By Michael P. Sampson (part 1 of 8)
The president of a corporation, manager of a limited liability company, trustee of a family trust, or principal of another business entity receives a summons in a Florida family law case. One spouse contends the other’s control, ownership of an interest in, or history of substantial business with the entity requires its joinder as a party. The suing spouse may contend joinder is necessary for the court to transfer or sell real property or other assets from the entity to the spouse.
A spouse who sues a trust may contend the trust must be joined because the spouse claims a direct or equitable interest in the trust or may attack the other spouse’s creation or use of a trust or entity as an attempt to manipulate the distribution of property in the divorce. See, e.g., Schneider v. Schneider, 864 So. 2d 1193, 1997 (Fla. 4th DCA 2004) (improper for husband to place marital funds in an irrevocable trust as a “stratagem” to manipulate equitable distribution).
The Georgia Supreme Court, in Gibson v. Gibson, 301 Ga. 622, 801 SE 2d 40 n. 4 (2017), distinguishing Schneider, rejected a wife’s claim that $3.2 million her husband moved into irrevocable trusts should be equitably divided in their divorce. No evidence established he formed or funded the trusts when he knew she was contemplating divorce or with the actual intent to hinder or defraud her. He did not actively conceal the transfers from her. He delivered dominion and control of the assets that funded the trusts to the trustee before she filed for divorce.
A spouse may contend failing to join a trust and beneficiaries may invite their lawsuits and motions to intervene in proceedings or to challenge the family court’s decisions regarding trust assets. See Crescenze v. Bothe, 4 So. 3d 31, 32 (Fla. 2d DCA 2009).
How may the business entity or trust get out of the family law case? In this blog series, we discuss challenges to service of process and jurisdiction that may be available to secure dismissal.
Due Process: Service of Process and Personal Jurisdiction Over An Entity
For a family law judge in Florida to adjudicate a spouse’s claims over a corporate entity or trust, the spouse must satisfy due process requirements. First, service of process over the entity or trust must be sufficient. Second, there must be a basis for personal jurisdiction over the entity. See Borden v. East-European Ins. Co., 921 So. 2d 587, 591 (Fla. 2006) and Scott-Lubin v. Lubin, 49 So. 3d 838, 840 n. 1 (Fla. 4th DCA 2010).
Service of process and personal jurisdiction are two distinct but related elements of due process protections. See Ulloa v. CMI, Inc., 133 So. 3d 914, 919 (Fla. 2013) (discussing difference between service of process, personal jurisdiction, and subpoena power). Both valid service of process and a basis for personal jurisdiction are necessary before an entity can be compelled to answer a claim brought in a Florida family law case.