judicial estoppel

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No Harm in Failure to Disclose

The debtor was entitled to reopen her bankruptcy case to disclose a post-confirmation, pre-discharge lawsuit where she successfully completed her 100% plan so there was no harm to creditors by her failure to timely disclose the lawsuit, and the debtor would benefit from the opportunity to comply with Eleventh Circuit disclosure requirements. In re Calixto, No. 17-18317 (Bankr. S.D. Fla. Jan. 31, 2023).

Approximately one year before the end of her chapter 13 plan, the debtor slipped and fell on property owned by Gulfstream Park Racing Association, Inc. One month after she successfully completed her plan and received her discharge, she sued Gulfstream in state court for negligence. Gulfstream moved for summary judgment arguing that the debtor was judicially estopped from pursuing the case because she failed to disclose the lawsuit to the bankruptcy court. The debtor moved to reopen her bankruptcy in order to disclose the claim.

The court began with sections 541 under which a lawsuit is property of a chapter 13 bankruptcy estate, and 1306(a)(1) which incorporates property acquired by the debtor post-confirmation into the bankruptcy estate. It noted that while the Code does not obligate debtors to make ongoing post-confirmation disclosures when they acquire new property, Eleventh Circuit precedent has established that debtors have a continuing duty to disclose a post-confirmation litigation claim.

Having found that the litigation was property of the estate and that the debtor had a duty to disclose it and failed to do so, the court went on to consider the equities of allowing her to reopen her bankruptcy to do so now. It weighed the benefits of reopening against prejudice to any of the parties.

While the court noted that it views nondisclosure with a jaundiced eye, in this case, the debtor’s schedules were accurate when she filed them and when her case was confirmed. Furthermore, all her creditors were paid the full amount of their claims so none were prejudiced by the debtor’s failure to disclose the lawsuit during her bankruptcy and none stood to benefit from the disclosure now. Nor was the trustee prejudiced by the failure to disclose because the debtor retained her right to personally pursue the litigation while her bankruptcy case was pending. Thus, “even if the Debtor had previously disclosed the litigation claim – or if the Court permits her to reopen her case now to disclose it – it would not have, and will not have, any effect on her bankruptcy estate or her creditors.”

On the other hand, by reopening, the debtor stood to benefit from the opportunity to satisfy the procedural technicality established by the Eleventh Circuit and pursue her rights against Gulfstream in state court.

The court found that requiring Gulfstream to address the merits of the debtor’s case in state court did not constitute prejudice.

The court granted the debtor’s motion to reopen.

Calixto Bankr SD Fla Jan 2023

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Sixth Circuit All But Eliminates Defense to Judicial Estoppel

Stating that it “is always in a Chapter 13 petitioner’s interest to minimize income and assets,” and speculating that “had the bankruptcy court and Stanley’s creditors known about [his civil] claim, the outcome of Stanley’s bankruptcy petition could have been less favorable to Stanley,” the Sixth Circuit all but eliminated a bankruptcy debtor’s defense against judicial estoppel based on lack of motive to conceal the claim. Stanley v. FCA US, LLC, No. 21-4238 (6th Cir. Oct 18, 2022). [Read more…] about Sixth Circuit All But Eliminates Defense to Judicial Estoppel

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Great Decision on Judicial Estoppel

In a lengthy decision addressing a challenge to its order reopening the debtor’s chapter 13 case, a Bankruptcy Court for the District of South Carolina found that the debtor had no duty under the Bankruptcy Code or Rules to disclose a lawsuit that accrued and was filed post-confirmation. In the face of a judicial estoppel defense raised by the Defendants in the debtor’s state personal injury lawsuit, the court stated, “[w]ithout such a duty or knowledge that one existed, Debtor cannot be found to have acted intentionally to mislead this Court.” In re Boyd, No. 13-2924 (Bankr. S.C. July 17, 2020). [Read more…] about Great Decision on Judicial Estoppel

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Fifth Circuit Approves Alternative to Judicial Estoppel Reaching Same Result

Finding its decision “odd” and “not the route we would have taken,” the Fifth Circuit affirmed the bankruptcy court’s order declining to apply judicial estoppel to put an end to the debtor’s personal injury litigation against Wal-Mart, but ordering the debtor to turn over any recovery he made through the lawsuit for distribution to creditors. Wal-Mart Stores v. Parker, No. 18-30378 (5th Cir. Jan. 8, 2020) (unpublished).

While Mr. Parker’s chapter 13 case was pending, he suffered a work-related injury during a delivery to Wal-Mart. He filed a civil lawsuit in state court against the company. He failed to notify the bankruptcy trustee or court of the lawsuit. He completed his plan, received discharge, and his case was closed. Wal-Mart moved to reopen to seek dismissal of Mr. Parker’s personal injury case on the basis of judicial estoppel. The bankruptcy court found that the elements of judicial estoppel were met, but declined to apply the doctrine. Instead, the court ordered Mr. Parker to turn over any proceeds from the lawsuit to the bankruptcy trustee for distribution to creditors. Wal-Mart sought and obtained leave to appeal directly to the Fifth Circuit. [Read more…] about Fifth Circuit Approves Alternative to Judicial Estoppel Reaching Same Result

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Fifth Circuit Bludgeons Debtors with Judicial Estoppel Ruling

The district court did not abuse its discretion in dismissing the plaintiff’s case under the False Claims Act where he had failed to disclose the cause of action in his pending chapter 13 case. Bias v. Tangipahoa Parish School Board, No. 17-30982 (5th Cir. March 22, 2019) (withdrawing prior opinion) (unpublished, per curiam opinion).

After his chapter 13 case was confirmed in bankruptcy court, debtor, Ronald Bias, learned that his retirement from the Marine Corps had mistakenly been permitted two years earlier than it should have been. The Marine Corps offered him the option of continuing his teaching position in the Junior Reserve Officer’s Training Corp (JROTC), Tangipahoa Parish School District, as a way of fulfilling his pre-retirement obligations. While teaching, Mr. Bias learned of a fellow marine and teacher at the school whom he believed was submitting false reimbursement requests to the Marine Corps. After he reported his suspicions, Mr. Bias was offered the opportunity to retire or be transferred to a new school district. [Read more…] about Fifth Circuit Bludgeons Debtors with Judicial Estoppel Ruling

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Eleventh Circuit Applies New Judicial Estoppel Analysis

When addressing judicial estoppel, courts may no longer apply a presumption of motive to conceal, but must look at the facts and circumstances behind a bankruptcy debtor’s failure to disclose his civil action in the bankruptcy proceeding. Silva v. Pro Transport Inc., No. 17-12744 (11th Cir. Aug. 10, 2018).

After Julio Antonio Silva’s chapter 13 bankruptcy plan was confirmed, he filed an FLSA claim in district court against his employers for failure to pay overtime. He did not tell his civil counsel about his bankruptcy nor did he immediately inform the bankruptcy court of the district court case. The district court granted the employer’s motion for summary judgment on the basis of judicial estoppel, and awarded over $50,000 to the employer in sanctions and attorney fees. Mr. Silva appealed the sanctions award. [Read more…] about Eleventh Circuit Applies New Judicial Estoppel Analysis

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Debtors’ Challenge to Private Student Loan Survives Dismissal Motion

A private loan in excess of the cost of attendance is not subject to exception from discharge under section 523(a)(8)(A)(ii). McDaniel v. Navient Solutions, No. 09-37450, Adv. Proc. No. 17-1274 (Bankr. D. Colo. Sept. 2018).

In their confirmed chapter 13 plan, Byron and Laura McDaniel treated their student loans, including those held by Navient Solutions, as unsecured Class Four claims to be deferred until after discharge. Upon completion of their plan, the McDaniels obtained discharge, but later moved to reopen. They filed an adversary proceeding seeking a declaration that a particular private loan held by Navient was not excepted from discharge. They also sought a finding that Navient violated the discharge injunction by collecting on that private loan post-discharge. Navient moved to dismiss the adversary proceeding. [Read more…] about Debtors’ Challenge to Private Student Loan Survives Dismissal Motion

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No Recovery for Foreclosure Sale of Non-Disclosed Property

The chapter 13 debtor was judicially estopped from challenging the foreclosure sale of his property as a violation of the automatic stay because he failed to disclose his ownership interest in the property. Fornesa v. Fifth Third Mortgage Co., No. 17-20324 (5th Cir. July 27, 2018). [Read more…] about No Recovery for Foreclosure Sale of Non-Disclosed Property

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Circuit Rejects Mechanical Application of Judicial Estoppel

The district court abused its discretion when it mechanically applied judicial estoppel to bar the plaintiff’s personal injury lawsuit after he and his wife successfully completed their 100% plan. Clark v. Advanced Composites Grp., No. 17-1727 (2d Cir. March 30, 2018).

Michele and John Clark had one more payment due on their five-year chapter 13 plan when Mr. Clark was diagnosed with mesothelioma which he believed to have been caused by exposure to asbestos through his service with the United States Air Force and in his subsequent private sector work. The Clarks notified their bankruptcy counsel of his diagnosis and their intention to commence litigation, but their counsel did not notify the bankruptcy court. The Clarks successfully completed their plan payments. One year later, and one week prior to formal discharge and closure of their bankruptcy, Mr. Clark filed a personal injury complaint against Boeing and numerous other corporations. The case was removed to district court. Boeing then moved to dismiss the lawsuit on grounds of judicial estoppel. Finding that the Clarks’ failure to disclose Mr. Clark’s diagnosis to the bankruptcy court amounted to a false representation which the bankruptcy court acted upon by discharging them, the district court granted the motion. Mr. Clark died during the pendency of the appeal. [Read more…] about Circuit Rejects Mechanical Application of Judicial Estoppel

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Eleventh Circuit Eliminates Presumption of Intent for Judicial Estoppel

Whether a debtor intends to make a mockery of the judicial system when she fails to disclose a civil lawsuit in her bankruptcy schedules requires consideration of a totality of facts and circumstances. Slater v. U.S. Steel Corp., No. 12- 15548 (11th Cir. Sept. 18, 2017).

When she filed her chapter 7 bankruptcy petition, Sandra Slater failed to disclose her civil lawsuit for retaliation and discrimination in her employment that was pending in district court. In fact, in her Schedule B and in the Statement of Financial Affairs she affirmatively stated that she had no contingent claims or pending lawsuits. After her bankruptcy was fully administrated, U.S. Steel moved for summary judgment in the district court seeking a finding that her pending claims for employment discrimination should be barred by the doctrine of judicial estoppel due to her failure to disclose them in her bankruptcy. The next day, explaining that she had misunderstood the questions in the bankruptcy filings, Ms. Slater amended her bankruptcy documents to list the lawsuit. The bankruptcy court granted the trustee’s motion for an order to employ Ms. Slater’s current district court lawyers (who were different from her bankruptcy lawyer) so they could continue to pursue the employment lawsuit. Ms. Slater then converted from chapter 7 to chapter 13 but failed to make all required contributions to the plan and her case was ultimately dismissed. [Read more…] about Eleventh Circuit Eliminates Presumption of Intent for Judicial Estoppel