Korti v. Anthony Wayne Rehabilitation Center for Handicapped and Blind Inc
OPINION AND ORDER DENYING 25 MOTION for Summary Judgment filed by AW Holdings LLC. Signed by Judge Rudy Lozano on 2/26/2014. (lns)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
BAYSAH J. KORTI,
A.W. HOLDINGS, LLC,
d/b/a Anthony Wayne
CAUSE NO. 1:13-CV-63
OPINION AND ORDER
This matter is before the Court on the Defendant’s Motion for
Summary Judgment, filed by Defendant, A.W. Holdings, LLC d/b/a
Anthony Wayne Services, on July 8, 2013 (DE #25).
For the reasons
set forth below, the motion is DENIED.
national origin claims against Defendant, A.W. Holdings, LLC d/b/a
Anthony Wayne Services (“AWS”) under Title VII of the Civil Rights
Act of 1964, 42 U.S.C. § 2000(e) et seq. and 42 U.S.C. § 1981
because he failed to identify his purported claim as a potential
asset in his sworn declaration of assets that he submitted in a
Chapter 13 bankruptcy proceeding.
Defendant originally contended
that, because Plaintiff failed to disclose the potential asset,
Korti should be estopped from pursuing this lawsuit and summary
judgment is appropriate. What proceeds next is the product of many
rounds of briefs.
Plaintiff filed a response in opposition (DE #32) arguing that
when Plaintiff’s original bankruptcy case was filed on November 3,
2011, he honestly believed he did not have an interest in any
pending or potential lawsuit.
On April 4, 2012, Plaintiff was
terminated from his employment with AWS (which termination is the
basis for his discrimination claims) and he could not sustain his
bankruptcy petition, so he dismissed his bankruptcy petition. After
dismissal, Korti received his right to sue letter from the EEOC.
Then, Plaintiff filed a second Chapter 13 bankruptcy on February
14, 2013. During the second bankruptcy proceeding, Korti disclosed
his claim to the Trustee at a meeting of the creditors and his
counsel drafted an amendment and modification to his bankruptcy
Plan, agreeing to turn over any proceeds from any settlement or
disposition of this litigation. Thus, Plaintiff believes he should
not be estopped because he contends his initial failure to disclose
proceeding, he informed the Trustee of the lawsuit and filed an
amendment and modification to the Plan.
In its reply, Defendant argues for the first time that
Plaintiff should be judicially estopped from bringing the present
claims for his own benefit, and that any and all damages recovered
should go toward paying Korti’s creditors and the bankruptcy
Trustee, capping the amount of damages at the amount owed in the
bankruptcy proceeding. (DE #35.)
Plaintiff then argues in his sur-response that Defendant
seemingly concedes that Korti may proceed with his current claim
and that Defendant’s argument that Korti’s damages should be capped
and he cannot personally benefit from any recovery is an argument
improperly set forth for the first time in a reply brief, and the
Bankruptcy Court should be the entity to hear that argument. (DE
Defendant then filed a sur-reply (DE #42).
that Korti only belatedly amended his Schedule B to his second
bankruptcy petition after Defendant filed the instant motion for
Defendant argues that Korti is judicially estopped from recovering
any damages for his personal benefit, or any more than he may owe
to his creditors, but states that Rainey v. UPS, 466 F. App’x, 542
(7th Cir. 2012) “does permit the present lawsuit to proceed.”
#42, p. 5.)
Then, Plaintiff filed a sur-sur-response, and quoted recent
case law while continuing to argue that Korti’s claims should not
be dismissed on the theory of judicial estoppel.
Finally, in the last brief submitted to this Court, Defendant
conceded that in light of Rainey, Korti is not judicially estopped
from proceeding with this case.
AWS then “withdr[ew] its request
that the Court dismiss this case in its entirety on the grounds of
judicial estoppel because Korti rectified his nondisclosure of this
(DE #46, p. 2.)
AWS then argues that Korti should
still be precluded from recovering any damages for his personal
benefit and that AWS could not have raised that issue before its
reply brief because Korti did not disclose the lawsuit to his
bankruptcy counsel until after the motion for summary judgment was
This case is fully briefed and ripe for adjudication.
The undisputed facts in this case are straightforward.
November 3, 2011, Korti filed a Voluntary Petition for Chapter 13
Schedule B listed his personal property, and Korti
swore under penalty of perjury that he did not have any “contingent
and unliquidated claims of every nature, including tax refunds,
counterclaims of the debtor, and right to set offs.”
B, Not. Of Bankr. Case Filing, 11-14138.)
While that claim was pending, on April 4, 2012, Plaintiff was
terminated from his employment with Defendant.
the termination was wrongful, and it is the basis for the wrongful
termination claims in the present suit.
Korti then filed a Charge
of Discrimination against AWS on April 9, 2012.
(Pl.’s Ex. C.)
his Charge of Discrimination, Korti alleges that AWS terminated him
and discriminated against him on the basis of his race and national
Plaintiff notified his bankruptcy attorney of his job loss and
she explained to Korti that he must have consistent income to
sustain his bankruptcy and that without a job, his bankruptcy would
(Pl.’s Ex. A, Korti Aff. ¶ 7.)
petition because Korti failed to make payments as required by the
terms of the Chapter 13 plan.
(Def.’s Ex. C.)
gainful employment, but he was unsuccessful.
Korti tried to find
moved to dismiss the Petition because he could no longer make the
(Def.’s Ex. D.)
The original bankruptcy
petition was dismissed on October 17, 2012 without a discharge.
(Def.’s Ex. E.)
About two months after his first bankruptcy petition was
dismissed, Korti received a Right to Sue letter in connection with
his Charge of Discrimination on December 10, 2012. (Def.’s Ex. F.)
Korti then filed a second Voluntary Petition for Chapter 13
bankruptcy on February 14, 2013.
(Def.’s Ex. G.)
Korti did not
list his EEOC Charge of Discrimination or any potential claims
against AWS anywhere on Schedule B.
Every creditor who asserted a
claim in Plaintiff’s original bankruptcy is currently listed in
Plaintiff’s pending bankruptcy.
(Pl.’s Ex. G.)
Korti filed the
present lawsuit alleging race and national origin discrimination on
March 4, 2013.
During Plaintiff’s 341 Meeting of Creditors, held on March 28,
2013, Plaintiff disclosed his claim to the Trustee.
(Korti Aff. ¶
18.) On approximately June 6, 2013, a letter regarding an upcoming
deposition in this case was sent to Korti from Christopher C. Myers
& Associates. (Id. ¶ 19.) Shortly thereafter, Plaintiff took the
letter to his bankruptcy attorney, Laura Boyer-King (over one month
before Defendant’s Motion for Summary Judgment was filed).
Ms. King drafted an Amendment and Notice of Amendment to
Plaintiff’s Schedule B and a Modification to Plan with accompanying
Motion, in which Plaintiff agreed to “turn over any proceeds from
the settlement, award or other disposition of the litigation
pending before the United States District Court for the Northern
District of Indiana.”
(Pl.’s Ex. L.)
Those documents were filed
with the Bankruptcy Court on August 19, 2013.
modification to the Plan, and on September 12, 2013, Judge Robert
E. Grant granted the modification.
states Plaintiff agrees to turn over any proceeds from his civil
action to the Trustee as additional funding to the Plan.
Procedure, summary judgment is proper only if it is demonstrated
that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.
Nebraska v. Wyoming, 507 U.S. 584, 590 (1993); Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986).
In other words, the record
must reveal that no reasonable jury could find for the nonmovant.
Karazanos v. Navistar Int’l Transp. Corp., 948 F.2d 332, 335 (7th
Cir. 1991); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
In deciding a motion for summary judgment, a court
must view all facts in the light most favorable to the nonmovant.
Anderson, 477 U.S. at 255; NUCOR Corp. v. Aceros Y Maquilas de
Occidente, 28 F.3d 572, 583 (7th Cir. 1994).
The burden is upon the movant to identify those portions of
admissions on file, together with the affidavits,” if any, that the
movant believes “demonstrate the absence of a genuine issue of
Celotex, 477 U.S. at 323.
Once the movant has met
this burden, the nonmovant must support its assertion that a fact
is genuinely disputed by citing to particular parts of materials in
Fed. R. Civ. P. 56(c); Becker v. Tenenbaum-Hill
Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990); Schroeder v.
Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir. 1989).
underlying a particular claim and ‘only disputes over facts that
might affect the outcome of the suit under governing law will
properly preclude the entry of summary judgment.”
Fiorenzo, 840 F.2d 427, 434 (7th Cir. 1988) (emphasis in original)
(citing Anderson, 477 U.S. at 248).
“A party who bears the burden of proof on a particular issue
may not rest on its pleading, but must affirmatively demonstrate,
by specific factual allegations, that there is a genuine issue of
material fact which requires trial.”
Beard v. Whitley Country
REMC, 840 F.2d 405, 410 (7th Cir. 1988) (emphasis in original); see
also Hickey v. A.E. Staley Mfg., 955 F.2d 1385, 1391 (7th Cir.
Therefore, if a party fails to establish the existence of
an essential element on which the party bears the burden of proof
at trial, summary judgment will be appropriate. In this situation,
there can be “’no genuine issue as to any material fact,’ since a
complete failure of proof concerning an essential element of the
Celotex, 477 U.S. at 323.
In its opening brief, AWS argued that the doctrine of judicial
estoppel precludes Korti from maintaining this suit based upon his
failure to disclose it in his previous Chapter 13 bankruptcy, and
when he first filed his current bankruptcy petition. Of course, it
is undisputed that Korti did inform the Trustee and his bankruptcy
attorney during his 341 Meting of Creditors, and then filed an
Amended Schedule B and Notice of Amendment to include his civil
claim in his Schedule B and Modification of Plan.
In the Plan
Modification, Plaintiff agreed to “turn over any proceeds from the
settlement, award or other disposition of the litigation.”
Judicial estoppel is an equitable doctrine used in the court’s
discretion to prevent litigants from gaining by taking inconsistent
positions in separate proceedings.
See, e.g., Cannon-Stokes v.
Potter, 453 F.3d 446, 448 (7th Cir. 2006).
Courts may apply the
(1) the later position is clearly inconsistent with
the earlier position; (2) the facts at issue are
the same in both cases; (3) the party to be
estopped convinced the first court to adopt its
position; and (4) the party seeking to assert an
inconsistent position would derive an unfair
advantage or impose an unfair detriment on the
opposing party if not estopped.
United States v. Christian, 342 F.3d 744, 747 (7th Cir. 2003).
Estoppel “is to be applied where intentional self-contradiction is
being used as a means of obtaining [an] unfair advantage.”
Holding Co. v. Baxter Travenol Labs., Inc., 106 F.3d 1388, 1396
contrast, courts should not apply the doctrine where the debtor’s
failure to disclose was the result of mistake or inadvertence.
See, e.g., In re Cassidy, 892 F.2d 637, 642 (7th Cir. 1990).
In this case, Defendant has cited to nothing in the record to
indicate that Korti intentionally omitted the litigation from his
first filing, or at the beginning of the second petition, or that
he possessed a bad motive.
In his affidavit, Korti attested that
“[a]t no time was I under the knowledge, impression or belief that
I was required to notify the Court of my Charge of Discrimination”
and that he never “purposefully withh[e]ld information from [his]
bankruptcy attorney, Chapter 13 Trustee or the Bankruptcy Court.”
(Korti Aff. ¶¶ 14, 15, 23.)
When Korti filed his second Chapter 13
Bankruptcy, he notified the Trustee at the 341 Meeting of Creditors
that he “may have a lawsuit” and then later had his attorney draft
an amendment to the Schedule B and a Modification to the Plan.
(Id. ¶¶ 18, 20.)
In their response memorandum, Korti cites to Rainey v. United
Parcel Serv., Inc., 466 F. App’x 542, 544 (7th Cir. 2012).
also involved a debtor who omitted an EEOC charge from a Chapter 13
After the bankruptcy case closed, the EEOC issued a
right to sue letter and the debtor sued his employer.
court dismissed the lawsuit because the debtor lacked standing, the
bankruptcy case was closed, and the trustee did not have a chance
to administer or abandon the claims so they remained part of the
Id. at 543-44.
However, the court ruled the debtor could
pursue the litigation claims if the bankruptcy court reopened his
Id. at 544.
On appeal, the debtor sought to vacate the
dismissal as he had succeeded in reopening his Chapter 13 case and
The Seventh Circuit specifically
rejected the employer’s argument that the debtor was barred from
pursuing the claims because he had not disclosed them earlier,
reasoning as follows:
[A]s long as the bankruptcy proceedings are ongoing
- which is now the situation as to Rainey - 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. . . . Preventing Rainey from bringing his
claims would undermine the interests of his
creditors . . . .”
Rainey, 466 F. App’x at 544-45; see also Aikens v. Soul Circus,
Inc., No. 09 C 6678, 2011 WL 2550828, at *4 n. 5 (N.D. Ill. June
24, 2011 (emphasis in original) (citations omitted) (“The ‘own
equitable doctrine, and the Seventh Circuit has stated that it
would be inequitable to use the doctrine to harm creditors . . . .
Thus, unless the bankruptcy estate itself engages in ‘contradictory
This Court believes, along with the rationale stated in Comein
v. City of Country Club Hills, No. 11 C 5766, 2013 WL 5408640, at
*3 (N.D. Ill. Sept. 26, 2013), that the holding in Rainey:
[I]s particularly appropriate where, as here, the
debtor’s inadvertence or mistake, as opposed to
intentional concealment designed to mislead, is the
reason for nondisclosure in a bankruptcy petition.
See New Hampshire v. Maine, 532 U.S. 742, 753
(2001) (“We do not question that it may be
appropriate to resist application of judicial
estoppel where a party’s prior position was based
on inadvertence or mistake.”); Lujano, 2012 WL
4499326, at *10 (“[C]ourts should not apply the
doctrine where the debtor’s failure to disclose was
the result of mistake or inadvertence.
estoppel is to be applied where intentional selfcontradiction is being used as a means of obtaining
an unfair advantage.”).
Indeed, this line of case law is so fitting, and so ironclad,
that Defendant actually concedes in his reply memorandum (in
contrast to his original argument in support of summary judgment)
that Korti’s claims “should not be dismissed” (DE #35, p. 3) and
then specifically states in its sur-sur reply that AWS withdraws
its request that the Court dismiss this case in its entirety on the
grounds of judicial estoppel.
(DE #46, p. 2.)
This Court agrees
that Plaintiff should not be judicially estopped from pursuing the
instant litigation against AWS.
There is no evidence suggesting
that Korti’s nondisclosure was in bad faith, and because the
creditors in this second proceeding are the same as the first, they
will not suffer any prejudice either.
The last issue, though, is one that the Defendant inserted for
the first time in its reply memorandum.
Defendant contends that
Korti should be judicially estopped from recovering more than he
owes his creditors and that the “available damages in this case
proceeding.” (DE #35, p. 3.) Plaintiff has directed this Court to
the analogous case of Osterhout v. Wal-Mart Stores East, LP, No.
2:10 CV 363, 2012 WL 1434842 (N.D. Ind. Apr. 25, 2012), in which
the Defendant filed a motion to dismiss, but then conceded in their
reply that their argument of judicial estoppel was foreclosed based
(Id. at *1.)
Defendants withdrew their request to
dismiss the plaintiff’s claim, but raised the new issue of asking
the court to limit Plaintiff’s damages to the amount owed to her
creditors in her bankruptcy case, arguing “she should not be
rewarded for attempting to defraud her creditors by her delay in
notifying the trustee of this lawsuit.”
(Id. at *2.)
also asked the court to “declare that [Plaintiff] may only pursue
her case on behalf of the bankruptcy estate.”
denied the request, noting that arguments raised for the first time
in a reply brief are waived.
Id. (citing Broaddus v. Shields, 665
F.3d 846, 854 (7th Cir. 2011); Mendez v. Perla Dental, 646 F.3d
420, 423-24 (7th Cir. 2011)).
But it also rationalized that:
[E]ven if the Court considered the arguments, the
Court must defer their resolution to the expertise
of the Bankruptcy Court.
If, as the Defendants
suggest, the Plaintiff intended to defraud her
creditors and the Bankruptcy Court makes such a
finding, it may determine the appropriate remedy
for that conduct. Similarly, whether [Plaintiff]
may only pursue her case for the benefit of the
bankruptcy estate is within the jurisdiction of the
Osterhout, 2012 WL 11434842, at *2.
This Court agrees with all of the reasoning set forth in
Osterhout - it was improper for Defendant to set forth the new
issue of whether Korti’s damages should be capped at the amount he
owes to his creditors for the first time in its reply brief.1
Moreover, even if this Court considered the merits of the argument,
the bankruptcy court is the proper entity to determine this issue.
The Chapter 13 Trustee has consented to Plaintiff’s Modification
Plan, and Judge Robert E. Grant granted the Modification.
The Modification states that Plaintiff will turn over any
proceeds from his civil action to the Trustee as additional funding
to the Plan.
Whether Korti’s damages should be limited to the
amount owed to his creditors in his bankruptcy case is an issue
within the jurisdiction of the bankruptcy court.
Defendant argues that AWS could not have addressed this
issue in its original summary judgment motion because Korti did
not list the lawsuit as a bankruptcy asset until after the motion
for summary judgment was filed. Nevertheless, at the time the
instant motion was filed, on July 8, 2013, Korti had already
disclosed to the Trustee at the 341 Meeting of Creditors, that he
may have a lawsuit, and had already consulted with his bankruptcy
attorney. (Korti Aff. ¶¶ 18, 20.) Even assuming, arguendo, AWS
did not waive this argument, the Court additionally finds it
fails on the merits.
For the aforementioned reasons, Defendant’s Motion for Summary
Judgment, filed by Defendant, A.W. Holdings, LLC d/b/a Anthony
Wayne Services (DE #25), is DENIED.
DATED: February 26, 2014
/s/ RUDY LOZANO, Judge
United States District Court
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