Morgan et al v. Mercedes Benz US International Inc

Filing 25

MEMORANDUM OPINION. Signed by Magistrate Judge T Michael Putnam on 2/20/19. (MRR, )

FILED
2019 Feb-20 PM 01:48
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

ROBERT A. MORGAN, in his capacity )
as Chapter 7 trustee, and DEBORAH
)
CLEVELAND,
)
)
Plaintiffs,
)
)
vs.
)
)
)
MERCEDES-BENZ U.S.
)
INTERNATIONAL, INC.,
)
)
Defendant,
)

CIVIL ACTION NO:
7:18-cv-00464-TMP

MEMORANDUM OPINION

Introduction
Pending before the court is Defendant’s motion for partial judgment on the
pleadings, filed pursuant to Federal Rule of Civil Procedure 12(c). (Doc. 14). The
motion has been fully briefed. The plaintiff opposes the motion, asserting that the
complaint adequately sets forth viable claims. The parties have consented to the
jurisdiction of the magistrate judge pursuant to 28 U.S.C. § 636(c).
Rule 12(c) provides that a party may move for a judgment on the pleadings
“[a]fter the pleadings are closed – but early enough not to delay trial.” Fed. R. Civ.
P. 12(c). Entry of a “[j]udgment on the pleadings is appropriate when there are no
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material facts in dispute, and judgment may be rendered by considering the
substance of the pleadings and any judicially noticed facts.” Hawthorne v. Mac
Adjustment, Inc., 140 F.3d 1367, 1370 (11th Cir. 1998). The court must “accept all
facts in the complaint as true and view them in the light most favorable to the
nonmoving party.” Cannon v. City of West Palm Beach, 250 F.3d 1299, 1301 (11th
Cir. 2001). Generally, an affirmative defense pleaded in the answer cannot be
considered as a basis for dismissing the complaint under Rule 12(c). La Grasta v.
First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004); Future Fibre Techs.
Pty. Ltd. v. Optellios, Inc., No. 2:08-CV-00600-UA-DNF, 2009 WL 10669938, at
*2 (M.D. Fla. May 7, 2009) (“[A] plaintiff is not required to negate an affirmative
defense in its complaint.”).
Mercedes-Benz U.S. International, Inc. (“Mercedes-Benz”) seeks to have
Deborah Cleveland (“Cleveland”) dismissed as a party from this suit because she
lacks standing to bring employment claims alongside the Chapter 7 Bankruptcy
Trustee, Robert A. Morgan. (Doc. 14, p. 1-2). The defendant contends that once
she filed for bankruptcy, all of her assets, including her inchoate claims and causes
of action, because the assets of the bankrupt estate, not hers. Cleveland counters
that she should be allowed to maintain a presence in the suit because her claim for
equitable relief is not included in the bankruptcy estate and the amount recovered
might exceed the value of her creditors’ claims. (Doc. 21, p. 5-6). The parties do
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not dispute that Mercedes-Benz terminated Cleveland on July 15, 2016, after
which Cleveland voluntarily filed for Chapter 7 bankruptcy protection on
March 23, 2018. (Doc. 14).

Cleveland disclosed the existence of her claims

against Mercedes-Benz in the bankruptcy disclosure petition. (Doc. 14, p. 2).
Now, Cleveland, in her individual capacity, with Morgan, in his capacity as
Chapter 7 Trustee, bring suit alleging that Mercedes-Benz violated Cleveland’s
rights under the Americans with Disabilities Act (“ADA”) and the Family Medical
Leave Act (“FMLA”).

(Doc. 14, p. 2).

Mercedes-Benz filed a motion for

judgment on the pleadings. (Doc. 14). Cleveland filed a response. (Doc. 21).
Mercedes-Benz filed a reply. (Doc. 22).
Discussion
Generally, prudential standing bars actions where a plaintiff is not the real
party in interest. Barger v. City of Cartersville, Ga., 348 F.3d 1289, 1292 (11th
Cir. 2003) (overruled on other grounds, Slater v. United States Steel Corp., 871
F.3d 1174 (11th Cir. 2017)).

“To satisfy the ‘prudential’ requirements for

standing, a party generally must assert his own legal rights and interests rather than
those of a third party.” Oswalt v. Sedgwick Claims Management Services, Inc.,
2015 WL 1565033, at *3 n.6 (M.D. Ala. Apr. 8, 2015) (citing Harris v. Evans, 20
F.3d 1118, 1121 (11th Cir. 1994)).

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When a debtor files for relief under the bankruptcy code, a bankruptcy estate
is created that contains “all legal or equitable interests of the debtor in property . . .
.” 11 U.S.C. § 541(a)(1) (2016). The bankruptcy estate encompasses all claims or
causes of action that accrue before the debtor files the bankruptcy petition. Parker
v. Wendy’s Int’l., Inc., 365 F.3d 1268, 1272 (11th Cir. 2004). Thus, the trustee is
the only party with standing to prosecute causes of action belonging to the estate.
Id. The plaintiff’s voluntary bankruptcy relinquished her ownership in the claims
and causes of action that accrued prior to the filing of the bankruptcy petition.
In Oswalt, the District Court for the Middle District of Alabama concluded
that the plaintiff did not have standing to bring claims because his claims could be
brought only by the bankruptcy trustee. Oswalt, 2015 WL 1565033, at *1. The
court examined relevant Eleventh Circuit precedent and concluded that “under the
authority of Burkett—as well as the persuasive unpublished opinions of the
Eleventh Circuit in Webb, Chen, and Baxley—th[e] plaintiff lacks standing to
continue to prosecute the causes of action before the court, since all of the
plaintiff’s legal and equitable interests in the causes of action were extinguished
when they became assets of his bankruptcy estate . . . .” Id. at *5 1, see also Jones v.

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The Oswalt court based its decision on the following cases. Burkett v. Shell Oil Co., 448 F.2d
59 (5th Cir. 1971); Chen v. Siemens Energy Inc., 467 F. App’x. 852 (11th Cir. 2012) (plaintiff’s
claims included legal and equitable relief); Webb v. City of Riverdale, 472 F. App’x. 884 (11th
Cir. 2012); Baxley v. Pediatric Services of Am., Inc., 147 F. App’x. 59 (11th Cir. 2005)
(plaintiff’s claims included legal and equitable relief).
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Clayton County, 184 F. App'x 840, 842 (11th Cir. 2006) (“Regardless of whether a
bankruptcy debtor discloses its existence, a pre-petition cause of action is the
property of the Chapter 7 bankruptcy estate. Parker v. Wendy's International, Inc.,
365 F.3d 1268, 1272 (11th Cir.2004). ‘Thus, a trustee, as the representative of the
bankruptcy estate, is the proper party in interest, and is the only party with standing
to prosecute causes of action belonging to the estate.’”). The property of the
bankruptcy estate includes “all legal or equitable interests of the debtor in property
as of the commencement of the case.” 11 U.S.C. § 541(a)(1); see Isaac v. IMRG,
224 F. App'x 907, 909 (11th Cir. 2007).
Mercedes-Benz terminated Cleveland on July 15, 2016. (Doc. 14, p. 1).
Cleveland filed for Chapter 7 bankruptcy protection more than a year later, on
August 24, 2017. (Doc. 14, p. 2). Cleveland properly declared the existence of her
claims on her bankruptcy disclosure petition. (Doc. 14, p. 2). Cleveland filed the
current action, jointly with the bankruptcy trustee, on March 23, 2018. (Doc. 1).
According to the relevant precedent, all of Cleveland’s causes of action belong to
the Chapter 7 bankruptcy trustee, because all of her “legal and equitable” interests
are included in the bankruptcy estate. Here, the reasoning in Oswalt is persuasive
because Cleveland’s claims belong to the bankruptcy estate, Cleveland does not
satisfy prudential standing.

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Typically, motions to dismiss of this kind are based on situations in which a
debtor fails to properly disclose the existence of a claim or action in bankruptcy
court petition and dismissal is proper under the doctrine of judicial estoppel. Here,
judicial estoppel is not at issue because Cleveland properly disclosed her claims.
The court instead applies prudential standing. Cleveland argues that she personally
should remain in the action and pursue injunctive relief because the “remedy of
reinstatement is of no monetary value” to the estate. (Doc. 21, p. 1). In Toussaint,
the court examined the issue of prudential standing and concluded that judicial
estoppel, as discussed in Burnes2 and Barger,3 is not relevant to prudential
standing analysis. Toussaint v. Howard Univ., No. 03-1395, 2005 WL 6778614, at
*3-4 (D.D.C. Nov. 8, 2005). While judicial estoppel may apply differently to legal
and equitable claims, standing does not differentiate. See Oswalt, 2015 WL
1565033, at *5; see also Chen v. Siemens Energy Inc., 467 F. App’x. 852, 854
(11th Cir. 2012) (dismissing legal and equitable claims for lack of standing). The
Court finds the reasoning in Toussaint persuasive and finds that upon filing for
Chapter 7 bankruptcy the Cleveland’s entire cause of action transferred to the
bankruptcy estate. Id. at *3.

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3

Cleveland does not have standing to maintain

Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (2002).
Barger, 348 F.3d at 1296.
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equitable or legal claims against the defendant in this action. Robert Morgan, in
his capacity as Chapter 7 Trustee, is the real party in interest.
Cleveland is not without an avenue by which she may protect her interests.
First, the Chapter 7 trustee holds the rights of the debtor in trust “where they may
be administered to creditors and/or re-vested with the debtor after the bankruptcy
proceeding.” Toussaint, WL 6778614, at *4. Next, Cleveland has the right to
receive notice of and to object to any proposed settlement. Fed. R. Bankr. P. 9019.4
Toussaint, WL 6778614, at *4. This allows her to protect and assert her claim for
reinstatement or other equitable remedies 5 through her objection to any proposed
settlement of the discrimination action that does not fairly take into account her
practical interest in such remedies.
Conclusion
Accordingly, Defendant’s motion for judgment on the pleadings (Doc. 14) is
due to be granted. A separate order will be entered dismissing Cleveland as a party
in this action.

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See In re RFE Indus., Inc. v. Gibbons, 283 F.3d 159, 163-64 (3d Cir. 2002); In re Brutsche, 500
B.R. 62, (D.N.M. 2013); In re Middendorf, 381 B.R. 774 (D. Kan. 2008); In re Mobile Air
Drilling Co., Inc., 53 B.R. 605 (N.D. Ohio 1985).

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The court expresses no opinion as to whether frontpay is an equitable remedy the plaintiff
retains a practical (albeit not legal) interest in and whether it is property of the bankruptcy estate
in that frontpay, being a sum of money tied to future earning awarded in lieu of reinstatement,
arguably is a property interest accruing after the filing of the bankruptcy petition.
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DATED the 20th day of February, 2019.

_______________________________
T. MICHAEL PUTNAM
UNITED STATES MAGISTRATE JUDGE

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