Yoshimoto v. O'Reilly Automotive, Inc. et al

Filing 48

ORDER CERTIFYING SUMMARY JUDGMENT RULING 39 PER 28 U.S.C. § 1292(b). Signed by Judge Beeler on 7/7/2011. (lblc1, COURT STAFF) (Filed on 7/7/2011)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

Northern District of California

10

Oakland Division
NORMAN YOSHIMOTO,

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11

No. C 10-05438 LB

Plaintiff,

ORDER CERTIFYING SUMMARY
JUDGMENT RULING PER 28 U.S.C. §
1292(b)

v.
13
O’REILLY AUTOMOTIVE, INC., et al.,
14
15

[ECF No. 40]
Defendants.
_____________________________________/

16
17

I. INTRODUCTION
On June 6, 2011, the court issued an order denying Defendant O’Reilly Automotive’s motion for

18

summary judgment based on judicial estoppel. ECF No. 39.1 On June 14, 2011, O’Reilly

19

Automotive requested that the court amend its order and certify it for appeal pursuant to pursuant to

20

28 U.S.C. § 1292(b). ECF No. 41 at 1. O’Reilly Automotive also asks the court to stay this case

21

pending the appeal, if the court grants its request for certification. On June 17, 2011, Plaintiff

22

Norman Yoshimoto filed his opposition to O’Reilly Automotive’s request. ECF No. 44. The court

23

grants O’Reilly Automotive’s request because the order presents a controlling question of law about

24

which there are substantial grounds for difference of opinion, and an immediate appeal may

25

materially advance the ultimate termination of the litigation. In the interests of judicial economy,

26

the court grants O’Reilly Automotive’s request for a stay while the appeal is pending.

27
28

1

Citations are to the Electronic Case File (“ECF”) with pin cites to the electronic page
number at the top of the document, not the pages at the bottom.
C 10-05438 LB
ORDER GRANTING REQUEST

II. LEGAL STANDARD

1
2

Section 1292(b) provides a means for litigants to bring an immediate appeal of a non-dispositive

3

order with the consent of both the district court and the court of appeals. 28 U.S.C. § 1292(b); In re

4

Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1982). The district court may certify an order

5

for interlocutory appellate review under section 1292(b) if the following three requirements are met:

6

“(1) there is a controlling question of law, (2) there are substantial grounds for difference of opinion,

7

and (3) an immediate appeal may materially advance the ultimate termination of the litigation.” Id..

8

A district court may certify an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) “only in

9

exceptional situations in which allowing an interlocutory appeal would avoid protracted and

10

expensive litigation.” Id. (citing U.S. Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir.1966)).
III. DISCUSSION

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11

As discussed below, O’Reilly Automotive argues that the three requirements for permissive

13

certification are present. ECF No. 41 at 2.2 The court briefly summarizes the underlying order. The

14

court then analyzes the arguments made by O’Reilly Automotive as to the three factors for

15

permissive certification and concludes that certification is appropriate.

16

A. Background to Instant Motion to Amend

17

Plaintiff Norman Yoshimoto is suing his former employer, O’Reilly Automotive, Inc. (successor

18

to CSK Auto, Inc.), asserting six claims related to alleged discrimination. Complaint, ECF No. 1.

19

O’Reilly Automotive filed a motion for summary judgment, arguing that the doctrine of judicial

20

estoppel bars Yoshimoto from bringing these claims because he concealed them from the

21

bankruptcy court. Motion, ECF No. 24 at 12.

22

In an exercise of its discretion, the court balanced the need to protect judicial integrity with the

23

equities in stopping the litigation, ultimately denying O’Reilly Automotive’s motion for summary

24

judgment for the following reasons: (1) the trustee of the bankruptcy estate, who O’Reilly

25
26
2

27
28

Yoshimoto argues that the court’s decision was correct and, therefore, certification is
inappropriate. ECF No. 44 at 4. However, in his brief, Yoshimoto does not provide any more
meaningful discussion or analysis as to the three factors that govern whether the order should be
certified for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
C 10-05438 LB
ORDER GRANTING REQUEST

2

1

Automotive claimed was the real party-in-interest,3 did not make any inconsistent statements; (2)

2

application of the doctrine of judicial estoppel to bar Yoshimoto from bringing the claims would

3

harm the creditors of the estate; and (3) there might be other solutions to police Yoshimoto’s

4

inconsistencies without punishing the creditors. Order, ECF No. 39 at 15-16.

5

Judicial estoppel may be invoked by the court at its discretion. Morris v. California, 966 F.2d

6

448, 453 (9th Cir. 1991). In the context of assessing a motion for summary judgment based on

7

judicial estoppel, the Ninth Circuit discussed and applied certain factors set out by the Supreme

8

Court. Hamilton v. State Farm Fire & Cas. Ins. Co., 270 F.3d 778, 782 (9th Cir. 2001). The Ninth

9

Circuit stated that these factors were not exhaustive. Id.

10

In support of its motion for summary judgment, O’Reilly Automotive presented several cases in
which various appellate courts affirmed a district court’s application of judicial estoppel to bar a

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11

debtor from pursuing a claim that the debtor previously had concealed from the bankruptcy court.

13

But O’Reilly Automotive provided no controlling cases that held a district court abuses its discretion

14

when, after consideration of all the facts, it declines to apply judicial estoppel to bar a debtor from

15

pursuing a claim that the debtor previously had concealed from the bankruptcy court when the

16

bankruptcy court subsequently authorized the pursuit of the claims by the debtor for the benefit of

17

the bankruptcy estate.

18

As discussed in the court’s order, the Ninth Circuit cases cited by O’Reilly Automotive –

19

Hamilton and Hay v. First Interstate Bank of Kalispell, N.A., 978 F.2d 555 (9th Cir. 1992) – are

20

distinguishable and simply do not address whether the application of judicial estoppel with the

21

instant facts is required as a matter of law. Order, ECF No. 39 at 12-13.

22

And, again as discussed in the court’s order, there are conflicting outcomes and value judgments

23

applied in the non-binding decisions that more squarely address the issue. Id. at 12-15. Boiled

24

down, the court addressed the competing policies of maximizing creditor recovery and the integrity

25
26
27
28

3

In its initial case management statement, O’Reilly Automotive claimed that Yoshimoto
was not the real party-in-interest. ECF No. 18 at 3. Yoshimoto sidestepped this issue by coming to
an agreement with the bankruptcy estate that permitted Yoshimoto to pursue the pre-petition claims
with the bankruptcy estate and Yoshimoto sharing in any recovery from his pre-petition or postpetition claims. Opposition, ECF No. 29 at 12; Agreement, Exh. W., ECF No. 32 at 8.
C 10-05438 LB
ORDER GRANTING REQUEST

3

claims through litigation in this case. Id. (analyzing cases); compare In re Cheng, 308 B.R. 448,

3

458-59 (9th Cir. BAP 2004) (finding that bankruptcy court erred when it invoked judicial estoppel

4

without considering its effect on unsecured creditors), aff’d, 160 Fed. Appx. 644 (9th Cir. 2005),

5

Biesek v. Soo Linger R. Co., 440 F.3d 410, 413-14 (7th Cir. 2006) (analyzing the competing

6

concerns and noting importance of creditors’ interest) (dictum), Craft v. Demeyer Furniture, Inc.,

7

No. 1:10-CV-230-BLW, 2011 WL 573595 at *3-*4 (D. Idaho Feb. 13, 2011) (finding that interests

8

of plaintiff’s creditors outweighed court’s interest in the integrity of the judicial system, rejecting

9

Laisure-Radke, supra), with In re Coastal Plains, 179 F.3d 197 (5th Cir. 1999) (holding that the

10

integrity of the system outweighed creditors’ interest); Burnes v. Pemco Aeroplex, Inc., 291 F.3d

11

1282 (11th Cir. 2002) (same); Laisure-Radke v. Barr Laboratories, Inc., No. C03-3654RSM, 2006

12
For the Northern District of California

of the judicial process and declined to bar the bankruptcy trustee’s decision to pursue the creditors’

2

UNITED STATES DISTRICT COURT

1

WL 1727978, at *4 (W.D. Wash. June 22, 2006) (same), aff’d, 313 Fed. Appx. 32 (9th Cir. 2009).

13

B. § 1292(b) Factors

14

1. Whether There is a Controlling Question of Law

15

The Ninth Circuit defines a controlling question as one in which “the resolution of the issue on

16

appeal could materially affect the outcome of litigation in the district court.” In re Cement Antitrust

17

Litigation, 637 F.2d at 1027. O’Reilly Automotive claims that there is a controlling question of law,

18

specifically: “whether a post-discharge amendment and debtor-trustee sharing agreement has any

19

legal effect on a judicial estoppel analysis when a debtor concealed known claims in his bankruptcy

20

petition.” ECF No. 41 at 5. The court acknowledges that its order presents this issue, even if it

21

disagrees with O’Reilly Automotive’s characterization of its holding. (As discussed in the previous

22

section, the court views the issue as balancing policies and exercising discretion to allow the

23

bankruptcy trustee to vindicate the interests of creditors through the litigation.) Regardless, a

24

reversal of the order would bar Yoshimoto from asserting his pre-petition claims against O’Reilly

25

Automotive and would terminate the case because Yoshimoto has not yet asserted any other claims.

26

Thus, the order presents a controlling question. See, e.g., In re Trace Intern. Holdings, Inc., No. 04

27

Civ. 1295(KMW), 2009 WL 3398515, at *3 (S.D.N.Y. Oct. 21, 2009).

28

A number of circuit courts have expressed that certification pursuant to 28 U.S.C. § 1292(b) is

C 10-05438 LB
ORDER GRANTING REQUEST

4

1

not appropriate when the issue is whether the district court abused its discretion. See, e.g., Ohio

2

Environmental Council v. U.S. Dist. Court, Southern Dist. of Ohio, Eastern Div., 565 F.2d 393 (6th

3

Cir. 1977); Matter of Doe, 546 F.2d 498, 502 (2d Cir. 1976); In re Virginia Elec. & Power Co., 539

4

F.2d 357, (4th Cir. 1976) (“Ordinarily, we agree, the decision to sit or not to sit is within the sound

5

discretion of the trial court and is not properly appealable under Section 1292(b).”). Ultimately,

6

however, the court takes the view that:

7
8
9
10

The key consideration is not whether the order involves the exercise of discretion,
but whether it truly implicates the policies favoring interlocutory appeal. The
determination of what orders are properly reviewable under § 1292(b) must be
made by a practical application of those policies, not by a mechanical application
of labels such as ‘discretionary’ or ‘nondiscretionary.’ Those policies, both before
and since the enactment of § 1292(b) have included the avoidance of harm to a
party pendente lite from a possibly erroneous interlocutory order and the
avoidance of possibly wasted trial time and litigation expense.

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11
Katz v. Carte Blanche Corp., 496 F.2d 747, 756 (3d Cir. 1974). And, in this case, the court

13

recognizes that, however one frames the question, the Ninth Circuit could conclude that, as a matter

14

of law, judicial estoppel prevents Yoshimoto from pursuing his pre-petition claims – even if it was

15

authorized by the bankruptcy estate, which will share in any recovery – and that such a holding

16

would terminate the litigation. See In re Coastal Plains, 179 F.3d at 204 (holding that, as a matter of

17

law, judicial estoppel prevented a bankruptcy estate’s trustee and a successor to the debtor’s claim

18

from pursuing the matter when the debtor had omitted the claim from its bankruptcy schedules); see

19

generally Yanez v. U.S., 989 F.2d 323, 325 (9th Cir. 1993) (noting that the district court certified its

20

decision regarding judicial estoppel for interlocutory appeal).

21

2. Whether There Are Substantial Grounds for a Difference of Opinion

22

“Courts traditionally will find that a substantial ground for difference of opinion exists where the

23

circuits are in dispute on the question and the court of appeals of the circuit has not spoken on the

24

point, if complicated questions arise under foreign law, or if novel and difficult questions of first

25

impression are presented.” Couch, 611 F.3d at 633 (quotations omitted). O’Reilly Automotive

26

argues that the order raises novel and difficult questions of first impression because neither the

27

parties nor the court were able to uncover a Ninth Circuit precedent squarely on point and the

28

resolution of the issue requires a balancing of important and conflicting policy concerns. ECF No.

C 10-05438 LB
ORDER GRANTING REQUEST

5

1

41 at 6. O’Reilly Automotive further states that there is conflicting authority. Id. at 6-7. As noted

2

above and in its summary judgment ruling, the court agrees that there is conflicting authority and

3

that the Ninth Circuit has not yet spoken definitively to the issue.

4
5
6

3. Whether an Immediate Appeal Might Materially Advance the Ultimate Termination of
the Litigation
O’Reilly Automotive claims that an immediate appeal here will materially advance the ultimate

7

termination of the litigation because, if the Ninth Circuit accepts O’Reilly Automotive’s

8

petition and rules in its favor on appeal, judgment would be entered for the defendant and the

9

lawsuit terminated. ECF No. 41 at 7. The court agrees.

10

Mindful that certification pursuant to § 1292(b) is to be used sparingly, at a June 30, 2011 case

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11

C. Additional Considerations

management conference, the court asked the parties to discuss the practical issues surrounding

13

certification.

14

First, the court asked whether certification would likely avoid protracted, expensive litigation.

15

O’Reilly Automotive claimed that the underlying litigation likely would be protracted and expensive

16

because the claims make Yoshimoto’s employment history relevant and Yoshimoto was employed at

17

the company for many years. O’Reilly Automotive noted that a hearing before another panel that

18

was scheduled for 45 minutes ended up taking two days. Yoshimoto argued that certification and a

19

stay would not avoid litigation expenses because he had filed a new action for his post-petition

20

claims, Yoshimoto v. O'Reilly Automotive, Inc. et al., No. C 11-03119-DMR, and the two cases

21

overlap extensively.

22

Second, Yoshimoto reiterated his position that the underlying order was unlikely to be reversed

23

and, therefore, certification would result only in an unnecessary delay. O’Reilly Automotive

24

countered that the procedures for certification lessen the likelihood of such an outcome because it

25

must file its application to the Court of Appeals within ten days.

26

In addition to the issues described above, the court noted that certification of a garden-variety

27

employment case to an already-burdened Ninth Circuit posed resource concerns. The court weighs

28

these considerations and concludes that certification is still appropriate because further guidance on

C 10-05438 LB
ORDER GRANTING REQUEST

6

1

the application of judicial estoppel in this context would be helpful and, if the Ninth Circuit

2

disagrees with the court’s assessment of this need, the Ninth Circuit can deny O’Reilly

3

Automotive’s application.

4

D. Whether a Stay is Warranted

5

Section 1292(b) states that an application for an appeal shall not automatically stay the

6

proceedings but permits the court to order a stay. 28 U.S.C. § 1292(b). O’Reilly Automotive

7

requests that the court stay all court proceedings during the appeal because, if successful, its appeal

8

would end the lawsuit. Motion, ECF No. 41 at 7. Thus, any proceedings might waste valuable

9

resources of the parties and the court. Id. at 7-8. The court agrees but, for the sake of clarity,

10

reminds the parties that this does not preclude Yoshimoto from pursuing his post-petition claims.

12
For the Northern District of California

UNITED STATES DISTRICT COURT

11

IV. CONCLUSION
While certification pursuant to § 1292(b) is to be used sparingly, on balance, the court finds that

13

its order meets all of the necessary criteria for the reasons discussed above and is appropriate for

14

certification. See In re Coastal Plains, 179 F.3d at 204 (“Most unfortunately, Browning did not seek

15

certification from the district court that, pursuant to 28 U.S.C. § 1292(b), the judicial estoppel ruling

16

“involve[d] a controlling question of law as to which there is substantial ground for difference of

17

opinion and that an immediate appeal from the order may materially advance the ultimate

18

termination of the litigation.’”); In re Trace Intern. Holdings, Inc., 2009 WL 3398515. Accordingly,

19

the court GRANTS O’Reilly Automotive’s motion to amend. The court amends its order, ECF No.

20

39, to add the following sentence: “The court certifies the issues decided by this order for immediate

21

interlocutory appeal pursuant to 28 U.S.C. § 1292(b).” And, in the interest of judicial economy, the

22

court stays this case during the pendency of the appeal.

23

This disposes of ECF No. 40.

24

IT IS SO ORDERED.

25

Dated: July 7, 2011
_______________________________
LAUREL BEELER
United States Magistrate Judge

26
27
28

C 10-05438 LB
ORDER GRANTING REQUEST

7