Osterhout v. Wal-Mart Stores East LP et al

Filing 45

OPINION AND ORDER, DENYING 26 MOTION to Dismiss filed by Cynthia Carlson, Kay Smith, Crystal Shannon, Wal-Mart Stores East LP. Signed by Judge William C Lee on 4/25/12. (kjp)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
NANCY OSTERHOUT,
Plaintiff,
v.
WAL-MART STORES EAST, LP,
CYNTHIA CARLSON, CRYSTAL
SHANNON, AND KAY SMITH,
Defendants

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Cause No. 2:10 CV 363

OPINION AND ORDER
Before the Court is Defendants’ “Motion to Dismiss” [DE 26] filed on February 6, 2012.
Plaintiff responded on March 14, 2012 to which the Defendants’ replied on April 11, 2012. For the
following reasons, the Defendants’ Motion to Dismiss is DENIED.
DISCUSSION
On December 28, 2009, Plaintiff Nancy Osterhout (“Osterhout”), filed her Charge of
Discrimination (“the Charge”) with the EEOC claiming that Wal-Mart failed to accommodate her
disability and terminated her because of it. In addition, the Charge alleged gender and age
discrimination, retaliation and interference with her Family and Medical Leave Act rights.
Osterhout asserted that the discriminatory actions began as early as November, 2008. On July 29,
2010, the EEOC issued a right to sue letter which Osterhout followed up with the present lawsuit,
filed on September 17, 2010.
Throughout this same time frame, Osterhout was involved in a bankruptcy proceeding under
Chapter 13 of the Bankruptcy Code. Osterhout’s bankruptcy petition was filed on August 29, 2008,

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four months prior to her filing of the Charge. Her bankruptcy filings included a Statement of
Financial Affairs form stating that she had no pending suits or administrative proceedings against
the Defendants as well as a Schedule B Personal Property form that indicated she had no “other
contingent and unliquidated claims.” Based upon her filings, the Bankruptcy Court approved a
repayment plan for her on November 25, 2008. The repayment plan was approved before Osterhout
filed her formal Charge but after the alleged discrimination by the Defendants began according to
the dates in her Charge. Defendants have now moved to dismiss the Complaint asserting that the
doctrine of judicial estoppel precludes her from prosecuting her present claims because she has not
disclosed them to the bankruptcy trustee.
On February 7, 2012, the day after the present Motion to Dismiss was filed, counsel for
Osterhout contacted her bankruptcy counsel, and informed him of both the pending lawsuit and the
motion to dismiss filed by Defendants. Thereafter, Osterhout’s bankruptcy counsel filed a Notice
of Amendment of her Chapter 13 Bankruptcy, amended the statement of her financial affairs, and
amended her declaration concerning debtor’s schedules. On February 24, 2012, the bankruptcy
trustee sent Osterhout’s counsel a letter indicating that Osterhout, as a debtor in possession, may
pursue her cause of action but application must be made to the bankruptcy court to employ
Osterhout’s current attorney as special counsel to represent Osterhout in the pending case. On
March 21, 2012, Plaintiff filed her response to the motion to dismiss setting forth the above
information and noting that as of that filing date, the application to appoint current counsel to litigate
the pending suit has not been made despite multiple requests.
On April 11, 2012, Defendants filed their reply brief wherein they concede that the doctrine
of judicial estoppel is foreclosed based upon the Seventh Circuit’s recent decision in Rainey v.

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United Parcel Serv., 2012 WL 753680 (7th Cir. March 7, 2012).1 As a result “Defendants withdraw
their request that the Court dismiss Osterhout’s claim on the theory of judicial estoppel.” (Reply,
p. 2). In light of this concession, the Motion to Dismiss is DENIED.
Defendants also raise several new issues in their reply brief that are not properly before this
court. For instance, Defendants ask the Court to limit Plaintiff’s damages to the amount owed to her
creditors in her bankruptcy case contending that she should not be rewarded for attempting to
defraud her creditors by her delay in notifying the trustee of this lawsuit. Defendants also ask the
Court to declare that Osterhout may only pursue her case on behalf of the bankruptcy estate.
Generally, arguments raised for the first time in a reply brief are waived. 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 here, even 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 Osterhout may only pursue her case for
the benefit of the bankruptcy estate is within the jurisdiction of the bankruptcy court. Accordingly,
the Motion to Dismiss on these grounds is DENIED as well.
CONCLUSION
Based on the foregoing, the Defendants’ Motion to Dismiss [DE 26] is DENIED.
Entered: This 25th day of April, 2012
s/ William C. Lee
United States District Judge

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Defendants note that a more recent Fifth Circuit case that has decided the judicial estoppel issue
differently. See Love v. Tyson Foods, Inc., ___ F.3d ___, 2012 WL 1110096 (5th Cir., April 4, 2012).

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