Paul v. Hewlett Packard Enterprise Company
OPINION AND ORDER DENYING 18 Defendant's Motion for Judgment on the Pleadings. Signed by District Judge Terrence G. Berg. (AChu)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
RICK S. PAUL,
Case No: 16-11965
Hon. Terrence G. Berg
OPINION AND ORDER DENYING DEFENDANT’S
MOTION FOR JUDGMENT ON THE PLEADINGS (DKT. 18)
In this age-discrimination case, Plaintiff Rick Paul is suing his
former employer, Defendant Hewlett Packard Enterprise Co.
Defendant says that Plaintiff is barred from filing this lawsuit
under the doctrine of judicial estoppel because, prior to filing this
lawsuit, Plaintiff failed to disclose his age-discrimination claims in
his bankruptcy case. Defendant has therefore moved for judgment
on the pleadings, and in the alternative for summary judgment,
and Plaintiff has opposed the motion. For the reasons outlined below, Defendant’s motion is DENIED.
Plaintiff began working for Defendant in 2006. Dkt. 18, Pg. ID
86. In June of 2012, Plaintiff filed for Chapter 13 bankruptcy in
the United States Bankruptcy Court for the Eastern District of
Michigan. Dkt. 18, Pg. IDs 86-88. Plaintiff was required to list all
personal property assets, including “[o]ther contingent claims of
every nature” in Schedule B of his Chapter 13 Plan. Dkt. 18, Pg.
ID 86; Dkt. 18-4, Pg. ID 136. With the assistance of his bankruptcy counsel, William Calunas, Plaintiff amended Schedules D, F, I,
and J on five occasions between July 2012 and March 2013. Dkt.
18, Pg. ID 87.
In August of 2014, Plaintiff was told he was being removed
from his position with Defendant and that he should apply for
other openings within the company. Dkt. 21-1, Pg. ID 339. In early January 2015, Plaintiff made an internal complaint of age discrimination. Plaintiff was terminated on January 23, 2015. Id. at
Pg. ID 340.
Plaintiff notified his bankruptcy counsel on January 26, 2015
that he was going to file a complaint with the Equal Employment
Opportunity Commission, which he did on the following day. Id;
Dkt. 18, Pg. ID 89. Plaintiff informed his bankruptcy counsel in
August 2015 that mediation of the EEOC claim was futile and
that the next step would be filing a lawsuit in federal court. Dkt.
21-1, Pg. ID 340. The EEOC issued a right to sue letter on March
2, 2016. Dkt. 1, Pg. ID 5. The complaint in this case was filed on
May 31, 2016. Dkt. 1. Plaintiff states that he informed his bankruptcy counsel of the fact that the federal lawsuit was filed in July
2016. Dkt. 21-1, Pg. ID 340.
Plaintiff states that he was unaware that he needed to amend
his bankruptcy schedules to reflect the fact that he had made a
claim for damages, that he relied on his bankruptcy counsel to advise him of such an obligation, and that if he had been so advised,
he would have instructed his counsel to amend the schedules. Id.
at Pg. ID 341. Prior to filing this lawsuit, however, Plaintiff had
not amended Schedule B of his plan to reflect his agediscrimination claim as one of his assets as required by 11 U.S.C.
On January 13, 2017, Defendant filed this motion for judgment
on the pleadings, which sought to have Plaintiff’s complaint dismissed on judicial estoppel grounds because Plaintiff had not disclosed this claim to the bankruptcy court. Dkt. 18. After learning
of his obligation to amend his schedules, Plaintiff discharged his
former bankruptcy counsel and instructed new counsel to correct
his schedules. Dkt. 21-1, Pg ID 341. The amended schedules reflecting this claim were filed on March 28, 2017. Dkt. 31-4, Pg. ID
Defendant’s motion for judgment on the pleadings, and in the
alternative for summary judgment is now before the Court.
Dkt. 18. Plaintiff opposes the motion. Dkt. 21.
Having considered the Parties’ arguments, the Court concludes
that oral argument would not help the Court resolve Defendant’s
motion. Thus, the Court will decide the motion based on the Parties’ written submissions. See E.D. Mich. LR 7.1(f).
III. Standard of Review
The Parties dispute under which Federal Rule of Civil Procedure the Court should review Defendant’s motion. Defendant argues that because it relies solely on the pleadings, EEOC documents referenced in Plaintiff’s complaint, and Plaintiff’s bankruptcy pleadings (which are matters of public record), the Court
should decide the motion using Rule 12(c) (which relates to judgment on the pleadings). Dkt. 18, Pg. ID 91. In response, Plaintiff
submits that the appropriate standard of review is that of Rule 56
(which relates to summary judgment). Dkt. 21, Pg. ID 329. To resolve Defendant’s motion, the Court need only consider matters of
public record, so the Court will not convert Defendant’s motion into one for summary judgment. See JPMorgan Chase Bank, N.A. v.
Winget, 510 F.3d 577, 581 (6th Cir. 2007) (stating that courts use
the same standard of review for motions brought pursuant to Rule
12(c) as they do for motions brought pursuant to Rule 12(b)(6));
New England Health Care Employees Pension Fund v. Ernst &
Young, LLP, 336 F.3d 495, 501 (6th Cir. 2003) (noting that when
deciding a Rule 12(b)(6) motion, a court “may consider materials
in addition to the complaint if such materials are public records or
are otherwise appropriate for the taking of judicial notice”).
When reviewing a motion for judgment on the pleadings, the
merits of the claims are not at issue. Instead, the Court must take
as true “all well-pleaded material allegations” and may grant the
motion only if “the moving party is nevertheless clearly entitled to
judgment.” Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner
& Smith, Inc., 479 F.2d 478, 480 (6th Cir. 1973). But the Court
“need not accept as true legal conclusions or unwarranted factual
inferences.” Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999).
Defendant argues that the Court should apply the doctrine of
judicial estoppel to prevent Plaintiff from pursuing this case because Plaintiff failed to amend his bankruptcy schedules to include his age discrimination claim as an asset. Dkt. 18, Pg. IDs
93-102. Plaintiff responds that he informed his bankruptcy attorney of this claim multiple times but that his attorney never informed him of his duty to amend his bankruptcy materials. Dkt.
21, Pg. ID 334. Defendant replies that, so long as Plaintiff has not
amended his bankruptcy schedules, what Plaintiff told his bank5
ruptcy attorney does not matter because Plaintiff is bound by his
attorney’s action (or, here, inaction). Dkt. 23, Pg. ID 368.
Judicial estoppel is an equitable doctrine that protects “the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship.” White v. Wyndham
Vacation Ownership, Inc., 617 F.3d 472, 476 (6th Cir. 2010). The
Court may apply judicial estoppel if a party “(1) assert[s] a position that is contrary to one that the party has asserted under oath
in a prior proceeding, where (2) the prior court adopted the contrary position either as a preliminary matter or as part of a final
Even if these elements are satisfied, “judicial estoppel is inappropriate in cases of conduct amounting to nothing more than
mistake or inadvertence.” Id. A party’s failure to report a claim
to a bankruptcy court may be declared inadvertent: “(1) where the
debtor lacks knowledge of the factual basis of the undisclosed
claims, and (2) where the debtor has no motive for concealment.”
Id. Furthermore, if the record establishes knowledge of the claim
and motive for concealment, a party can prevent judicial estoppel
by showing an “absence of bad faith.” Id. at 476. In order to show
an absence of bad faith, a party must provide evidence of efforts
taken to correct the initial omission. Id. at 480. The court weighs
the timing, extent, and effectiveness of those efforts to determine
whether to apply judicial estoppel. Id.
Here, there is no dispute that Plaintiff, by failing to amend his
schedules accordingly, has asserted a position in this lawsuit (that
he has an age-discrimination claim entitling him to a possible financial recovery) that is contrary to the position he asserted in his
bankruptcy proceedings (that he has not such claims). There is
also no dispute that the bankruptcy court relied on Plaintiff’s contrary position as a preliminary matter. Even more, Plaintiff had
knowledge of the factual basis underlying his claim during at least
a portion of the time during which he did not amend his bankruptcy schedules; Plaintiff first complained of age discrimination
in December of 2014, but did not complete his amendment until
March of 2017. Dkt. 1, Pg. ID 4; Dkt. 31-4, Pg. ID 1,680. Nor is
there a dispute that Plaintiff had a motive to conceal his claim
from the bankruptcy court—debtors who omit claims from their
bankruptcy schedules always have a motive to conceal because
“[i]t is always in a Chapter 13 petitioner's interest to minimize income and assets.” Lewis v. Weyerhaeuser Co., 141 Fed.Appx. 420,
426 (6th Cir. 2005) (internal citations omitted). Thus, the question for this Court is whether Plaintiff’s efforts to correct his initial omission demonstrate an absence of bad faith.
Two cases are particularly instructive to the Court’s analysis.
In White v. Wyndham Vacation Ownership, Inc., 617 F.3d 472 (6th
Cir. 2010), the plaintiff attempted to correct a similar initial omission by filing with the district court an affidavit from her attorney
stating that he had discussed plaintiff’s claim during a bankruptcy
However, the affidavit lacked specific information re-
garding the alleged corrections, and a transcript of the hearing
contained no record of the alleged discussion. Id. at 480-81. The
plaintiff also sought to correct her initial omission by filing with
the bankruptcy court an application to employ counsel, which
identified the existence of a lawsuit, but did not state whether the
plaintiff was the plaintiff or the defendant. Id. Both the affidavit
and the application were submitted prior to the defendant’s motion for summary judgment raising the judicial estoppel issue. Id.
After the defendant filed its summary judgment motion, the
plaintiff partially amended her “Statement of Financial Affairs” to
reflect her harassment claim, but her amendment did not “adequately fix” her filings, it “only updated a part of them.” Id. at
481. The Sixth Circuit affirmed the application of judicial estoppel to bar the lawsuit, noting that the plaintiff’s attempts to correct her omission were “limited and ineffective.” Id. at 482.
In Eubanks v. SBSK Fin. Grp., Inc., 385 F.3d 894 (6th Cir.
2004), the plaintiffs amended their bankruptcy schedules to list
the defendant as a creditor, attempted to amend their schedules a
second time, and put the court on notice of the relevant claim
through correspondence, motions, and status-conference requests.
See Eubanks, 385 F.3d at 898-99. The Sixth Circuit reversed the
application of judicial estoppel against the plaintiffs’ claim. Id. at
899. When commenting on Eubanks, the White panel explained
that Eubanks reflected “numerous, effective attempts to correct
the initial omission before (and after) the defendant in that case
filed a motion to dismiss based on a claim of judicial estoppel.”
White, 617 F.3d at 483.
When considering a plaintiff’s efforts to correct an initial omission in a bankruptcy proceeding, the Court must consider the timing, extent, and effectiveness of the efforts. White, 617 F.3d at
480. Corrective efforts taken before a defendant moves to dismiss
the case are more important than efforts taken after such a motion.
Here, Plaintiff’s actions fall somewhere between the
half-hearted, unsuccessful efforts of the plaintiff in White and the
extensive, successful efforts of the plaintiffs in Eubanks:
Effort to correct
omission made prior
to motion raising
Plaintiff did not attempt to correct his omission until after Defendant filed its motion to dismiss, but afterwards—albeit four
months afterwards—successfully amended his bankruptcy schedule to reflect his cause of action. See Dkt. 31. In other words, the
Court must decide whether Plaintiff’s ultimate success in amending his bankruptcy schedule outweighs his delay in doing so.
Whether to take a “better late than never” approach and permit
Plaintiff to continue his lawsuit depends on how the Court weighs
two important policy interests at stake. First, there is the interest
in preserving the integrity of the courts. To maintain that integrity, it is important to prevent “a party from abusing the judicial
process through cynical gamesmanship.” White, 617 F.3d at 476.
Applying judicial estoppel to a party who updates his or her bankruptcy documents only after a dispositive motion points out his or
his omission is one method of discouraging such gamesmanship; it
takes away any benefit that a party might have received had they
omitted the asset on purpose in an attempt to dupe the bankruptcy court. Second, there is the policy interest of assisting prevailing creditors to recover as much of their debt as possible from a
debtor who has declared bankruptcy. Permitting a debtor’s lawsuit to continue once she has successfully amended her bankruptcy schedules to include the omitted asset of a claim serves the policy of assisting creditors to potentially recoup more of their losses
(should the creditor prevail).
Both of the above policy interests are important, but the former
serves the latter; courts work to resolve disputes by providing a
means for harmed parties to seek redress for their injuries. Maintaining the integrity of the courts serves to ensure that the court
system functions properly.
Judicial estoppel should be applied
with caution to avoid impinging on the truth-seeking function of
the court. See Eubanks, 385 F.3d at 897 (citing Teledyne Indus.,
Inc. v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990)). If the Court
were to apply judicial estoppel here, Plaintiff would lose the ability to prosecute what could be a valid age discrimination claim
against the Defendant, and Plaintiff’s creditors would see a potential asset vanish.
Reviewing the record in this case, the Court finds that Plaintiff’s conduct here more closely resembles that of the plaintiff in
Eubanks than in White. Plaintiff asserts that he repeatedly in11
formed his former bankruptcy counsel of this claim in this case,
relying on counsel’s expertise in recognizing the need to amend
the bankruptcy schedules. When he learned that such amendment was required but had not been completed, Plaintiff discharged his former bankruptcy counsel, retained new counsel, and
the schedules have now been amended. By successfully amending
his bankruptcy schedules, Plaintiff has demonstrated an absence
of bad faith in his initial omission. Given Plaintiff’s absence of
bad faith, the application of judicial estoppel is inappropriate here.
For the foregoing reasons, Defendant’s motion is DENIED.
Dated: August 25, 2017
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service
I hereby certify that this Order was electronically filed, and
the parties and/or counsel of record were served on August 25,
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