Allen et al v. C & H Distributors L L C et al

Filing 180

MEMORANDUM RULING re 152 SUPPLEMENTAL MOTION for Summary Judgment filed by C & H Distributors L L C, Ergocraft Contract Solutions, Travelers Property Casualty Co of America, K K America Corp, Great American Insurance Co. Signed by Judge S Maurice Hicks on 03/26/2015. (crt,McDonnell, D)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT

HELEN C. ALLEN, ET AL.

CIVIL ACTION NO. 10-1604

VERSUS

JUDGE S. MAURICE HICKS, JR.

C & H DISTRIBUTORS, LLC, ET AL.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM RULING
Before the Court is a Supplemental Motion for Summary Judgment (Record
Document 152) filed on behalf of Defendants C&H Distributors, LLC (“C&H”), K+K America
Corporation (“K+K America”), Travelers Property Casualty Company of America
(“Travelers”), Ergocraft Contract Solutions (“ECS”), and Great American Insurance
Company (“Great American”). Defendants seek dismissal of the claims of Plaintiffs Helen
and Robert Allen (“the Allens”) on the ground of judicial estoppel. See id. The Allens
opposed the motion and filed a supplemental affidavit. See Record Documents 155 & 177.
For the reasons which follow, the Supplemental Motion for Summary Judgment is
GRANTED based on the doctrine of judicial estoppel without prejudice to the rights of a
Chapter 7 trustee to pursue the claims if the Allens’ bankruptcy case is reopened and
converted to a Chapter 7 liquidation.

BACKGROUND1
The Allens filed this action on October 21, 2010 seeking damages for injuries Helen
Allen allegedly suffered on October 21, 2009 when a stool on which she was sitting broke
and caused her to fall. The Allens allege that a number of defendants were involved in
manufacturing the allegedly defective stool, and they seek damages from them under the
Louisiana Products Liability Act.
The Allens filed for Chapter 13 bankruptcy on July 14, 2009. Their original Chapter
13 plan was confirmed on September 29, 2009. The Chapter 13 plan was administered
by the Bankruptcy Court for almost 4 years. During such time, the Allens received relief
from creditors, paying $150 per month toward multiple debts.
The Allens never disclosed the existence of this personal injury suit to the
Bankruptcy Court. They filed amendments to their bankruptcy plan multiple times while this
suit was pending. Such amendments occurred on January 11, 2011; December 19, 2011;
and January 17, 2013. None of these amendments disclosed this suit to the Bankruptcy

1

Defendants submitted a Statement of Undisputed Material Facts (Record Document
152-1). Local Rule 56.2 states:
Each copy of the papers opposing a motion for summary judgment shall
include a separate, short and concise statement of the material facts as to
which there exists a genuine issue to be tried. All material facts set forth in
the statement required to be served by the moving party will be deemed
admitted, for purposes of the motion, unless controverted as required by this
rule.
The Allens did not file a separate statement of disputed material facts. Based on Fifth
Circuit case law and the local rules, this Court deems Defendants’ Statement of Undisputed
Material Facts admitted. See Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458
(5th Cir. 1998). Thus, much of the Background Section of the instant Memorandum Ruling
is drawn from Defendants’ Statement of Undisputed Material Facts.
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Court.
In June 2013, the Allens filed for discharge. The Bankruptcy Court entered a Final
Decree in April 2014, finding that the estate has been fully administered and relieving the
trustee from further duties. The Bankruptcy Court then closed the Chapter 13 case without
a discharge, noting that the Allens failed to file a Financial Management Course Certificate
proving compliance with the required instructional course concerning personal financial
management. This failure precluded any further relief or discharge.
On June 12, 2014, the Allens responded to written discovery propounded in the case
by C&H, K+K America, and Travelers. In response to C&H’s Interrogatory Number 21, the
Allens denied having ever filed for bankruptcy. In response to C&H’s Interrogatory Number
11, which concerned their involvement in any other legal proceeding, the Allens did not
disclose their bankruptcy. The Allens did not disclose the bankruptcy in their May 30, 2014
response to Ergocraft’s Interrogatory Number 13 and Request for Production M, both of
which concerned the Allens’ involvement in other legal proceedings.
The bench trial in this matter was set for September 15, 2014. See Record
Document 139. On September 2, 2014, Defendants filed a Joint Motion for Leave to File
Late Supplemental Motion for Summary Judgment.

See Record Document 150.

Defendants indicated that they had learned on August 24, 2014 that the Allens had filed for
Chapter 13 bankruptcy. See id. The Court upset the bench trial, granted leave, and the
Supplemental Motion for Summary Judgment is now before the Court. See Record
Documents 151 & 152.2
2

Counsel for Defendant Ergocraft and Great American now admits that he knew of
the bankruptcy as early as March 28, 2012. See Record Document 163 at 13. There is
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ANALYSIS
I.

Summary Judgment Standard.
Summary judgment is proper pursuant to Rule 56 of the Federal Rules of Civil

Procedure when “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Quality Infusion Care, Inc. v. Health Care Serv.
Corp., 628 F.3d 725, 728 (5th Cir.2010).3 “Rule 56[(a)] mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who fails to
make a showing sufficient to establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at trial.” Patrick v. Ridge, 394
F.3d 311, 315 (5th Cir.2004).
“A party seeking summary judgment always bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those portions of the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553 (1986).

no indication that counsel for C&H, K+K America, and Travelers knew of the bankruptcy
prior to August 2014. The Allens raised this timeliness issue in a Motion to Strike the
Supplemental Motion for Summary Judgment. See Record Document 166. The Court
denied such motion, believing judicial estoppel needed to be addressed before the case
moved forward and noting that judicial estoppel is a doctrine that can be raised by the
Court on its own. See Record Document 175; see also Grigson v. Creative Artists Agency
L.L.C., 210 F.3d 524, 530 (5th Cir. 2000) (“Judicial estoppel is not raised; but, because that
doctrine protects the judicial system, we can apply it sua sponte in certain instances.”).
3

The Court notes that Rule 56 now employs the phrase “genuine dispute,” rather
than “genuine issue.” This 2010 amendment does not alter the Court’s analysis, as there
was not a substantive change to the summary judgment standard. See F.R.C.P. 56(a) and
advisory committee’s note (emphasis added).
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If the moving party fails to meet this initial burden, the motion must be denied, regardless
of the nonmovant’s response. See Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th
Cir.1995).
If the movant demonstrates the absence of a genuine dispute of material fact, “the
nonmovant must go beyond the pleadings and designate specific facts showing that there
is a genuine [dispute] for trial.” Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 141 (5th
Cir.2004). Where critical evidence is so weak or tenuous on an essential fact that it could
not support a judgment in favor of the nonmovant, then summary judgment should be
granted. See Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir.2005). Where the
parties dispute the facts, the Court must view the facts and draw reasonable inferences in
the light most favorable to the plaintiff. See Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct.
1769 (2007). In sum, the motion for summary judgment “should be granted so long as
whatever is before the district court demonstrates that the standard for the entry of
summary judgment, as set forth in Rule 56(c), is satisfied.” Celotex Corp., 477 U.S. at 323,
106 S.Ct. at 2553.
II.

Judicial Estoppel.
Judicial estoppel is a common law doctrine by which a party who has assumed one

position in his pleadings may be estopped from assuming an inconsistent position. See
Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th Cir.1988). The equitable doctrine serves
“to protect the integrity of the judicial process, by preventing parties from playing fast and
loose with the courts to suit the exigencies of self interest.” In re Coastal Plains, Inc., 179
F.3d 197, 205 (5th Cir. 1999) (internal quotation marks, parentheses, and citation omitted).
Detrimental reliance by the opponent of the party against whom the doctrine is applied is
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not necessary, as judicial estoppel is meant to protect the judicial system, not the litigants.
See id.
“Judicial estoppel has three elements: (1) The party against whom it is sought has
asserted a legal position that is plainly inconsistent with a prior position; (2) a court
accepted the prior position; and (3) the party did not act inadvertently.” In re Flugence, 738
F.3d 126, 129 (5th Cir. 2013). In the bankruptcy setting, “the obligation to disclose pending
and unliquidated claims in bankruptcy proceedings is an ongoing one.” Jethroe v. Omnova
Solutions, Inc., 412 F.3d 598, 600 (5th Cir. 2005). Specifically, “Chapter 13 debtors have
a continuing obligation to disclose post-petition causes of action.” Flugence, 738 F.3d at
129.
III.

Analysis.
The threshold question here is whether judicial estoppel bars the Allens from

pursuing their personal injury suit in this Court. The Allens argue that the application of
judicial estoppel “should be guided by a sense of fairness” and is unwarranted in this
instance because their failure to disclose was “benign, inadvertent neglect;” the
nondisclosure was attributable to their counsel; and they “simply had no idea that the filing
of a bankruptcy petition has any relationship whatsoever with this suit.” Record Document
155 at 3-4, 15. The Allens have submitted an affidavit stating that they did not intentionally
conceal assets and “if [they] had been aware that the legal claims arising out of the incident
of October 21, 2009 should have been added into their Chapter 13, [they] would have done
so.” Record Document 177. The Allens further point to Defendants’ “unclean hands” as
a basis to defeat the application of judicial estoppel. See Record Document 155 at 6-12.
More specifically, as to the first and third element of judicial estoppel, the Allens
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argue:
[T]his personal injury claim did not exist when the debtors filed their
bankruptcy petition. The debtors did have a continuing duty to disclose postpetition causes of action and negligently failed to do so. There is no showing
that the debtors had any intent whatsoever to mislead anyone. The only
showing that can be made is that the plaintiffs/debtors are unsophisticated
and were unaware that this cause of action had to be disclosed, once it had
accrued after the filing of their petition.
Record Document 155 at 15. As to the second element of judicial estoppel, the Allens
maintain that “the bankruptcy court neither accepted nor rejected” their position because
“there was no discharge granted nor have any proceeds from this suit been received.” Id.
at 15.
The Court will now consider the elements of judicial estoppel.
The Party Against Whom It Is Sought Has Asserted a Legal Position That Is Plainly
Inconsistent with a Prior Position
The Allens admit that they did not list this suit as an asset in their bankruptcy
proceeding. Their positions in the bankruptcy court and in the instant litigation are clearly
inconsistent. “It goes without saying that the Bankruptcy Code and Rules impose upon
bankruptcy debtors an express, affirmative duty to disclose all assets, including contingent
and unliquidated claims. The duty to disclose is continuous.” In re Superior Crewboats,
Inc., 374 F.3d 330, 335 (5th Cir. 2004), citing Coastal Plains, 179 F.3d at 207-208.4 Thus,
under Coastal Plains, the Allens’ omission of the personal injury claim from their mandatory
4

A Chapter 13 debtor has a continuing obligation to disclose claims that arise, or
assets that are acquired, after the commencement of the bankruptcy case. See 11 U.S.C.
§§ 1306(a)(1) and 521(a)(1). Therefore, the Allens were under a continuing duty from and
after the date the personal injury claim arose to promptly disclose the existence of the
personal injury claim to the Bankruptcy Court and their creditors. See Kane v. Nat’l. Union
Fire Ins. Co., 535 F.3d 380, 384-385 (5th Cir. 2008), citing 11 U.S.C. §521(a)(1); Coastal
Plains, Inc., 179 F.3d at 207-208 (5th Cir. 1999).
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bankruptcy filings is tantamount to a representation that no such claim existed. See
Coastal Plains, 179 F.3d at 210. Now, in this matter, the Allens contend that their lawsuit
is viable and worth over $75,000. Such inconsistency readily satisfies the first prong of the
judicial estoppel inquiry. See Superior Crewboats, 374 F.3d at 335.
A Court Accepted the Prior Position
The Allens argue that the bankruptcy court neither accepted nor rejected their
position because there was no discharge. This Court is not so convinced. The Allens’
bankruptcy case was on the Bankruptcy Court’s docket for nearly 5 years. The Allens
amended their bankruptcy plan three times while the instant suit was pending. The
Bankruptcy Court confirmed their Chapter 13 plan and plan modifications proposed by the
Allens on the assumption that the schedules were accurate and that the Allens had
truthfully disclosed all of their assets. See Flugence, 738 F.3d at 130 (“Moreover, the
bankruptcy court accepted the prior position by omitting any reference to the
personal-injury claim in the modified plan.”); Abreu v. Zale Corp., No. 3:12-CV-2620-D,
2013 WL 1949845, at *3 (N.D. Tex. May 13, 2013) (“Courts have consistently held that a
bankruptcy court accepts a debtor’s position when it relies on her asset schedules and
confirms her bankruptcy plan. This reliance need not be explicit; the court assumes reliance
on the debtor's schedules when the bankruptcy court confirms the debtor’s plan.”). The
record establishes that the Bankruptcy Court relied on the Allens’ nondisclosure at several
critical times during the pendency of the case, and each time accepted the failure to
disclose to the detriment of creditors.5 Thus, the Court finds that the second element for
5

The fact that the Allens’ bankruptcy case was closed without discharge due to their
failure to file a required form certifying the completion of a financial course does not affect
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judicial estoppel is satisfied.
The Party Did Not Act Inadvertently
“[A] debtor’s failure to satisfy [his] statutory disclosure duty is inadvertent only when,
in general, the debtor either lacks knowledge of the undisclosed claims or has no motive
for their concealment.” Superior Crewboats, 374 F.3d at 335, citing Coastal Plains, 179
F.3d at 210. Neither consideration exculpates the Allens in this instance.
The Allens’ position that they were ignorant of the law and/or had no knowledge fails.
Clearly, the Allens had knowledge of their personal injury claims because they filed these
instant lawsuit while their bankruptcy case was still pending. See Lejeune v. Turner Indus.
Grp., LLC, No. CIV.A. 11-1238, 2012 WL 1118631, at *4-6 (E.D. La. Apr. 3, 2012) aff’d sub
nom., Parker v. Turner Indus. Grp., L.L.C., 492 F. App’x 475 (5th Cir. 2012) (“Thus, a
plaintiff is duty-bound to disclose a claim any time that he is aware of the facts giving rise
to a potential cause of action, irrespective of his knowledge of the law.”). Moreover, as to
motivation, it is well settled in the Fifth Circuit that “the motivation sub-element is almost
always met if a debtor fails to disclose a claim or possible claim to the bankruptcy court.
Motivation in this context is self-evident because of potential financial benefit resulting from
the nondisclosure.” Love v. Tyson Foods, Inc., 677 F.3d 258, 262 (5th Cir. 2012); see also
Flugence, 738 F.3d at 131 (“Flugence knew of the facts underlying her personal-injury
claim. The bankruptcy court also found that she had motive to conceal, because her claim,
if disclosed, would be available to the creditors. That she did not know that bankruptcy law
required disclosure–even if true– is, according to our precedents, irrelevant.”). Therefore,

the application of judicial estoppel. See Lisiecki v. Bank of Am., N.A., No. 08-12380, 2009
WL 1438550, at *4 (E.D. Mich. May 19, 2009).
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the Allens’ arguments on the issue of inadvertence are uniformly rejected by binding
precedent.
CONCLUSION
Based on the foregoing analysis, the Defendants’ Supplemental Motion for Summary
Judgment (Record Document 152) is GRANTED and the Allens’ claims are DISMISSED
on the ground of judicial estoppel. Such dismissal is WITHOUT PREJUDICE to the rights
of a Chapter 7 trustee to pursue the claims if the Allens’ bankruptcy case is reopened and
converted to a Chapter 7 liquidation. See Reed v. City of Arlington, 650 F.3d 571, 579 (5th
Cir. 2011) (“Absent unusual circumstances, an innocent bankruptcy trustee may pursue for
the benefit of creditors a judgment or cause of action that the debtor–having concealed that
asset during bankruptcy–is himself estopped from pursuing.”).
A Judgment consistent with the terms of the instant Memorandum Ruling shall issue
herewith.
IT IS SO ORDERED.
THUS DONE AND SIGNED, in Shreveport, Louisiana, this 26th day of March, 2015.

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