Wise or not, parties have a right to waive discovery from the other party and settle their matter. Sometimes, both parties have access to and/or knowledge of all of the finances. Sometimes, the rely on the parties sworn Case Information Statements that disclose income, assets, liabilities and budgets and also have tax returns, W-2s and paystubs, as well as other documents attached. Sometimes, there just isn’t anything to fight about.
What happens when parties settle without conducting formal discovery? Can a court simply throw out their agreement for that reason? Given the plethora of cases in New Jersey that discuss the public policy regarding settlement and the absence of case law that supports the proposition that parties cannot settle cases unless there is discovery, one would surmise that a court cannot set aside an agreement for that reason.
However, that is exactly what the trial court did in the case of Jordonne v. Saint Louis. The court went a step further and dismissed the case too because the case was a year and a half old and the trial judge was unwilling to start the case, though the judge did preserve the original filing date as the cut off date for equitable distribution and alimony.
The Appellate Division predictably reversed the case on July 16, 2024 in an unreported (non-precedential) decision.
In this case, the decision to dismiss is even more curious. The parties served discovery, but seemingly agreed to forego formal responses and instead, exchanged case information statements, tax returns, current wage statements, early settlement panel (ESP) position statements, and an appraisal of a multi-family house owned by defendant. When the case didn’t settle at ESP, they went to mediation and settled the case with a signed agreement that provided that: (1) defendant would pay lump-sum alimony of $50,000 in two payments; (2) the funds in the parties’ bank accounts as of the date of the filing of the complaint will be divided equally; (3) the equity in the house owned by defendant will be divided equally either through a sale or defendant’s purchase of plaintiff’s interest within one year.
Prior to the mediation, plaintiff’s counsel subpoenaed certain bank records which were not received until after the settlement was signed. The records showed an account with a little more than $100,000 as of the date of Complaint which was drawn down by more than 90% in the months following. While this may have impacted when plaintiff was to be paid, it certainly did not impact the amount due her from the account.
Notwithstanding, she moved to modify or reform the agreement and restore the funds removed and also to invalidate certain aspects of the agreement that deferred the obligation to make the payments. Defendant cross moved to incorporate the agreement into a Final Judgment of Divorce or to hold a hearing to determine if the agreement should be invalidated.
As noted above, the trial court invalidated the agreement because the parties exchanged no discovery responses before signing the agreement. In doing so, the trial court erroneously held:
“No one moved to enforce discovery. No one moved to dismiss any pleadings for the discovery. . . .
The parties went to . . . mediation . . . and apparently, were able to hammer out this agreement that everyone acknowledges was signed.
How you settle a case without knowing what the issues are from doing orderly discovery, I will – there’s no possible way that could be the case. So, under these circumstances, as soon as anyone comes in and says, “I didn’t know what I was signing; I wasn’t . . . fully apprised of what was available for distribution,” there’s no possible way this [c]ourt could ever find that the agreement was knowingly and voluntarily entered into with a full understanding of [that] person’s rights and responsibilities. So, there’s no possible way this [c]ourt can . . . enforce that agreement.
In the Appellate Decision opinion, as expected, it goes on for almost two pages regarding the case law supporting the enforceability of agreements, even mediated agreements. Rather, they held that”
“We are aware of no requirement that parties in a matrimonial action must formally respond to discovery requests before they may enter into a settlement agreement.
The issues essential to determining the validity of a matrimonial settlement agreement are whether the parties knowingly and voluntarily entered into the agreement and whether its terms are fair and equitable. The family court did not make findings of fact and conclusions of law on either of those questions. In addition, the court did not resolve plaintiff’s allegations that defendant engaged in fraudulent activity warranting modification of portions of the agreement or other remedial action. Plaintiff’s motion and defendant’s crossmotion raised disputed issues of material fact that require an evidentiary hearing
As a result, the matter was remanded for an evidentiary hearing on the issues raised in the motion and cross motion.
The court also reversed the dismissal. While noting that the trial court had equitable discretion to dismiss based upon the failure to respond to discovery, the appellate court noted that the trial court made no fact findings or conclusions of law as to the circumstances surrounding the failure to respond to discovery. The court also noted that the exchange of financial information and reaching a settlement provided “…a readily apparent explanation for their failure to formally respond to the discovery requests. The record contains no indication that either party demanded formal responses to their discovery requests, put the opposing party on notice that they would seek dismissal of their
pleadings if such responses were not forthcoming, or ever sought such drastic relief.”
Moreover, the court did not explore alternatives to dismissal which should be something of last resort. The Appellate Division noted that in light of the prior informal discovery, “… it would be reasonable to conclude that they could provide formal discovery responses in a relatively short period in the event the court does not enforce or modify the settlement agreement. This alternative would be preferable to dismissing the pleadings and suggesting one of the parties file a new complaint for divorce.
Looking at the calendar could explain why the trial court did as it did. The case was a year and a half old already and the motion was heard on March 31st, three months before the end of the court year and thus, the case would be more than 2 years old before it was resolved. The case was already “beyond goal” since it was more than a year old and the likelihood of having a plenary hearing and deciding a case in that short window was unlikely. However, as noted by the appellate division, setting aside the agreement which neither party wanted and dismissing pleadings which neither party asked for, was not the solution.
Though I am not sure that anyone needed the reminder, the take away from this case, however, is that parties are free to waive discovery at their own peril.
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