In the context of judicial estoppel, courts are divided on the issue of whether, for purposes of analyzing the defense of mistake or inadvertence, a plaintiff’s subjective intent matters. Several recent cases touch on this issue.
In considering judicial estoppel, courts generally consider three factors set forth in New Hampshire v. Maine, 532 U.S. 742 (2001): “(1) Is a party’s later position clearly inconsistent with its earlier position? (2) Has the party succeeded in persuading a court to accept that 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? (3) Will the party seeking to assert an inconsistent position derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped?” Moses v. Howard University Hospital, 606 F.3d 789, 798 (D.C. Cir. 2010). If these prima facie elements are established the plaintiff may then raise the defense of mistake or inadvertence. Courts have found that mistake or inadvertence is not shown when a plaintiff knows of the facts giving rise to the undisclosed claim and has a motive to conceal the claim. However, courts diverge in their treatment of the “motive to conceal” factor.
Some find that “motive” is established whenever there is an advantage to be gained by concealment without regard to whether the plaintiff actually sought to gain that advantage. See, e.g., Robinson v. District of Columbia, No. 13-1297 (D.C. Jan. 29, 2014) (though the court found that the plaintiff/debtor relied on advice of counsel and had no subjective intent to deceive, “motive to conceal” still established because plaintiff/debtor reaped advantage by reason of the concealment). [Arguably, this improperly conflates the third element of New Hampshire with the defense of inadvertence, making establishment of the prima facie case for judicial estoppel all that is necessary to defeat the defense].
Other courts, including the Fourth, Sixth, Seventh, and Ninth Circuits inquire into the subjective intent of the plaintiff. See, e.g., Javery v. Lucent Technologies, ___ F.3d ___, No. 12-3834 (6th Cir. Feb. 3, 2014) (“[A]ny omission was almost certainly due to carelessness or inadvertent error as opposed to intentional, strategic concealment or impermissible gamesmanship.”); Dzakula v. McHugh, — F.3d —, 2014 WL 128605 (9th Cir. Jan. 15, 2014) and Ah Quin v. County of Kauai Dept. of Trans., 733 F.3d 267 (9th Cir. 2013) (interpreting “inadvertence” and “mistake” according to their ordinary meaning including a subjective element); Thomas v. Indiana Oxygen Co., No. 14-476 (S.D. Ind. July 15, 2014); Skrzecz v. Gibson Island Corp., No. 13-1796 (D. Md. July 11, 2014) (following Whitten v. Fred’s, Inc., 601 F.3d 231, 242 (4th Cir. 2010) to find that “the Fourth Circuit has analyzed the issue of intent in terms of whether there is evidence of bad faith.”); Korti v. A.W. Holdings, LLC, No. 13-63 (N.D. Ind. Feb. 26, 2014) (relying on Rainey v. United Parcel Serv., Inc., 466 F. App’x 542, 544 (7th Cir. 2012) for the conclusion that motive to conceal has “bad faith” element).
The plaintiff/debtor’s attempts to rectify the nondisclosure either by disclosing it in a still pending bankruptcy case or reopening a closed case to include the information may be a relevant consideration. Thomas v. Indiana Oxygen Co., No. 14-476 (S.D. Ind. July 15, 2014) (swift corrective action suggests inadvertence); Ramirez v. Manpower, No 13-2880 (N.D. Cal. July 10, 2014) (failure to reopen a bankruptcy case to add information about a pending lawsuit put the “inadvertence” inquiry into the narrow, non-subjective, analytical mode); Nationwide Prop. & Cas. Co. v. Hunt, No. 11-2591 (N.D. Ala. June 13, 2014) (no estoppel where plaintiff/debtor did not reap any benefit from nondisclosure in his chapter 13 case of an insurance claim where his bankruptcy was dismissed for failure to make plan payments ten days after he made his insurance claim). Compare Zyla v. Am. Red. Cross Blood Serv., No. 13-2464 (N.D. Cal. March 27, 2014) (unless and until the bankruptcy court actually takes corrective action based upon the plaintiff/debtor’s late disclosure, the presumption of intentional deceit still obtains).
A couple of courts, after finding that the plaintiff was not estopped from pursuing the previously undisclosed lawsuit nonetheless left in the hands of the bankruptcy court the question of whether the lawsuit damages should be capped at the amount necessary to pay off the bankruptcy creditors. Korti v. A.W. Holdings, LLC, No. 13-63 (N.D. Ind. Feb. 26, 2014); Thomas v. Indiana Oxygen Co., No. 14-476 (S.D. Ind. July 15, 2014).
Tags: judicial estoppel
