Mayo Granados v. Supervalu Inc et al

Filing 33

MINUTE ORDER IN CHAMBERS by Judge John A Kronstadt: Remanding case to Los Angeles Superior Court, Case number BC472439 Case Terminated. Made JS-6 (Attachments: # 1 Letter CV-103) (shb)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Mayo Granados v. Supervalu, Inc., et al.

Present: The Honorable

Date

August 16, 2012

JOHN A. KRONSTADT, UNITED STATES DISTRICT JUDGE

Andrea Keifer

Not Reported

Deputy Clerk

Court Reporter / Recorder

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

I.

(IN CHAMBERS) ORDER RE DEFENDANTS’ MOTION TO DISMISS
CERTAIN CAUSES OF ACTION (Dkt. 11) JS-6

INTRODUCTION

The issue presented on this motion is whether Plaintiff Mayo Granados (“Plaintiff”) is judicially
estopped from advancing employment discrimination claims against his former employers that accrued
prior to Plaintiff’s bankruptcy. Plaintiff did not disclose these claims in connection with his bankruptcy,
which resulted in a complete discharge of Plaintiff’s debt. For the reasons set forth in this Order, the
Court now GRANTS Defendants’ motion to dismiss Plaintiff’s first four causes of action with prejudice,
and REMANDS Plaintiff’s fifth claim to the California Superior Court for the County of Los Angeles for
lack of subject matter jurisdiction.
II.

PROCEDURAL BACKGROUND

On March 12, 2012, the Court held its initial hearing on this motion, which was brought by
Defendants Supervalu, Inc., Albertson’s, New Albertson’s, and American Stores Company, LLC
(collectively, “Defendants”). At the hearing, the Court granted Defendants’ motion to dismiss Plaintiff’s
first four causes of action and stated that it would remand the fifth cause of action to the California
Superior Court. Dkt. 28. However, the Court stayed execution of that ruling for 45 days, until May 1,
2012, and set a status conference for April 30, 2012, to permit Plaintiff an opportunity to seek to reopen
his bankruptcy and seek to disclose his employment-related claims in some retroactive manner. In
advance of the status conference, each side submitted a status report. On April 24, 2012, Plaintiff
reported that he had successfully reopened his bankruptcy case, and that a hearing would be held on
June 5, 2012 in relation to a potential compromise. Dkt. 30. On April 25, 2012, Defendants submitted a
status report setting forth their position that regardless of whether Plaintiff succeeded at reopening his
bankruptcy, Plaintiff is judicially estopped from asserting the undisclosed employment claims. Dkt. 31.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Date

August 16, 2012

Mayo Granados v. Supervalu, Inc., et al.

The Court held the status conference as scheduled on April 30, 2012. Dkt. 32. After each side
presented its present position, the Court took the issue of judicial estoppel under submission. Id.
III.

BACKGROUND

Plaintiff alleges that he was employed by Defendants for over 14 years as an Assistant Store
Director. Compl. ¶ 8, Notice of Removal, Exh. A, Dkt. 1. He alleges that he suffered from a physical
disability as a result of spine and lower back injuries and herniated discs, and the perceived and mental
disability associated with anxiety and depression. Compl. ¶ 9. Plaintiff states that he filed a Workers’
Compensation claim based on these disabilities, and that following the submission of such claim,
Defendants created a hostile work environment and harassed, discriminated and retaliated against
Plaintiff. He contends that he was wrongfully terminated on April 5, 2010. Compl. ¶¶ 10-22.
On June 30, 2010, Plaintiff filed a Bankruptcy Petition under Chapter 7. 11 U.S.C. Ch. 7.
However, in that Petition, Plaintiff did not disclose as an asset his potential employment discrimination
and wrongful termination causes of action against Defendants or his potential recovery from such
claims. Plaintiff’s bankruptcy was discharged on November 9, 2010, and closed on December 3, 2010.
Dkt. 11; Request for Judicial Notice (“RJN”), Exhs. B-C, Dkt. 12.
Approximately 11 months later, on October 28, 2011, Plaintiff filed this action in the Los Angeles
County Superior Court. Plaintiff’s complaint advanced five causes of action: (i) perceived and/or
physical disability discrimination, harassment and retaliation in violation of California Government Code
§ 12940 et seq.; (ii) perceived and/or mental disability discrimination, harassment and retaliation in
violation of California Government Code § 12940 et seq.; (iii) violation of California Family Rights Act,
California Government Code § 12945.2 et seq.; (iv) retaliation and wrongful termination in violation of
public policy; and (v) violation of California Labor Code § 226 et seq.
On December 8, 2011, Defendants removed the action to this Court on the basis of diversity
jurisdiction. Plaintiff moved to remand the action, arguing that the amount in controversy does not
exceed $75,000, and that the fourth cause of action for wrongful termination in violation of public policy
arises under California Workers’ Compensation laws and cannot be removed to federal court. The
Court denied Plaintiff’s motion to remand at the March 12, 2012 hearing. Dkt. 28.
In the instant motion, Defendants seek dismissal of Plaintiff’s first four causes of action. They
contend that Plaintiff lacks standing because the claims belonged to the bankruptcy estate and that he
is judicially estopped from bringing them because they were not identified as an asset during the course
of the bankruptcy proceedings. Dkt. 11.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Mayo Granados v. Supervalu, Inc., et al.

IV.

Date

August 16, 2012

ANALYSIS
A.

Judicial Estoppel
1.

Legal Standard

“Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by
asserting one position, and then later seeking an advantage by taking a clearly inconsistent position.”
Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 783 (9th Cir. 2001). Courts consider three
factors in evaluating the applicability of judicial estoppel: “(1) whether a party's later position is ‘clearly
inconsistent’ with its original position; (2) whether the party has successfully persuaded the court of the
earlier position[;] and (3) whether allowing the inconsistent position would allow the party to ‘derive an
unfair advantage or impose an unfair detriment on the opposing party.’” United States v. Ibrahim, 522
F.3d 1003, 1009 (9th Cir. 2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 750, (2001)).
“In the bankruptcy context, a party is judicially estopped from asserting a cause of action not
raised in a reorganization plan or otherwise mentioned in the debtor's schedules or disclosure
statements.” Hamilton, 270 F.3d at 784. The purpose of judicial estoppel is to protect the integrity of the
bankruptcy process. Id. at 785. The “integrity of the bankruptcy system depends on full and honest
disclosure by debtors of all of their assets. The courts will not permit a debtor to obtain relief from the
bankruptcy court by representing that no claims exist and then subsequently to assert those claims for
his own benefit in a separate proceeding.” Id. (italics in original). “The Bankruptcy Code and Rules
impose upon the bankruptcy debtors an express, affirmative duty to disclose all assets, including
contingent and unliquidated claims.” Id. (italics in original; internal quotations omitted). “The debtor's
duty to disclose potential claims as assets does not end when the debtor files schedules, but instead
continues for the duration of the bankruptcy proceeding.” Id.
2.

Application

Each of the three operative factors is met. First, Plaintiff’s later position, the filing of this action,
is clearly inconsistent with his original position, the failure to identify his causes of action as an asset in
his bankruptcy schedules, i.e., that he had no such claims. See id. at 784 (noting that the debtor
“clearly asserted inconsistent positions” by failing to disclose claims and then advancing such claims).
Second, Plaintiff “successfully persuaded” the bankruptcy court of his earlier position when that court
discharged Plaintiff’s debts in reliance on his incomplete bankruptcy schedules. See id. (“[A] discharge
of debt by a bankruptcy court… is sufficient acceptance to provide a basis for judicial estoppel, even if
the discharge is later vacated.”). Third, Plaintiff derived an unfair advantage by receiving a discharge of
his debts. Thus, Plaintiff’s employment discrimination and wrongful termination claims meet the factors
for application of judicial estoppel.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Mayo Granados v. Supervalu, Inc., et al.
B.

Date

August 16, 2012

Relevance of Plaintiff’s Knowledge and Good Faith
1.

The Parties’ Arguments

Plaintiff contends that he was unaware of his potential claims against Defendants until he met
with his attorney in April 2011. This occurred one year after the termination of his employment and after
the conclusion of his bankruptcy. Because he claims that he was unaware of a viable basis for any
wrongful termination claims prior to this time, he contends that he did not act in bad faith when he
completed his bankruptcy schedules without identifying as assets the causes of action that he brings in
this case. For these reasons, Plaintiff contends that judicial estoppel should not bar his claims.
Defendants contend that Plaintiff need not have been aware of the exact causes of action;
instead, the law requires only knowledge of facts giving rise to the claims. Defendants contend that it is
clear from Plaintiff’s complaint that he was aware of the facts giving rise to his discrimination and
wrongful termination claims at the time he was terminated inasmuch as he alleges, inter alia, that he
was harassed and the subject of discrimination while an employee. Defendants also assert that good
faith is not relevant because the Ninth Circuit has not recognized an exception to judicial estoppel in
cases of inadvertence or mistake.
2.

Legal Standard

“Judicial estoppel will be imposed when the debtor has knowledge of enough facts to know that
a potential cause of action exists during the pendency of the bankruptcy, but fails to amend his
schedules or disclosure statements to identify the cause of action as a contingent asset.” Hamilton, 270
F.3d at 784. See also Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir. 1992)
(“We recognize that all facts were not known to [the plaintiff] at that time, but enough was known to
require notification of the existence of the asset to the bankruptcy court; the debtor must disclose any
litigation likely to arise in a nonbankruptcy context.”). As one court explained:
Hamilton, Hay, and Monroe County Oil make it clear that the duty of the bankruptcy
petitioner to disclose the existence of a potential claim is not a formalistic duty
predicated on the procedural status of a claim, but is a duty of candor that accrues from
the time the facts that give rise to the potential claim are known. Hay, 978 F.2d at 557. It
is also clear… that the subjective intent of the bankruptcy petitioner at the time of the
bankruptcy filing to pursue or not pursue the claims is not relevant. The duty of the
bankruptcy petitioner is to disclose all actual and potential assets of the bankruptcy
estate, not just those assets the petitioner may subjectively choose to pursue….
Whether Plaintiff's intentions were innocent when she made the representation to the
bankruptcy court that she had no potential claims does not directly enter into the
determination of whether judicial estoppel applies.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Date

August 16, 2012

Mayo Granados v. Supervalu, Inc., et al.

Rose v. Beverly Health & Rehab. Servs., 356 B.R. 18, 25-27 (E.D. Cal. 2006).
3.

Application

The issue presented here with respect to estoppel is not whether Plaintiff acted in good faith
when he failed to disclose his present claims during the course of the bankruptcy. Under the standard
set forth by the Ninth Circuit in Hamilton and Hay, the issue is instead whether Plaintiff had sufficient
factual knowledge about the conditions of his employment to know that a potential cause of action
existed during the pendency of his bankruptcy. Plaintiff’s complaint alleges the following: “When Plaintiff
was harassed, discriminated against and retaliated against, Plaintiff’s perceived and/or mental
disability(s) and/or complaints about the unlawful conduct were motivating reasons and/or factors in
Defendants’ conduct.” Compl. ¶ 56. In his wrongful termination in violation of public policy claim,
Plaintiff alleges that Defendants retaliated against, discriminated against, and terminated him in part
“for complaining about such discrimination and retaliation.” Id. at ¶¶ 82-84. Similar allegations are
repeated throughout the complaint. Nothing in these allegations or in Plaintiff’s opposition to
Defendants’ motion suggests that, during the pendency of his bankruptcy, Plaintiff lacked knowledge of
the facts giving rise to these claims. Indeed, it would be neither logical nor credible for Plaintiff to so
contend. Thus, the issue is whether he was aware of his working conditions and Defendants’ allegedly
discriminatory and retaliatory motivation, not whether he knew what causes of action might arise from
them. Accordingly, Plaintiff was obligated to disclose his potential claims to the bankruptcy court,
regardless of whether he intended to pursue them or fully understood that they had accrued. Because
he had knowledge of sufficient facts to give rise to his claims, and because the three factors for judicial
estoppel are met, Plaintiff is judicially estopped from advancing his employment discrimination and
wrongful termination claims.
C.

Significance of Reopening Plaintiff’s Bankruptcy Proceedings

Although the Court previously provided Plaintiff the opportunity to seek to reopen his bankruptcy
and disclose these claims, see Dkt. 28, the Court finds that Plaintiff is judicially estopped from
advancing his employment discrimination and wrongful termination claims regardless of whether he
now discloses them. The policies underlying the doctrine of judicial estoppel and the bankruptcy laws
require that failure to disclose potential assets act as a complete bar to later recovery. The Eleventh
Circuit explained these policies as follows:
The success of our bankruptcy laws requires a debtor's full and honest disclosure.
Allowing [the plaintiff] 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.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Date

August 16, 2012

Mayo Granados v. Supervalu, Inc., et al.

Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1288 (11th Cir. 2002). As the Ninth Circuit observed in
Hamilton,
we must invoke judicial estoppel to protect the integrity of the bankruptcy process. The
debtor, once he institutes the bankruptcy process, disrupts the flow of commerce and
obtains a stay and the benefits derived by listing all his assets. The Bankruptcy Code
and Rules impose upon the bankruptcy debtors an express, affirmative duty to disclose
all assets, including contingent and unliquidated claims. … [The plaintiff’s] failure to list
his claims against [the defendant] as assets on his bankruptcy schedules deceived the
bankruptcy court and [the plaintiff’s] creditors, who relied on the schedules to determine
what action, if any, they would take in the matter.
270 F.3d at 785.
These rules control in this action. Thus, to protect the integrity of the bankruptcy system and of
the courts, Plaintiff must be estopped from asserting his claims even if he were to re-open his
bankruptcy, seek to disclose them and have them pursued as assets of the estate.1 It would be
inconsistent with the important policies requiring a full and open disclosure of assets to permit this
course. Thus, creditors who may have participated in the bankruptcy process two years ago, may not
have the interest or incentive to participate anew. It would be unfair, therefore, for Plaintiff to be
permitted to pursue claims now that could result in a greater benefit to him than he would have attained
had they been disclosed as part of the 2010 bankruptcy process. The policy that requires a full and
open disclosure must be respected, lest debtors seek to conceal asserts during their bankruptcies in
order to seek to attain greater personal benefits from them by re-opening the proceeding years later.
Although in any one case the result of this policy could mean that creditors would be denied the
potential benefit of the proceeds that could result from the pursuit of undisclosed claims, enforcement of
these policies overrides this possibility; they are essential to protect all creditors and to ensure the
integrity of the bankruptcy system.

1

Because judicial estoppel bars Plaintiff from advancing these claims, the Court need not reach Defendants’
argument that Plaintiff lacks standing. Notably, unlike judicial estoppel, which cannot be cured through the
reopening of Plaintiff’s bankruptcy, Plaintiff could potentially acquire standing by reopening his bankruptcy and
entering into an agreement under which he would be authorized to advance the claims on behalf of himself and/or
his former creditors. See Ortiz v. Sodexho Operations, LLC, Nos. 11-CV-1295 JLS (RBB) & 10-CV-2224 JLS
(RBB), 2011 U.S. Dist. LEXIS 111208, at *10 (S.D. Cal. Sept. 27, 2011) (noting that the plaintiff had standing after
reopening her bankruptcy because the claims were sold to a third party who authorized the plaintiff to advance
them, but nonetheless finding that the claims were barred by judicial estoppel).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

LA CV11-10175 JAK (MANx)

Title

Mayo Granados v. Supervalu, Inc., et al.

V.

Date

August 16, 2012

CONCLUSION

For the foregoing reasons, the Court finds that Plaintiff is judicially estopped from advancing his
first, second, third and fourth causes of action for employment discrimination and wrongful termination.
Thus, the Court dismisses these claims with prejudice. Plaintiff’s fifth claim for violation of California
Labor Code § 226 is remanded to the Superior Court for the State of California, County of Los Angeles,
Central District, Case No. BC472439.

IT IS SO ORDERED.
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Initials of Preparer

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