Failure to Disclose Lottery Winnings is a Lesson for All Divorcing Couples

If you’re getting divorced don’t forget in re Marriage of Rossi (2001) 90 Cal.App.4th 108. Rossi is one of the most important cases in all of California divorce law. Why? Because of the penalty imposed on Ms. Rossi for failing to disclose her 1.3 million dollar lottery jackpot. The case was big news a few years ago, but people have short memories, so a reminder is due.

Ms. Rossi never told her husband about her lottery winnings while they were married. The parties’ divorce judgment said they had made a full disclosure of all gifts and property. It also provided that a party who failed to disclose an asset that was later discovered would pay its full market value to the other party. This is common divorce judgment language. Ms. Rossi never mentioned the lottery winnings and she arranged to have the money mailed to her mother’s house.

But, the postman always rings twice and Mr. Rossi found out about his ex-wife’s lottery winnings when he got a letter in the mail offering to buy out lottery winnings. He moved to set aside the divorce judgment on grounds of fraud, breach of fiduciary duty, and failure to disclose. He asked the trial court to award him 100 percent of the lottery money plus attorneys’ fees. The trial court ruled that Ms. Rossi had intentionally breached her fiduciary duty to Mr. Rossi by concealing the winnings from him. It awarded Mr. Rossi 100 percent of the winnings. Ms. Rossi appealed, but lost.

The lesson of this story should be obvious: Parties in a California divorce have a duty to disclose all of their assets, debts, liabilities and income, whether they believe them to be community or separate property. This is the law, no ifs, ands, or buts. You must list this information on your Preliminary and Final Declarations of Disclosure. And it doesn’t hurt to have a private investigator run a propety check on your spouse sometime after the divorce is over. Mr. Rossi learned of his wife’s lottery winnings by chance through the mail. Who knows, you may have won the lottery and not even know it.

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For more information, please call Philip A. Wasserman at 661-294-8484 or email him at pawlaw@earthlink.net.