Robey v. Cleveland School District et al
Filing
52
MEMORANDUM OPINION re 51 Order on Motion to Alter Judgment. Signed by District Judge Sharion Aycock on 10/25/2013. (psk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
WALTER S. ROBEY
PLAINTIFF
V.
CIVIL ACTION NO. 2:12CV101-SA-SAA
CLEVELAND SCHOOL
DISTRICT, et al.
DEFENDANTS
MEMORANDUM OPINION DISMISSING CASE
Defendants ask the Court to reconsider its refusal to judicially estop Plaintiff’s action
because of his failure to disclose this claim as part of his Bankruptcy petition.1 After reviewing
the record on Defendant’s Motion to Dismiss [5] and the request for reconsideration, the Court
GRANTS that request and DISMISSES this action.
Reconsideration Standard
A Rule 59(e) motion “calls into question the correctness of a judgment.” In re Transtexas
Gas Corp., 303 F.3d 571, 581 (5th Cir. 2002). The Fifth Circuit has held that such a motion is not
the proper vehicle for rehashing evidence, legal theories, or arguments that could have been
offered or raised before the entry of judgment. Simon v. United States, 891 F.2d 1154, 1159 (5th
Cir. 1990). Rather, Rule 59(e) “serve[s] the narrow purpose of allowing a party to correct
manifest errors of law or fact or to present newly discovered evidence.” Waltman v. Int’l Paper
Co., 875 F.2d 468, 473 (5th Cir. 1989) (internal quotations omitted).
1
After briefing was complete on Defendant’s Motion to Dismiss [5], the Bankruptcy Trustee of Walter Robey’s
estate filed a Letter “abandon[ing] any interest the bankruptcy estate may have in his causes of action.” See Report
from Trustee of Walter and Lille Robey’s Estate, Dec. 18, 2012 [39]. The Court in its earlier Order on Motion to
Dismiss [43] found that declaration dispositive as to Defendant’s judicial estoppel claims. However, the Court
noted that “[i]f Defendants believe this disclaimer not to be dispositive, they are instructed to file a Motion to Alter
or Amend Judgment within the time specified by the Federal Rules of Civil Procedure for further consideration.”
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.” Brandon v.
Interfirst Corp., 858 F.2d 266, 268 (5th Cir. 1988). The purpose of this doctrine is 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.” Id. The Fifth Circuit has not hesitated to apply
judicial estoppel to foreclose a party from pursuing a cause of action where the party, a debtor in
bankruptcy, has concealed his claim from the bankruptcy court, and in fact, has held that
“[j]udicial estoppel is particularly appropriate where, as here, a party fails to disclose an asset to
a bankruptcy court, but then pursues a claim in a separate tribunal based on that undisclosed
asset.” Kamont v. West, 83 F. App’x 1, 3 (5th Cir. 2003). According to the Fifth Circuit, “[a]
court should apply judicial estoppel if (1) the position of the party against which estoppel is
sought is plainly inconsistent with its prior legal position; (2) the party against which estoppel is
sought convinced a court to accept the prior position; and (3) the party did not act inadvertently.”
Jethroe v. Omnova Solutions, Inc., 412 F.3d 598, 600 (5th Cir. 2005); Lowe v. Am. Eurocopter,
LLC, 2011 U.S. Dist. Lexis 67291 (N.D. Miss. June 22, 2011). Each of these elements is
satisfied here.
The record and facts regarding Plaintiff’s Bankruptcy action are undisputed. Plaintiff
filed a Voluntary Petition for Chapter 13 Bankruptcy on February 1, 2008. On June 3, 2011,
Plaintiff filed a Motion to Amend Plan, in which he disclosed to the bankruptcy court that his
employment contract had been non-renewed. Plaintiff failed to disclose at that time that he had
filed a cause of action or might otherwise have a potential claim against the Cleveland School
District on the basis that his termination was a violation of state or federal law. Pertinent here,
2
Plaintiff had already filed his EEOC Charge alleging race discrimination on April 6, 2011, and
had amended that charge again on May 17, 2011, prior to filing his Motion to Amend the Plan.
The bankruptcy court approved the amendment in July of 2011, and Plaintiff filed this federal
cause of action on June 12, 2012. Defendant filed its Motion to Dismiss [5] shortly after
asserting that judicial estoppel was proper because Plaintiff failed to disclose this litigation in his
bankruptcy action. In response, Plaintiff secured a waiver in December of 2012 from the Trustee
indicating that the bankruptcy estate abandoned its interest in Plaintiff’s cause of action.
Defendants contend that Plaintiff’s failure to disclose this litigation despite his ongoing
duty to disclose potential claims to the bankruptcy court is, in effect, a representation to the
bankruptcy court that he did not have any potential claims against Defendants. This, according
to Defendants, is an inconsistent position.
The Bankruptcy Code and Rules “impose upon bankruptcy debtors an express,
affirmative duty to disclose all assets, including contingent and unliquidated claims.” In re
Coastal Plains, Inc., 179 F.3d 197, 207-08 (5th Cir. 1999) (citing 11 U.S.C. § 521(1)). “The duty
of disclosure in a bankruptcy proceeding is a continuing one, and a debtor is required to disclose
all potential causes of action.” Id. at 208 (quoting Youngblood Group v. Lufkin Fed. Sav. &
Loan Ass’n, 932 F. Supp. 859, 867 (E.D. Tex. 1996)). Indeed, the “importance of this disclosure
duty cannot be overemphasized.” Id.
The Fifth Circuit has held that
The rationale for … decisions [invoking judicial estoppel to prevent a party who
failed to disclose a claim in bankruptcy proceedings from asserting that claim
after emerging from bankruptcy] is that the integrity of the bankruptcy system
depends on full and honest disclosure by debtors of all of their assets. The courts
will not permit a debtor to obtain relief from the bankruptcy court by representing
that no claims exist and then subsequently to assert those claims for his own
benefit in a separate proceeding. The interests of both the creditors, who plan their
actions in the bankruptcy proceeding on the basis of information supplied in the
disclosure statements, and the bankruptcy court, which must decide whether to
3
approve the plan of reorganization on the same basis, are impaired when the
disclosure provided by the debtor is incomplete.
Id.
The Court finds that Plaintiff’s position in the bankruptcy court and this litigation is
clearly inconsistent. See Superior Crewboats, Inc. v. Primary P & I Underwriters, 374 F.3d 330,
335 (5th Cir. 2004) (finding inconsistent positions taken where personal injury litigation not
disclosed to bankruptcy even where the trustee formally abandoned the claim and the bankruptcy
court issued a “no asset” discharge).
Here, the Bankruptcy Court has accepted the previous position. The Bankruptcy Trustee
in Plaintiff’s case has officially abandoned the claim, thereby accepting Plaintiff’s prior position
that he had no contingent or unliquidated claims of any nature. Further, this Court accepted
Plaintiff’s previous position to the extent that Plaintiff pursued this litigation as if had standing to
do so. Because Plaintiff’s claim against Defendants was technically property of the estate, the
bankruptcy trustee is the representative of the estate with the capacity to sue and be sued. 11
U.S.C. § 323(a); Reed v. City of Arlington, 650 F.3d 571, 575 (5th Cir. 2011). Therefore, until
the trustee disclaimed these causes of action, Plaintiff lacked standing in this case. Accordingly,
the second element is satisfied.
In regards to the third prong of the judicial estoppel test, the Fifth Circuit has held that
“based on the importance of full disclosure in bankruptcy, in considering judicial estoppel for
bankruptcy cases, the debtor’s failure to satisfy its 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.” In re Coastal Plains, 179 F.3d at 210. In this case, there is no basis for
concluding that Plaintiff’s failure to disclose this litigation to the bankruptcy court was
“inadvertent.” In order for a debtor to lack knowledge of an undisclosed claim, the debtor must
4
have been unaware of the facts giving rise to his claim when he represented that he had no
potential claim to the bankruptcy court. See Jethroe v. Omnova Solutions, Inc., 412 F.3d 598,
600 (5th Cir. 2005). Merely demonstrating an unawareness of the legal duty to disclose is not
enough. Id. Plaintiff was clearly aware that he had claims against the Defendants when he filed
his Motion to Amend the Plan in the bankruptcy proceeding. As noted above, Plaintiff had
already filed a charge of discrimination, as well as an amendment to that charge with the EEOC
and instituted an appeal proceeding as to his termination.
Additionally, the Plaintiff here had motive to conceal this litigation. If he ultimately
recovered on his claims, he would not be required to give any potential monetary award to his
creditors. As the Fifth Circuit noted in Superior Crewboats,
The [plaintiffs] had the requisite motivation to conceal the claim as they would
certainly reap a windfall had they been able to recover on the undisclosed claim
without having disclosed it to the creditors. Such a result would permit debtors to
“[c]onceal their claims; get rid of [their] creditors on the cheap, and start over
with a bundle of rights.”
374 F.3d at 336 (internal citations omitted); see also Cargo v. Kan. City S. Ry. Co., 408 B.R.
631, 639 (W.D. La. 2009) (“Indeed, a motive to conceal claims subsists in all bankruptcy cases
in which a concealed legal claim would, if disclosed, form part of the bankruptcy estate and the
debtor is aware of the claim’s monetary value.”). The Court finds further support for this
conclusion as Plaintiff filed a Motion to Amend the Plan when he was terminated, thereby
recognizing his duty of continuing disclosure when to do so would lower his payment schedule
under the Plan; however, he failed to fulfill that duty when to do so may inure to the benefit of
the bankruptcy estate. Accordingly, because the Court concludes that the Plaintiff did not act
“inadvertently,” the third element is satisfied.
5
Moreover, the Court finds it inapposite that the Bankruptcy Trustee abandoned the claims
asserted in this lawsuit. This Court has held that “whether the Trustee abandons the claim well
after the bankruptcy discharge is irrelevant to whether the judicial estoppel doctrine should
apply.” Kaufman v. Robinson Prop. Group, L.P., 2009 U.S. Dist. Lexis 85331, *5 (N.D. Miss.
Sept. 16, 2009); accord Henley v. Pers. Fin. Corp., 2002 U.S. Dist. Lexis 27512 (S.D. Miss. Dec.
3, 2002) (“if [debtor] knew or should have known of her cause of action at any time during the
pendency of her bankruptcy, then an argument could be made that . . . [she] forfeited her right to
pursue litigation against [defendant] and ought not be permitted to pursue this litigation even if it
were abandoned by the trustee.”); Chickaway v. Bank One Dayton, N.A., 261 B.R. 646, 653
(S.D. Miss. 2001) (“[E]ven if the trustee . . . were to abandon the claims, there would remain the
question of whether [debtor’s] failure to include her claims against Bank One in her bankruptcy
schedules, as required by various provisions of the bankruptcy code, would judicially estop her
from pursuing her claim against Bank One”). Indeed, the Fifth Circuit has held that upon
abandonment by the bankruptcy trustee, the estate’s interest in the claim reverts to the debtors
who were then properly estopped from gaining a benefit from their deception. Superior
Crewboats, 374 F.3d at 335.
Accordingly, Plaintiff’s failure to disclose his causes of action against Defendants in his
Chapter 13 bankruptcy action judicially estop him from pursuing his claims here.
Conclusion
Defendant’s Motion to Alter or Amend [44] is GRANTED. The Court hereby corrects its
earlier manifest error of law that that the Plaintiff was not judicially estopped from asserting this
cause of action. The Court finds that Plaintiff’s claims are barred by the doctrine of judicial
6
estoppel as a matter of law. Therefore, the Plaintiff’s claims are DISMISSED, and this case is
CLOSED.
SO ORDERED, this the 25th day of October, 2013.
/s/ Sharion Aycock_________
U.S. DISTRICT JUDGE
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?