D.C. Court of Appeals affirms summary judgment based on judicial estoppel

In Atkins v. 4940 Wisconsin LLC, ___ A.2d ___, 2014 D.C. App. LEXIS 192 (D.C. July 3, 2014), the Court affirmed the trial court's award of summary judgment to the defendant on the grounds of judicial estoppel, based on the plaintiff's filings in bankruptcy court in which he represented in his schedules that he had no unliquidated claims.  An aggravating factor here was that the defendant in the personal injury suit had had a claim of $328,606 against the plaintiff due to a retail lease, which claim was discharged in the bankruptcy.

In the District of Columbia, the courts generally consider three factors in deciding whether to apply judicial estoppel: (1) whether a party's later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading a court to accept the party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled; and (3) whether the party seeking to impose an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.

Editor's note:

The doctrine of judicial estoppel precludes a party from taking one position on an issue before one court and the opposite position before a different court, and has been adopted in the District of Columbia.  See Fairman v. District of Columbia, 934 A.2d 438, 443 (D.C. 2007); Porter Novelli v. Bender, 817 A.2d 185, 188 (D.C. 2003); Thoubboron v. Ford Motor Co., 809 A.2d 1204, 1212 (D.C. 2002);  Lofchie v. Wash. Square P'ship, 580 A.2d 665, 668-69 (D.C. 1990)(concurring opinion by Schwelb, J);  See also Comcast Corp. v. FCC, 390 U.S. App. D.C. 111, 116, 600 F.3d 642, 647 (D.C. Cir. 2010).

In Moses v. Howard Univ. Hosp., 391 U.S. App. D.C. 21, 30, 606 F.3d 789, 798 (D.C. Cir. 2010), the United States Court of Appeals for the District of Columbia Circuit stated,

While “‘[t]he circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle,’” Maine, 532 U.S. at 750 (quoting Zurich Ins. Co., 667 F.2d at 1166), we have explained that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then] simply because his interests have changed, assume[s] a contrary position.’”  Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749). 

The Moses Court stated that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then,] simply because his interests have changed, assume[s] a contrary position.’” Id. at 798. (citing Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749).

In New Hampshire v. Maine, 532 U.S. 742, 749 (3d ed. 2000), the Supreme Court spoke approvingly of judicial estoppel in that it “’prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding,’” (quoting 18 MOORE’S FEDERAL PRACTICE § 134.30 (3d ed. 2000)), and explained that judicial estoppel is “’an equitable doctrine invoked by a court at its discretion,’” Maine, 532 U.S. at 750 (quoting Rolfs, 893 F.3d at 1037).  See also Moses v. Howard Univ. Hosp., 606 F.3d 789, 798 (D.C. Cir. 2010).

In the context of bankruptcy proceedings, “[a] debtor is required to disclose all potential claims in a bankruptcy petition. See 11 U.S.C. §§ 521(1), 541(a)(1).  The Moses Court interpreted this to mean that “. . . a debtor is under a duty both to disclose the existence of pending lawsuits when he files a petition in bankruptcy and to amend his petition if circumstances change during the course of the bankruptcy.” Id. at 793.

The doctrine of judicial estoppel may be applied where the plaintiff has failed to comply with these statutory requirements:

Courts have routinely held that judicial estoppel is appropriate when a debtor fails to identify a claim in a bankruptcy proceeding and then proceeds to assert that claim in a separate judicial action. See Moses v. Howard Univ. Hosp., 606 F.3d at 798 ("[E]very circuit that has addressed the issue has found that judicial estoppel is justified to bar a debtor from pursuing a cause of action in district court where that debtor deliberately fails to disclose the pending suit in a bankruptcy case."); Kopff v. World Research Group, LLC, 568 F. Supp. 2d 39, 43-44 (D.D.C. 2008) (citing cases).

Frese v. Empire Fin. Servs., 725 F. Supp. 2d 130, 140 (D.D.C. 2010).

A debtor in bankruptcy court has a continuing duty to disclose all assets and potential assets to the court until her discharge date.[1] 11 U.S.C. § 521(1) and 541(a)(7); In re Wilmoth, 412 B.R. 791, 798-99 (Bankr. E.D. Va. 2009) (explaining that [t]he duty to list all property and applicable exemption is an ongoing duty prior to closing of the case and the duty falls squarely on the Debtor’s shoulders); Burnes v. Pemco Aeroplex, 291 F.3d 1282, 1286 (11th Cir. 2002); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999).[2]

“Reopening a case does not automatically grant the Debtor a right to amend schedules or take other actions that ought to have occurred prior to closing; instead, the reopening of the case allows administrative and ministerial loose ends to be tied. See Finch v. Coop (In re Finch), 378 B.R. 241, 246 (B.A.P. 8th Cir. 2007) (citing In re Barlett, 326 B.R. 436, 438 (Bankr. N.D. Ind. 2005)). Chapter 7 trustees are not automatically reappointed as trustees upon the reopening of a bankruptcy case. Fed. R. Bankr. P. 5010.”  In re Wilmoth, 412 B.R. 791, 795-796 (Bankr. E.D. Va. 2009)

 

[1] Federal bankruptcy law requires a debtor to list in the initial petition, inter alia, a “schedule of assets.” 11 U.S.C. § 521(a)(1)(B)(1).  Official Form 6 for Schedule B requires a debtor to list “all personal property of the debtor of whatever kind,” and property of a bankruptcy estate is defined broadly to include “all legal or equitable interests of the debtor in property as of commencement of the case.” 11 U.S. C. § 541(a)(1).  Courts have interpreted this definition to include “all causes of action that could be brought by a debtor.”  USinternetworking, Inc. v. Gen. Growth Mgmt., 310 B.R. 274, 281 (Bankr. D. Md. 2004) (citing Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989)).  The duty to disclose such claims continues for the duration of the bankruptcy proceeding. Id. at 282 (citing Browing Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999)).

[2] "'The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information … prior to confirmation to suggest that it may have a possible cause of action, then that is a "known" cause of action such that it must be disclosed'".  Browning Mfg., 179 F3d at 208, quoting Union Carbide Corp. v. Viskase Corp. (In re Envirodyne Indus., Inc.), 183 B.R. 812, 821 n.17 (Bankr. N.D. Ill. 1995)). "Any claim with potential must be disclosed, even if it is 'contingent, dependent, or conditional'".  Browning Mfg., 179 F.3d at 208, quoting Westland Oil Dev. Corp. v. MCorp Management Solutions, Inc., 157 B.R. 100, 103 (S.D. Tex. 1993) (emphasis the Court’s).