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    Public Law Legal Research Blog

    BANKRUPTCY: Judicial Estoppel in Post-Bankruptcy Court State Court Actions

    Posted by Gale Burns on Tue, Apr 2, 2013 @ 17:04 PM

    The Lawletter Vol 38 No 1

    Anne Hemenway, Senior Attorney, National Legal Research Group

    Many considerations come into play before an entity or individual files for bankruptcy relief.  Included among them is the careful consideration the potential debtor must give to other nonbankruptcy claims or lawsuits to which it is, or may be in the future, a party.  If it goes forward as a debtor, it must avoid the pitfall of having the doctrine of judicial estoppel preclude it from seeking future relief in a nonbankruptcy court.

    Judicial estoppel is an equitable doctrine applied at the discretion of the court.  New Hampshire v. Maine, 532 U.S. 742 (2001).  The primary purpose of the doctrine of judicial estoppel is to protect the integrity of the judicial process and to guard the judicial process against improper use.  Milton H. Greene Archives, Inc. v. Marilyn Monroe, LLC, 692 F.3d 983, 993 (9th Cir. 2012) (the doctrine is invoked because of "general considerations of the orderly administration of justice and regard for the dignity of judicial proceedings and to protect against a litigant playing fast and loose with the courts" (internal quotation marks omitted)).  The fundamental requirement for the application of judicial estoppel is that the party against whom estoppel is asserted must be assuming a position of fact inconsistent with a stance that that party has taken in prior litigation.  Bland v. Doubletree Hotel Downtown, Civ. No. 3:09CV272, 2010 WL 723805 (E.D. Va. Mar. 2, 2010).  Judicial estoppel is most often applied where in its schedules the debtor has failed to disclose assets or contingent assets to the bankruptcy court but then later pursues a known claim in state court.  In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012); Guay v. Burack, 677 F.3d 10 (1st Cir. 2012).

    The specific elements of judicial estoppel are (1) the party to be estopped must be advancing an assertion that is inconsistent with a position taken during previous litigation; (2) the position must be one of fact instead of law; (3) the prior position must have been accepted by the court in the first proceeding; and (4) the party to be estopped must have acted intentionally and not inadvertently.  Love v. Tyson Foods, Inc., 677 F.3d 258 (8th Cir. 2012). Importantly, judicial estoppel requires that the party adopting the inconsistent positions must have acted with some intent in doing so.

    In Bland, the court held that judicial estoppel applied where the debtor had failed to properly disclose a claim in her bankruptcy proceedings.  Even though the debtor had actually amended her petition to include the claim against the defendant hotel, she stated that the claim's value was only one dollar.  The court stated:

    While the Court would be receptive to the conclusion that Bland neglected to initially include the Doubletree claim in the bankruptcy proceeding as a result of inadvertence where she amended her petition upon supposedly learning for the first time of the necessity for doing so, the Court cannot ignore or discount the undisputed fact that she valued the claim at such a negligible amount while seeking a bounty in this litigation.  The Court simply cannot tolerate such purposeful action.

    2010 WL 723805, at *5.  The court held that the debtor's later Title VII claim against her employer was barred under the doctrine of judicial estoppel because of her failure to disclose the contingent or unliquidated claim in her bankruptcy case and because her actions were not inadvertent.

    Ultimately, how the court applies the doctrine of judicial estoppel is discretionary, and it is an equitable tool.  The doctrine can lead to harsh results and, therefore, must be applied with caution.  Lowery v. Stovall, 92 F.3d 219 (4th Cir. 1996); John S. Clark Co. v. Faggert & Friedmen, P.C., 65 F.3d 26 (4th Cir. 1995).

    Topics: legal research, The Lawletter Vol 38 No 1, bankruptcy, Anne Hemenway, judicial estoppel is discretionary tool of the cou, protection of judicial integrity and process, invoked against party asserting inconsistent stanc, not disclosing assets or contingent assets, acted intentionally

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