In re Marriage of Liszka, 2016 IL App (3d) 150238

Background

Kathleen and Michael Liszka divorced after co-owning ISP Painting, Inc. (Kathleen 51%, Michael 49%); trial focused on property division, business valuation, child support, and maintenance.
Kathleen produced a business valuation (Zouzias) valuing ISP at $1,116,000 as of Dec. 31, 2011; Michael sought to offer a later valuation through expert Hoffer but disclosed her report 4 days before trial.
Kathleen initially provided some ISP documents redacted; after motions to compel she produced unredacted ledgers and balance sheets in late Aug–Sept 2013. Michael then produced Hoffer’s report. Trial court barred Hoffer under discovery rules and denied Michael’s motion to continue.
Trial court awarded ISP and the marital home to Kathleen, ordered cash payments to equalize the 50/50 division, denied Michael maintenance, and later imputed $17,500/month income to Michael for child support and created a 503(g) trust.
On reconsideration the court reduced Kathleen’s payment obligation substantially. Michael appealed, challenging (inter alia) the barring of his expert, denial of a continuance, the imputed income, valuation of ISP (and retained earnings), treatment of Coreman Technologies, attorney-fee treatment, and denial of reopening proofs. The appellate court affirmed in part, reversed and remanded in part.

Issues

Issue	Plaintiff's Argument (Kathleen)	Defendant's Argument (Michael)	Held
1. Barring Michael’s valuation expert under discovery rules	Sanction appropriate for untimely disclosure; Kathleen argued compliance with discovery and prejudice from late report	Late disclosure caused by Kathleen’s delayed/unredacted production; barring was unduly severe — request for continuance/deposition was proper remedy	Reversed: court abused discretion by barring Hoffer; Kathleen’s late production caused delay; remand to allow both experts to testify and, if needed, continue trial
2. Motion to continue trial after late expert disclosure	Continuing would reward dilatory behavior and prejudice Kathleen	Continuance necessary because Michael’s expert received key financials less than a month before trial; deposition/time to respond required	Trial court abused discretion in barring expert; proper remedy would have been to grant continuance so expert could be deposed (remand)
3. Imputation of $17,500/month income for child support	Court permissibly imputed income based on past $210,000 salary, Michael’s skills/experience, his standard of living, and findings he was voluntarily unemployed/evading support	Imputation must be linked to earning capacity and evidence of ability to earn that sum; court relied on spending rather than objective earning-capacity proof	Reversed as to amount: imputing $17,500/month solely on spending was an abuse; remanded for fresh imputation based on earning capacity (not spending)
4. Valuation/division of ISP, retained earnings, Coreman, and attorney fees	Adopt Zouzias’s valuation (2011) and treat Coreman as part of ISP; deny treating Kathleen’s attorney fees as advances; exclude 2013 tax returns	Michael argued 2013 retained earnings and later tax returns should be considered; Coreman is a separate valuable asset; Kathleen’s higher attorney fees should be advances against estate	Majority affirmed: trial court may rely on Zouzias where she was only expert admitted; Coreman found to have no separate value; attorney fees need not be equalized; retained earnings should be addressed on remand if new valuation excludes them; trial court did not abuse discretion denying reopening to admit 2013 returns (but returns may be considered on remand valuation)

Key Cases Cited

Marshall v. Osborn, 213 Ill. App. 3d 134 (expert-disclosure sanctions; barring is not the only sanction)
McGovern v. Kaneshiro, 337 Ill. App. 3d 24 (barring witnesses is a drastic sanction)
Nedzvekas v. Fung, 374 Ill. App. 3d 618 (factors for evaluating discovery sanctions)
Vallejo v. Mercado, 220 Ill. App. 3d 1 (when party acts in good faith, continuance preferred over barring expert)
In re Marriage of Rubinstein, 145 Ill. App. 3d 31 (use evidence near date of judgment for valuation)
In re Marriage of Grunsten, 304 Ill. App. 3d 12 (valuation issues for closely held companies resolved by trier of fact)
In re Marriage of Gunn, 233 Ill. App. 3d 165 (reliance on expert testimony and weighing competing methodologies)
In re Marriage of Lundahl, 396 Ill. App. 3d 495 (retained earnings are marital property)
In re Marriage of Gosney, 394 Ill. App. 3d 1073 (standards for imputing income)
In re Marriage of Sweet, 316 Ill. App. 3d 101 (court may impute income consistent with earning potential)