Eighth Circuit Takes Hard Line on Judicial Estoppel

Posted by NCBRC - February 25, 2016

Applying little analysis beyond recitation of bullet points, the Eighth Circuit found that bankruptcy debtors have an obligation to report lawsuits filed during the life of the chapter 13 plan and that failure to do so justifies application of judicial estoppel. Jones v. Bob Evans Farms, Inc, No. 15-2068 (8th Cir. Jan. 26, 2016).

Mr. Jones and his wife Sherron Shores filed chapter 13 bankruptcy shortly after Mr. Jones began working at Bob Evans. In the petition, the debtors failed to include Ms. Shore’s pending worker’s compensation claim. When the trustee objected to confirmation they amended their schedules to include the claim. The order confirming their amended plan included the instruction to report to the trustee any lawsuits that are “received or receivable” during the life of the plan. While the bankruptcy was pending, Mr. Jones filed an employment discrimination claim against Bob Evans. He did not report the lawsuit to the trustee. He received his discharge in bankruptcy and, in the discrimination case, Bob Evans moved to dismiss based on Mr. Jones’s failure to inform of the bankruptcy court of the lawsuit. The district court granted the motion. Mr. Jones moved to reopen his bankruptcy case to add the lawsuit but the district court found the effort too little, too late. His “last minute candor” did not alter the decision to dismiss based on judicial estoppel.

On appeal, the Eighth Circuit listed three factors relevant to the question of whether a claim should be barred by judicial estoppel: 1) adopting a later position that is “clearly inconsistent” with an earlier one, 2) persuading a court to accept the earlier position thereby creating the impression that one or the other court was misled, and 3) gaining an unfair advantage by reason of the inconsistent positions. Citing Stallings v. Hussmann Corp., 447 F.3d 1041 (8th Cir. 2006), the court found generally that a “party who has filed for bankruptcy may be judicially estopped from pursuing a claim not disclosed in his or her bankruptcy filings.”

The court rejected without analysis NACBA’s argument as amicus that Bankruptcy Rule 1007, which mandates disclosure of a post-petition acquisition of an interest in property, does not demand disclosure of a post-petition lawsuit. Rather the court, again citing Stallings, found that “a Chapter 13 debtor who does not amend his bankruptcy schedules to reflect a post petition cause of action adopts inconsistent positions in the bankruptcy court and the court where that cause of action is pending.”

Without pointing to any concrete advantage enjoyed by Mr. Jones, the court found that “a Chapter 13 debtor who receives a right to sue letter from the EEOC while his bankruptcy case is pending has a motive to conceal his employment discrimination claims from that court.” The court further held that any theoretical inadvertence the debtor might claim is defeated by the existence of the bankruptcy court’s order to disclose post-petition lawsuits “received or receivable.”

Jones 8th Cir opinion


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