discovery, or the lack of it, bore on the question of due diligence. Indeed, it seems unlikely that any discovery sufficient to reveal the undisclosed fact had been conducted in these cases. If it had, and the respon-dent had failed to make the required dis-closure, that circumstance would most probably have been cited in the opinions.

In the foregoing cases, the section 2-1401 (or section 72) petitions alleged

fraudulent concealment of the undisclosed matter in issue. In Goldsmith, how-ever, as the appellate court specifically noted,21 the pe-titioner made no allegation of fraud. Does this circum-stance distinguish the fore-going cases, which found due diligence on the part of petitioner without any ap-parent requirement of dis-covery, from Goldsmith,

which holds that the conduct of dis-covery is necessary to establish due dili-gence?

The answer should be no. The nature of the nondisclosure in Buck, Garmisa, Frazier and Deahl – i.e., mere silence, not a lie nor an active concealment of the truth – was exactly the same as the na-ture of the nondisclosure in Goldsmith.22 If there was an affirmative obligation to disclose in the former cases, regardless of formal discovery, then the same obli-gation should have been found in Gold-smith as well. The Goldsmith holding should not be read to turn on the lack of a pro forma allegation of fraud.

What discovery is required?

It appears, therefore, that Goldsmith announces a new standard for the assess-ment of due diligence in section 2-1401 litigation, at least as concerns the belated discovery of concealed assets. This new standard, however, raises a host of issues not addressed in the opinion.

If the conduct of formal discovery is a prerequisite to establishing due dili-gence in a subsequent section 2-1401 pe-tition, how much and what sort of dis-covery is required? In Goldsmith itself, the petitioner had relied upon an un-signed financial affidavit submitted by the respondent, probably (since this was

a Cook County case) the financial disclo-sure affidavit specified in Rule 13.3.1 of the Rules of the Circuit Court of Cook County. Such an affidavit is commonly requested as part of formal discovery.

Why was this affidavit not sufficient to satisfy the discovery required by the Goldsmith court? The affidavit was un-signed; would the result have been dif-ferent if it had been signed? The opinion does not say.

And if a financial disclosure affida-vit, signed or not, is not a sufficient use of the discovery process to demonstrate due diligence, then what is? Suppose that the petitioner conducted formal discov-ery, but the undisclosed asset was such that the discovery did not reveal it (as might have been the case in Buck, for ex-ample, where the undisclosed assets were owned not by the respondent but by his company and were not the type of asset normally shown on a corporate balance sheet). Must the petitioner show that the requested discovery, if properly re-sponded to, would have disclosed the un-disclosed asset? If not, what was the pur-pose of requiring the conduct of discov-ery as an element of due diligence? Gold-smith answers none of these questions.

Moreover, Goldsmith provides no ex-planation of the policy underlying the rule it announces. It is clear that divorc-ing parties can no longer safely rely on representations and warranties of full disclosure set forth in a marital settle-ment agreement, but why not? A marital settlement agreement is, after all, a con-tract, and (as Goldsmith itself notes)23 is to be construed in accordance with con-tract principles. Contracting parties com-monly make and rely upon representa-tions and warranties (indeed, it is their purpose to be relied upon) and the law of contracts protects such reliance.

Why should it not do so here? Both discovery responses and marital settle-

How much discovery do you need? There’s no definite answer,

but at a minimum, more than an unsigned financial affidavit.

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14. Id. at 495, 742 N.E.2d at 383.15. 4 Ill.App.3d 411, 280 N.E.2d 444 (1st Dist. 1972).16. Id. at 423, 280 N.E.2d at 452.17. 203 Ill.App.3d 847, 561 N.E.2d 160 (5th Dist.

1990).18. Id. at 853, 561 N.E.2d at 164.19. 13 Ill.App.3d 150, 300 N.E.2d 497 (1st Dist.

1973).20. Id. at 159, 300 N.E.2d at 504.21. Goldsmith, 2011 IL App (1st) 093448, ¶ 11, 962

N.E.2d at 522. 22. Where there has been an affirmative misrepre-

sentation of the truth, the courts are willing to relax the due diligence requirement and to vacate a judgment even though the requirement has not been satisfied. In re Marriage of Roepenack, 2012 IL App (3d) 110198, ¶ 40.

23. Goldsmith, at ¶ 40, 962 N.E.2d at 526.

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ment agreements are made under oath and as part of a court proceeding, yet under Goldsmith the former may be re-lied upon to demonstrate due diligence but the latter may not be. No policy ra-tionale justifies this differential treat-ment, which may have serious implica-tions not only for the conduct of domes-tic relations litigation but also for alter-native means of divorce resolution, such as mediation or the collaborative law ap-proach, in which formal discovery can-not be conducted precisely because the parties have chosen to resolve their dif-ferences without litigation.

Undisclosed assets and discovery: how can you protect your client?

Given that Goldsmith is (at least in the first appellate district) the law, what are its implications for practicing attorneys?

Pre-decree. If you are in the pre-de-cree process, the most obvious is that conducting little or no discovery, and instead relying on representations and warranties of full disclosure in a mari-tal settlement agreement to establish due diligence, will no longer protect your cli-ent (or you). You should at least con-sider conducting some formal discovery in every case.

How much? There’s no definite an-swer, but at a minimum, more than an unsigned financial affidavit. Since sec-tion 2-1401 litigation frequently involves nondisclosure of assets, discovery argu-ably requires disclosure of all assets and interests in property of any kind, actual or contingent, by means of a request for a financial affidavit, standard matrimo-nial interrogatories and requests for pro-duction of documents. If your client will not authorize such discovery, you should document that you recommended that it be done and explained the risks of fail-ing to do so.

You should also provide for this prob-

lem, to the extent possible, when drafting the marital settlement agreement. The agreement should include a clause pro-viding for the division of later-discovered assets (as was present in the Goldsmith agreement) and retention of jurisdiction by the trial court to enforce the terms of the agreement. Such a clause will at least give a basis and a means to divide the as-sets themselves. This, however, may not be the end of your travails.

If the later-discovered assets are of a character or a value such that disclo-sure of them, at the time of the divorce, would have resulted in a materially dif-ferent property distribution or changes to other terms of the agreement (e.g., maintenance), then the proper remedy is to reopen the judgment, not merely to distribute the later-discovered assets. Doing so, however, requires a valid sec-tion 2-1401 petition and its concomitant showing of due diligence.

Could you insert a provision in the marital settlement agreement stipulat-ing to the reopening of the judgment if a substantial undisclosed asset is discov-ered later? Perhaps, but it would be un-wise to rely exclusively on such a provi-sion. Remember that the trial court loses jurisdiction of the case 30 days after entry of final judgment, and a section 2-1401 petition, though filed in the same proceeding, is not a continuation of it.24 It is a new action and must satisfy the re-quirements of section 2-140125 – includ-ing due diligence. For the parties to try to bypass these requirements by agreement seems perilously close to an attempt to invoke the court’s jurisdiction by agree-ment, which is invalid.26

Finally, if full discovery has not been conducted, you should include in the marital settlement agreement the same type of representation and warranty of full disclosure found ineffective in Gold-smith. Other districts of the appellate court may not agree with Goldsmith,

and even in the first district, you will not be able to argue, if the need should later arise, that the case was wrongly decided if your marital settlement agreement does not include any representation and warranty of full disclosure.

Post-decree. If you are at the post-de-cree stage, i.e., an undisclosed asset has been found more than 30 days after the entry of judgment and you are prepar-ing to file a section 2-1401 petition, you should thoroughly investigate the na-ture and extent of the pre-decree discov-ery that was conducted, so that you will know in advance if you may be facing a Goldsmith issue. If so, and if there is any possibility that the respondent knew of the undisclosed asset at the time of judg-ment, you should be sure to include in your petition an allegation of fraudulent concealment, so as to be able to rely on the cases discussed above holding that there is an affirmative obligation to dis-close material assets. Goldsmith may be inconsistent with these cases, but it did not overrule or distinguish (or even men-tion) them.

If the judgment includes a provision for division of later-discovered assets, you should also consider whether it is re-ally necessary to petition to reopen the judgment, or whether distribution of the asset in accordance with the provision would be sufficient. Is the later-discov-ered asset of a character or value such that disclosure of it at the entry of judg-ment would have resulted in a materially different judgment, or can substantial justice be done by distribution? If the lat-ter, you will petition only to enforce the judgment, not to reopen it, and in that case you will not have to deal with sec-tion 2-1401 and its requirements at all. ■

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24. 735 ILCS 5/2-1401(b).25. E.g., Buck, 318 Ill.App.3d at 493, 742 N.E.2d

at 381.26. E.g., Roberts v. Roberts, 90 Ill.App.2d 184, 192,

234 N.E.2d 372, 377 (1st Dist. 1967).

Reprinted with permission of the Illinois Bar Journal, Vol. 101 #5, May 2013.

Copyright by the Illinois State Bar Association.www.isba.org

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