O'CONNELL et al v. MARSHALLS, INC. et al
MEMORANDUM. SIGNED BY MAGISTRATE JUDGE ELIZABETH T. HEY ON 10/11/2017. 10/11/2017 ENTERED AND COPIES E-MAILED.(amas)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
VALERIE O’CONNELL & ALBERT
KLESCHIK, SR., h/w
MARSHALLS, INC. & THE TJX COMPANIES,
MEMORANDUM AND ORDER
In this action, Plaintiffs Valerie O’Connell and Albert Kleschick, Sr., wife and
husband (“Plaintiffs”), seek damages from Marshall’s, Inc., and the TJX Companies, Inc.
(“Defendants”),1 for damages allegedly sustained when Ms. O’Connell slipped and fell in
a Marshall’s store. Presently before the court are Defendants’ motions for leave to
amend their Answer to add the affirmative defenses of standing and judicial estoppel, and
for summary judgment based on the same affirmative defenses. Docs. 17 & 18. For the
reasons that follow, the motion for leave to amend the Answer will be granted, and the
motion for summary judgment will be denied.
FACTUAL AND PROCEDURAL BACKGROUND
Both of the affirmative defenses that are the subject of Defendants’ motions rely
on Plaintiffs’ Chapter 13 bankruptcy petition. Therefore, I begin by exploring the
procedural history of both this lawsuit and the bankruptcy petition. Except where stated,
the following facts are not in dispute for purposes of these motions.
Defendants aver that the proper defendant is Marmaxx Operating Corporation.
See, e.g., Doc. 17 at 1.
On May 16, 2016, Plaintiff O’Connell was injured in a slip-and-fall accident
giving rise to the present litigation. Plaintiffs commenced this action in the Philadelphia
Court of Common Pleas on May 12, 2017, and Defendants timely removed it to this court
on May 30, 2017. Doc. 1. Plaintiff O’Connell states a claim for negligence and Plaintiff
Kleschnik states a claim for loss of consortium. Id. at 23 (Complaint). On June 16, 2017,
Defendants filed their Answer. Doc. 4.
At some point after this suit was filed, Defendants learned that on November 12,
2015 -- that is, approximately six months prior to the incident giving rise to the present
civil action -- Plaintiffs filed for Chapter 13 bankruptcy protection in the Eastern District
of Pennsylvania. See Bankr. Pet. 15-18147, Doc. 17-4 (Exh. C); Voluntary Pet. &
Summary of Schedules, Doc. 17-7 (Exh. D).2 At the time of the filing, Plaintiff
Kleschnik had a pending claim in a slip and fall case, and disclosed that claim on the
Chapter 13 Schedule B-Personal Property (“Schedule B”) form , in the category of
“Other contingent and unliquidated claims of every nature . . . .” Schedule B, Doc. 17-7
at 9, item 21 (ECF pagination).
On July 20, 2017, Plaintiffs filed an Amended Schedule B form with the
bankruptcy court, providing updated information on Plaintiff Kleschick’s previouslydisclosed personal injury claim, and adding (without any date information) Plaintiff
O’Connell’s “Age Discrimination action.” Doc. 17-6 (Exh. E) (“Amended Schedule B”).
As will be discussed, the parties dispute when Defendants became aware of the
However, in the Amended Schedule B, Plaintiffs did not disclose the existence of their
negligence action against Defendants in the instant matter.
On August 18, 2017, Defendants filed the present related motions -- first, a motion
for leave to amend the Answer to assert the affirmative defenses of standing and judicial
estoppel, and second, a motion for summary judgment based on the same affirmative
defenses. Docs. 17 & 18. In the motions, Defendants argue that Plaintiffs did not have
standing to bring this action because they did not disclose it to the bankruptcy court or
bring it on behalf of the bankruptcy estate, and that the action is barred by the doctrine of
judicial estoppel because Plaintiffs’ position before the bankruptcy court is inconsistent
with their position in this lawsuit, and because Plaintiffs’ failure to disclose the present
negligence action to the bankruptcy court evidenced an intent to conceal it from potential
On August 25, 2017, Plaintiffs filed a second Amended Schedule B with the
bankruptcy court, for the first time disclosing the present lawsuit. See second Amended
Schedule B, Doc. 19 Exh. 2 (“Second Amended Schedule B”).
On September 1, 2017, Plaintiff filed a response in opposition to Defendants’
motion for leave to amend, arguing that the motion should be denied on the grounds of
delay and futility. Doc. 19. On September 13, 2017, Plaintiff filed a response in
opposition to Defendants’ motion for summary judgment, arguing that they were not
required to disclose the present lawsuit to the bankruptcy court because it arose several
months after they filed for Chapter 13 bankruptcy protection, and that to the extent they
were required to do so, they filed the second Amended Schedule B immediately after
Defendants’ motions alerted them to the issue. Doc. 21. Defendants thereafter filed
reply briefs in support of both motions. Docs. 24 & 25.
DEFENDANTS’ MOTION FOR LEAVE TO AMEND
Defendants aver that during discovery in this case, they learned that Plaintiffs had
previously filed for Chapter 13 bankruptcy, in a proceeding which entered an automatic
stay and remains pending in the bankruptcy court, and without disclosing their claims
against Defendants to that court. As a result, Defendants seek to amend their Answer to
include the following affirmative defenses:
TWENTIETH AFFIRMATIVE DEFENSE
Plaintiffs’ claims are barred by the doctrine of judicial
estoppel, which prevents a party from taking inconsistent
positions by prosecuting claims not disclosed in a bankruptcy
proceeding. Plaintiffs had an affirmative duty to disclose
assets including causes of action to the bankruptcy court,
failed to do and thereby represented that they had no such
claims. Plaintiffs cannot now take the inconsistent and
opposite position that they do have a claim by pursuing this
TWENTY-FIRST AFFIRMATIVE DEFENSE
Plaintiffs’ claims are barred because they lack
standing to pursue the claims. Having filed for bankruptcy
protection, all of the Plaintiffs’ assets, including these claims,
are property of the bankruptcy estate, and having failed to
disclose the claims, Plaintiffs lack standing to pursue them.
Doc. 17 ¶ 17.3
The proposed Amended Answer is attached to Defendants’ motion at Doc. 17-5
Defendants are unable to amend their Answer without leave or court or consent of
Plaintiffs as too much time has passed after service of their Answer. See Fed. R. Civ. P.
15(a)(1) (allowing 21 days to amend pleading not requiring a response). Therefore, their
ability to amend their Answer is governed by Rule 15(a)(2), which provides that “a party
may amend its pleadings only with the opposing party’s consent or the court’s leave.
The court should freely give leave when justice so requires.” Id. R. 15(a)(2). Leave to
amend a pleading is generally granted unless equitable considerations “render it
otherwise unjust.” Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (citing
Foman v. Davis, 371 U.S. 178, 182 (1962)). “Among the factors that may justify denial
of leave to amend are undue delay, bad faith, and futility,” although courts have
consistently recognized that “prejudice to the non-moving party is the touchstone for the
denial of an amendment.” Id. (quoting Lorenz v. CSZ Corp., 1 F.3d 1406, 1414 (3d Cir.
1993)) (citations omitted)). Plaintiffs here rely on undue delay and futility to defeat the
proposed amendments. Doc. 19.
With respect to delay, delay alone is insufficient to warrant denial of leave to
amend. Arthur, 434 F.3d at 204 (citing Adams v. Gould, Inc., 739 F.2d 858, 868 (3d
Cir. 1984)). Delay becomes “undue” when it places “an unwarranted burden on the
court . . . [and] an unfair burden on the opposing party.” Id. (quoting Adams, 739 F.2d
at 868). “When a party fails to take advantage of previous opportunities to amend,
without adequate explanation, leave to amend is properly denied.” Id. (citing Adams,
739 F.2d at 868); see also Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 273
(3d Cir. 2001) (“[T]he question of undue delay requires that we focus on the movant’s
reasons for not amending sooner.”).
As for futility, “[a] determination as to futility does not require a conclusive
determination on the merits of a claim or defense; rather, the futility of an amendment
may only serve as the basis for denial of leave to amend when the proposed amendment
is frivolous or advances a claim that is legally insufficient on its face.” Pharmaceutical
Sales & Consulting Corp. v. J.W.S. Delavau Co., 106 F.Supp.2d 761, 764 (D.N.J. 2000)
(citing Miller v. Beneficial Mgmt. Corp., 844 F. Supp. 990, 1001 (D.N.J. 1993)). As a
result, courts place a heavy burden on opponents who argue that a proposed amendment
to a pleading is futile. See id. Assertions that amendment to an answer would be futile
are reviewed under the motion to dismiss standard, which requires the court to accept as
true the allegations in the defendant’s proposed affirmative defenses and construe them
in the light most favorable to the defendant. Id. at 765; see also In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) (“‘Futility’ means that the
complaint, as amended, would fail to state a claim upon which relief could be granted.”).
In making the futility determination, the court looks only to the pleadings.
Pharmaceutical Sales, 106 F. Supp.2d at 764.
Plaintiffs first argue that the motion for leave to amend should be denied on
grounds of undue delay. Doc. 19 at 15-16 (ECF pagination). According to Plaintiffs,
Defendants knew or should have known about Plaintiffs’ Chapter 13 bankruptcy
proceeding “well before” they filed their Answer, see id. ¶ 5, citing a June 3, 2016 public
records report that lists the bankruptcy proceeding, and which was provided by
Defendants in their document production. See Accurint Report, Bates Nos. TJX0099100, Doc. 19 at 19-20 (ECF pagination). As a result, Plaintiffs argue that they are
entitled to conduct discovery on the issue of when and how Defendants learned of
Plaintiffs’ Chapter 13 proceeding, but that such discovery is precluded because the fact
discovery deadline in this case has now passed. Doc. 19 ¶ 23.
I disagree with Plaintiffs’ position. Adding the two affirmative defenses sought by
Defendants would not affect the remaining Scheduling Order in this case, nor prejudice
Plaintiffs who were obviously aware of their own bankruptcy proceeding. In addition,
there is no evidence of bad faith or dilatory motive on behalf of Defendants. Plaintiffs
have presented no evidence that Defendants knew or should have known about Plaintiffs’
bankruptcy proceeding before they filed their Answer, and Plaintiffs certainly did not
disclose it to them. Although the public records report is dated a few days before
Defendants filed their original Answer, it is not clear on what date that report came into
Defendants’ hands, and Defendants were entitled to develop evidentiary support for the
affirmative defenses and related summary judgment motion. In any event the Court
would decline to penalize Defendants for being too slow in discovering Plaintiffs’
Chapter 13 filing where Plaintiffs had themselves failed to disclose the existence of this
lawsuit in filings made to the bankruptcy court. Defendants filed their original Answer
on June 16, 2017, and filed the present motion on August 18, 2017, two months and two
days later. See Docs. 4 & 17. This period of time does not warrant a finding of undue
delay. See Sweet St. Deserts, Inc. v. Chudleigh’s Ltd., Civil Action No. 12-3363, 2013
WL 5467962, at *3 (E.D. Pa. Sept. 27, 2013) (Baylson, J.) (“A two and a half month
delay is a relatively short period of time, and not undue delay.”). Therefore, the motion
for leave will not be denied on the grounds of delay.
Plaintiffs also oppose the motion on grounds of futility. Doc. 19 at 12-15 (ECF
pagination). However, if all of the facts asserted by Defendants in their motion are taken
as true and viewed in the light most favorable to Defendants -- as they must be -- then
Defendants have stated non-frivolous and legally sufficient defenses of lack of standing
and judicial estoppel. As previously noted, Plaintiffs filed for Chapter 13 bankruptcy
protection prior to the incident giving rise to this lawsuit, but failed to disclose this
lawsuit in an Amended Schedule B in which Plaintiffs updated the bankruptcy court on
the status of a negligence action which arose prior to the Chapter 13 filing, and disclosed
an age discrimination lawsuit which arose after the Chapter 13 filing. Because the court
looks only to the pleadings in making its determination regarding a motion to amend,
Plaintiffs’ explanations for why they failed to disclose this lawsuit in the Amended
Schedule B are immaterial, and will be addressed in the context of Defendants’
summary judgment motion.
For the foregoing reasons, Defendants’ motion for leave to amend their affirmative
defenses will be granted.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Defendants also move for summary judgment on the basis of the same affirmative
defenses raised in the motion for leave to amend -- standing and judicial estoppel. Docs.
18 & 24. A moving party is entitled to summary judgment “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). An issue is “genuine” if the evidence is such
that a reasonable jury could return a verdict for the non-moving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).4 A factual dispute is “material” if it
might affect the outcome of the case under governing law. Id.
“A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by . . . citing to particular parts of materials in the record . . . or . . . showing
that the materials cited do not establish the absence or presence of a genuine dispute. . .
.” Fed. R. Civ. P. 56(c)(1)(A), (B). “Speculation, conclusory allegations, and mere
denials are insufficient to raise genuine issues of material fact.” Boykins v. Lucent
Techs., Inc., 78 F.Supp.2d 402, 408 (E.D. Pa. 2000). On a motion for summary
judgment “we view the underlying facts and all reasonable inferences therefrom in the
light most favorable to the party opposing the motion.” Mancini v. Northampton
County, 836 F.3d 308, 313 (3d Cir. 2016) (quoting Blunt v. Lower Merion Sch. Distr.,
767 F.3d 247, 265 (3d Cir. 2014)).
Standing is “the threshold question in every federal case.” Warth v. Seldin, 422
U.S. 490, 498 (1975).
In essence the question of standing is whether the litigant is
entitled to have the court decide the merits of the dispute or of
particular issues. This inquiry involves both constitutional
Anderson predated the 2010 Amendment to Rule 56. However, the change in
wording and location within the rule for the summary judgment standard did not alter the
standard or caselaw interpretation of the standard. Fed. R. Civ. P. 56 advisory
committee’s note to 2010 Amendments.
limitations on federal-court jurisdiction and prudential
limitations on its exercise. In both dimensions it is founded
in concern about the proper – and properly limited – role of
the courts in a democratic society.
Id. (citations omitted).
The Third Circuit has not addressed the issue of standing where, as here, a civil
action is brought by plaintiffs acting on their own behalf during the pendency of a
Chapter 13 bankruptcy proceeding in which they are the debtors. In order to answer the
question of standing in this circumstance, it is necessary to investigate principles of
bankruptcy law, including whether a civil claim that arises during the pendency of a
Chapter 13 bankruptcy proceeding constitutes “property of the estate” for purposes of the
bankruptcy proceeding, and, if so, the impact of Federal Rule of Bankruptcy Procedure
6009, which requires the debtor/plaintiff to bring such a civil lawsuit “in behalf of the
The first question is easily answered in the affirmative. Section 541 of the
Bankruptcy Code provides that commencement of a bankruptcy proceeding “creates an
estate . . . comprised of . . . all legal or equitable interests of the debtor in property as of
the commencement of the case.” 11 U.S.C. § 541(a)(1); see Oneida Motor Freight, Inc.
v. United Jersey Bank, 848 F.2d 414, 416 (3d Cir. 1988). These interests include pending
lawsuits and potential or likely causes of action. Krystal Cadillac-Oldsmobile GMC
Truck, Inc. v. Gen. Motors, Corp., 337 F.3d 314, 322 (3d Cir. 2003). Moreover, in the
context of a Chapter 13 bankruptcy, section 1306 provides that “[p]roperty of the estate
includes . . . all property of the kind specified in [section 541] that the debtor acquires
after the commencement of the case but before the case is closed, dismissed, or converted
to a case under [another] chapter . . . of this title, whichever occurs first. . . .” 11 U.S.C.
§ 1306(a)(1) (emphasis added); see also In re Stretcher, 466 B.R. 891, 893 (W.D. Tex.
2011) (“[F]or Chapter 13 cases, the definition of ‘property of the estate’ is expanded”
beyond the requirements of section 541, to include all property the debtor acquires “after
the commencement of the case but before the case” concludes) (citing section 1306(a)).
In other words, by the plain language of sections 541 and 1306, the property of a
Chapter 13 bankruptcy estate includes both existing and potential causes of action at the
time the bankruptcy proceeding is commenced (11 U.S.C. § 541), and those which arise
after the bankruptcy proceeding has commenced and before it has been “closed,
dismissed, or converted.” Because Plaintiffs’ cause of action against Defendants arose
after Plaintiffs filed for Chapter 13 bankruptcy protection, but before that proceeding has
terminated, Plaintiffs’ cause of action clearly constitutes property of the bankruptcy
Having established that Plaintiffs’ lawsuit is part of the bankruptcy estate,
Defendants move for summary judgment based on Federal Rule of Bankruptcy
Procedure 6009, which provides:
With or without court approval, the trustee or the debtor in
possession may prosecute or may enter an appearance and
defend any pending action or proceeding by or against the
debtor, or commence and prosecute any action or proceeding
in behalf of the estate before any tribunal.
Fed. R. Bankr. P. 6009. Defendants argue that Plaintiffs lack standing because they did
not timely disclose this action to the bankruptcy court and did not bring this action “in
behalf of the [bankruptcy] estate.” Doc. 18-6 at 7-8 (ECF pagination).
There is little case law interpreting Rule 6009 generally, let alone in the
circumstances which arise here. Nevertheless, although Plaintiffs did not bring the
present action “in behalf of the estate” or amend the caption to include this language,
such steps are not explicitly required by the rule, and case law does not require such
formality. Rather, cases relied upon by Defendants strongly support the conclusion that
disclosure of a post-bankruptcy petition civil lawsuit will satisfy the requirement of
standing, and thus of Rule 6009. See, e.g, Rugiero v. Nationstar Mortg., LLC, 580 Fed.
Appx. 376, 379 (6th Cir. 2014) (test of whether debtor is acting on behalf of estate is
whether debtor has properly disclosed the cause of action to bankruptcy court, trustee,
and creditors); Cowling v. Rolls Royce Corp., Civil Action No. 11-0719, 2012 WL
4762143, at *4-5 (S.D. Ind. Oct. 5, 2012) (dismissing civil lawsuit for lack of standing
because plaintiff, whose claims arose after he filed for Chapter 13 protection, did not
dispute the fact that he never disclosed the civil lawsuit in his Chapter 13 bankruptcy
proceeding, and stating that debtors who disclosed pending lawsuits would have standing
to pursue their lawsuits on behalf of the bankruptcy estate); Robertson v. Flowers Baking
Co. of Lynchburg, LLC, Civil Action No. 11-0013, 2012 WL 830097, at *4 (W.D. Va.
Mar. 6, 2012) (Chapter 13 debtor lost standing regarding undisclosed asset). The
unmistakable conclusion of these and many other cases is that a debtor’s failure to
disclose a pending civil action to the Bankruptcy Court deprives that debtor of standing to
bring the civil action -- and, logically, that a debtor will have standing if the civil action is
Here, although Plaintiffs failed to disclose this lawsuit to the bankruptcy court for
over a year after the cause of action accrued, Plaintiffs did disclose it by filing a second
amended Schedule B on August 25, 2017. Therefore, unlike the cases relied upon by
Defendants, here Plaintiffs have disclosed the present lawsuit to the Bankruptcy Court,
and thus have standing. I will examine the impact of Plaintiffs’ failure to make this
disclosure in a more timely manner as part of the equities in the judicial estoppel
discussion, but for purposes of legal standing, I conclude that Plaintiffs’ recent
Defendants also move for summary judgment on the grounds that Plaintiffs’
failure to timely disclose this cause of action in their schedules to the bankruptcy court
judicially estops them from claiming they have an interest in this case. Judicial estoppel
is a judge-made “doctrine that seeks to prevent a litigant from asserting a position
inconsistent with one that she has previously asserted in the same or in a previous
proceeding.” Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 358
(3d Cir. 1996); see also In re Kane, 628 F.3d 631, 639 (3d Cir. 2011) (“[J]udicial estoppel
is a fact-specific, equitable doctrine, applied at a court’s discretion.”). It is “an extreme
remedy, to be used only when the inconsistent positions are tantamount to a knowing
misrepresentation to or even fraud on the court.” Chao v. Roy’s Constr., Inc., 517 F.3d
180, 186 N. 5 (3d Cir. 2008).
Before examining the elements of a judicial estoppel defense, it is first necessary
to consider the premise of Defendants’ argument; as a matter of bankruptcy law, did
Plaintiffs owe a duty to disclose their claims in this lawsuit to the bankruptcy court.
While closely related to the previous discussion, this question merits closer analysis in
light of the focus on the equities involved. As the Third Circuit has stated, “[b]ecause
creditors and the bankruptcy court rely heavily on the debtor’s disclosure statement . . . ,
the importance of full and honest disclosure cannot be overstated. Ryan, 81 F.3d at 362.
The Bankruptcy Code requires the debtor to file “a schedule of assets and liabilities.”
11 U.S.C. § 521(a)(1)(B)(i). As with the definition of property of the bankruptcy estate,
such assets include causes of action and potential causes of action. See Ryan, 81 F.3d at
362 (“schedule must disclose . . . ‘contingent and unliquidated claims of every nature’”)
(quoting Official Forms, Schedule B, App. 41). Under the Code, assets that were not
disclosed cannot be discharged and remain property of the estate, meaning that a debtor
who failed to disclose assets cannot regain ownership of them. See 11 U.S.C. § 554(d);
see Parker v. Wendy’s Intern., Inc., 365 F.3d 1268, 1272 (11th Cir. 2004) (“Failure to list
an interest on a bankruptcy schedule leaves that interest in the bankruptcy estate.”)
Although the Third Circuit has not held directly on this point, other courts have
held that in a Chapter 13 reorganization, the duty to disclose continues after a debtor
submits the schedule of assets and liabilities, meaning that the debtor must amend the
schedule if the asset picture changes. See, e.g., Ajaka v. Brooksamerica Mort. Corp., 453
F.3d 1339, 1344 (11th Cir. 2006). Plaintiffs cite to cases reaching a different conclusion,
Doc. 21 at 17 (ECF pagination), but those cases are distinguishable. First, in a case
involving a Chapter 7 bankruptcy petition, the Honorable Eduardo C. Robreno of this
court found no continuing duty of the debtor to disclose a personal injury claim that did
not exist at the time of the petition, pointing out the difference between a Chapter 13
reorganization and a Chapter 7 liquidation. Gaito v. A-C Product Liab. Trust, 542 B.R.
155, 165 & n.9 (E.D. Pa. 2015). Similarly, the Honorable D. Brooks Smith (now Chief
Judge of our circuit) held, in the context of a Chapter 11 petition, that a personal injury
cause of action that accrued five months after the bankruptcy petition was filed, and bore
no relationship to it, did not become part of the bankruptcy estate. In re Doemling, 127
B.R. 954, 955-57 (W.D. Pa. 1991). In contrast, as cited above, section 1306 is
unequivocal that all property that a debtor acquires after commencement of the
proceeding and up until the matter is concluded becomes part of the estate. Therefore, I
conclude here that Plaintiffs had a duty to advise the bankruptcy court of their claims in
this matter, as they accrued while the bankruptcy proceeding was still pending.
Turning back to judicial estoppel, that doctrine is applicable when three elements
are met; (1) the party to be estopped must have taken irreconcilably inconsistent
positions, (2) the party to be estopped acted in bad faith, and (3) the remedy is tailored to
address the harm. G-I Holdings, Inc. v. Reliance Ins. Co., 586 F.3d 247, 262 (3d Cir.
2009); Krystal Cadillac, 337 F.3d at 320.
With regard to irreconcilably inconsistent positions, “[a]ll that is necessary to
meet this first prong is that the party to be estopped asserted an inconsistent position in a
previous proceeding and cannot credibly reconcile his or her changed stance.” Ortlieb v.
Hudson Bank, 312 F.Supp.2d 705, 711 (E.D. Pa. 2004). Not surprisingly, therefore,
most courts find this element to be satisfied where plaintiffs initiate a civil action
without disclosing the lawsuit to the bankruptcy court. See, e.g., In re Superior
Crewboats, Inc., 374 F.3d 330, 335 (5th Cir. 2004) (“[Debtors] omission of the personal
injury claim from their mandatory bankruptcy filings is tantamount to a representation
that no such claim exists.”); Ortlieb, 312 F.Supp.2d at 712 (plaintiff asserted
irreconcilably inconsistent positions in filing for bankruptcy protection and omitting any
mention of contingent claims against defendant in three bankruptcy disclosure
statements); Tokheim v. Georgia-Pacific Gypsum, L.L.C., 606 F.Supp.2d 988, 996
(N.D. Iowa 2009) (plaintiff’s failure to amend bankruptcy schedules to disclose claims
that accrued after she filed for Chapter 13 bankruptcy protection “clearly inconsistent”
with subsequent civil lawsuit).
Plaintiffs argue that because they did not have a duty to disclose the present claim
in their Chapter 13 bankruptcy proceeding, they have not taken irreconcilably
inconsistent positions. Doc. 21 at 17 (ECF pagination). I disagree. As just discussed,
Plaintiffs were required to disclose this civil action to the bankruptcy court because their
claims accrued while their Chapter 13 proceeding was still pending. By bringing this
action on their own behalf and failing to promptly disclose it to the bankruptcy court,
Plaintiffs in essence represented opposite positions to two courts, telling this court they
had a claim for money damages against Defendants and telling the bankruptcy court that
they did not. Therefore, the first element of judicial estoppel is met.
The second element requires that the party to be estopped acted in bad faith, which
means it “play[ed] fast and loose” with the court. Krystal Cadillac, 337 F.3d at 319
(quoting Scarano v. Central R. Co. of N.J., 203 F.2d 510, 513 (3d Cir. 1953)). In this
context, bad faith requires a showing that Plaintiffs deliberately failed to disclose this
lawsuit to the bankruptcy court, meaning that they had knowledge of the claim and a
motive to conceal it from their creditors. See id. at 321 (“[A] rebuttable inference of bad
faith arises when averments in the pleadings demonstrate both knowledge of a claim and
a motive to conceal that claim in the face of an affirmative duty to disclose.”) (citing
Oneida Motor Freight, 848 F.2d at 416-18). However, the Third Circuit has also held
that “policy considerations militate against adopting a rule that the requisite intent for
judicial estoppel can be inferred from the mere fact of non-disclosure in a bankruptcy
proceeding.” Ryan, 81 F.3d at 364 (declining to treat careless or inadvertent nondisclosures “as equivalent to deliberate manipulation when administering the ‘strong
medicine’ of judicial estoppel”) (quoting Chaveriat v. Williams Pipe Line Co., 11 F.3d
1420, 1428 (7th Cir. 1993)). The Court explained that judicial estoppel “is not meant to
be a technical defense for litigants seeking to derail potentially meritorious claims,
especially when the alleged inconsistency is insignificant at best and there is no evidence
of intent to manipulate or mislead the courts.” Id. at 365.
Plaintiffs attach affidavits in which they state that the failure to disclose the
present negligence lawsuit to the bankruptcy court prior to August 25, 2017, was
inadvertent and unintentional. See Affidavits of Mr. Kleschick and Ms. O’Connell, Doc.
21 Exh. 2.5 In the affidavits, Plaintiffs explain that when they filed their amended
schedules on July 20, 2017, they did so at the request of the Chapter 13 trustee for the
principal reason of accounting for the settlement of Mr. Kleschick’s pre-bankruptcy
petition personal injury claim. Kleschick Aff. ¶ 9; O’Connell Aff. ¶ 9. They also
disclosed to the bankruptcy court the settlement of a claim Plaintiff O’Connell had with
her employer shortly before they filed for bankruptcy protection. Kleschick Aff. ¶ 4;
O’Connell Aff. ¶ 4. Plaintiffs further explain that they (and their counsel) did not
believe they were required to notify the Bankruptcy Court regarding the present
negligence lawsuit because, unlike the two lawsuits they had disclosed, this action arose
after they filed for bankruptcy protection. Kleschick Aff. ¶ 16; O’Connell Aff. ¶ 16.
Lastly, Plaintiffs state that they filed their second Amended Schedule B in the
bankruptcy court on August 25, 2017, “[i]mmediately upon learning . . . that we needed
to account for the instant claim in our Schedule B.” Kleschick Aff. ¶ 14; O’Connell
Aff. ¶ 14.
Plaintiffs’ explanation for why they believed this lawsuit was not required to be
disclosed to the bankruptcy court -- it arose after they petitioned for bankruptcy
protection, while the others arose beforehand -- is plausible, and there is no additional
evidence to suggest that the omission was anything other than a misunderstanding of
bankruptcy law. Therefore, I see insufficient indication that Plaintiffs intended to “play
Two pages of Mr. Kleschick’s affidavit were inadvertently omitted from the
original filing, but were added to the record by a Praecipe to Attach filed on September
14, 2017. See Docs. 21 & 22.
fast and loose” with the courts, and decline to make a finding of bad faith. As a result, I
conclude that the second element of judicial estoppel is not met, and that Plaintiffs are
therefore not estopped from bringing this action.
Because I have not found bad faith, I do not find it necessary to address the third
prong of the judicial estoppel analysis (whether the severe remedy of judicial estoppel is
tailored to address the harm). However, I note that Plaintiffs have now placed the
bankruptcy court on notice of this civil action, and that presumably the bankruptcy court
can now take whatever action it sees fit with regard to any proceeds recovered in this
Defendants are granted leave to amend their Answer to add the affirmative
defenses of standing and judicial estoppel. However, Defendants’ motion for summary
judgment, which is based on the same affirmative defenses, will be denied. An
appropriate order follows.
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