Ellis v. Alexander et al
Filing
154
MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 4/25/2018: For the reasons explained in the accompanying opinion, the defendants' motion for summary judgment 110 is denied. Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KRYSTAL ELLIS,
Plaintiff,
v.
DANA ALEXANDER, BARBARA
WEST, ROBERT KLICH, GARY
YAMASHIROYA, JOHN E.
ROBERTS, BRIAN J. HOLY, ERIC A.
REYES, DANIEL R. JENSEN, ROSS
K. TAKAKI, MARK A. REGAL,
BRIAN S. SPAIN, LUIS GONZALEZ,
DANIEL DURST, KEVIN KEEFE,
JEFFREY ALLEN, FLOYD
GOLDSMITH, ALMA RODRIGUEZ,
MARINA MAKROPOULOS,
BRANDON L. DOUGHERTY,
ELIZABETH SALGADO,
JOHNATHAN J. ELARDE, SERGUEY
KLEMENS, TIMOTHY M. HAWKINS,
MICHAEL WALSH JR., NATHANIEL
WARNER, AND CITY OF CHICAGO,
Defendants.
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No. 16-CV-05155
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
Plaintiff Krystal Ellis has filed suit alleging that the City of Chicago and over two dozen
members of the Chicago Police Department violated her constitutional rights in the wake of her
boyfriend’s death at the hands of CPD officers. First Amended Complaint (“FAC”), ECF No. 62.
According to Ellis, after CPD officers shot and killed her boyfriend, she was detained without
probable cause and locked in an interrogation room for seven hours. Id. ¶¶ 30-55. Ellis also
alleges that CPD officers searched her car and personal property without probable cause. Id.
¶¶ 27-29.
Shortly over a year after she filed this lawsuit, Ellis filed for Chapter 7 bankruptcy in the
Northern District of Illinois. Defs.’ Statement of Facts ¶ 23, ECF No. 112. She was represented
in bankruptcy court by Geraci Law, LLC, a high volume bankruptcy firm that she learned about
from a television commercial. The schedules of Ellis’s bankruptcy petition required her to
describe and list all of her assets. The petition specifically required her to disclose “any legal or
equitable interest in . . . claims against third parties, whether or not you have filed a lawsuit or
made a demand for payment.” Id. ¶ 26. It also asked whether she had been “a party in any
lawsuit, court action, or administrative proceeding” in the year prior to her bankruptcy filing. Id.
¶ 28. Nonetheless, Ellis failed to disclose this suit in her bankruptcy petition. Ellis signed a
declaration under penalty of perjury attesting to the truthfulness of the statements set forth in her
bankruptcy petition. Id. ¶ 31. In the weeks immediately before her bankruptcy creditor meeting,
Ellis was deposed in this lawsuit and conducted a site visit of the police precinct where she was
detained. Id. ¶ 18. At the creditor meeting, Ellis was asked whether she had any “personal injury
actions or lawsuits of any kind against anyone that you have filed or could file?” Ellis answered
no. Audio of Creditor Meeting 1:38-1:44, ECF No. 134-1.
Defendants filed the instant motion for summary judgment based on Ellis’s failure to
disclose this case in her bankruptcy proceedings. As soon as Ellis’s counsel in this action learned
of the bankruptcy, Ellis and counsel contacted Geraci Law. Pl’s Statement of Additional Facts ¶¶
8-14, ECF No. 131. Counsel learned that Geraci Law had moved, without Ellis’s knowledge, to
withdraw from Ellis’s bankruptcy case due to irreconcilable differences. Id. ¶ 15. Counsel spoke
to the bankruptcy trustee, who had to recuse herself from the matter due to a conflict of interest.
Id. ¶ 16. A new trustee subsequently re-opened the case, and a third trustee was assigned to
determine whether or not to administer Ellis’s interest in this lawsuit as an asset to her creditors.
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Id. ¶¶ 17-19. Counsel told the trustee that the case could be worth a small or large amount of
money, depending on the results of discovery and the jury’s findings. Id. ¶ 20. Ellis subsequently
filed amended schedules that included this suit, valuing it at $12,500. Id. ¶ 27.1 The trustee
decided not to administer Ellis’s interest in the case as an asset, abandoning it. Id. ¶ 25.
Ellis submitted a declaration indicating that she did not disclose this suit because Geraci
Law misinformed her about her obligations. Her bankruptcy counsel asked her if she was a party
to any “personal injury” lawsuits, which Geraci Law indicated was something akin to a car
accident case. According to Ellis, she did not believe that this case, concerning an illegal
detention and seizure and involving no physical injury, was a personal injury suit. Pl’s Resp. to
Defs.’ Statement of Facts ¶ 26, ECF No. 130. She did tell her bankruptcy counsel about a recent
car accident that had resulted in a settlement. She did not, however, disclose this suit to her
bankruptcy counsel because she did not believe it was an asset that she could use to pay
creditors.
The Court now considers defendants’ summary judgment motion.2
DISCUSSION
“The doctrine of judicial estoppel prevents litigants from manipulating the judicial
system by prevailing in different cases or phases of a case by adopting inconsistent positions.”
1
Illinois law exempts from a bankruptcy estate “a payment, not to exceed $15,000 in
value, on account of personal bodily injury of the debtor.” 735 ILCS 5/12-1001(h)(4).
2
On reply, defendants ask the Court to strike substantial portions of Ellis’s response to
their statement of undisputed facts, as well as Ellis’s entire statement of additional facts, for noncompliance with local rules and inclusion of immaterial facts. The Court declines to do so.
Defendants cite to Local Rule 56.1 for the proposition that Ellis was required to either admit
their statements of undisputed fact or deny them with citation for the record. Ellis’s responses,
however, complied with Rule 56.1, as they dispute defendants’ proposed facts (or inferences to
be drawn therefrom) with citations to the record. Moreover, as explained herein, the portions of
Ellis’s statement of additional facts that the defendants argue are immaterial—concerning Ellis’s
bankruptcy representation and the steps Ellis and counsel took after defendants filed their motion
for summary judgment—are relevant to the disposition of defendants’ motion.
3
Spaine v. Community Contacts, Inc., 756 F.3d 542, 547 (7th Cir. 2014). A prototypical
application of judicial estoppel bars a plaintiff from pursuing a legal claim that the plaintiff
deliberately failed to disclose in a bankruptcy petition. Id. Manipulation of the kind sufficient to
invoke judicial estoppel occurs “when a debtor deliberately conceals a contingent or unliquidated
claim during bankruptcy proceedings and then later seeks to profit from that claim after
obtaining a discharge of her debts.” Id.
So when does a failure to disclose a lawsuit in bankruptcy constitute deliberate
concealment? The Seventh Circuit provides several data points. First, in Cannon-Stokes v.
Potter, 453 F.3d 446 (7th Cir. 2006), the court determined that a plaintiff was judicially estopped
from pursuing a claim she failed to disclose in bankruptcy. There, although the plaintiff relied on
erroneous advice from bankruptcy counsel in failing to disclose the suit, she never moved to reopen the bankruptcy to disclose the suit and make her creditors whole. Id. at 449. Under these
circumstances—where the plaintiff (intentionally or otherwise) misrepresented her position in
bankruptcy, and then sought to benefit without giving the bankruptcy trustee the opportunity to
pursue the case on behalf of her creditors—the Seventh Circuit concluded that the plaintiff was
judicially estopped from recovering.
By contrast, the court determined that the plaintiff in Spaine could proceed
notwithstanding her initial failure to disclose her employment discrimination lawsuit in
bankruptcy. 756 F.3d at 547-48. In Spaine, the plaintiff submitted an affidavit indicating that she
had orally disclosed the lawsuit to her bankruptcy trustee at a creditors meeting, but omitted the
suit from her schedules. With knowledge of the discrimination suit, the trustee concluded that the
plaintiff had no assets and discharged her unsecured debts. The Seventh Circuit ruled that the
plaintiff’s oral disclosure provided evidence—sufficient to stave off summary judgment—that
4
her failure to list the suit on her bankruptcy schedules was innocent, and not a deliberate
deception. Id.
Perhaps most helpful is Metrou v. M.A. Mortenson Co., 781 F.3d 357 (7th Cir. 2015),
where the court again ruled that judicial estoppel did not bar recovery for a plaintiff who initially
failed to disclose a lawsuit in bankruptcy. After the Metrou plaintiff, David Matichak, was
discharged from bankruptcy, he filed a tort suit based on an incident that occurred prior to his
bankruptcy. Matichak failed to disclose his possible (and eventually real) tort claims; his
schedules contained only workers’ compensation claims based on the incident. He failed to
include a possible tort lawsuit in his schedules because his lawyers failed to inform him that he
might be entitled to a recovery for the incident beyond workers’ compensation. Defendants in the
tort suit moved for summary judgment on judicial estoppel grounds. Matichak then notified the
bankruptcy trustee, who reopened the bankruptcy and moved to replace Matichak as the plaintiff
in the tort suit. The district court permitted the substitution, but limited damages to value of the
plaintiff’s unpaid debts. This had the effect of denying Matichak recovery of any damages for his
own benefit.
The Seventh Circuit concluded that the district court erred in limiting recovery such that
only creditors—and not Matichak—could benefit. In so doing, the court found that Matichak
submitted sufficient evidence that he did not deliberately hide the tort claim from his creditors
when he averred that his lawyers misadvised him about his possible avenues for recovery. It then
concluded that “debtors who make innocent errors should not be punished by loss of their choses
in action when they turn the claims over to the Trustees.” Id. at 360. “[A] debtor who errs in
good faith, and tries to set things right by surrendering the asset to the Trustee, remains entitled
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to any surplus after creditors have been paid, just as would have occurred had the claim been
disclosed on the bankruptcy schedules.” Id.
Notwithstanding minor factual differences, Metrou compels rejection of the defendants’
motion. Like Matichak, Ellis presented evidence that she omitted her suit from bankruptcy
schedules due to confusion brought about by poor counsel—in Ellis’s case, her misunderstanding
of the meaning of a “personal injury” lawsuit. And like Matichak, Ellis re-opened her bankruptcy
and amended her schedules to include her suit. If it was reasonable to conclude that Matichak’s
failure to disclose was innocent, the same could be said with regard to Ellis. True, in Metrou, the
bankruptcy trustee decided to take over Matichak’s case for the benefit of his creditors, whereas
Ellis’s trustee abandoned the lawsuit.3 But that does not matter. In Metrou, the Seventh Circuit
considered whether Matichak’s failure to disclose could be deemed innocent, and concluded it
could. Any attempt to distinguish Metrou “would be slicing the baloney mighty thin.” Sessions v.
Dimaya, -- S. Ct. --, 2018 WL 1800371, at *9 (2018).
On that note, the defendants point to evidence they say requires the conclusion that Ellis
deliberately misled her creditors. Much of this evidence suggests that Ellis was engaged in
activity related to this litigation in close temporal proximity to her bankruptcy: she conducted a
site visit and was deposed in this litigation in the weeks immediately prior to her creditor
3
The defendants contend that Ellis does not have standing to continue pursuing this case
because the bankruptcy trustee did not properly notify creditors pursuant to 11 U.S.C. § 554
before abandoning this lawsuit as an asset. But the defendants cite to no evidence of the trustee’s
supposed deficiency, instead noting only that the bankruptcy docket does not spell out each and
every step the trustee took. The Court will not conclude that the trustee procedurally erred in the
absence of any evidence of that being the case. More importantly, even if the trustee did not
adequately protect creditors before abandoning the asset, the provisions cited by the defendants
“are intended for the benefit of creditors, none of whom complained or is complaining about the
trustee’s failure to comply with them.” Morlan v. Universal Guarantee Life Ins. Co., 298 F.3d
609, 621 (7th Cir. 2002). “They are not intended for the benefit of alleged violators of the
debtor’s legal rights, and so the defendants are the ones who lack standing—standing to object to
the abandonment of [Ellis’s] claim.” Id.
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meeting. This, however, is beside the point. Ellis does not suggest that she forgot about this case
while filling out her bankruptcy schedules and at the creditor meeting; she posits that she did not
disclose the lawsuit because bankruptcy counsel misadvised her about the definition of a
personal injury suit and, as a result, she did not believe this lawsuit was an asset she could use to
pay creditors. That the evidence conclusively establishes Ellis did not suffer a bout of amnesia
with regard to this lawsuit says little about whether her omission was a deliberate ruse.4
Defendants also repeatedly make two related, and incorrect, legal arguments: that the
erroneous advice of counsel cannot render a nondisclosure innocent, and that Ellis’s decision to
re-open her bankruptcy and disclose carries no weight. In support of the former, defendants cite
to Cannon-Stokes’ proclamation that “bad legal advice does not relieve the client of the
consequences of her own acts.” Defs.’ Reply Br. at 4, ECF No. 133 (citing Cannon-Stokes, 453
F.3d at 449). But defendants omit the remainder of the paragraph, which defines the
circumstances in which bad legal advice can absolve a plaintiff: “[A] debtor in bankruptcy is
bound by her own representations, no matter why they were made, at least until the debtor moves
to amend the disclosures and pay the creditors their due (a step that, to repeat, Cannon-Stokes
has not taken).” Id. Unlike Cannon-Stokes, Ellis has taken that step. And so the Court can
consider evidence that her initial failure to disclose was based on an innocent misunderstanding.
Indeed, it is unclear how the Metrou court could have found Matichak’s failure to disclose to be
4
The defendants argue that it does not matter how Ellis was advised, as she was asked at
the creditor meeting whether she was a party to “lawsuits of any kind against anyone.” Defs.’
Reply at 10. Ironically, in an attempt to prove Ellis deceptively omitted information, the
defendants pointedly fail to include the beginning of the question posed to Ellis: “Do you have
any personal injury actions or lawsuits of any kind against anyone that you have filed or could
file?” Audio of Creditor Meeting 1:38-1:44, ECF No. 134-1. At least one reasonable
interpretation of this question (in which “personal injury” modifies both “actions” and
“lawsuits”) comports with Ellis’s affidavit indicating that she did not disclose the lawsuit
because she incorrectly believed it was not a personal injury suit.
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potentially innocent if both the subsequent re-opening of his bankruptcy and the bad advice of
counsel were irrelevant. The case law demonstrates that Ellis’s decision to re-open her
bankruptcy permits the Court to consider evidence that her omission was an innocent result of
bad legal advice.5 And Ellis’s declaration provides evidence sufficient to support a reasonable
finding that Ellis’s non-disclosure was not a deliberate misrepresentation.
*
*
*
For the foregoing reasons, the defendants’ motion for summary judgment is denied. It
bears noting here that denial of the defendants’ summary judgment motion does not mean that
the defendants may raise the judicial estoppel issue at trial. “[J]udicial estoppel is an equitable
doctrine invoked by a court at its discretion.” New Hampshire v. Maine, 532 U.S. 742, 750
(2001) (internal quotation marks omitted). See also Grochocinski v. Mayer Brown Rowe & Maw,
LLP, 719 F.3d 785, 796 (7th Cir. 2013) (“Judicial estoppel is a flexible equitable doctrine that is
not ‘reducible to any general formulation of principle’ and accordingly does not lend itself to
rigid rules.”) (quoting New Hampshire v. Maine, 532 U.S. at 750). It is, in short, a doctrine for
the Court, not for a jury, to assess and, if warranted, apply. And while the Court will not with this
ruling foreclose the defendants from reasserting a motion premised on judicial estoppel, before
considering any further motion, or holding an evidentiary hearing, it will require a more robust
5
Indeed, the nature of personal bankruptcy practice makes it likely that omissions result
either from a debtor’s lack of sophistication or from erroneous legal advice. Debtors in personal
bankruptcy are almost certain to be pro se or, like Ellis, represented by an attorney from a high
volume practice. Even where a debtor is “represented,” in many cases, the debtor may never
even have met with counsel, instead providing information only to a non-attorney staff member.
It is, therefore, “not difficult to imagine that some debtors . . . may not realize that a pending
lawsuit qualifies as a ‘contingent and unliquidated claim’ that must be disclosed on a schedule of
assets.” Slater v. United States Steel Corp., 871 F.3d 1174, 1186 (11th Cir. 2017) (en banc).
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rebuttal to the plaintiff’s sworn account of how she came to omit this case from her bankruptcy
schedules. On the present record, application of the doctrine of judicial estoppel is not warranted.
Dated: April 25, 2018
John J. Tharp, Jr.
United States District Judge
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