Protecting the Data

In an era when identity theft causes millions of dollars in losses, many clients are properly expressing fears about disclosing their credit card numbers, checking account information, Social Security Numbers and other sensitive financial data during required financial disclosure proceedings. While some clients balk about disclosing personal financial data, other clients actually refuse to cooperate with even standard divorce disclosure proceedings. As practitioners, we have grown so accustomed to revealing sensitive financial information that we may inadvertently engage in disclosure without providing clients with appropriate safeguards. The enactment of federal legislation such as the Health Insurance Portability and Accountability Act (HIPAA), which strenuously regulates disclosure of medical records, provides an opportunity for matrimonial attorneys to reassess the security that we provide our own clients when it comes to disclosing sensitive financial information.

Tightening Internal Policies

To alleviate clients' fears, it is appropriate to develop internal policies about access to sensitive information and document maintenance and retention. Locking the cabinets containing client information and shredding financial documents that are not returned to clients at the end of a case are two minimal safeguards all practitioners should follow. Greater security is needed when we must protect the financial information transferred to our safekeeping by professionals like doctors, lawyers, accountants, financial planners or therapists and by business owners with confidential client lists and trade secrets.

In the ordinary course of pretrial disclosure, the non-titled spouse is clearly entitled to complete financial information about the titled spouse's profession or business. When providing the information, care must be exercised in giving enough data to satisfy disclosure mandates while protecting confidential information. For example, where the titled spouse is a practicing attorney concentrating in plaintiff negligence cases, the value of the cases pending when the divorce was commenced is a component of the value of the law practice. Evaluating this work in progress requires the forensic appraiser to review confidential information. However, the clients of the attorney spouse are entitled to the benefit of the attorney-client privilege. This dilemma is usually resolved by disclosing information like the type of case, the extent of the injury, the work performed on the file up to the commencement date of the divorce, the disbursements incurred and similar relevant information, without disclosing the client's full name. The privacy of the clients can be protected by identifying them by a code such as the first three letters of their last name and the last two letters of their first name. This solution provides all the information needed to appraise the value of the work in progress properly, while maintaining client confidentiality. A similar method can be used by other professionals, such as medical doctors and accountants. Once the appraising experts and the lawyers reach an agreement to use this coded approach, it should be reduced to a written stipulation to avoid future conflicts about the accuracy of the method or the extent of compliance.

Frequently, this type of coding is unduly burdensome, results in confusing, rather than clarifying, issues or simply fails to protect the critical information the client needs to safeguard. A clothing manufacturer, for example, may have a unique supplier that permits the manufacturer to produce clothing for less money than a competitor. During disclosure, the non-titled spouse may properly wish to inquire about whether invoices paid to this supplier are genuine or, pardon the pun, fabricated. Disclosure of the supplier to the competition could destroy the clothing manufacturer' business.

The owner of a gasoline station may occasionally purchase cheaper gasoline from an unauthorized supplier in violation of the gas station's franchise agreement. A thorough forensic analysis during divorce disclosure proceedings would discover the variation between gallons actually pumped and those purchased through legitimate franchise channels. Releasing such information could result in the termination of the franchise and resultant loss of the business. In a divorce where the titled spouse owns a financial planning business that generates its income based upon commissions charged for assets under management, the titled spouse may be required to disclose the assets held by hundreds of clients, none of whom would consent to the release of this sensitive financial data without some type of protection.

Orders of Confidentiality

In cases like these, an order of confidentiality is the only tool available to protect the confidential information of the titled spouse. An order of confidentiality meticulously defines the information that shall be deemed confidential, identifies the individuals who are entitled to have access to the information and carefully restricts the disclosure of the data outside the context of the divorce action. To ensure that anyone who may have access to the information during disclosure proceedings will not disclose the information, the order requires any individual or entity receiving confidential information to execute an undertaking in which the order and its directives are acknowledged. The undertaking also places individuals on notice that breaching the undertaking will have consequences, including financial ones. This prevents, for example, an accountant hired by one of the parties from disclosing information obtained under the order. Even court reporters attending depositions should execute the undertaking. Usually, the order can be obtained by stipulation before disclosure begins. If adverse relationships exist, the order can be requested upon application to the court.

A sample form for such an order and for the related undertaking follow. In the sample form, the titled spouse is the defendant. The alternative phrases bracketed in the form are provided as examples of the types of material that should be defined in the order.

CONFIDENTIALITY ORDER

This Order of Confidentiality shall govern all financial materials, documents and information (“Information”) produced and to be produced to plaintiff by defendant, whether such information is on behalf of defendant personally or on behalf of any business in which defendant has an interest, in connection with the above-captioned litigation (“this action”) in response to any discovery request or otherwise used at any hearing, mediation, trial or other proceeding in this action (collectively, “the Discovery Materials”).

Defendant designates as “Confidential,” upon a good-faith basis, any document, testimony, information or other Discovery Material produced in this action that is not public and contains proprietary or confidential business information including the name, address, telephone number, date of birth or age, Social Security number [financial condition, investment objectives, bank, investment, or credit card account balances and account numbers or other financial information] [medical information, diagnosis, prognosis, test results or treatment notes] concerning any past, present or future [client] [patient] of the defendant, as well as any proprietary or confidential business information pertaining to defendant's business interests.

Any Confidential Discovery Material shall be maintained in confidence by plaintiff and plaintiff's agents, as defined below, and shall not be used for any purpose other than in connection with this action or any other litigation or other dispute resolution mechanism arising out of or related to the parties' divorce and related matters and shall not be disclosed to any person, except to:

(a) the Court and any other person such as a mediator, who serves in a judicial or quasi-judicial function, and their personnel, and professional court reporters engaged to transcribe testimony, provided that such Confidential Discovery Material is filed in accordance with the rules of the Court under seal to the extent reasonably possible;

(b) plaintiff's counsel; and

(c) experts engaged by plaintiff or plaintiff's counsel to assist with respect to this action, provided that any such individual signs an undertaking in the form of Exhibit A, hereto.

Within thirty (30) days after entry of final judgment, the denial or dismissal of this action, or other resolution of this action, whichever occurs later, all Discovery Materials designated as Confidential shall be returned to defendant, and plaintiff, plaintiff's counsel and plaintiff's experts shall not maintain any reproduction, photocopies, replicas, transcripts, electronic or digital records or other copy of any Discovery Material designated Confidential, except that counsel may retain for their files one complete set of all captioned litigation documents (for example, pleadings, motion papers, briefs and the like) and their own work product generated in connection with this litigation, provided such materials remain subject to this Confidentiality Order.

Any individual or entity that violates the provisions of this Order shall be liable to defendant or defendant's [clients] [patients] for consequential damages and legal fees incurred in relationship to such violation.

(Plaintiff's Signature) (Defendant's Signature)

(Plaintiff's Counsel) (Defendant's Counsel)

SO ORDERED:

CONFIDENTIALITY UNDERTAKING

The undersigned hereby acknowledges that he/she has read the Order of Confidentiality entered with respect to the above captioned action; that he/she understands the terms and conditions thereof and agrees to be bound to such terms; and that he/she agrees to be subject to the personal jurisdiction of said Court, or such other court as may be appropriate, for the purpose of enforcement of this Undertaking.

In an era when identity theft causes millions of dollars in losses, many clients are properly expressing fears about disclosing their credit card numbers, checking account information, Social Security Numbers and other sensitive financial data during required financial disclosure proceedings. While some clients balk about disclosing personal financial data, other clients actually refuse to cooperate with even standard divorce disclosure proceedings. As practitioners, we have grown so accustomed to revealing sensitive financial information that we may inadvertently engage in disclosure without providing clients with appropriate safeguards. The enactment of federal legislation such as the Health Insurance Portability and Accountability Act (HIPAA), which strenuously regulates disclosure of medical records, provides an opportunity for matrimonial attorneys to reassess the security that we provide our own clients when it comes to disclosing sensitive financial information.

Tightening Internal Policies

To alleviate clients' fears, it is appropriate to develop internal policies about access to sensitive information and document maintenance and retention. Locking the cabinets containing client information and shredding financial documents that are not returned to clients at the end of a case are two minimal safeguards all practitioners should follow. Greater security is needed when we must protect the financial information transferred to our safekeeping by professionals like doctors, lawyers, accountants, financial planners or therapists and by business owners with confidential client lists and trade secrets.

In the ordinary course of pretrial disclosure, the non-titled spouse is clearly entitled to complete financial information about the titled spouse's profession or business. When providing the information, care must be exercised in giving enough data to satisfy disclosure mandates while protecting confidential information. For example, where the titled spouse is a practicing attorney concentrating in plaintiff negligence cases, the value of the cases pending when the divorce was commenced is a component of the value of the law practice. Evaluating this work in progress requires the forensic appraiser to review confidential information. However, the clients of the attorney spouse are entitled to the benefit of the attorney-client privilege. This dilemma is usually resolved by disclosing information like the type of case, the extent of the injury, the work performed on the file up to the commencement date of the divorce, the disbursements incurred and similar relevant information, without disclosing the client's full name. The privacy of the clients can be protected by identifying them by a code such as the first three letters of their last name and the last two letters of their first name. This solution provides all the information needed to appraise the value of the work in progress properly, while maintaining client confidentiality. A similar method can be used by other professionals, such as medical doctors and accountants. Once the appraising experts and the lawyers reach an agreement to use this coded approach, it should be reduced to a written stipulation to avoid future conflicts about the accuracy of the method or the extent of compliance.

Frequently, this type of coding is unduly burdensome, results in confusing, rather than clarifying, issues or simply fails to protect the critical information the client needs to safeguard. A clothing manufacturer, for example, may have a unique supplier that permits the manufacturer to produce clothing for less money than a competitor. During disclosure, the non-titled spouse may properly wish to inquire about whether invoices paid to this supplier are genuine or, pardon the pun, fabricated. Disclosure of the supplier to the competition could destroy the clothing manufacturer' business.

The owner of a gasoline station may occasionally purchase cheaper gasoline from an unauthorized supplier in violation of the gas station's franchise agreement. A thorough forensic analysis during divorce disclosure proceedings would discover the variation between gallons actually pumped and those purchased through legitimate franchise channels. Releasing such information could result in the termination of the franchise and resultant loss of the business. In a divorce where the titled spouse owns a financial planning business that generates its income based upon commissions charged for assets under management, the titled spouse may be required to disclose the assets held by hundreds of clients, none of whom would consent to the release of this sensitive financial data without some type of protection.

Orders of Confidentiality

In cases like these, an order of confidentiality is the only tool available to protect the confidential information of the titled spouse. An order of confidentiality meticulously defines the information that shall be deemed confidential, identifies the individuals who are entitled to have access to the information and carefully restricts the disclosure of the data outside the context of the divorce action. To ensure that anyone who may have access to the information during disclosure proceedings will not disclose the information, the order requires any individual or entity receiving confidential information to execute an undertaking in which the order and its directives are acknowledged. The undertaking also places individuals on notice that breaching the undertaking will have consequences, including financial ones. This prevents, for example, an accountant hired by one of the parties from disclosing information obtained under the order. Even court reporters attending depositions should execute the undertaking. Usually, the order can be obtained by stipulation before disclosure begins. If adverse relationships exist, the order can be requested upon application to the court.

A sample form for such an order and for the related undertaking follow. In the sample form, the titled spouse is the defendant. The alternative phrases bracketed in the form are provided as examples of the types of material that should be defined in the order.

CONFIDENTIALITY ORDER

This Order of Confidentiality shall govern all financial materials, documents and information (“Information”) produced and to be produced to plaintiff by defendant, whether such information is on behalf of defendant personally or on behalf of any business in which defendant has an interest, in connection with the above-captioned litigation (“this action”) in response to any discovery request or otherwise used at any hearing, mediation, trial or other proceeding in this action (collectively, “the Discovery Materials”).

Defendant designates as “Confidential,” upon a good-faith basis, any document, testimony, information or other Discovery Material produced in this action that is not public and contains proprietary or confidential business information including the name, address, telephone number, date of birth or age, Social Security number [financial condition, investment objectives, bank, investment, or credit card account balances and account numbers or other financial information] [medical information, diagnosis, prognosis, test results or treatment notes] concerning any past, present or future [client] [patient] of the defendant, as well as any proprietary or confidential business information pertaining to defendant's business interests.

Any Confidential Discovery Material shall be maintained in confidence by plaintiff and plaintiff's agents, as defined below, and shall not be used for any purpose other than in connection with this action or any other litigation or other dispute resolution mechanism arising out of or related to the parties' divorce and related matters and shall not be disclosed to any person, except to:

(a) the Court and any other person such as a mediator, who serves in a judicial or quasi-judicial function, and their personnel, and professional court reporters engaged to transcribe testimony, provided that such Confidential Discovery Material is filed in accordance with the rules of the Court under seal to the extent reasonably possible;

(b) plaintiff's counsel; and

(c) experts engaged by plaintiff or plaintiff's counsel to assist with respect to this action, provided that any such individual signs an undertaking in the form of Exhibit A, hereto.

Within thirty (30) days after entry of final judgment, the denial or dismissal of this action, or other resolution of this action, whichever occurs later, all Discovery Materials designated as Confidential shall be returned to defendant, and plaintiff, plaintiff's counsel and plaintiff's experts shall not maintain any reproduction, photocopies, replicas, transcripts, electronic or digital records or other copy of any Discovery Material designated Confidential, except that counsel may retain for their files one complete set of all captioned litigation documents (for example, pleadings, motion papers, briefs and the like) and their own work product generated in connection with this litigation, provided such materials remain subject to this Confidentiality Order.

Any individual or entity that violates the provisions of this Order shall be liable to defendant or defendant's [clients] [patients] for consequential damages and legal fees incurred in relationship to such violation.

(Plaintiff's Signature) (Defendant's Signature)

(Plaintiff's Counsel) (Defendant's Counsel)

SO ORDERED:

CONFIDENTIALITY UNDERTAKING

The undersigned hereby acknowledges that he/she has read the Order of Confidentiality entered with respect to the above captioned action; that he/she understands the terms and conditions thereof and agrees to be bound to such terms; and that he/she agrees to be subject to the personal jurisdiction of said Court, or such other court as may be appropriate, for the purpose of enforcement of this Undertaking.