Practicing to Deceive: Using the Doctrine of Judicial Estoppel to Untangle the Web in Employment Cases, Part I
Picture it:1 Miami, Florida, 2014. A practitioner is defending a case of disability discrimination under the ADA. In preparing for the deposition of the plaintiff, the practitioner completes a routine public records check on the plaintiff when she discovers that shortly after the lawsuit was filed, the plaintiff filed for bankruptcy protection. Upon review of the bankruptcy petition, the practitioner finds that the plaintiff did not disclose the discrimination lawsuit on his petition. At first, our practitioner thinks “Jackpot!” But wait, she ponders. Is the doctrine of judicial estoppel even recognized anymore? The realization quickly sets in that she is about to delve into the world of bankruptcy practice. Like most employment practitioners, the mere mention of the word “bankruptcy” usually causes her to run in the other direction. It seems all too “inside baseball” — a highly specialized area with its own jargon and rules where only specialists dare to go.
This perception of bankruptcy law and practice is common, but it is one that must be corrected, especially for employment practitioners. Indeed, with 75,141 bankruptcy cases filed in Florida in 2014,2 this area certainly cannot be ignored. This article attempts to provide some guidance in this area through a discussion of the doctrine of judicial estoppel. It discusses the doctrine in two parts. In the first part, it discusses the current status of the doctrine of judicial estoppel, particularly in the bankruptcy context, along with the defenses to the application of the doctrine. In the second part, this article addresses some of the basic principles of bankruptcy law and practice encountered in litigating the issue of judicial estoppel.
A Review of the Doctrine of Judicial Estoppel
The doctrine of judicial estoppel protects the integrity of the judicial system.3 It is a well-settled doctrine that has been recognized by the courts for more than a century.4 The U.S. Supreme Court generally has explained the doctrine as follows: “‘[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he [or she] may not thereafter, simply because his [or her] interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him [or her].’”5 In other words, it “‘generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.’”6 The 11th Circuit has further explained that “[t]he doctrine is designed to prevent the parties from making a mockery of justice by inconsistent pleadings.”7 It noted that this doctrine prevents the “‘parties from playing fast and loose with the courts to suit the exigencies of self-interest.’”8 Thus, this doctrine protects the judicial system from a party deliberately changing his or her position to serve its needs of the moment and perverting the judicial process to serve his or her own self-interest.9
Since the doctrine is one based on equity, and for the purpose of protecting the judicial system and preventing the “‘improper use of judicial machinery,’” it is invoked at the court’s discretion and there is no strict formulation or required elements.10 The Supreme Court has recognized that the following three factors can guide the analysis in determining whether equity warrants the application of the doctrine11: 1) A party’s subsequent position “must be clearly inconsistent with its earlier position”12; 2) whether the party succeeded in persuading a court to accept the 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’”13; 3) whether the party making the inconsistent statement would obtain an unfair advantage or whether the opposing party would suffer an unfair detriment if the party were not estopped.14
The Supreme Court, however, emphasized that these factors are not inflexible prerequisites or an exhaustive formula, noting there may be other considerations that guide this decision based on the facts presented.15
In 2002, the 11th Circuit considered, for the first time, the application of the doctrine of judicial estoppel in an employment discrimination action. In observing it was addressing an issue of first impression, the court in Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285-88 (11th Cir. 2002), concluded that the plaintiff was estopped from seeking monetary damages for his discrimination claim because he failed to disclose the claim in a concurrent bankruptcy proceeding. Consistent with the Supreme Court’s direction, the 11th Circuit in Burnes indicated that the following two factors will govern the analysis in determining whether to apply the doctrine: 1) “[I]t must be shown that the allegedly inconsistent positions were made under oath in a prior proceeding”; and 2) “such inconsistencies must be shown to have been calculated to make a mockery of the judicial system.”16
Yet, it noted that these factors are not inflexible or exhaustive and that the court “must always give due consideration to all of the circumstances of a particular case when considering the applicability of this doctrine.”17
The doctrine of judicial estoppel has been applied in a variety of different factual contexts, including bankruptcy proceedings. Indeed, a heightened duty of candor exists in a bankruptcy action. The Bankruptcy Code requires “[a] debtor seeking shelter under the bankruptcy laws [to] disclose all assets, or potential assets, to the bankruptcy court.”18 This requirement includes the duty to disclose any lawsuits.19 The duty of candor is so critical to the administration of the bankruptcy proceedings that it does not end with the submission of the filings; the debtor has a duty to amend his or her disclosures if circumstances change.20 Thus, as recognized by the 11th Circuit, “[f]ull and honest disclosure in a bankruptcy case is ‘crucial to the effective functioning of the federal bankruptcy system.’”21 As a result, the doctrine of judicial estoppel serves a unique and important purpose regarding representations to the bankruptcy court because the need for full disclosure by the debtor is indispensible and the motive of self-interest is great.22
Indeed, the 11th Circuit opined that “‘the importance of full and honest disclosure cannot be overstated.’”23 For example, the purpose of the Ch. 724 petition is to allow the debtor to obtain a discharge of debts in exchange for authorizing the trustee to collect and liquidate the assets.25 This function cannot be served without complete honesty by the debtors regarding their assets. In addition, both the creditors and the bankruptcy court rely on the accuracy and completeness of these disclosures in determining whether a discharge is appropriate.26 These same principles of candor apply even if protection is sought under Ch. 13 of the Bankruptcy Code.27
As a result of the unique aspects involved in a bankruptcy case, including the fundamental requirement of honesty and full disclosure to operation of the bankruptcy system, the 11th Circuit “repeatedly has recognized that, when a debtor fails to disclose a pending lawsuit to the bankruptcy court, while having knowledge of the lawsuit and a motive to conceal it, the doctrine of judicial estoppel bars the undisclosed action from proceeding.”28
• First Factor: Inconsistent Statements Under Oath — The first factor in the analysis typically is easy to establish. The 11th Circuit has found it can be satisfied when the debtor has failed to disclose the lawsuit, either initially or through the failure to amend the disclosures after the lawsuit has been filed, in any type of bankruptcy proceeding and he or she simultaneously prosecutes the omitted action.29
• Second Factor: Calculated to Make a Mockery of the Judicial System — Most of the analysis in these cases is devoted to the second factor. This factor cannot be established by simple error or inadvertence.30 However, the 11th Circuit has held that, in the context of an omission of assets in a bankruptcy proceeding, “deliberate or intentional manipulation can be inferred from the record.”31 This inference can be made even if the debtor claims the omission is the result of error or inadvertence.32 Indeed, “‘[i]n considering judicial estoppel for bankruptcy cases, the debtor’s failure to satisfy its statutory disclosure duty is “inadvertent” only when, in general, the debtor either lacks knowledge of the undisclosed claims or has no motive for their concealment.’”33 Thus, despite the debtor’s claim of inadvertence, this factor can be satisfied by establishing that the debtor had knowledge of the lawsuit and a motive to conceal it.34
For example, in Burnes, the discrimination lawsuit was not yet pending at the time that the employee filed for bankruptcy protection.35 Nonetheless, the 11th Circuit affirmed the application of the doctrine of judicial estoppel to bar the monetary claim because the employee later filed a discrimination lawsuit, did not include the lawsuit on his updated or amended schedules when he converted the action from Ch. 13 to Ch. 7, and received a complete discharge of his debts.36 It explained that there was sufficient evidence of a motive to conceal because “[i]t is unlikely he would have received the benefit of a conversion to [Ch.] 7 followed by a no asset, complete discharge had his creditors, the trustee, or the bankruptcy court known of a lawsuit claiming millions of dollars in damages.”37 As further evidence of the debtor’s motive, the court relied on his attempt to re-open the bankruptcy proceedings to disclose the lawsuit, which it found was an implicit admission that the disclosure would have made a difference in the action.38
In Barger v. City of Cartersville, Georgia, 348 F.3d 1289, 1294-95 (11th Cir. 2003), the 11th Circuit also concluded that the undisputed evidence was sufficient to conclude that the debtor engaged in an intentional manipulation, despite her claim to the contrary. Specifically, the court noted that the plaintiff was pursuing her discrimination claim when she filed for bankruptcy protection, but she never disclosed the lawsuit as an asset after having numerous opportunities to do so and averring under the penalty of perjury that her disclosures were complete and accurate.39 She also had a motive to conceal the lawsuit so she could keep any proceeds for herself and obtain a complete discharge of all of her debts.40 As a result, the court concluded that the plaintiff’s “knowledge of her discrimination claims and motive to conceal them are sufficient evidence from which to infer her intentional manipulation.”41 The court further relied on the debtor’s conduct at the creditors’ meeting42 shortly after the bankruptcy petition was filed.43 At this meeting, the debtor disclosed the lawsuit, but misrepresented and failed to disclose all of the relief sought.44 Thus, while the debtor argued that this disclosure should save her claim, the court instead found that it further supported the conclusion that she engaged in an intentional manipulation.45
The 11th Circuit continued to follow Burnes and Barger in Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1275-76 (11th Cir. 2010), when it concluded that sufficient evidence existed of an intentional manipulation to warrant the application of the doctrine of judicial estoppel. In Robinson, it was undisputed that the debtor had knowledge of the lawsuit.46 However, the debtor argued that she had a lack of motive to conceal it because she fully satisfied her debts in accordance with her Ch. 13 plan.47 In rejecting this argument, the 11th Circuit noted that the debtor did not fully satisfy her debts until nine months after she filed the discrimination lawsuit.48 It found that the district court properly concluded that there was a motive to conceal because if “she realized any proceeds from the suit prior to the discharge of her bankruptcy… she could have kept the proceeds for herself without their becoming part of the bankruptcy estate and going to her creditors to satisfy her debts.”49
Indeed, at the time of the nondisclosure, which the court noted was the relevant period, legitimate questions were present as to whether the debtor would be able to satisfy the plan.50 Thus, the debtor’s full monetary repayment of her debts does not preclude a finding of a motive to conceal.51 The 11th Circuit recognized that there were other facts that weighed in favor of the application of judicial estoppel, including that the debtor failed to disclose other assets in the bankruptcy proceedings.52
However, the 11th Circuit found in Ajaka v. BrooksAmerica Mortgage Corporation, 453 F.3d 1339, 1344-46 (11th Cir. 2006),53 which did not involve employment claims, that there was a genuine dispute of material fact regarding the debtor’s intent to conceal. The claim did not exist before the plaintiff filed for bankruptcy protection.54 Thereafter, the plaintiff served a demand letter and filed a lawsuit based on an alleged truth-in-lending violation.55 Although the plaintiff did not amend his bankruptcy schedules at the same time, before the defendant in the litigation raised the prospect of judicial estoppel, the debtor’s attorney informed his bankruptcy lawyer that the schedules needed to be amended.56 Less than a month after the lawsuit was filed, the defendant sought to bar the claim through the application of judicial estoppel.57 Two months later (and three months after the lawsuit was filed), the schedules were amended to disclose the lawsuit.58 The court noted, however, that this case was different from Burnes because all of the creditors in the bankruptcy proceeding, which included the defendant in the lawsuit, were aware of the claim shortly after the lawsuit was filed and at a time when they could have taken action to prevent any harm from the omission in the disclosures.59 Therefore, based on a review of all of the circumstances, the court held that there was a genuine issue of material fact regarding the plaintiff’s intent, even though the debtor had knowledge and a motive to conceal the lawsuit.60 As a result, it reversed the entry of summary judgment in the defendant’s favor based on judicial estoppel.61
• Application of Judicial Estoppel in State Court — Although the doctrine has been applied in state court actions, the analysis and result has been different. In 2001, the Florida Supreme Court reaffirmed the application of the doctrine.62 In doing so, it set forth the elements for the application of the doctrine as follows: 1) The position must be successfully maintained; 2) the positions must be clearly inconsistent; 3) the parties must be the same; and 4) the same questions must be involved.63 The court explained that a favorable verdict will establish that the position has been successfully maintained.64 In addition, it found that, while judicial estoppel typically requires mutuality of parties, there is an exception when special fairness or policy considerations compel it, such as when a party changes its position after litigating its original position to a favorable verdict.65 The court did not require the defendant to establish that it had been misled or detrimentally relied on the opposing party’s representation.66
Nonetheless, based on the analysis established by the Florida Supreme Court, several district courts of appeal have rejected the application of judicial estoppel when the plaintiff failed to disclose the lawsuit in the bankruptcy proceedings.67 For example, in Grau v. Provident Life and Accident Insurance Co., 899 So. 2d 396, 400-401 (Fla. 4th DCA 2005), the Fourth District reversed the entry of summary judgment based on judicial estoppel because the bankruptcy court did not make any finding regarding the merits of the nondisclosed claim and this case did not fit within the exception to the mutuality requirement. Specifically, the court found that the doctrine was not applicable because “this is not a case where a plaintiff litigated to a jury verdict on one legal theory, only to abandon that theory for a contradictory one when the verdict was not as favorable as the plaintiff desired.”68 In addition, in Losacano v. Deaf & Hearing Connection of Tampa Bay, Inc., 988 So. 2d 66, 69 (Fla. 2d DCA 2008), the Second District refused to follow Barger and reversed the trial court’s entry of judgment based on judicial estoppel after the trustee substituted for the debtor on appeal, finding that the doctrine could not be applied against the trustee. Therefore, this issue may have a different outcome in state court. However, as the 11th Circuit recognized, federal law governs the analysis when it involves a bankruptcy proceeding and a claim under federal discrimination law.69
Arguments Against the Application of Judicial Estoppel
In addition to arguments regarding the application of the factors for judicial estoppel, a number of other defenses have been raised to the application of this doctrine. Some of these defenses have been successful, resulting in the court declining to apply the doctrine, while others have been rejected as a basis to avoid the doctrine of judicial estoppel. These arguments, or defenses, are discussed below.
• Successful Defenses — Certain claims for injunctive relief are not barred by the doctrine of judicial estoppel. Even if the doctrine of judicial estoppel bars a debtor’s claim for monetary relief, his or her claims for injunctive relief to change the employer’s practices may not be barred. The 11th Circuit has recognized that a debtor could proceed with an undisclosed claim for injunctive relief to change the employer’s practices because it would have had no impact on the bankruptcy proceedings, would not have increased the value of the bankruptcy estate, and it “was of no consequence to the trustee or the creditors.”70 In reaching this conclusion, however, the court specifically refused to comment on other types of nonmonetary relief, such as reinstatement, which were not sought by the debtor.71 Subsequently, the court in Barger concluded that judicial estoppel did not bar her claim for reinstatement because that claim “would have added nothing of value to the bankruptcy estate even if she properly disclosed it.”72
The doctrine of judicial estoppel may be inapplicable before a discharge has been entered. When the bankruptcy court has not accepted or otherwise relied on the debtor’s concealment, such as by entering a discharge of debts, the court may not apply the doctrine of judicial estoppel without other evidence of the debtor’s intent to make a mockery of the judicial system.73 This instance happens more frequently in Ch. 13 proceedings when a discharge typically is entered later in the proceedings.74 However, there may be other orders or relief provided under Ch. 13, such as a reduction in the amount of repayment plan, that demonstrate judicial acceptance of the debtor’s position.75
• Rejected Defenses — Lack of privity is no defense. The 11th Circuit has rejected any requirement of identity or privity of the parties in the two actions.76 The court noted that identity of the parties or privity is not required because the doctrine “protects the integrity of the judicial system, not the litigants.”77 Lack of prejudice to the opposing party is no defense. The 11th Circuit also has rejected a requirement of prejudice to or detrimental reliance by the opposing party in order to apply the doctrine of judicial estoppel.78 In doing so, it noted, again, that the purpose of the doctrine is to protect the judicial system, not the parties, thus, there is no requirement to show individual prejudice from the omissions or detrimental reliance by the opposing party.79
A lack of actual fraud does not prevent the application of the doctrine. The application of the doctrine is not dependent on whether the disclosure would have led to a different result in the bankruptcy proceeding.80 Thus, even if the result in the bankruptcy proceeding would have been the same had the lawsuit been disclosed, that fact does not allow the debtor to escape the application of the doctrine.81 The application of the doctrine is based on the possibility of defrauding the court and is not dependent on an actual fraudulent result.82 A debtor cannot cure his or her omission through a subsequent amendment. The 11th Circuit repeatedly has rejected the debtor’s attempt to cure the omission by seeking to reopen the bankruptcy proceedings and/or amend the disclosures.83 It has opined that:
Allowing [the debtor] to back-up, re-open the bankruptcy case, and amend his bankruptcy filings, only after his omission has been challenged by an adversary, suggests that a debtor should consider disclosing potential assets only if he is caught concealing them. This so-called remedy would only diminish the necessary incentive to provide the bankruptcy court with a truthful disclosure of the debtors’ assets.84
Attorney malpractice is no defense. A debtor’s attempt to blame his or her bankruptcy attorney for the nondisclosure will not save the claim from the doctrine of judicial estoppel.85 The 11th Circuit in Barger specifically rejected this argument.86 It noted that:
“[I]f an attorney’s conduct falls substantially below what is reasonable under the circumstances, the client’s remedy is against the attorney in a suit for malpractice. But keeping this suit alive merely because plaintiff should not be penalized for the omissions of his own attorney would be visiting the sins of plaintiff’s lawyer upon the defendant.”87
In addition, the debtor cannot create a genuine issue of fact by asserting that she believed the lawsuit had been disclosed because it is contrary to her averment in the bankruptcy petition acknowledging that she read the petition and confirmed its completeness.88 This contention will be disregarded as a sham.89
No waiver of judicial estoppel because it was omitted as an affirmative defense. Although the 11th Circuit has not addressed this issue, at least one court within the circuit has held that the failure to include judicial estoppel as an affirmative defense in the answer does not waive the right to assert the doctrine.90 Indeed, as the court explained, there is no waiver if the plaintiff receives notice of the defense through other means, including a motion for summary judgment promptly filed after the discovery of the concealment.91 It found that a motion was adequate notice as long as the plaintiff had an opportunity to respond to it and rebut it.92 The court explained that a defendant typically does not have notice of the nondisclosure at the time of filing the answer, and the plaintiff cannot claim prejudice by the defendant’s discovery of a fact that the plaintiff knew all along.93 Finally, the purpose of the doctrine of judicial estoppel supports the finding of no waiver. In particular, the doctrine exists to protect the integrity of the judicial system, not the litigants.94 This purpose would not be served if the doctrine could be waived, particularly when the plaintiff had an opportunity to respond, could not articulate any prejudice, and would be able to benefit from this deception at the expense of the integrity of the judicial system.95
Untangling the Principles of Bankruptcy Law and Practice
In the next issue, this article returns to the story of the diligent practitioner, considers the application of the doctrine in the practitioner’s case, and explores some of the basic principles of bankruptcy law and practice implicated in this doctrine.
1 Sophia Petrillo, Golden Girls, Witt/Thomas Productions, Touchstone Television. As with the stories fondly recounted by the character, Sophia Petrillo, on the Golden Girls television show, the following story is provided for illustrative purposes only and it does not depict any actual person or event.
2 Federal Judicial Caseload Statistics 2014, Table F, Cases Commenced, Terminated, and Pending, 2013 and 2014 (In 2014, there was a decrease in the bankruptcy cases filed in Florida. In 2013, 79,665 cases were filed. However, over the same period of time, the total number of civil case filings was only 25 percent of the total bankruptcy filings, http://www.uscourts.gov/Viewer.aspx?doc=/uscourts/Statistics/FederalJudicialCaseloadStatistics/2014/tables/F00Mar14.pdf. Compare Federal Judicial Caseload Statistics 2014, Table C, Cases Commenced, Terminated, and Pending, 2013 and 2014, http://www.uscourts.gov/Viewer.aspx?doc=/uscourts/Statistics/FederalJudicialCaseloadStatistics/2014/tables/C00Mar14.pdf.
3 New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001).
4 The U.S. Supreme Court has noted that this doctrine was recognized as early as 1895. Id. (citing Davis v. Wakelee, 156 U.S. 680, 689 (1895)).
5 New Hampshire, 532 U.S. at 749 (quoting Davis, 156 U.S. at 689). The 11th Circuit likewise has recognized that “[j]udicial estoppel is applied to the calculated assertion of divergent sworn positions.” Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002).
6 New Hampshire, 532 U.S. at 749 (quoting Pegram v. Herdrich, 530 U.S. 211, 227 n. 8 (2000)).
7 Burnes, 291 F.3d at 1285; see also Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1273 (11th Cir. 2010); Ajaka v. Brooksamerica Mortgage Corp., 453 F.3d 1339, 1344 (11th Cir. 2006); Barger v. City of Cartersville, Ga., 348 F.3d 1289, 1293 (11th Cir. 2003).
8 Burnes, 291 F.3d at 1285 (11th Cir. 2002) (quoting In re Coastal Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1999)); see also Barger, 348 F.3d at 1293.
9 Burnes, 291 F.3d at 1285; see also Robinson, 595 F.3d at 1273; Ajaka, 453 F.3d at 1344-45; Barger, 348 F.3d at 1293.
10 New Hampshire, 532 U.S. at 750 (quoting Konstantinidis v. Chen, 626 F.2d 933, 938 (D.C. Cir. 1980), and citing Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)); see also Ajaka, 453 F.3d at 1344 (noting that “[j]udicial estoppel is intended to be flexible rule”).
11 New Hampshire, 532 U.S. at 750-51.
12 Id. at 750 (internal quotation marks omitted).
13 Id. (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982)).
14 Id. at 751.
15 Id.
16 Burnes, 291 F.3d at 1285; see also Robinson, 595 F.3d at 1273; Ajaka, 453 F.3d at 1344; Barger, 348 F.3d at 1293-94.
17 Burnes, 291 F.3d at 1285-86; see also Robinson, 595 F.3d at 1273; Ajaka, 453 F.3d at 1344; Barger, 348 F.3d at 1293-94.
18 Burnes, 291 F.3d at 1286; see also 11 U.S.C. §§521(1), 541(a)(7); Robinson, 595 F.3d at 1274; Ajaka, 453 F.3d at 1344.
19 Burnes, 291 F.3d at 1286-87; see also Robinson, 595 F.3d at 1274 (“It is undisputed that a pending lawsuit seeking monetary compensation qualifies as an asset” and was required to be disclosed).
20 Burnes, 291 F.3d at 1286-87 (recognizing that “[t]he duty to disclose is a continuing one that does not end once the forms are submitted to the bankruptcy court; rather, a debtor must amend his financial statements if circumstances change”); see also Robinson, 595 F.3d at 1274 (affirming the application of judicial estoppel when the debtor failed to amend her bankruptcy petition to disclose a subsequently filed lawsuit); Ajaka, 453 F.3d at 1344. This duty exists regardless of the type of bankruptcy protection sought. Robinson, 595 F.3d at 1274.
21 Burnes, 291 F.3d at 1286-87 (quoting Ryan Operations G.P. v. Santiam-Midwest Lumber Co. et al., 81 F.3d 355, 362 (3d Cir. 1996)).
22 Burnes, 291 F.3d at 1286.
23 Id. (quoting Ryan Operations G.P., 81 F.3d at 362).
24 In the context of employment disputes, the most common types of bankruptcy protection are Ch. 7 and Ch. 13. In a Ch. 13 proceeding, unlike a Ch. 7 proceeding, there is no discharge of debts at the beginning of the proceeding. Burnes, 291 F.3d at 1284, n.1. Instead, under Ch. 13, the debtor is allowed to extend or reduce the debts through an approved rehabilitation plan. Id. ; De Leon v. Comcar Industries, Inc., 321 F.3d 1289, 1291 (11th Cir. 2003). Although a trustee may be appointed to allocate a portion of the debtor’s earnings to pay creditors, it is not a complete liquidation and the trustee does not marshal and liquidate the debtor’s assets as under Ch. 7. Burnes, 291 F.3d at 1284, n.1.
25 Burnes, 291 F.3d at 1284, n.1.
26 Id. at 1286.
27 De Leon, 321 F.3d at 1291-92 (noting that the duty of candor and the doctrine of judicial estoppel applies equally to proceedings under Chs. 7 and 13); see also Robinson, 595 F.3d at 1274-75. Specifically, the 11th Circuit observed: “‘[A]ny distinction between the types of bankruptcies available is not sufficient enough to affect the applicability of judicial estoppel because the need for complete and honest disclosure exists in all types of bankruptcies.’” Robinson, 595 F.3d at 1274 (quoting De Leon, 321 F.3d at 1291). In addition, the court concluded that “a financial motive to secret assets exists under Ch. 13 as well as under Ch. 7 because the hiding of assets affects the amount to be discounted and repaid.” De Leon, 321 F.3d at 1291. As a result, the 11th Circuit held “that the rule established in Burnes, that judicial estoppel bars a plaintiff from asserting claims previously undisclosed to the bankruptcy court where the plaintiff both knew about the undisclosed claims and had a motive to conceal them from the bankruptcy court, applies equally in Ch. 13 bankruptcy cases.” Id.
28 Dunn v. Advanced Med. Specialties, Inc., 556 F. Appx. 785, 788 (11th Cir. 2014); see also Robinson, 595 F.3d at 1272; Barger, 348 F.3d at 1294; De Leon, 321 F.3d at 1291; Burnes, 291 F.3d at 1285-88.
29 Dunn, 556 F. Appx. at 788-89; Robinson, 595 F.3d at 1275; Ajaka, 453 F.3d at 1344; Barger, 348 F.3d at 1294.
30 Robinson, 595 F.3d at 1275; Ajaka, 453 F.3d at 1345; Barger, 348 F.3d at 1294; Burnes, 291 F.3d at 1286-87.
31 Robinson, 595 F.3d at 1275; Barger, 348 F.3d at 1294; Burnes, 291 F.3d at 1286-88. But see Wheeler v. Florida Dep’t of Corr., No. 3:04-CV-1147-J-32MCR, 2006 WL 2321114 at *6 (M.D. Fla. 2006) (holding an evidentiary hearing sua sponte to discern whether the debtor possessed the requisite intent).
32 Dunn, 556 F. Appx. at 789; Robinson, 595 F.3d at 1275-76; Barger, 348 F.3d at 1295; De Leon, 321 F.3d at 1291-92; Burnes, 291 F.3d at 1286-87.
33 Robinson, 595 F.3d at 1275 (quoting Barger, 348 F.3d at 1295-96).
34 Robinson, 595 F.3d at 1275-76; Barger, 348 F.3d at 1295; De Leon, 321 F.3d at 1291-92.
35 Burnes, 291 F.3d at 1284.
36 Id. at 1284, 1286-88.
37 Id. at 1288.
38 Id.
39 Barger, 348 F.3d at 1294-95.
40 Id. at 1296.
41 Id.
42 This meeting is required by 11 U.S.C. §341. In this meeting, the debtor may be asked to confirm the accuracy of the information contained in the petition, and it may serve as further evidence to support the application of judicial estoppel if the debtor continues to conceal his or her employment claims.
43 Barger, 348 F.3d at 1296.
44 Id.
45 Id. Judge Barkett, however, dissented from this decision. Id. at 1297-98. She concluded that the debtor’s conduct was not calculated to make a mockery of the judicial system because she disclosed the lawsuit to her bankruptcy attorney, she disclosed it in the creditors’ meeting, and the trustee did not seek to substitute for the debtor in this lawsuit after he became aware of it. Id. at 1297. She concluded that the disclosure at the creditors’ meeting, while not complete, undermines any conclusion that she intended to conceal it. Id. Judge Barkett found this case distinguishable from Burnes and De Leon because the debtor made some attempt to disclose the lawsuit to the bankruptcy court, even if it was not complete. Id. at 1298. Judge Barkett also noted that the application of judicial estoppel requires consideration of all of the circumstances. See id. Thus, she noted that merely because the debtor had knowledge of the claim and a motive to conceal it does not require application of the doctrine in all cases. See id.
46 Robinson, 595 F.3d at 1275.
47 Id.
48 Id. at 1275-76.
49 Id. at 1275 (internal quotation marks omitted).
50 Id. at 1276.
51 Id.
52 Id. at 1275-76. Judge Anderson concurred in judgment only. Robinson, 595 F.3d at 1277 (Anderson, J., concurring). He explained that he believed he was obligated to concur in the judgment based on circuit precedent. Id. He expressed concern that the court has established an inflexible definition of inadvertence as set forth in the Barger decision. Id. (“I fear that we have created an inflexible formula for ‘inadvertence’ that prevents courts from thoroughly examining all of the circumstances of a particular case.”). Without the circuit precedent, Judge Anderson would have concluded that there was a fact issue as to whether the debtor intentionally contradicted herself. Id. He noted that there was minimal activity in the bankruptcy proceeding after the lawsuit was filed and that all creditors received full payment shortly thereafter, which gives rise to an inference that there was no value to the creditors in the claim. Id. In addition, he noted that there was no evidence that settlement of the lawsuit was imminent or realistic. Id. On the other hand, it is undisputed that she had knowledge of the claim, a theoretical motive to conceal, and had failed to disclose another lawsuit in the past. Id. In his view, however, these facts do not extinguish the disputed issue of material fact. Id. Nonetheless, he acknowledged that he was bound to follow prior panel precedent and affirm the application of the doctrine of judicial estoppel. Id. at 1277-78.
53 Judge Barkett, who dissented in Barger, authored this decision of the court.
54 Ajaka, 453 F.3d at 1342.
55 Id.
56 Id. at 1342-43.
57 Id.
58 Id.
59 Id. at 1345.
60 Id. at 1345-46.
61 Id.
62 Blumberg v. USAA Cas. Ins. Co., 790 So. 2d 1061, 1066 (Fla. 2001).
63 Id.
64 Id. at 1067.
65 Id. at 1066-67.
66 Id. at 1065-67; see also Grau v. Provident Life & Acc. Ins. Co., 899 So. 2d 396, 399 (Fla. 4th DCA 2005). Prior to this decision, district courts of appeal frequently rejected the application of the doctrine based on a lack of detrimental reliance. See Vining v. Segal, 773 So. 2d 1243, 1243 (Fla. 3d DCA 2000); Ramsey v. Jonassen, 737 So. 2d 1114, 1116 (Fla. 2d DCA 1999).
67 Montes v. Mastec N. Am., Inc., 132 So. 3d 1195, 1198 (Fla. 3d DCA 2014) (rejecting the application of the doctrine when the plaintiff amended his bankruptcy schedules after the motion for summary judgment was filed and there was a lack of mutuality of parties in the two proceedings); Losacano v. Deaf & Hearing Connection of Tampa Bay, Inc., 988 So. 2d 66, 69 (Fla. 2d DCA 2008); Grau, 899 So. 2d at 399.
68 Grau, 899 So. 2d at 401.
69 Burnes, 291 F.3d at 1285.
70 Id. at 1289.
71 Id. at 1289, n.3.
72 348 F.3d at 1297.
73 Strauss v. Rent-A-Center, Inc., 192 F. Appx. 821, 823 (11th Cir. 2006) (quoting Burnes, 291 F.3d at 1285) (finding that the district court’s application of judicial estoppel was reversible error because the debtor “was not successful in ‘persuading a tribunal to accept the earlier position, so that judicial acceptance of the inconsistent position in a later proceeding creates the perception that either court was misled’”); see also Ajaka, 453 F.3d 1344 (noting that one pertinent factor is “whether the party successfully persuaded a court to accept the earlier position”).
74 Strauss, 192 F. Appx. at 823.
75 Robinson, 595 F.3d at 1276; De Leon, 321 F.3d at 1292 (affirming the application of the doctrine of judicial estoppel to a Ch. 13 proceeding and concluding that the debtor had a motive to conceal because the disclosure would have impact the amount of repayment of debt under his plan).
76 Burnes, 291 F.3d at 1286.
77 Id.
78 Id.
79 Id. But see Ajaka, 453 F.3d at 1345 (emphasis in original) (noting that “prejudice serves an important role in the applicability of the doctrine in this context, for it is difficult to impute an intent to make a mockery of the judicial system where the complaining party was aware of the inconsistency in sufficient time and in a position to properly raise an objection in the original proceeding”) (internal quotations marks omitted).
80 Robinson, 595 F.3d at 1275.
81 Id.
82 Id.
83 Burnes, 291 F.3d at 1288; see also Barger, 348 F.3d at 1297; De Leon, 321 F.3d at 1291-92.
84 Burnes, 291 F.3d at 1288.
85 Dunn, 556 F. Appx. at 789; Barger, 348 F.3d at 1295. But see Ajaka, 453 F.3d at 1345.
86 Barger, 348 F.3d at 1295 (observing that “the attorney’s omission is no panacea [as] [t]here is certainly no merit to the contention that dismissal of petitioner’s claim because of his counsel’s unexcused conduct imposes an unjust penalty on the client. Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent.”) (internal quotations marks and citations omitted).
87 Barger, 348 F.3d at 1295 (citations omitted) (quoting Link v. Wabash R.R. Co., 370 U.S. 626, 634 (1962)). As set forth above, Judge Barkett dissented from this decision, specifically noting that the fact she informed her attorney and her attorney admitted that his oversight caused the nondisclosure should prevent the application of the doctrine of judicial estoppel. Id. at 1298 (Barkett, J., dissenting).
88 Dunn, 556 F. Appx. at 789.
89 Id. (citing Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657 (11th Cir. 1984)).
90 Lett v. Reliable Ruskin, No. 1:05CV479-WHA, 2006 WL 2056582 at *4 (M.D. Ala. 2006). The 11th Circuit also has not addressed which party has the burden of proof in considering the application of this doctrine. Outside of this circuit, courts generally have found that the defendant bears the burden to prove this doctrine. Vehicle Mkt. Research, Inc. v. Mitchell Int’l, Inc., 767 F.3d 987, 996 (10th Cir. 2014); Love v. Tyson Foods, Inc., 677 F.3d 258, 262 (5th Cir. 2012); Barley v. Fox Chase Cancer Ctr., No. CIV.A. 13-6269, 2014 WL 5369401 at *5 (E.D. Pa. Oct. 23, 2014). Yet, the Fifth Circuit has held that, once the defendant establishes knowledge and a motive to conceal, the burden shifts to the debtor to establish inadvertence for the nondisclosure. Love, 677 F.3d at 262.
91 Lett, 2006 WL 2056582 at *4 (“Thus, if a plaintiff receives notice of an affirmative defense by some means other than pleadings, the defendant’s failure to comply with Rule 8(c) does not cause the plaintiff any prejudice.”) (internal quotation marks omitted).
92 Id. at **4-5. However, the court noted that “it would have been more appropriate form for [the defendant] to first ask this court for leave to amend its [a]nswer.” Id. at *5, n.2.
93 Id. at *5, n.2.
94 Burnes, 291 F.3d at 1285-86.
95 Lett, 2006 WL 2056582 at **4-5.
Sacha Dyson is a partner with Thompson, Sizemore, Gonzalez & Hearing, P.A., in Tampa. She received her B.S., with honors, from Rochester Institute of Technology, and her J.D., cum laude , from Stetson University College of Law where she served as the executive editor of the Stetson Law Review . She represents businesses, governmental entities, and educational institutions in labor, employment, education, housing, and other civil rights disputes.
This column is submitted on behalf of the Labor and Employment Law Section, Shane Thomas Munoz, chair, and Robert Eschenfelder, editor.
