Eleventh Circuit Applies New Judicial Estoppel Analysis

Posted by NCBRC - October 18, 2018

When addressing judicial estoppel, courts may no longer apply a presumption of motive to conceal, but must look at the facts and circumstances behind a bankruptcy debtor’s failure to disclose his civil action in the bankruptcy proceeding. Silva v. Pro Transport Inc., No. 17-12744 (11th Cir. Aug. 10, 2018).

After Julio Antonio Silva’s chapter 13 bankruptcy plan was confirmed, he filed an FLSA claim in district court against his employers for failure to pay overtime. He did not tell his civil counsel about his bankruptcy nor did he immediately inform the bankruptcy court of the district court case. The district court granted the employer’s motion for summary judgment on the basis of judicial estoppel, and awarded over $50,000 to the employer in sanctions and attorney fees. Mr. Silva appealed the sanctions award.

While his appeal was pending, the Eleventh Circuit decided Slater v. U.S. Steel Corp., 871 F.3d 1174 (11th Cir. 2017) (en banc), which revisited that circuit’s treatment of judicial estoppel: specifically, the issue of intent.

“Judicial estoppel applies when (1) a party takes an inconsistent position under oath in a separate proceeding, and (2) the party’s inconsistent positions were calculated to make a mockery of the judicial system.” Prior to the Eleventh Circuit’s reconsideration of Slater, the second prong of this test was easily met by the presumption that hiding the existence of the civil action from the bankruptcy court adhered to the debtor/plaintiff’s benefit and thus revealed motive to conceal and an intent to make a mockery of the judicial system.

The decision in Slater walked-back the presumption and replaced it with a requirement that the court look to the circumstances surrounding the nondisclosure in individual cases. Such circumstances include the debtor/plaintiff’s level of sophistication, whether he attempted to correct the non-disclosure, whether the trustee knew of the civil case, whether the debtor/plaintiff disclosed other civil actions.

With these considerations in mind, the court turned to whether the district court in this case properly awarded sanctions to the employer after entering judgment in its favor. The court was persuaded that Mr. Silva’s counsel’s conduct was not sanctionable. The fact that the circuit court changed its position on judicial estoppel in Slater was indication that Mr. Silva’s counsel did not adopt a frivolous legal position in arguing against application of that doctrine. Although the appeal did not challenge the underlying grant of summary judgment, the court noted that Mr. Silva’s lack of sophistication and the bankruptcy court’s allowance of his amendment to include the FLSA claim, suggested that the district court erred in barring his civil claim, lending further support to Mr. Silva’s attorney’s decision to pursue the civil case.

The court reversed the award of sanctions.

Silva 11th Cir Aug 2018


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