Miller v. GreenLeaf Orthopaedic Associates S.C. et al
MEMORANDUM OPINION AND ORDER. Mailed notice(drw, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
No. 10 C 5867
Judge James B. Zagel
ASSOCIATES S.C. et al.,
MEMORANDUM OPINION AND ORDER
Venita Miller (“Miller”) sues Greenleaf Orthopedic Associates
(“Greenleaf”), her one-time employer for engaging in race and disability
discrimination when it terminated her. Miller also sues both Greenleaf and its
office manager Linda Miller (“Linda”) under one statute which permits individuals
as well as employers to be sued for violating federal constitutional rights and the
statute defining the rights of federal jurors. Lastly Greenleaf is sued under a federal
statute barring employer interference with federal jury duty of an employee.
Greenleaf seeks summary judgment arguing that Miller had “numerous
performance and credibility issues [and]…was terminated after it was believed that
she was absent from work due to jury duty and it was learned that [Miller] was not
in fact at jury duty. In light of [Miller’s] previous problems, this incident was the
last straw of Greenleaf.”
There is a crucial1 threshold issue. Does judicial estoppel (as it arises in
bankruptcy cases) preclude the claim for money damages?
Judicial estoppel prevents a party from abandoning a prior legal ground on
which it prevailed in a prior litigation. See Zedner v. United States, 547 U.S. 489,
504 (2006). If you claim X in a prior case and you secure some legal benefit as a
result, you cannot assert Not X in an effort to win another case. If you deny in a
litigation that Fido belonged to you and thus escape liability for Fido’s mauling of
a child, you will be precluded from seeking compensation for unnecessary police
shooting of your beloved pet after you had pulled the child away from Fido.
A common application of judicial estoppel doctrine arises when a debtor
files for bankruptcy protection and asserts, under oath, that he or she has only the
assets listed on the standard declaration of assets. The failure to reveal that debtor
has a pending litigation is a declaration that this asset does not exist. The debtor’s
pursuit of such an undisclosed claim may be foreclosed by judicial estoppel. The
legal benefit the debtor receives is the judicial approval of a reorganization plan
reducing various debts even if such approval is temporary and the bankruptcy court
never discharges debts and dismisses the case. The general rules governing these
1 I say “crucial” because there is good reason to believe that there are genuine issues of m aterial fact regarding som e or all of the claim s.
sides to the factual dispute have som e am m unition (none of it overwhelm ing) to support som e, if not all, their claim s and defenses.
Considering the reality that credibility of witnesses is the prim ary com ponent of any verdict or finding in this dispute, it would be appropriate
to consider the testim ony of the witnesses even if som e of the claim s to which it is addressed are no longer in the case. W henever a
narrative involves a claim about a “last straw”, m uch of the past will need to be heard. M iller’s narrative too covers a lot of ground.
cases is set forth in Love v. Tyson Foods, Inc. 677 F.3d 258 (5th Cir. 2012). See
also Williams v. Hainje, 375 Fed.Appx 625, 2010 WL 1936269 (7th Cir. 2010);
Esparza v. Costco Wholesale Corporation, 2011 WL 6820022 (N.D. Ill).
A District Court has discretion in deciding whether to apply judicial estoppel
because the acts which would ordinarily constitute grounds for estoppel may be
excused under the general rubric of “inadvertency.” To reach a decision the
District Court is entitled to determine facts after a hearing such as the one
conducted in two separate sessions in this case.
The material facts are, with one exception, not in dispute. It is the inferences
to be drawn from them that are disputed. The inferences I will make depend upon
the circumstances of events and the credibility of Miller and others whose
testimony I heard.
Miller was fired by Defendants on 18 September 2009. Thirteen days prior
to the firing, she consulted with bankruptcy attorneys and filled out a questionnaire
of the sort commonly used by personal bankruptcy lawyers. After employment
termination she did not proceed with a petition in bankruptcy because she would
likely not have the money to pay for lawyers and the costs of proceeding after
having lost the income from her job. Miller essentially postponed the decision to
file to a future date. The document entitled “Confidential Bankruptcy Consultation
Questionnaire for David M. Siegel & Associates” (“Form”) is in evidence albeit
under seal except for that portion about pending litigation which is in the public
record. The present litigation is not listed because on 9 September 2009, Miller
had not been fired.
This lawsuit was filed on 15 September 2010. Discovery proceeded with
document discovery and interrogatories. On 12 April of the following year, Miller
was deposed. All this occurred before Miller filed a bankruptcy petition.
On 4 June 2011, Miller telephoned her bankruptcy counsel and informed
their office that she had a wrongful termination case. Someone2 in the office then
inserted, in the appropriate place on the Form, “ v. Greenleaf Orthopedics
(wrongful termination).” The stands for “debtor.” The Form of 5 September
2009 became the revised Form of 4 June 2011.
The petition for a Chapter 13 bankruptcy was filed on 19 July 2011. The
Greenleaf lawsuit was not listed as an asset on Schedule B of the official form for a
voluntary petition in bankruptcy. David Siegel testified that the failure to include
the lawsuit on Schedule B was an error made in his office since the lawsuit was
noted in the Form.
What followed was routine practice. There was a Section 341 hearing at
which time the trustee (or his representative) meets with creditors (if any show up)
2 According to the testimony of David Siegel, that person would be an attorney in his office.
and the debtor. Ordinarily, as happened here, the hearing results in a
recommendation from the trustee to the bankruptcy judge about whether, or to
what extent, the debtor should be discharged of her debts. Characterizing a 341
hearing as a "Meeting of creditors and equity security holders" is often a misnomer
while creditors and security holders have the right to be there and ask the debtor
questions under oath, creditors frequently decline to appear. The purpose of the
meeting is primarily for the trustee to examine the debtor under oath to confirm
that the filing is made in good faith (i.e. is not hiding assets) and that the debtor has
provided adequate and accurate financial documentation (if not, the trustee will ask
the debtor to file further documentation and hold another Section 341 hearing after
reviewing it).3 The purpose of a 341 hearing is to enable the trustee to make an
informed recommendation to the bankruptcy judge concerning discharge. There
was a Chapter 13 plan of 26 September 2011 that was confirmed by Judge Doyle
on 7 October 2011.
There was a serious flaw in the bankruptcy process and it arose because of
something that Miller did not do at the 341 hearing, to wit, tell the trustee about the
Greenleaf lawsuit. The trustee did put Miller under oath and asked a question
which should have elicited a positive answer about the existence of the lawsuit.
Miller answered “No.” The answer is untrue.
3 In Chapter 7 cases, trustees also advise the debtor of the consequences of seeking a discharge in bankruptcy.
None of this is to have been known to either counsel in this case. On 14
November 2011, Miller sat for the second session of her deposition which dealt
almost entirely with the facts surrounding the firing. Late in the deposition defense
counsel asked about Miller’s current financial condition presumably because
Miller had found other employment at Stroger Hospital. She answered her
condition was not where she wanted “it to be right now…” Miller was asked if she
was aware of wage assignments. She replied “Right now I’m in Chapter 13. And I
just pay my trustees. And if that is a wage assignment, that is a wage assignment
currently.” This answer led to the following exchange.
Q. When did you file for Chapter 13?
A. In July.
Q. July of 2011?
Q. Did you disclose your lawsuit against Greenleaf as an asset in your
On November 17, Miller filed amended Schedules in Bankruptcy proceedings.
There is no quarrel that the effect of signing and filing the petition with its
schedules is a sworn denial that Miller had a lawsuit pending, a lawsuit that might
recover assets for the benefit of creditors. Nor is there a question that Miller
gained some legal benefit since the Bankruptcy Court granted the petition
approving the plan. There is no doubt that Miller concealed nothing from
Bankruptcy counsel. There is no reason to bar Greenfield’s argument that estoppel
was waived in its answer; estoppel was pled as an affirmative defense, and I am
unwilling to preclude its use because the particular type of estoppel was not
What drives the dispute here is (1) the factual significance of Miller’s
testimony under oath that this lawsuit did not exist, i.e. her state of mind, (2) the
legal significance of her lawyer’s error and (3) the nature of the remedy if Miller’s
conduct cannot be considered inadvertent.
When judicial estoppel is applicable, the initial remedy is to bar the plaintiff
from collecting on her claim. But, should the monetary remedy simply be
dismissed? The answer seems to depend on the status of the bankruptcy
proceedings. If it is irrevocably closed, then the claim is dismissed. This was the
holding in Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7 th Cir. 2006). A variation
on this theme is found in Williams v. Hainje, 375 Fed.Appx. 625, 2010 WL
1936269 (7th Cir.) (There was no bankruptcy trustee to take on the claim since the
bankruptcy petition was dismissed.)
Some persons who conceal an asset and get caught have argued that the
claim should not be dismissed if the bankruptcy proceeding can be reopened. The
Circuits are divided on this point. Compare Burnes v. Pemco Aeroplex, 291 F.3d
1282, 1288 (11th Cir. 2002) (reopening bankruptcy is a “so-called remedy [that]
would only diminish the necessary incentive to provide the bankruptcy court with a
truthful disclosure of…assets.) with Dunmore v. U.S., 358 F.3d 1107, 1113 (9 th Cir.
2004) (reopening the bankruptcy is “a permissible alternative to judicial estoppel
that prevents [the bankrupt person] from deriving an unfair advantage if not
estopped.”) The rationale for permitting the case to proceed is that the damages, if
any, will go to the bankruptcy trustee. A ruling that precludes a trustee from
acquiring funds to pay creditors more speedily or pay them more money than they
can reasonably expect to receive from the current plan may harm creditors.4 The
District Courts in this Circuit have not found reopening bankruptcy to be an
appropriate remedy. See Esparza v. Costco Wholesale Corporation, 2011 WL
6820022 (N.D. Ill) (collecting cases).
The ability to have bankruptcy reopened is, in this district’s Bankruptcy
Courts, not much constrained. An informal survey of some Bankruptcy Judges
here suggests that Chapter 7 trustees (and not the bankrupt) are the frequent source
4 The trustee can take steps to control the case even to the point of settling it without the consent of M iller.
The trustee can abandon the
case, and if that occurs, M iller cannot pursue it. There are reasons why a trustee m ight conclude that it would be best to let the case go
forward when the cost of litigating it m ay be zero as it m ight well be in litigation where a prevailing plaintiff’s fees and costs can be paid by
the defendant. Nothing in the law precludes creditors them selves from realizing on the claim after its discovery.
of petitions to reopen. This practice has been noticed in the past. Kane v. Nat’l
Union Fire Ins. Co., 535 F.3d 380, 384-85 (5th Cir. 2008). The trustee wants to
acquire a previously undisclosed asset to benefit the creditors and the bankrupt will
rarely have the incentive to seek reopening (for which a filing fee must be paid).
Reopening is largely confined to Chapter 7 cases because Chapter 13 cases are
closed when the Plan is consummated, and this usually takes quite a while. A
trustee in a Chapter 13 case does have the option of seeking control of the asset,
converting it into a Chapter 7 asset. A Chapter 13 petitioner keeps control of the
estate; a Chapter 7 trustee controls the estate. Such an action leaves the trustee
with the power to settle the case on terms providing enough funds to convert the
plan to a 100% payout to creditors on a fast schedule. In Chapter 7 cases, the
discovery of an undisclosed asset like the one here might lead a trustee to deprive
the bankrupt of the benefit of whatever discharge of debts was granted by the
Bankruptcy Court. This can occur if there is deliberate concealment of the asset.
In Cannon-Stokes, the Seventh Circuit noted that all six of the appellate
courts to have considered the question have held that a debtor in bankruptcy who
denies owning an asset, including a chose in action, cannot collect on that asset
after bankruptcy ends. Our Court of Appeals joined them.5
The opinion offered no holding on the issue of reopening bankruptcy. It did disapprove of
the conduct of the appellant who claimed, in disclosing her assets, to have overlooked an
asset which she believed was worth three times the value of the debts she had discharged.
A doctrine that induces debtors to be truthful in their bankruptcy filings will
assist creditors in the long run (though it will do them no good in the
particular case) and it will assist most debtors too, for the few debtors who
scam their creditors drive up interest rates and injure the more numerous
honest borrowers. Judicial estoppel is designed “to prevent the perversion of
the judicial process (internal citations omitted).
Judicial estoppel adopts a policy of discouraging the concealment of assets
by petitioners in bankruptcy. Trustees do not conceal assets for personal gain and
their desire to reopen a closed case is consistent with this policy. It is easy for
them to reopen a closed case.
The final fact pattern is that of an asset discovered or added to the schedule
while the bankruptcy proceeding is not closed. This is the case here. It is not
unusual in Chapter 13 cases which often result in long term payment plans which
are not carved in stone. They can be modified as circumstances change, usually
the circumstances in which the debtor finds herself having, say, more or less
income or assets or a medical emergency. There are no cases enunciating rules that
And it noted that if she were really making an honest attempt to pay her debts, then as soon
as she realized it had been omitted, she would have filed an amended schedule and “moved
to reopen bankruptcy, so that the creditors could benefit from any recovery.” She did none
of that. This is a hint that reopening would be a permissible alternative to judicial estoppel as
the 9th Circuit so held. But the words of the opinion can be interpreted as a demonstration of
why the appellant’s claim of overlooking an asset was not credible.
More to the point is a nonprecedential disposition in Rainey v. UPS, Inc., 466 Fed.
Appx. 542,544 (7th Cir. 2012) where the Court observed that “as long as bankruptcy
proceedings are ongoing…a Chapter 13 debtor can inform the trustee of previously
undisclosed legal claims, and unless the trustee elects to abandon that property, the debtor
may litigate the claims on behalf of the estate and for the benefit of the creditors without
court approval.” Id. at 544.
restrict adding new assets to an open Chapter 13 Plan or a Chapter 7 estate.
The deterrent to lie which is embedded in the doctrine of judicial estoppel
may not be significantly attenuated by allowing the failure to disclose to be
repaired. This is so because a deliberate liar must face the risk that waiting to
disclose might leave him in the position of asking for reopening which may not be
granted. This seems a logical ground to confine judicial estoppel of any pursuit of
a chose in action to cases in which the bankruptcy proceedings are and remain
closed. Whether there will be proof (or disproof) of this proposition is a prediction
I am not inclined to make.
The legal significance of the bankruptcy lawyer’s failure to list an asset that
was contained in the lawyer’s own work papers is clear. The petition with its
schedules is signed by Miller and not just her lawyer. Based on her testimony, I
conclude that she signed the papers because she accepted her lawyer’s implicit
assurance that it was the proper document to be filed. There is no deliberate lie in
these papers but that does not do her much good. “A lawyer is the client’s agent,
and the client is bound by the consequences of advice that the client chooses to
follow.” Cannon-Stokes, 453 F.3d at 449. So, Miller is, in legal essence, the
person who prepared the petition herself and left out the wrongful termination
This may not be inconsistent with inadvertence. But there are reasons to
conclude against inadvertence. She knew about and participated in some of the
proceedings of the case. Moreover, this is, from her point of view, a wrongful
firing, not the kind of event that a person can easily put out of her mind as one
might put out of mind that a truck crushed her parked car when she was at work.
There is, often, implicitly or explicitly, a serious personal insult in the act of firing
in addition to the economic loss. Yet, the act of signing a fairly technical legal
paper on an unfamiliar form by a person who, both testimony and deposition
shows, had real-life problems resulting from the loss of a job. I might be willing to
conclude that this signing, considered alone, is an inadvertent act.6
The pillar which supports the Greenleaf motion is the sworn in-person oral
denial of the existence of this case at the 341 hearing. It is difficult to conceive of
this as “inadvertent” on its face. Miller contends that two elements of the
procedure show that her answer could be, and was, inadvertent. First it is said that
One of the escape clauses for these omissions is the absence of motive to conceal the claim
of wrongful termination. There was a motive. Failing to tell the trustee or the court could
well influence the content of the plan and the speed with which it was confirmed. That Miller
may not have perceived that she had a motive does not help her. As I read the cases, it is the
existence of a motive not the consciousness of it in the mind of the debtor that counts. See
Eastman v. Union Pacific R.R. Co., 493 F.3d 1151, 1159 (7th Cir. 2007) (The ever present motive
to conceal legal claims and reap the financial rewards is undoubtedly why so many of the
cases applying judicial estoppel involve debtors-turned-plaintiffs who have failed to disclose
such claims in bankruptcy.) Cases in which there appears to be no profit to a plaintiff or
petitioner do support that notion that failure to disclose was inadvertent.
the question was not clear enough for Miller to understand what it was she was
being asked about and, second, that this examination was conducted at a fast pace
by a trustee’s employee who was following a familiar routine.
The quality of the recording of the 341 hearing is too poor to permit a
conclusion of the precise nature of the question. Miller argues that the question
used unfamiliar words, i.e. litigation, which might not be readily understood by
her. The trustee testified that she generally asks this question using words which a
non-lawyer would understand. She asks whether or not the petitioner has any
foreclosure or litigation and asks “are you being sued or are you suing anyone?” I
credit this testimony. Implicit in Miller’s position is a suggestion that the questions
come quickly after one another and elicit a series of “yes” answers and “no”
answers. We know this is true because you can hear the answers (not the questions)
clearly on the recording. The particular “No” that matters here was uttered in the
middle or toward the end of a series of “no” responses.
I am not persuaded that Miller offered an inadvertent answer. The most the
evidence will allow is that there is a dead heat between the two sides on
“inadvertence” and ties go to Greenleaf because Miller bears the burden of proving
inadvertence. So the facts can establish judicial estoppel.
Enforcing judicial estoppel is an equitable remedy (Johnson v. ExxonMobil
Corp., 426 F.3d 887 (7th Cir. 2005)) and therefore one which is granted at the
discretion of the court. Equity, in this case, is not on the side of foreclosing the
wrongful termination claim of Miller. The issue has arisen during the pendency of
an existing bankruptcy proceeding, and incorporating the value of this lawsuit into
the Chapter 13 plan is neither difficult nor unfair to Greenleaf. In this case, I
weigh the equitable and patent interests of creditors against the equitable interests
of Greenleaf. The interests of Greenleaf would be more substantial if not for
Miller’s intent to pursue non-monetary remedies for the termination if it is proved
to be wrongful. The case will have to be tried and many of the costs of litigation
borne even if I were to dismiss the demand for money damages. I do not put the
interests of Miller herself in the balance on this issue.
The motion to dismiss the demand for monetary compensation is denied. I
will request the Chapter 13 Trustee to declare whether he wishes to take steps to
gain complete authority over the monetary claim or to otherwise ensure that the
creditors’ interests are protected.
James B. Zagel
United States District Judge
DATE: September 13, 2012
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?